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Clause 2 ordered to stand part of the Bill.

Clause 3 ordered to stand part of the Bill.

Clause 4

The Welsh Government

Stephen Crabb: I beg to move, That the clause stand part of the Bill.

The Temporary Chairman (Mr Christopher Chope): With this we may take new clause 5—The National Assembly for Wales—

‘The Government of Wales Act 2006 is amended by adding at the end of section 1 (The Assembly)—

(a) The Assembly may change its name by means of a resolution agreed to by a simple majority;

(b) on the first occasion a resolution under subsection (6)(a) is passed, the expression “National Assembly for Wales” shall be replaced wherever it occurs in the GOWA 2006 by the name contained in that resolution;

(c) on any subsequent occasion, the name contained in a resolution under the terms of subsection (6)(a) shall replace the previous name in the same manner;

(d) unless the context requires otherwise, in any enactment, instrument of other document passed or made before this subsection comes into force any reference to the National Assembly for Wales is to be read as, or as including, a reference to the Assembly as renamed.”.’.

Stephen Crabb: Let me begin, Mr Chope, by welcoming you to the Chair. It is a pleasure to serve under your chairmanship.

30 Apr 2014 : Column 933

Following the 2011 Assembly election, the First Minister of Wales announced that the Welsh Assembly Government wished to be known instead as the Welsh Government. That change was made in order to make clearer the respective roles of the Welsh Government and the National Assembly for Wales following the devolution of full law-making powers. Since then, the term “Welsh Government” has increasingly been used by people throughout Wales, and it is now the commonly used term for the Executive. However, “Welsh Government” remains an informal moniker, and “Welsh Assembly Government” is still the formal legal name in statute.

In recognition of the widespread use of “Welsh Government” as the generally accepted term, and following the request from the First Minister, clause 4 provides for the name of the Executive to be changed formally. That will mean that, for the first time, the new title can be used in formal legal documents, in keeping with common parlance. The clause provides that any reference to “Welsh Assembly Government” in existing legislation should be read as a reference to the “Welsh Government”, unless the specific context requires the former name to be used.

As usual, Plaid Cymru Members wish to go even further and have tabled new clause 5, which seeks to devolve to the National Assembly for Wales the power to change its name through a resolution passed by a simple majority. In renaming the Welsh Assembly Government we are simply reflecting what the Executive are now commonly known as. The same is not the case in respect of the National Assembly; people within and outside Wales know the legislature as the “National Assembly” or the “Welsh Assembly”, and I detect no popular clamour in my constituency or any other part of Wales I visit for a change in the name of Wales’s legislature.

Jonathan Edwards: Is the Minister aware that the leader of the Conservative party in the National Assembly has made a manifesto pledge to change the name of the Assembly and make it a Parliament?

Stephen Crabb: I am aware of all kinds of views from individuals across Wales on what the name of the legislature should or could be. I also recognise that the Silk commission recommended that if the Assembly wishes to change its name to the Welsh Parliament, that should be respected. However in tabling new clause 5 and other amendments Plaid Cymru seems to be doing exactly what it has wrongly accused this Government of doing: cherry-picking the Silk recommendations for implementation through this Bill.

The Secretary of State’s written statement on 3 March made the Government’s view clear: we do not regard this Bill as an appropriate vehicle for implementing Silk II recommendations, that those recommendations requiring primary legislation should be matters for the “next Government and Parliament” and, as such, they are for political parties to consider in preparing their election manifestos. That remains this Government’s approach, so I urge Plaid Cymru Members not to press their new clause to a vote.

Jonathan Edwards: It is a pleasure to serve under your chairmanship, Mr Chope.

30 Apr 2014 : Column 934

I rise to speak in favour of new clause 5, which stands in my name and those of my right hon. and hon. Friends. We will not be pushing it to a vote, because we want to save time and to have a discussion on income tax powers, which is what we really want to discuss in detail. However, I say to the Minister that, regardless of his opening remarks, our new clause is in the spirit of clause 4, which he has just presented. I hope the Government will see sense in due course, either in the later stages of the Bill’s progress in this House or in the other place.

New clause 5 would give powers to the National Assembly to change its name to the “National Parliament” or to any other name should it so decide. I stress that the new clause does not call for the institution’s name to be changed in this Bill, but rather that the power to take this decision should be granted to the National Assembly, as proposed in the Silk II recommendations. The Minister was being somewhat mischievous in saying that we were cherry-picking from the Silk recommendations, because our new clause is in line with the Silk II recommendations, in that it is a matter for the National Assembly if it wishes to change the name of the legislature. The new clause would empower it to make that decision rather than having to make a request to the UK Government of the day, as it has done for the name of the Executive.

The new clause would mean that the National Assembly would be able to change its name by means of a resolution agreed by a simple majority. It is gratifying that clause 4 officially changes the name of the Executive to the “Welsh Government”, a title that has been used widely for practical purposes since the 2011 election. There was a Scottish precedent for this change of title in 2007, when the “Scottish Executive” were renamed the “Scottish Government”. There has been broad agreement that the term “Welsh Assembly Government”, which had been in use since 2002, had been confusing and anachronistic after the separation of the Executive and legislative functions of the Assembly in 2007. It also gave rise to the unfortunate acronym WAG—being given the same label as a premiership footballer’s better half has done little for the democracy of our country. I have never used the term since I was elected, instead always using “Welsh Government”, so I was delighted that following the 2011 election the First Minister made the case that the Executive would be known as the “Welsh Government” thereafter. So I fully support clause 4, which makes that name official in legislation.

Now that the National Assembly is able to pass its own laws, it should be called a Parliament. However, I appreciate that others hold a different view, and that in the European tradition, the meeting place of a legislature is generally termed an Assembly. In France, for instance, the national legislature is called the Assemblée Nationale—if my memory of international rugby trips to Paris serves me correctly. Surely it should be a matter for the democratically elected Members of the national legislature of Wales to determine the name of the legislature in which they serve. That is what we are trying to achieve in new clause 5, but I will not press the matter to a vote. I expect there to be greater deliberations on this topic when the Bill reaches the other place.

7 pm

Mr Harper: I fully support clause 4, but I want to touch briefly on new clause 5, about which the hon. Member for Carmarthen East and Dinefwr (Jonathan

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Edwards) has just been talking. I do not support new clause 5, and I am glad that he is not going to press it to a vote. Although he makes the point that the text of the new clause does not pick a particular name, there is a bit of a hint in the title about where he is going. It is, I think, a qualitative difference. The Minister, in setting out the Government’s position, made it clear that the renaming of the Welsh Assembly Government to the Welsh Government is following public opinion and public usage, and simply therefore reflecting the reality of the situation. What the hon. Gentleman and his party are trying to do is the opposite. They are trying to push for changing the name of the Assembly in order to change the nature of the Assembly. Calling it the National Parliament for Wales, which implies a single institution, is clearly part of their campaign to move to a position where Wales ceases to be part of the United Kingdom and becomes an independent country. That is not something I support, which is why I do not support the new clause and why I think it is qualitatively different from clause 4.

Jonathan Edwards: I was anxious not to get involved in a debate about the actual name, but the hon. Gentleman will be aware that, in the UK’s tradition, Scotland became a law-making Parliament and was named as such. That is why I make the case for using the term “Parliament”. However, there are individuals, including those in my own party, who would prefer to keep the term the National Assembly. We want to empower the National Assembly to make that decision rather than the House of Commons.

Mr Harper: I see that point, but the danger is that the name change becomes part of the campaign to change the nature not just of the institution but of the relationship between Wales and the United Kingdom. That is why I think that the approach the Government are taking in clause 4, which is effectively to reflect popular usage of the term Welsh Government for the Welsh Assembly Government, is perfectly straightforward and sensible. Moreover, that is done through primary legislation and therefore keeps that decision for this House. I do not support new clause 5, which would give that power to the National Assembly.

Jonathan Edwards: It would be wrong to describe this as some sort of partisan nationalist plot to change the name of the National Assembly. As I have already said to the Under-Secretary of State, the position of the Tory leader in the Assembly group is to change the name to a National Parliament. Indeed it is even the position of the Presiding Officer of the National Assembly who is, of course, a Labour party Member.

Mr Harper: I take that point. I would oppose new clause 5 whoever drafted it, because the whole concept of changing the name to achieve a political outcome is not something that I support. We can have a debate about independence and whether the Welsh Assembly should turn into a Parliament of an independent Wales, but we should have it openly. We should not use changing the name as a surreptitious way of moving along the debate and hope that nobody notices. The hon. Gentleman has cunningly designed the new clause so that it does not say anywhere what the National Assembly should be called, but, as I have said, it is given away in the title

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as a little hint about where he wants to go. It is whatever the parliamentary equivalent of a Freudian slip is, which gives it away.

Geraint Davies (Swansea West) (Lab/Co-op): I think there may be some confusion here, because of course this Parliament enabled the Scottish Parliament to be so called, and there is no appetite for us to say to the Scottish Parliament that it can call itself what it likes—even the Scottish kingdom. Plaid Cymru is saying that the Welsh Assembly should be able to call itself what it likes, and there is, I understand, a strong case to call the National Assembly the National Parliament of Wales, but there is confusion here about what we are talking about. Scotland has no power to decide the name for itself.

