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

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

Mr David: 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.

David T. C. Davies: 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.

Owen Smith: 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?

David T. C. Davies: 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 the right hon. Member for Neath (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.

Huw Irranca-Davies: 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

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

David T. C. Davies: 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.

Mrs Gillan: 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.

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

David T. C. Davies: 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.

Geraint Davies: 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.

David T. C. Davies: 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

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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

Paul Murphy (Torfaen) (Lab): It is always interesting and a pleasure to follow the hon. Member for Monmouth (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: 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.

Paul Murphy: 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 majority—we 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 the hon. Member for Vale of Glamorgan (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. The hon. Member for Monmouth (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

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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.

Hywel Williams: 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.

Paul Murphy: 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”.—[Official Report, 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.

Roger Williams: 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.

Paul Murphy: 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

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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 the Member for Swansea West (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.

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

Paul Murphy: 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

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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.

Nick Smith (Blaenau Gwent) (Lab): I am interested in my right hon. Friend’s point about constituencies and coterminosity. Wherever possible, Assembly constituencies should align closely with boroughs and parliamentary constituencies, because that leads to better government, better democracy and better services.

Paul Murphy: But the Parliamentary Voting System and Constituencies Bill had nothing to do with better democracy and everything to do with partisanship. The Government were so stubborn in the other place in refusing 10% flexibility 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—we do not know for sure —taking away the block grant 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.

David T. C. Davies: 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?

Paul Murphy: 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

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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.

Mrs Gillan: 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.

Paul Murphy: 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, but—judging by the actions that have been taken in the House of Commons over the past year or so—I do not believe that that is true of much of the rest of her party. Those of us who are genuinely in favour of the Union want the Silk commission to be about helping the people of Wales ultimately to have a better deal from the United Kingdom.

3.8 pm

Roger Williams (Brecon and Radnorshire) (LD): It is always a privilege and a challenge to follow the right hon. Member for Torfaen (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

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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.

Paul Murphy: 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?

Roger Williams: 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 play 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.

Mr Mark Williams (Ceredigion) (LD): Does my hon. Friend take some assurance, as I do, from the Secretary of State’s words on timetables? When questioned by the hon. Member for Carmarthen East and Dinefwr (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.

Roger Williams: 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

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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, whose usefulness should not 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.

Huw Irranca-Davies: 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.

Roger Williams: 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 the Member for Bermondsey and Old Southwark (Simon Hughes) went to the same school at the same time as Paul, so I can vouch for his high academic attainment.

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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 the hon. Member for Montgomeryshire (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.

Guto Bebb: I was surprised by the comments of the right hon. Member for Neath (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?

Roger Williams: 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.

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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 the right hon. Member for Cardiff South and Penarth (Alun Michael). I look forward to their contributions, and have enjoyed some of those that have already been made. My hon. Friend the Member for Montgomeryshire (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.

Mr Mark Williams: 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?

Roger Williams: 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.

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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

Mr Wayne David (Caerphilly) (Lab): 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 particular, 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 the Member for Torfaen (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 the Member for Neath (Mr Hain), has been very unfair on the Secretary of State for Wales.

Paul Murphy: Unfair?

Mr David: 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

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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—the need to ensure consistency of fiscal powers within the UK. The hon. Member for Monmouth (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 what happens in 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

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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.

Nick Smith: 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.

Mr David: 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 the Member for Blaenau Gwent (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

Guto Bebb (Aberconwy) (Con): 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 the Member for Monmouth (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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Mr Mark Williams: 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?

Guto Bebb: 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 the hon. Member for Caerphilly (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.

Mr David: 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.

Guto Bebb: 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 the right hon. Member for Neath (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 the hon. Member for Pontypridd (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.

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

Guto Bebb: 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, the

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hon. Gentleman 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.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): 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”?

Guto Bebb: 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.

Huw Irranca-Davies: 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.

Guto Bebb: 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

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Back-Bench motion on the West Lothian question, my hon. Friend the Member for Carmarthen West and South Pembrokeshire (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 the hon. Member for Alyn and Deeside (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.

Mr Robin Walker (Worcester) (Con): 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?

Guto Bebb: 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—

Mr Walker: Or Worcester.