Mr Harper: That is a good point. There are two separate arguments, one about what we should call the different institutions and another about which body is the right body to pass the legislation to enact those changes. I think that the Government’s approach in clause 4, which recognises the reality of what we call the Welsh Government and reflects that in primary legislation passed by this Parliament, is the right one, rather than the approach followed by those who have signed up to new clause 5. That is why I will oppose the new clause, but I am glad that the hon. Member for Carmarthen East and Dinefwr is not going to press it to a vote. I hope that the Committee will support clause 4.

Owen Smith: I, too, welcome you to the Chair, Mr Chope. It is a pleasure to serve under your chairmanship.

We support clause 4, which renames the Welsh Assembly Government. That is what the Welsh Assembly has long said that it would like to happen and it reflects normal custom and practice across Wales, so we are pleased that the Government have decided to change things and use the term Welsh Government in future.

On new clause 5, we accept that there is a debate to be had about the name. Silk part II refers to the prospect of a Welsh Parliament and it is ironic that the leader of the Conservative party in Wales holds that view. I admire the chutzpah with which the Under-Secretary glossed over that, as it is an irony that the Opposition see clearly. However, this is an area of debate that ought properly to be dealt with in any legislation that reflects Silk part II rather than under this Bill, which properly reflects the preponderance of Silk part I. For that reason, even if the new clause were pressed to a vote, we probably would not support it.

Stephen Crabb: I agree very much with the comments made by my hon. Friend the Member for Forest of Dean (Mr Harper). There are two elements to the debate. The first is about what we call the legislature and the second is about where the decision is taken. As for the first, there is an emerging debate in Wales about what we should call the National Assembly and whether it should have its name changed. The leader of my party’s group in the Assembly has a view that I fully respect. He is an excellent colleague and I am sorry if I gave the impression that I was glossing over his views, but I still maintain the position that the debate is emerging and has not yet engaged with the public consciousness. Until we get to that point, it is probably a debate that will not be resolved.

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As for the second part of the debate, the Silk commission referred to the decision on where the decision should be made in part II of its recommendations. We have been clear and consistent all along that decisions about the Silk part II recommendations are not for this Bill but for a future Parliament and a future Government and for the parties to consider in their manifestos. I stand by my earlier remarks and ask the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) not to press his new clause to a vote.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5 ordered to stand part of the Bill.

New Clause 4

National Assembly to set number of AMs

‘Her Majesty may by Order in Council provide for the transfer of responsibility for setting the number of Assembly Members to the National Assembly for Wales.’.—(Jonathan Edwards.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The House divided:

Ayes 4, Noes 254.

Division No. 259]

[

7.8 pm

AYES

Edwards, Jonathan

Llwyd, rh Mr Elfyn

Lucas, Caroline

Williams, Hywel

Tellers for the Ayes:

Mr Mike Weir

and

Pete Wishart

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Alexander, rh Danny

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, rh Sir Tony

Baldwin, Harriett

Barclay, Stephen

Barker, rh Gregory

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Bellingham, Mr Henry

Beresford, Sir Paul

Bingham, Andrew

Binley, Mr Brian

Blackwood, Nicola

Boles, Nick

Bone, Mr Peter

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Burt, rh Alistair

Burt, Lorely

Byles, Dan

Campbell, rh Sir Menzies

Carmichael, Neil

Chishti, Rehman

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crouch, Tracey

Davies, David T. C.

(Monmouth)

Davies, Glyn

de Bois, Nick

Dinenage, Caroline

Dorries, Nadine

Doyle-Price, Jackie

Drax, Richard

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Evans, Graham

Evans, Jonathan

Evans, Mr Nigel

Evennett, Mr David

Fabricant, Michael

Fallon, rh Michael

Farron, Tim

Featherstone, Lynne

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fullbrook, Lorraine

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Glen, John

Graham, Richard

Gray, Mr James

Grayling, rh Chris

Green, rh Damian

Grieve, rh Mr Dominic

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hands, rh Greg

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Heald, Oliver

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hughes, rh Simon

Hunt, rh Mr Jeremy

Huppert, Dr Julian

Hurd, Mr Nick

Jackson, Mr Stewart

Johnson, Gareth

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kelly, Chris

Kirby, Simon

Knight, rh Sir Greg

Kwarteng, Kwasi

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Lefroy, Jeremy

Leigh, Sir Edward

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lidington, rh Mr David

Lilley, rh Mr Peter

Lloyd, Stephen

Lopresti, Jack

Luff, Sir Peter

Lumley, Karen

Maude, rh Mr Francis

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McPartland, Stephen

McVey, rh Esther

Menzies, Mark

Metcalfe, Stephen

Mills, Nigel

Milton, Anne

Mitchell, rh Mr Andrew

Moore, rh Michael

Mordaunt, Penny

Morgan, Nicky

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newton, Sarah

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

O'Brien, rh Mr Stephen

Ollerenshaw, Eric

Ottaway, rh Sir Richard

Parish, Neil

Patel, Priti

Pawsey, Mark

Penrose, John

Percy, Andrew

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pugh, John

Randall, rh Sir John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Simpson, Mr Keith

Skidmore, Chris

Smith, Chloe

Smith, Henry

Smith, Julian

Soames, rh Nicholas

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Stunell, rh Sir Andrew

Sturdy, Julian

Swayne, rh Mr Desmond

Swire, rh Mr Hugo

Syms, Mr Robert

Teather, Sarah

Thornton, Mike

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Walter, Mr Robert

Watkinson, Dame Angela

Weatherley, Mike

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Williams, Mr Mark

Williams, Stephen

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Mark Hunter

and

Claire Perry

Question accordingly negatived.

30 Apr 2014 : Column 938

30 Apr 2014 : Column 939

Clause 8

Welsh rate of income tax

The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move amendment 21, page 8, leave out line 23 and insert—

‘(1) Part 4A of GOWA 2006 (as inserted by section 6) is amended as follows.

(2) In section 116A(1) (overview), after “Part” insert “—

(a) Chapter 2 confers on the Assembly power to set a rate of income tax to be paid by Welsh taxpayers, and

(b) ”.

(3) After Chapter 1 insert—’.

This amendment and amendment 19 ensure that the overview provision in new section 116A(1) of GOWA 2006 relating to the Assembly power to set a rate of income tax can only come into force, like the other provisions relating to that power, following a yes vote in a referendum.

The Temporary Chair (Mr Christopher Chope): With this it will be convenient to discuss the following:

Amendment 2, page 8, line 36, leave out ‘only’ and insert ‘more than’.

Amendment 3, page 8, line 36, leave out ‘only one rate’ and insert ‘up to three rates’.

This amendment is proposed to implement the recommendations of the Silk Commission that the Welsh Government have the power to set different rates of tax for different income bands.

Government amendments 22 to 28.

Amendment 16, page 12, line 34, after ‘Assembly’, insert

‘and each House of Parliament’.

Amendment 6, page 12, line 37, at end add—

‘(2) The Secretary of State shall review the impact on the Exchequer effects of the provisions in this section on residents who live within 50 miles of the Wales/England border and the impact on the prospects for tax competition within the UK, and place a copy of the review in the Library of the House of Commons.’.

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Clause stand part.

Amendment 41, in clause 9, page 13, line 8, leave out ‘10’ and insert ‘15’.

Clause 9 stand part.

Amendment 1, in clause 11, page 16, line 20, leave out from ‘Wales’ to end and add

‘where a Welsh rate resolution specifies more than one rate of income tax.’.

Government amendment 19.

Amendment 38, in clause 28, page 29, line 34, after ‘except’, insert

‘sections 8 and 9 and’.

Amendment 39, page 29, line 36, at end insert—

‘(2A) Sections 8 and 9 shall not come into force until a Welsh Government Minister has laid a report before the National Assembly for Wales containing a statement to the effect that the Welsh Government, with regard to the Statement of Funding Policy, is content with the fairness of the arrangements for allocating funding from the UK Government to Wales.

(2B) Sections 8 and 9 shall be suspended following any substantive reform, amendment or other alteration of the arrangements mentioned in subsection (2A), until the process under subsection (2A) has been repeated.’.

Amendment 4, in title, line 3, leave out ‘a rate’ and insert ‘rates’.

Mr Gauke rose

Sir Greg Knight (East Yorkshire) (Con): On a point of order, Mr Chope. If the four people who voted in favour of new clause 4 want to express an opinion on one side of the argument or the other later this evening, is there not a case that you should weigh the voices?

The Temporary Chair: That could be considered. I have always been keen that we should allow the minority to express their opinion in the Chamber without having it suppressed.

Mr Gauke: It is a great pleasure to serve under your chairmanship this evening, Mr Chope, and to set out the Government’s position on clauses 8 and 9 and the Government amendments. I will also take the opportunity to comment on the amendments tabled by others and will have the chance to debate taxation powers with the shadow Secretary of State for Wales, which I am sure will bring back many happy memories for him of serving on Finance Bills.

Subject to the outcome of a referendum, clause 8 amends the Government of Wales Act 2006 to introduce a Welsh rate of income tax to be paid by those defined as Welsh taxpayers. Clause 9 amends the Income Tax Act 2007 to set out how the Welsh rate of income tax determines the Welsh basic, higher and additional rates of income tax. It also defines the income that will be taxed at those rates.

I shall start with Government amendments 19 and 21. The income tax provisions in clause 8 form part of a new part 4A of the 2006 Act, which is introduced by clause 6. Part 4A’s introductory section includes a reference to the income tax provisions in chapter 2. The provisions in clause 6 will come into force two months after this Bill receives Royal Assent. However, the income tax provisions in clause 8 and 9 can of course be brought into force only following a yes vote in a referendum.

30 Apr 2014 : Column 941

Amendment 19 therefore removes the reference to chapter 2 from clause 6, and amendment 21 reinserts the reference into clause 8, bringing the commencement of the reference into line with the rest of the income tax provisions. That will ensure that the amended Act accurately reflects the legislative competence of the Assembly at a given point.

The provisions in clause 9 concerning the Welsh rate have been revised since the draft Bill. That necessitated changes to the power to allow for further consequential changes to be made under secondary legislation introduced by clause 8 in new section 116I of the 2006 Act to ensure that it continued to work as intended. Government amendments 22, 27 and 28 make further technical changes to that power in order to clarify that proposed new section 11B does not impose a charge to income tax. Rather, the effect of the new section 11B is to apply the Welsh rates of income tax to a Welsh taxpayer’s non-savings income.

On Government amendments 23 to 26, the power in new section 116I also allows an order to be made to ensure that HMRC can continue to operate the PAYE system effectively in the event that the Assembly passes a Welsh rate resolution at a late stage in the preceding tax year. Such an order would require employers to continue to operate PAYE on the basis of the information issued by HMRC, rather than the correct tax position for a specified period. The tax position of employees would ultimately be correct over the course of the tax year.

The scenario I have set out would also apply if, for whatever reason, the Assembly did not pass a rate-setting resolution at all, assuming that that had not previously been announced by the Welsh Government. Although I accept that that is unlikely to arise in practice, it is important to recognise that the Assembly has the option not to pass a rate if it so chooses. Amendments 23 to 26 therefore extend the order-making power to cover that scenario. I hope that hon. Members will support those amendments and Government amendments 19, 21, 27 and 28.

In amendment 41, I was pleased to see an amendment from the hon. Members for Pontypridd (Owen Smith) and for Llanelli (Nia Griffith) that supports the principle of income tax devolution, although I note that their latest approach would not provide Wales with quite the same outcome that they have now proposed for Scotland. None the less, it is progress. Although I confess to not having previously studied the issue very closely, I was not sure whether the Labour party opposed income tax devolution or thought that there was not enough of it. No doubt we will receive an explanation later.

Owen Smith rose

Mr Gauke: Perhaps we will receive an explanation immediately. I will happily give the hon. Gentleman that opportunity.

Owen Smith: I am grateful to the Exchequer Secretary, and this of course brings back warm memories of time spent debating Finance Bills. He failed to mention our amendments 38 and 39—I presume he will do so in due course—which seek to give symmetry between Scotland and Wales in relation to tax powers. While I am on my feet, may I ask him to return to what he said earlier

30 Apr 2014 : Column 942

about Welsh taxpayers under this legislation? Will he confirm for the House that that would designate all MEPs in Wales as Welsh taxpayers, including Kay Swinburne, a Conservative, who does not live in Wales?

Mr Gauke: All Welsh MEPs will be Welsh taxpayers. I will deal with the amendments the hon. Gentleman mentions, although I do not think that they would achieve symmetry. I note that he was not very clear in responding to my point that only a little while ago he said that devolution of income tax to Wales was a Tory trap, or something of the sort. Now he proposes that devolving 10p is insufficient and that it should be 15p. I do not know whether he holds both views at the moment, or just one. I will certainly give way if he can provide some clarity on that point.

Owen Smith: Of course, they are entirely reconcilable, as I shall explain later. However, I did not hear an answer from the Exchequer Secretary on whether Kay Swinburne, the Conservative MEP for Wales, who still lives in Ledbury in England, would be designated as a Welsh taxpayer under the terms of the Bill. That strikes me as an extraordinary oversight by a Conservative Minister.

Mr Gauke: I will repeat what I said: Welsh MEPs will be Welsh taxpayers. I am not sure that I can be any clearer.

On the extent of income tax devolution, there is a careful judgment to be made. Devolving an element of income tax increases the financial accountability of the Assembly and the Welsh Government in three important ways. First, it will enable the Assembly to fund more of the spending for which it is responsible. Secondly, the Welsh Government will be able to vary the levels of tax and spending in Wales. Thirdly, while the Welsh Government currently control many key levers to generate economic growth in Wales such as education, skills, housing and planning, the resulting economic performance currently has no impact on their budget. Devolving an element of income tax will directly link the Welsh Government’s budget to their economic decisions.

7.30 pm

Mr Hanson: What will happen to the people residing in England who, as the Minister’s hon. Friends have said, already use services in Wales such as the health service? Many people on the border who live in England use health and education services in Wales. Is it equitable that they do not pay the level of tax that might be levied by the Welsh Assembly in future?

Mr Gauke: As the right hon. Gentleman knows, the question of who is a Welsh taxpayer is dependent on who resides in Wales. I take it from what he says that he is opposed in principle to the devolution of income tax. He is nodding his head as if to say yes. He will be aware that his party has tabled an amendment suggesting that 15p, not 10p, should be devolved to the Welsh Government. I do not know how he reconciles his view with that of his Front Benchers.

Mr Hanson: I support my hon. Friends’ amendment to look at how this impacts across the board. The Exchequer Secretary must accept that there are people

30 Apr 2014 : Column 943

in Shrewsbury, Herefordshire and Worcestershire who use services in Wales. Would he support—I am not saying that I support this—a Welsh Assembly Government charging for services used in Wales and paid for by Welsh taxpayers but also used by English people who do not contribute to the Welsh tax burden for those services?

Mr Gauke: This is not about charging for public services. We have devolution of income tax in Scotland, where the issues that the right hon. Gentleman has mentioned may arise. I am surprised that, as a distinguished shadow Minister, he appears to be taking a position at odds with his own Front Benchers.

Owen Smith rose

Mr Gauke: Perhaps if I give way to the hon. Gentleman he will explain the apparent contradiction between his amendments and a statement that seems to involve opposition to the devolution of income tax altogether.

Owen Smith: There is absolutely no contradiction on our part. The Minister has come very late to the debate; I do not know why the Secretary of State does not feel able to answer these questions, but that is for him to respond to. We have said throughout that we have never thought that income tax devolution to Wales was a priority. We do not think there is a significant appetite for it in Wales, and we consider that it creates a Tory trap in two respects. The Conservative party is committed, in Wales and across the rest of the UK, to cutting taxes further for the wealthiest people. The Secretary of State has said that he wants to do that. He has further said that he favours tax competition, with Wales able to undercut England. We are not in favour of that. However, given that in the Bill the Secretary of State has drawn a clear line between the quantum of income tax that is nominally to be devolved to Wales and the amount of borrowing that will be afforded to the Welsh Government, and given that £1.7 billion has been cut out of the Welsh budget, particularly in capital, we are in favour of increasing the amount of money that they might borrow. Our 10p to 15p change would achieve that, if the Welsh people agreed to it in a referendum.

Mr Gauke: I am grateful for that lengthy speech. I may have come late to the debate, but it is perfectly clear that Labour has been all over the place on this matter. I come back to what I said about the advantages of devolving income tax. One of those, very significantly, is that there is much greater accountability for the Welsh Government, because if they are able effectively to use the powers that they currently have to get the Welsh economy to grow, they will benefit from that as a consequence of increased revenues.

Mr Harper: Perhaps I can help to answer the question asked by the right hon. Member for Delyn (Mr Hanson). First, my constituents who have to use the NHS in Wales do not want to, would love not to and would like to use the NHS in England. Working with the Secretary of State for Health, I hope we will be able to put that in place by the end of this year, as he has pledged in the House.

Secondly, all UK taxpayers make a contribution to the Exchequer, which supplies the block grant to Wales that, of course, part-funds public services. Given that

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we are talking about a partial devolution, there is still quite a lot of money coming from the block grant and any of my constituents who are using public services will, of course, have paid their fair share.

Mr Gauke: My hon. Friend makes two valuable points. I presume that his very good argument about the block grant would be weakened if the devolved amount was 15p rather than 10p.

Geraint Davies: The Minister has made the case that, if the Welsh economy expands relative to the English economy, the new regime—the Welsh Exchequer, as it were—would gain. However, the corollary of that, of course, is that if the English economy grows faster than the Welsh economy as a result of the current Government generating growth through a London housing bubble, Wales will lose out. Why is the Minister putting only one half of the argument when this could in fact be a hidden trap?

Mr Gauke: One of the attributes of devolving an element of income tax is that it will ensure that the Welsh Government have the incentives to grow the economy as strongly as possible. I am rather surprised that the hon. Gentleman has so little faith in the Welsh Government that he does not want to encourage this opportunity and that he does not have the confidence that, by pursuing the right policies, the Welsh economy can grow significantly. I would have thought that that is what he wanted.