Guto Bebb: 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.

Mr Mark Williams: 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.

Guto Bebb: 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

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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.

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

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

Mr David: 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.

Guto Bebb: 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.

Hywel Williams: 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.

Guto Bebb: 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

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

Huw Irranca-Davies: 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.

Guto Bebb: 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.

Mrs Gillan: 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.

Guto Bebb: 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.

Owen Smith: 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 the Member for Ogmore (Huw Irranca-Davies) has said, we do not need to wait for Silk; we could have this now.

Guto Bebb: 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.

Huw Irranca-Davies: Will the hon. Gentleman give way on that point?

Guto Bebb: Once again, yes.

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

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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.

Guto Bebb: 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.

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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. The right hon. Member for Delyn (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

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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.

Hywel Williams: 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.

Guto Bebb: 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 the hon. Member for Carmarthen East and Dinefwr (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.

Jonathan Edwards rose

Guto Bebb: 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.

Jonathan Edwards rose

Guto Bebb: 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.

Hywel Williams: 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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Mr Deputy Speaker (Mr Lindsay Hoyle): 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.

Guto Bebb: 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.

Jonathan Edwards: 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.

Guto Bebb: 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.

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

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

Owen Smith: 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?

Guto Bebb: 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.

Paul Murphy: Will the hon. Gentleman give way?

Guto Bebb: This will be the last intervention, because I need to finish.

Paul Murphy: 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?

Guto Bebb: 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

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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.

Jonathan Edwards: 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?

Guto Bebb: 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

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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 rose

Mr Deputy Speaker (Mr Lindsay Hoyle): 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

Hywel Williams (Arfon) (PC): I am somewhat surprised to be called now. I hope that my hon. Friend the Member for Carmarthen East and Dinefwr (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 the Member for Dwyfor Meirionnydd (Mr Llwyd), who has had to leave because of a medical appointment? I was glad to hear the hon. Member for Aberconwy (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

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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 wants 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.

Mrs Gillan: 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.

Hywel Williams: 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.

Roger Williams: 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?

Hywel Williams: 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

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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.

Huw Irranca-Davies: 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 be done on a UK-wide basis, because that is where the resources lie.”

Hywel Williams: 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. The hon. Member for Brecon and Radnorshire (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, the right hon. Member for Torfaen (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 the hon. Member for Aberconwy 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

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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.

Alun Cairns: 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?

Hywel Williams: 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.

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4.24 pm

Alun Cairns (Vale of Glamorgan) (Con): 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 order 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 this 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 the Member for Montgomeryshire (Glyn Davies), who is fighting hard for his constituents.

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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.

Guto Bebb: 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?

Alun Cairns: 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: 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.

Alun Cairns: 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.

Owen Smith: 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.

Alun Cairns: 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 quite 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.

Guto Bebb: 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.

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

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We heard from my hon. Friend the Member for Worcester (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 the right hon. Member for Neath (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 enough. 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 largely make up the 65% of people who did not vote at the time.

Jonathan Edwards: The hon. Gentleman is using, as did the hon. Member for Aberconwy (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.

Alun Cairns: 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,

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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.

Guto Bebb: 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.

Alun Cairns: 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”


“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.

Owen Smith: 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.

Alun Cairns: 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

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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

Mr Deputy Speaker (Mr Lindsay Hoyle): 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

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

Guto Bebb: Will the hon. Gentleman give way?

Owen Smith: In a moment.

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

Guto Bebb rose

Owen Smith: 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: 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.

Owen Smith: 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.

Guto Bebb: I believe that the hon. Gentleman doth protest too much.

Owen Smith: 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 be 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.

Mrs Gillan: 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.

Owen Smith: With the 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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Mr Deputy Speaker (Mr Lindsay Hoyle): 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.

Owen Smith: 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 the Member for Torfaen (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.

Mrs Gillan indicated dissent.

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

Mrs Laing: It hasn’t been done.

Owen Smith: 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.

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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.

Alun Cairns: 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.

Owen Smith: 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.

Alun Cairns: 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.

Owen Smith: 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

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

I have a second concern, which, actually, I share with some Government Members—even, perhaps, the hon. Member for Monmouth (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?