Geraint Davies: The Minister knows that investment and economic development in Wales would deliver jobs and that that would reduce social security costs and increase income tax. There is no proposition for social security to be devolved, so a lot of the benefits will be in England. What is more, with this new manifestation of the policy—this half-cocked version—there is a real danger that, if a London-centric recovery occurs, Wales will lose out.

Mr Gauke: Again, I am not sure that a contribution from the Labour Back Benches is entirely aligned with the views of those on the Labour Front Bench.

Geraint Davies: We’ve got a democracy here!

The Temporary Chair (Mr Christopher Chope): Order. Only one person can speak at a time.

Mr Gauke: I am sorry that I have clearly touched a nerve with the hon. Gentleman. [Interruption.]

The Temporary Chair: Order.

Mr Gauke: I continue to touch a nerve with the hon. Gentleman. If tax receipts grow in Wales as a consequence of greater economic growth—after all, the Welsh Government have powers over education, skills, housing and planning—it will be to the advantage of Wales and the Welsh Government. I have no doubt that it is the desire of the Welsh Government to do the best for the Welsh economy. This is an opportunity to benefit from growth and increased tax receipts.

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Owen Smith: I am grateful to the Minister for giving way; he is being very generous with his time. This is like all our yesterdays, in that we are debating, by implication at least, the Laffer curve. He said a moment ago that if Wales were to pursue the right policies, it would see economic growth by deploying these new powers. Does he mean by that that taxes in Wales should be cut, as the Secretary of State has said he would do? If so, which taxes does the Exchequer Secretary propose to cut and by how much?

Mr Gauke: That is a matter for the Welsh Government. They might want to pursue tax policies, but I repeat that policies on education, skills, housing and planning all contribute towards economic growth. The situation at the moment is that the Welsh Government control many of the key levers to generate economic growth, but do not currently benefit from any resulting economic performance through the impact on its budget. This devolution of tax will address that situation. Equally, to go back to the point made by the hon. Member for Swansea West (Geraint Davies), it means that if bad policies are pursued and they damage growth, that will have a consequence for the Welsh economy. I am sure that he is not suggesting that the Welsh Government will pursue growth-damaging policies.

Geraint Davies rose

Owen Smith rose

Mr Gauke: I will give way one last time to each hon. Gentleman.

Geraint Davies: Does the Minister accept that although some powers to effect economic performance are in Wales, the mass of powers are in this place in terms of the Exchequer, our relationship with the Bank of England and macro-economic policies across the United Kingdom? With the budget that it has, Wales alone cannot determine its economic future. To say so is simply misleading, and he should withdraw it. It is a disgrace.

Mr Gauke: The hon. Gentleman may say that the mass of powers are here, but we are talking about a relative test involving Wales versus the rest of the United Kingdom. United Kingdom policies apply across the United Kingdom; the specific policy of the Welsh Government may result in changes in growth in the economy and the impact of that on the budget.

Geraint Davies rose

Mr Gauke: I will now give way to the hon. Member for Pontypridd. I think that I have—[Interruption.]

The Temporary Chair (Mr Christopher Chope): Order. The Minister is not giving way to the hon. Member for Swansea West (Geraint Davies). We must have some order. There are not many Members in the Chamber, but they seem to be making a mockery of the rules of order. I think that the Minister is giving way to the hon. Member for Pontypridd (Owen Smith).

Owen Smith: I merely wanted to ask whether, while talking about good and bad policies, the Minister would care to congratulate the Welsh Government on the good policy of Jobs Growth Wales. The policy has been

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seven times more effective than the Work programme in Wales, and has resulted in Wales having higher growth and, indeed, better unemployment figures than anywhere else in the UK.

Mr Gauke: It is worth pointing out that 12,000 new jobs, as I understand it, have been created under the Work programme in Wales, but I think that I should make a little progress, Mr Chope.

The change involves creating incentives for the Welsh Government, which of course means transferring some risks to them. Specifically, the Welsh Government’s budget will benefit if the income tax base grows faster in Wales than the UK average, but it will be adversely affected if growth in Wales is slower. Crucially, the larger the proportion of income tax that we devolve, the greater the potential impact on the Welsh Government’s budget. Devolving 15p of income tax would increase the size of the impacts by 50% compared with devolving 10p. There is a balance to be found between risks and rewards, and at this stage we see no evidence to suggest that we should move away from the Silk commission’s assessment, which resulted in the recommendation to devolve 10p of income tax. That recommendation is now reflected in the Bill.

Owen Smith: Will the Minister give way a final time?

Mr Gauke: I remember debates on Finance Bills in which it was very difficult to speak for long without a contribution from the hon. Gentleman, and nothing has changed. I will give way again.

Owen Smith: I aim to entertain and to scrutinise legislation properly. Simply on the question of risk, will the Exchequer Secretary tell us what risk the Welsh Government will bear in relation to the potential costs of the change? We know that it will cost between £40 million and £42 million to do it in Scotland. Will it be more or less for Wales? How much will it be?

Mr Gauke: At this point, it is not possible to say what the cost will be. I must say that, with the gain in greater accountability and the greater devolution of powers, hon. Members should welcome the change. The hon. Gentleman is aware that the issue is one for a future referendum. Whether the Welsh people want to go down such a route is a question for them, and such matters will clearly be relevant to that debate. However, on having a 10p rate rather than a 15p rate, I hear the arguments in favour of essentially no devolution whatsoever and those for having a larger sum, but we believe that we have got the balance right. I hope that hon. Members will accept the balance achieved by the Silk commission recommendation, and that the hon. Gentleman will not persist with amendment 41.

7.45 pm

Mr Mark Williams: I congratulate my hon. Friend and the Wales Office on their work on this matter. I endorse the principles behind the Silk commission and the legislation. Although my hon. Friend alluded to Silk, he has not yet mentioned the principles behind the lockstep and not giving the Welsh Government the capacity to vary rates between the bands. Some of us still have concerns about that.

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Mr Gauke: I am grateful to my hon. Friend because he takes me neatly on to the next line of my speech.

Amendments 1 to 4, which were tabled by Plaid Cymru, relate to the single Welsh rate of income tax—the so-called lockstep system. Fundamentally, income tax devolution must work within the integrated UK-wide income tax system. It must work for Wales by increasing the accountability of the Assembly and the Welsh Government, and it must work for the UK by maintaining the stability of the tax system.

Following a thorough and robust assessment of the Silk commission recommendations, we have determined that that would be most effectively achieved through a single Welsh rate of income tax that applied to all bands. There are two main reasons for that. First, the pooling and redistribution of tax revenues is a key feature of our fiscal model and ensures that wealth is shared among the regions and countries of the UK. The income tax structure is a key mechanism for achieving wealth redistribution. It is surely right, therefore, that UK-wide redistribution is decided at the UK level. The lockstep ensures that that will continue to be the case.

Secondly, although there are many benefits of tax devolution, it is not without risk. Specifically, we need to minimise the potential for harmful tax competition, increased opportunities for tax avoidance and evasion, and higher administrative burdens. It is therefore crucial that when we devolve taxes, we do so in a way that minimises those risks. In particular, the Government have consistently been clear that tax devolution should not benefit one part of the UK to the detriment of another. Tax devolution is not about moving economic activity from one area to another, but about empowering the devolved Administrations to generate additional growth and increasing their accountability by linking their budgets to their decisions. That incentivises the devolved Administrations and increases their accountability to the people, in this case in Wales.

Without the lockstep, the Welsh Government could substantially lower the rates of tax for the upper bands in Wales without making any change to the basic rate. That would be a considerable incentive for high earners to move across the border, which would benefit Wales, but would be to the detriment of the UK as a whole. Instead, the lockstep system will enable the Welsh Government to vary the levels of tax and spending in Wales, but the size of any differences will be unlikely to lead to tax competition. For example, they would be similar to the existing differences between the levels of council tax in neighbouring local authorities in Wales.

Devolving an element of income tax is therefore best achieved using the lockstep system. That will enable us to deliver substantial benefits to Wales, while continuing to redistribute wealth throughout the income tax system and minimise the risk of tax competition. I hope that I have helped hon. Members to understand our rationale for the lockstep system. I therefore ask them not to press amendments 1 to 4.

Jonathan Edwards rose

Mr Gauke: Perhaps the hon. Gentleman will take this opportunity to say that he will not press those amendments.

Jonathan Edwards: Does the hon. Gentleman not understand that he has contradicted himself? Indeed, the whole Wales Bill is contradictory. He is arguing that

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the powers are needed to incentivise the Welsh Government to develop economic growth, but he is placing a lockstep on those powers, making it impossible to use them. It is essentially a handcuff on those powers. There is a huge contradiction in what he is saying.

Mr Gauke: I do not accept that the powers are impossible to use. One can debate whether the rates should be varied, but the fact that there will be greater accountability will benefit Wales as a whole. We must balance the improvement in accountability in Wales with the difficulties that might arise with tax competition in the higher rates, which would be likely to damage the tax base in the UK as a whole. That is why we proceeded with a lockstep.

On amendment 6, tabled by the hon. Member for Pontypridd, I assure the Committee that the Government always consider the impacts of potential policy options and keep policies under review. An assessment of the potential impacts of devolving elements of income tax to the Welsh Assembly is summarised in the documents accompanying the introduction of the Wales Bill, in particular the Command Paper and the impact assessment. That assessment explains how the proposed system of income tax devolution achieves the key benefits identified by the Silk commission, increasing the accountability of the Assembly and Welsh Government and providing flexibility over the levels of tax and spending in Wales, while also minimising the risks of tax competition in the UK whereby significantly different tax rates could affect the behaviour of people living close to the border.

The Government’s assessment of the Silk commission’s proposals look closely at the potential for harmful tax competition in the UK, particularly given the populous border between England and Wales. As a result of that work, the Government rejected a system of three independent Welsh rates of income tax, instead proposing the lockstep system. As I have previously explained, that system specifically helps to minimise the risk of harmful tax competition in the UK. I hope hon. Members agree that the assessment we have undertaken is suitably robust, and that they are reassured by our commitment to keep the policy under review. Clause 22 requires the Government to report annually on the implementation and operation of the finance provisions of the Bill, so we will keep Parliament informed in that regard. On that basis I hope that hon. Members will not press amendment 6.

Amendment 16 was tabled by my hon. Friend the Member for Forest of Dean (Mr Harper) as recommended in the Silk commission’s report of November 2012, and clause 8 provides for the Comptroller and Auditor General to report directly to the National Assembly for Wales on HMRC’s administration of the Welsh rate of income tax. That will provide independent assurance to the Assembly on HMRC’s performance in administering this tax. The Comptroller and Auditor General currently reports to Parliament on HMRC’s administration of its business, including the operation of the UK’s income tax system. Should the Welsh rate of income tax be introduced, it will be operated as part of the UK income tax system. The NAO would therefore be able to report to Parliament in relation to the Welsh rate as part of its existing remit, and clause 8 ensures that reporting to the Welsh Assembly on the Welsh rate will additionally fall within the NAO’s remit.

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Mr Harper: My hon. Friend will know from Second Reading that my concern is about companies based in my constituency that employ people, some of whom are resident in England and some in Wales, because there would be an administrative burden on those companies should there be a Welsh rate of income tax. I think the Minister has addressed this point, but will he confirm whether that burden—to the extent that it exists—will effectively be reported not just to the Welsh Assembly but also to this House? Members who represent English residents have a legitimate interest in how that complexity will hit local firms. If the Minister could be absolutely clear on that, there will be no need to press the amendment to a vote.

Mr Gauke: I am grateful to my hon. Friend for that point and I hope I can reassure him. There already exist mechanisms for scrutiny in relation to the Welsh rate by Parliament through existing vires. HMRC’s accounts would contain specific information on the Welsh rate, and they will continue to be laid before Parliament. Hon. Members will be presented with the levels of spending incurred by HMRC in administering the Welsh rate and the amounts of revenue collected. I believe that those existing channels provide an appropriate level of scrutiny for hon. Members in relation to the Welsh rate, and I hope that addresses my hon. Friend’s point.

I also think it right for additional insurance to be provided to the Assembly via the Comptroller and Auditor General’s report, and we anticipate that that report would be produced to a timetable similar to that of the wider report to Parliament on HMRC’s accounts. No doubt my hon. Friend will shortly contribute to the debate, but I have set out the existing mechanisms for scrutiny that will be available to Members of this Parliament, and I hope he is reassured.

On amendments 38 and 39, we have been working closely with the Welsh Government on Welsh funding. In particular, the Government recognise there has been convergence between the levels of funding in Wales and England since devolution, and that this is a significant concern in Wales. As a result, in October 2012 we agreed to implement a joint process to review the levels of funding in Wales and England in advance of the spending review. If convergence is forecast to occur over the course of the spending review period, options will be discussed to address the issue in a fair and affordable manner, based on a shared understanding of all the available evidence.

In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments and the outcome set out in a written ministerial statement. The review determined that funding levels are not expected to converge during the period to 2015-16, and in fact an element of divergence is forecast to occur. The review also determined that relative funding levels in Wales are within the range recommended by the Holtham commission.

These arrangements assure that we have a shared understanding of funding levels in Wales and a process is in place to consider options should convergence be forecast to resume. In no way would the devolution of income tax have any impact on these arrangements, and it is certainly not the case that income tax devolution would lock in the current level of funding. These arrangements therefore provide a firm basis for proceeding with the new financial powers in the Bill, and I hope

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that hon. Members will therefore not press amendments 38 and 39. I hope that my comments have been of assistance to the Committee, and that clauses 8 and 9 and the Government amendments will be added to the Bill this evening.

Jonathan Edwards: I wish to speak to amendments 1, 2, 3 and 4, in my name and the names of my colleagues in Plaid Cymru. We intend to press amendment 1 to a Division at the appropriate time.

The lockstep income tax power that is on offer in this Bill is not the one recommended by the Silk commission. We see two ways forward to preserve the integrity of the original Silk proposals. Either the lockstep income tax power should proceed without a referendum, which amendment 1 would achieve, or the Bill should be amended as per the Silk commission recommendation on income tax, which amendments 2, 3 and 4 seek to do, thereby restoring the need for a referendum, as Silk envisaged, on an income tax sharing arrangement without a lockstep.

I remind hon. Members that their parties, through their representatives on the commission, agreed to the Silk recommendations. Indeed, the Labour party’s representative on the commission was the esteemed former Assembly Member, Sue Essex, who is of course a former Finance Minister in the Welsh Government. The purpose of amendment 1 is to ensure that the referendum is on the ability of Wales to vary each income tax band individually, rather than the lockstep that is proposed in the Bill.

I believe that we should not have a referendum on these powers. The borrowing powers that will accompany the income tax powers would be essential to move the economy forward. Capacity will increase with the income tax powers. However, I accept the position of my party that a referendum should be held on the original Silk recommendations. In my view, the principle of fiscal devolution has already been conceded in this Bill—we will discuss the minor taxes next week—so the case for a referendum is not very strong.

Amendments 2, 3 and 4 would alter the Bill so that the lockstep is removed from the income tax power, giving Wales the ability to vary income tax band rates independently of each other, subject to a referendum, as per the original recommendation of the Silk commission. As the Bill stands, the lockstep on the ability to vary income tax in Wales means that all three bands can be moved up or down only in tandem, as is the case in Scotland. I hesitate to point out that those powers have never been used in Scotland, even though they have been available since devolution in 1999. Of course, the Silk recommendation was for the power to vary income tax band rates independently of each other. In reality the lockstep kills the ability to vary income tax at all, which strengthens the argument that I put to the Minister in an intervention—the lockstep hinders what the Government claim to be trying to achieve in the Bill, which is to incentivise the Welsh Government to develop their economy. Without the ability to introduce innovative income tax policy, how are they meant to achieve that?

8 pm

The Tory and Liberal Democrat UK coalition Government put narrow party interests before the Welsh national interest and added the lockstep to the income

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tax powers, riding roughshod over not only the people of Wales but the supposedly autonomous parties and colleagues in Wales. They ignored the fact that they had signed up to the Silk proposals via their own commissioner. Meanwhile, the Labour party, at its recent spring conference in Llandudno, said that it wanted for Wales what its devolution commission has settled on in Scotland. That goes beyond the Tory lockstep, with the added handicap that the band can be moved only one way—upwards. That is why I have labelled it “lockstep-plus”. This goes against everything that First Minister Carwyn Jones and Finance Minister Jane Hutt were saying for months prior to the Bill being introduced by the UK Government. They argued that the lockstep must be removed and Wales be given the ability to vary the bands individually, as recommended by the Silk commission. Having said that, we support amendment 41 from the Labour party, which would increase the fiscal responsibility of the Welsh Government up from 10p to 15p.

Hywel Williams: Does my hon. Friend find it peculiar that Labour’s position is to allow an increase in taxes in Wales, thereby handing a tax advantage to England? Its only policy on tax competition is to move it in favour of our friends in England.

Jonathan Edwards: That is an important intervention. The Labour party’s position is that it is worried about tax competition, yet, based on its tax policy, the only tax competition that could happen would favour England and other parts of the British state.

Owen Smith: Let us be absolutely clear: Labour has not argued, and is not arguing, for a tax increase in Wales. We know that the Conservative party is saying that it wants to cut taxes for the wealthiest in Wales. We are seeking to future-proof the legislation so that a Labour Government in Wales would be able to mitigate against further Tory tax cuts for the wealthiest, and introduce tax justice in Wales.

Jonathan Edwards: That is the crux of the argument, and the division between the Labour party and my party. My view is that we should empower the National Assembly and have a mature debate in Wales about what the level of taxation should be. I think the hon. Gentleman is aware of where my political conscience lies—I tabled an amendment to the Finance Bill to reinstate the top rate to 50p. Let us have the debate. Let us trust our Assembly Members to have the debate and let us see the National Assembly mature. The one thing that devolving responsibility for these powers will do is lead to the maturing of the Assembly. Hopefully, we will see the growth and development of our democracy in Wales.

When the Welsh Affairs Committee carried out the pre-legislative scrutiny of the Bill, we had independent witness after witness—I hasten to add that my hon. Friend the Member for Arfon (Hywel Williams) had taken over my role in the Committee for that period, as I was enjoying my paternity leave with my son Llywelyn—giving evidence, except of course the Secretary of State and Treasury Ministers, arguing that the lockstep should be removed. Those giving evidence included the leaders of all the parties in the Assembly, not least the leader of the Liberal Democrats and the Conservatives in Wales. Several distinguished economists, academics and experts,

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as well as the Chair of the Select Committee on Political and Constitutional Reform, also gave evidence. When the Welsh Affairs Committee visited Scotland following the initial Silk report, there was much excitement about its proposals. Academics, economists, civil servants, Ministers and Back Benchers in the Scottish Parliament were all in favour of Silk’s proposals for Wales, as opposed to what they have in the Scotland Act 2012.

I need not remind Labour Members present that the Labour First Minister, Carwyn Jones, said that the lockstep is a “Tory trap” and that it should be removed. He said the lockstep was “a long way short” of what was considered to be good for Wales, adding that

“binding the rates together is not right for Wales”.

That is a clear indication of the need to remove the lockstep on income tax varying powers.

We in Plaid Cymru are seeking, through amendment 21 and several other amendments, to maintain the integrity of the original cross-party Silk commission recommendations. We believe that the Welsh economy needs that sensible package of reforms in order to increase its ability to bring about economic growth and create jobs. We believe that it is a necessary tool, which will help us to begin to rebalance the economy of the British state by giving greater power to the nations and regions, and will help Wales to begin to lift itself from the bottom of the UK economic league table.

In its present form, the Bill requires Wales to hold a referendum on the lockstep model of income tax and win it in order to gain access to the higher limit applying to borrowing to fund investment. We believe that Wales needs access to that money in order to invest sensibly in infrastructure, secure a good return on its investment, and provide jobs that will have a beneficial effect on the state of the Welsh economy. We are all mindful of the huge cuts in its capital budget that the National Assembly has suffered under the coalition Government.

Given that the lockstep was not the compromise agreed by the parties during the Silk commission’s deliberations, it would surely make more sense to devolve the model without the need for a costly referendum. It is simply an income tax sharing model, with a 90-10 split between the United Kingdom and Welsh Governments. Giving the Welsh Government the ability to vary tax is a theoretical exercise that, as the Treasury well knows, cannot become reality with a lockstep—hence the strings that are attached in the Bill. The big prize of what we propose would be the increased borrowing capacity that I believe is required to help the Welsh economy to regenerate and renew itself.

It is clear that all the other parties are now putting narrow self-interest ahead of the Welsh economy by attaching conditions and caveats to Wales’s gaining of greater fiscal and financial powers. The Tories and Liberal Democrats have their condition of the lockstep, while Labour has its caveat in regard to reform of the Barnett formula, on which its members continue to contort and refuse to commit themselves despite citing it as a precondition for greater financial powers for Wales.

As for the debate in Wales, Andrew R. T. Davies and Kirsty Williams have announced some exciting tax policies that they wish to pursue in relation to the ability to vary taxes. Unfortunately, their colleagues down here in London are completely undermining what they have pledged to

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the people of Wales in various policy announcements. That is a big hit to their credibility, which may be why the Secretary of State introduced the lockstep: perhaps he wanted to undermine Andrew R. T. Davies.

There has already been much public debate in Welsh civil society about the issue of the lockstep and the power to vary income tax bands individually in Wales. There has been controversy as the lockstep row has engulfed the Conservatives. The Welsh Secretary has claimed that the mechanism would not prevent Welsh Ministers from using the powers—although they have not been used in Scotland since 1999—and has suggested that a 1p cut across all three bands would increase Wales’s competitiveness, a claim which, according to the Welsh Government, would cost £200 million a year. Meanwhile, the leader of the Conservatives in the Assembly rejected the lockstep in his submission to the Welsh Affairs Committee hearing on the powers, prompting a damaging fall-out with the Secretary of State. All the Tory Assembly Members were seconded down here to No. 10 Downing street to try to repair some of the damage.

We are often given the impression that it is the Treasury that does the overruling in all these matters. If Scotland does not have it, Wales surely cannot have it. However, the ability to vary income tax bands individually, as per Silk, would truly allow for the ability actually to vary income tax in Wales, and would be a significant step in the maturing of our democracy. As I said in our first debate this afternoon, it would provide a very positive narrative for the Westminster parties in relation to Scotland, demonstrating that they were serious about reforming the settlement of the UK and going beyond what Scotland has at present.

Mr Mark Williams: As the hon. Gentleman knows, I have a great deal of sympathy with him in regard to the lockstep, and, indeed, with one of his Select Committee colleagues who voted to remove it from the Bill. However, he is ending his speech—I think it is coming to an end: I think he has reached the last sheet—on an incredibly negative note. Does he accept that, in ensuring that our National Assembly has fiscal accountability, the Bill still represents a huge advance on the status quo? I sincerely hope that he will support it on Third Reading for that reason, whatever happens to his amendment this evening.

Jonathan Edwards: Of course the hon. Gentleman is right. We do support the Bill, but we want to use the opportunities provided by the Committee stage to strengthen and improve it. In my view, the lockstep is one provision that needs urgently to be removed. If the United Kingdom Government are determined to introduce it, let us devolve it in the Bill and then have a referendum on its removal. Why have a referendum on the lockstep mechanism?

The Secretary of State has spoken before of his belief that Wales needs the ability to vary income tax in order to be competitive—spoken as a true Conservative—but then does not offer a power that actually allows for any variation in income tax. That is the huge contradiction in the Bill as it stands. It is time for him and his Government to put their money where their mouth is and support our amendments—I am not holding out

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much hope—and for the Labour Members present to support what their party in Wales is saying by supporting us in the Lobby later.

Glyn Davies: This is a very important debate. The Bill is incredibly wide ranging and has lots of aspects to it, but the one issue that dominates it, as much the most important aspect, is the devolution of meaningful tax-raising powers to the National Assembly for Wales, and that involves a significant part of income tax. In doing that, the Bill will deliver financial accountability to the Welsh Government, which has been lacking since the National Assembly for Wales was established.

Let me give some context by saying something about my own background. In 1997, I was opposed to the establishment of the National Assembly for Wales, because I thought we were considering setting up a body that was not meaningful. I recall being at the count in Llandrindod Wells when the result for Carmarthenshire came through, and there were great celebrations because a yes vote had been snatched from defeat at the last minute. I recall driving home and thinking to myself that that was a key moment, and from then on I have taken the view that the National Assembly for Wales should have law-making powers and meaningful tax-raising powers. If we did not have those two powers, we were creating something that was simply not worth while. That is why this Bill is particularly important and we are dealing here with the key part.

It does not make any sense to have a Welsh Government who claim credit and say how good they are whenever they do something the people of Wales approve of but whenever something is done that the people of Wales do not approve of say, “We cannot do that because we do not have enough money from Westminster.” They transfer the blame, and they do not become a meaningful body until they are responsible for raising their own taxation. All of us know that from other things we might have done in our lives. When I was chair of Berriew community council, a very small village council, the biggest debate we had in the year was about whether we should levy 1p on the rates, just as a precept. It was much the biggest debate because it involved balancing what we wanted to spend with the demands on the ratepayers and it made us think clearly about the decisions we were taking. The same thing applied when I was the finance chairman of Montgomeryshire district council. We had an all-day debate every year about 1p on the rates, because again it was about balancing what the council wanted to spend against what we wanted to raise. That is what has always been lacking in the National Assembly.

I was a Member of the Assembly for eight years, at one stage being the finance spokesman, and I would never use the term “budget” as to my mind it was always an annual spending plan. It was not a genuine budget because it was not informing the people that it wanted money from them and that a balance was being struck between spending and demanding money from the ratepayers. So I am strongly in favour of the income tax proposal, because it is hugely important and it is why I really welcome the Bill. There are other parts of the Bill where my support is at varying levels, but the income tax proposal will be crucial.

My right hon. Friend the Secretary of State will know that I have always had some doubts about the need for a referendum. If we believe passionately that a

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body must have tax-raising powers to be a viable parliamentary body, we should commit ourselves in our manifestos to going forward with this proposal and then delivering it afterwards. I have come to accept that for two reasons, one of which is that there is a general expectation because of the referendum in Scotland that there will be a referendum on income tax-raising powers in Wales.

The second reason is that I want to stay as true as I can to the Silk commission report, which recommended a referendum, and all parties signed up to that. In pursuing this issue, I think I have to accept that there will be a referendum.

There has been a lot of discussion about the lockstep and the lack of freedom for the Welsh Government to vary individual rates. There will be different views on that, but I perfectly accept the rationale of the argument of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). I must say though that it diverts us from the huge step forward that the Bill represents.

8.15 pm

The Bill gives the National Assembly for Wales—the Welsh Government—financial accountability for what they do. We have two days of debate in Committee. By giving income tax powers to the National Assembly, we are trying to create the foundation stone on which we can build a proper body in Cardiff Bay, serving, and answerable to, the people of Wales with true financial accountability. For that reason this proposal and the Wales Bill itself deserve our full support.

Owen Smith: It is a pleasure, Mr Hoyle, to serve under your chairmanship, and to call you by your true name. This clause is one of the most important in the Bill, so it is a shame that we do not have a huge amount of time to discuss it. There are many important questions about how it will work in practice in Wales. The Exchequer Secretary attempted to answer some, but not all, of those questions, and there remains significant uncertainty as to how income tax varying powers would work in Wales and what the real risks would be to the Welsh Government’s budget and to the services on which the Welsh people rely through that budget.

I take some comfort from the Minister’s observation that there is probably a long time between today and these measures being deployed in anger in Wales. Crucially, from our perspective, we have been clear about the triple lock—about knowing that this would be good for Wales and for the Welsh budget, that fair funding was secured for Wales and that the Welsh people had assented at a referendum to these measures being employed in Wales. All of those three tests would have to be passed.

However, there remains on our part significant concerns about the motivation behind these proposals from the Conservative Government. We are suspicious that the true motivation is to cut taxes in Wales for the wealthiest, as the current Government have done across the rest of the UK. That suspicion is based on a very clear reading of the statement made by the leader of the Conservative party in the National Assembly, who, in a wide-ranging speech last year, explicitly called for cuts solely to the top rate of tax in Wales. This is not a fantasy on our part. The leader of the Tories says that he wants to cut just the top rate, and the Secretary of State wants tax competition through cutting across the board.

30 Apr 2014 : Column 956

Mr Gauke: The hon. Gentleman will be aware that, under the provisions in this Bill, a tax cut for one rate of income tax will apply to every rate of income tax. Does he understand that point, because that is what a lockstep means?

Owen Smith: I entirely understand that point, absolutely, completely and utterly. I also understand that the leader of the Conservative party in Wales has placed on the record his desire to cut solely the top rate of tax—[Interruption.] The Secretary of State is muttering from a sedentary position. I presume that he is referring to his colleague, the leader of the Tory party in Wales, because it was he who called for a cut to the top rate of tax. We understand perfectly well how this legislation will work in Wales, but we are not in favour of any one part of Britain undercutting another through tax competition, which is unfortunately the position of the Secretary of State for Wales—[Interruption.] He keeps chuntering from a sedentary position that I do not understand it, but, dare I say, if he had greater faith in his own understanding of his own Bill, introduced in this House with amendments tabled in his name, he would stand at the Dispatch Box to explain the Treasury position and the tax amendments. Unfortunately, he clearly does not understand it sufficiently not to have to rely on his colleague the Exchequer Secretary. We are extremely grateful to the Exchequer Secretary for turning up to act as a human shield for the Secretary of State for Wales, but it is a crying shame that the Secretary of State and the Minister require his support.

Mr Gauke: There is no doubt that the Secretary of State understands the measure but, given what we have heard so far from the shadow Secretary of State, perhaps it would have been better if one of the shadow Treasury team had been making the speech instead. They might have understood it.

Owen Smith: The Exchequer Secretary can continue to attempt to suggest that I do not understand the Bill, but I understand it perfectly. I understand perfectly how lockstep works, but equally understand that this Government have cut taxes for the wealthiest in Britain. They have exclusively cut the additional 50p rate to 45p. I also know that his party in Wales has proposed that it would like to go further with Wales, so he will forgive us if we are suspicious of the “tax cuts for the wealthy” motives of the Conservative party. I think we will continue to be suspicious. Unless he would like to get to his feet and tell us that he does not intend that his colleagues in Wales should cut taxes for the wealthiest, I suspect that he will not wish to intervene further.

On the subject of the complexity and cost of the Bill, the Exchequer Secretary left us entirely without answers about how it will work. In order to illustrate its complexity, I highlighted that he has today moved a poorly drafted clause that will see a Welsh Tory Member of the European Parliament who does not live in Wales and who does not have a residence of any description in Wales, but who lives in England, designated as a Welsh taxpayer. The logic of that is entirely lost on me, but I should have thought that he would want to check who his European Members are in Wales and where they lived before he determined that they would get a tax break—in her case, a £700 tax break—were his Government to do what the Secretary of State for Wales has suggested and

30 Apr 2014 : Column 957

cut all the tax bands in lockstep by 1%. That is the tax cut that she would get in Wales, despite the fact that she does not actually live in Wales.

Jonathan Edwards: The hon. Gentleman’s point about Kay Swinburne is an interesting one. Based on that, where does he expect that Stephen Kinnock will pay taxes should he be successful in winning Aberavon? Would it be in Aberavon, in Copenhagen or where he pays tax at the moment, in a tax haven in Switzerland?

Owen Smith rose—

Hon. Members: Just answer.

Owen Smith: I intend to answer. I fully anticipate that my friend, Mr Kinnock, were he to be so lucky as to win the forthcoming general election and be returned as the hon. Member for Aberavon, a great and noble seat in the Welsh Labour tradition, intends, as he has stated on the record, to live in Aberavon. The irony of this poorly drafted legislation that has been brought before us by those on the Treasury Bench today is that it would not matter where he lived. He could live in Copenhagen or in England and he would still, for the purposes of this half-cocked Bill, be considered a Welsh taxpayer. I do not think that the people of Aberavon would understand that and I suspect that the people of Wales will not understand why an English Tory MEP living in Ledbury will be deemed a Welsh taxpayer.

Let me return to the point about the complexity, if I may, and read a small section of the Bill to the Minister for the delectation of the House. It is entitled “Close connection with Wales or another part of the UK” and can be found in proposed new section 116G in clause 8. It says in subsections (3) and (4):

“T”—

the Welsh taxpayer—

“has a close connection with a part of the UK if in that year—

(a) T has 2 or more places of residence in the UK,

(b) for at least part of the year, T’s main place of residence in the UK is in that part of the UK,

(c) the times in the year when T’s main place of residence is in that part of the UK comprise (in aggregate) more of the year than the times when T’s main place of residence is in each other part of the UK (considered separately), and

(d) for at least part of the year, T lives at a place of residence in that part of the UK.

(4) In this section ‘place’ includes a place on board a vessel or other means of transport.”

I read those subsections for the enjoyment of the Leader of the House, who I am delighted to say has joined us, to point out what a ludicrously complex piece of drafting that is, and what a ludicrously complex Bill it is. We point that out because attending that complexity is cost—enormous cost.

The Secretary of State, or rather the Exchequer Secretary—the Secretary of State did not answer because he was not at the Dispatch Box—could not tell us how much it would cost to implement these measures in Wales. That is a surprise. He also talked about accountability. He might have been a little more accountable for his own Department, because it is today that the Government and his Department should have published

30 Apr 2014 : Column 958

the second annual report on the implementation of part 3 of the Scotland Act, inwhich we were anticipating, as outlined in the Secretary of State’s impact assessment to this Bill, a renewedand updated view on the costs associated with the implementation of these measures in Scotland. That has not been published today. It was not published in April as Ministers promised.

That is a dereliction of duty, not least because it leaves us in Wales with no idea as to how much these measures will cost. But we have reason to believe and to fear that it will be a significant amount of money, because we know from the first report on the implementation of the Scotland Act that it will cost more than £40 million to implement such measures in Scotland, and we know from the Government’s own impact assessment that it is likely to cost more in Wales. The reason is the porosity and populous nature of the border between England and Wales: 48% of the Welsh population and 10% of the English population live within 25 miles of that border, which means that fully 6.3 million people live along that border. In contrast, just 4% of the Scottish population and just 0.5% of the English population live within 25 miles of the border between England and Scotland, which means that just 450,000 people live along that border.

If it has taken so far, as the Government have conceded, £1.7 million to start the analysis of how these measures will work in Scotland, how Scottish taxpayers will be identified, how a pay-as-you-earn system will work, how employers will deal with it, and what the nature of the information to be provided to newly designated Scottish taxpayers will be—it is already £2 million-ish and counting, and soon to be £40 million for Scotland—do we not need to have some idea in Wales, as a part of prudent management of Treasury finances, and eventually Welsh Government—finances, of how much money it will cost the Welsh? If the Minister wants to offer us some indication, I should be grateful, but at the moment we are in the dark, and in the dark we remain concerned that the costs will be greater for Wales, and the disbenefits for Wales, therefore, potentially also greater.

In the light of the fact that there is such a long period before the measure comes into force, we will not press the amendments that we have tabled to the clause, but we will maintain our concerns about the motivations that lie behind it. We will continue to push for fair funding for Wales, not to the detriment of Scotland but in the interests of the people of Wales, and we will continue to ask the Minister to clarify what exactly this measure will mean for the Welsh people, and whether they will be better or worse off if the Bill were ever to be enacted.

Mr Gauke: After what is a relatively short speech from the hon. Member for Pontypridd (Owen Smith), I am still not entirely sure whether he is for or against it, but we are certainly for the devolution of income tax in the way set out in the clauses. I hope that the clauses and the Government amendments will have the support of the whole House, and that all other amendments will not be pressed.

Amendment 21 agreed to.

8.30 pm

Proceedings interrupted (Programme Order, 31 March and this day).

30 Apr 2014 : Column 959

The Chair put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).

Amendments made: 22, page 11, line 5, at end insert

‘at the rates provided for’.

This amendment, and amendments 27 and 28, make changes to reflect the fact that section 11B of the Income Tax Act 2007 (as inserted by clause 9) and section 13 of that Act provide for the rates at which income tax is charged rather than imposing the charge to income tax.

Amendment 23, page 11, line 14, at end insert—

‘(2A) If the Treasury consider it necessary or expedient to do so, they may by order provide that—

(a) the Welsh rate set by the Assembly for a tax year, or

(b) the fact that the Welsh rate has not been so set for a tax year,

does not require any change in the amounts repayable or deductible under PAYE regulations between the beginning of that year and such later date as may be specified in the order.’.

This amendment, and amendments 24 to 26, clarify and extend the power of the Treasury, previously in section 116I(4) of GOWA 2006 (as inserted by clause 8), by order to deal with the consequences for PAYE of a Welsh rate having been, or not been, set for a tax year.

Amendment 24, page 11, line 17, leave out ‘or (2)’ and insert ‘, (2) or (2A)’.

Amendment 25, page 11, leave out lines 18 to 26.

Amendment 26, page 11, line 33, leave out ‘(4)’ and insert ‘(2A)’.

Amendment 27, page 11, line 40, after ‘tax’, insert

‘at a rate provided for’.

Amendment 28, page 11, line 41, leave out ‘charged to income tax’ and insert

‘income which is charged to income tax at a rate provided for’.—(

Mr Gauke.

)

Clause 8, as amended, ordered to stand part of the Bill.

Clauses 9 and 10 ordered to stand part of the Bill.

Clause 11

Referendum about commencement of income tax provisions

Amendment proposed: 1, page 16, line 20, leave out from ‘Wales’ to end and add

‘where a Welsh rate resolution specifies more than one rate of income tax.’.—

(Jonathan

Edwards

.)

Question put, That the amendment be made.

The Committee divided:

Ayes 5, Noes 243.

Division No. 260]

[

8.30 pm

AYES

Edwards, Jonathan

Llwyd, rh Mr Elfyn

Lucas, Caroline

Williams, Hywel

Williams, Mr Mark

Tellers for the Ayes:

Dr Eilidh Whiteford

and

Mr Mike Weir

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, rh Sir Tony

Baldwin, Harriett

Barclay, Stephen

Barker, rh Gregory

Barwell, Gavin

Bebb, Guto

Bellingham, Mr Henry

Bingham, Andrew

Binley, Mr Brian

Blackwood, Nicola

Boles, Nick

Bone, Mr Peter

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, rh Paul

Burt, rh Alistair

Burt, Lorely

Byles, Dan

Campbell, Mr Gregory

Campbell, rh Sir Menzies

Carmichael, Neil

Clappison, Mr James

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crouch, Tracey

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

de Bois, Nick

Dinenage, Caroline

Dodds, rh Mr Nigel

Doyle-Price, Jackie

Drax, Richard

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Evans, Graham

Evans, Jonathan

Evans, Mr Nigel

Evennett, Mr David

Fallon, rh Michael

Farron, Tim

Featherstone, Lynne

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fullbrook, Lorraine

Garnier, Mark

Gauke, Mr David

Gibb, Mr Nick

Gillan, rh Mrs Cheryl

Glen, John

Graham, Richard

Gray, Mr James

Green, rh Damian

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hands, rh Greg

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Heald, Oliver

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hendry, Charles

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Hopkins, Kris

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Hughes, rh Simon

Huppert, Dr Julian

Hurd, Mr Nick

Jackson, Mr Stewart

Johnson, Gareth

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kelly, Chris

Knight, rh Sir Greg

Kwarteng, Kwasi

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Lefroy, Jeremy

Leigh, Sir Edward

Leslie, Charlotte

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lidington, rh Mr David

Lilley, rh Mr Peter

Lloyd, Stephen

Lopresti, Jack

Loughton, Tim

Luff, Sir Peter

Lumley, Karen

Maude, rh Mr Francis

Maynard, Paul

McCartney, Karl

McIntosh, Miss Anne

McPartland, Stephen

McVey, rh Esther

Menzies, Mark

Metcalfe, Stephen

Mills, Nigel

Milton, Anne

Moore, rh Michael

Morgan, Nicky

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

O'Brien, rh Mr Stephen

Ollerenshaw, Eric

Ottaway, rh Sir Richard

Paisley, Ian

Parish, Neil

Patel, Priti

Pawsey, Mark

Penrose, John

Percy, Andrew

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Pugh, John

Randall, rh Sir John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Robertson, Mr Laurence

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shannon, Jim

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Simpson, David

Simpson, Mr Keith

Skidmore, Chris

Smith, Chloe

Smith, Henry

Smith, Julian

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Stunell, rh Sir Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swire, rh Mr Hugo

Syms, Mr Robert

Teather, Sarah

Thornton, Mike

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Walter, Mr Robert

Watkinson, Dame Angela

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Claire Perry

and

Mark Hunter

Question accordingly negatived.

30 Apr 2014 : Column 960

30 Apr 2014 : Column 961

Clause 11 ordered to stand part of the Bill.

Clauses 12 and 13 ordered to stand part of the Bill.

Schedule 1 agreed to.

The occupant of the Chair left the Chair (Programme Order, this day).

The Deputy Speaker resumed the Chair.

Progress reported; Committee to sit again tomorrow.

Business without Debate

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

30 Apr 2014 : Column 962

Licences and Licensing

That the draft Licensing Act 2003 (Mandatory Conditions) Order 2014, which was laid before this House on 9 April, be approved.—(Anne Milton.)

The Deputy Speaker’s opinion as to the decision of the Question being challenged, the Division was deferred until Wednesday 7 May (Standing Order No. 41A).

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Constitutional Law

That the draft Scotland Act 1998 (Modification of Schedule 5) Order 2014, which was laid before this House on 17 March, be approved.—(Anne Milton.)

Question agreed to.

Petitions

Pub Rent Prices (Derbyshire)

8.43 pm

Pauline Latham (Mid Derbyshire) (Con): The petition, which has been signed by more than 430 people, relates to Claire and Scott Muldoon, who face eviction from the Patternmakers Arms.

The petition states:

The Petition of residents of the UK,

Declares that the Petitioners believe that it is unfair that Claire and Scott face eviction from Patternmakers Arms, a well-attended and happy pub, as a result of unreasonable increases in rent prices and further that the Government have consulted on establishing a Statutory Code and an independent Adjudicator for the pub sector to govern the relationship between large pub companies and their tenants.

The Petitioners therefore request that the House of Commons urges the Government to establish a Code to govern the relationship between large pub companies and their tenants as a matter of urgency.

And the Petitioners remain, etc.

[P001343]

HS2 Proposals for High-Speed Rail

8.44 pm

Natascha Engel (North East Derbyshire) (Lab): I would like to present a very topical petition from the Killamarsh and Renishaw HS2 Action Group, on behalf of the residents of Killamarsh and Renishaw. It calls on the House of Commons to reject the High Speed Rail (London - West Midlands) Bill, and I agree.

The petition states:

The Petition of residents of the UK,

Declares that the Petitioners believe that the HS2 rail plan for high speed rail will bring little benefit to the UK and will cost upwards of £33 billion to begin with; further that the Petitioners believe that the plans are badly thought through and will reap permanent untold damage, have no environmental benefits, are little use to this country and are an unaffordable luxury at this time; and further that the Petitioners believe that there are many more beneficial, viable, economically and environmentally sound proposals which should be prioritised ahead of HS2.

The Petitioners therefore request that the House of Commons reject the High Speed Rail (London - West Midlands) Bill.

And the Petitioners remain, etc.

[P001345]

30 Apr 2014 : Column 963

Free Schools (Chapeltown, Sheffield)

Motion made, and Question proposed, That this House do now adjourn.—(Anne Milton.)

8.45 pm

Angela Smith (Penistone and Stocksbridge) (Lab): It is a pleasure to have secured this Adjournment debate on a topic that is very important to the people of Chapeltown and the surrounding area.

Chapeltown, and Sheffield generally, is an area that enjoys a rich legacy when it comes to providing educational opportunities, whether for young or old. I emphasise that that legacy has always been very locally driven by pioneers such as Lady Mabel Smith, who was—believe it or not—the sister of the seventh Earl Fitzwilliam but was a Labour councillor who worked very hard over a number of years to provide education for local people in the 20th century. She was the driving force behind the establishment of Ecclesfield grammar school, which is now the local comprehensive serving the Chapeltown area. She was the chair of governors for 20 years until her death in 1951. Even now, Ecclesfield comprehensive, which is a very successful academy, has its assembly hall named after her—Lady Mabel hall. We are all very proud of the legacy that she has left us. The school goes from strength to strength under the inspired leadership of Joel Wirth, the head teacher.

That tradition—that legacy—has continued in recent years. We have seen the development of a sixth-form college in one of the most deprived parts of the city—Longley Park. We have seen Hillsborough college go from strength to strength. Only recently, it has enjoyed an £8.8 million investment from the Government because it is considered successful and has been judged by Ofsted to be a good college. Very recently, we have had a university technical college—a brand-new institution that is already going down very well in the city and which was driven absolutely by local employers and local educationists.

We have also seen the recent development of three new sixth forms, approved by the Secretary of State. They are all in the north of the city, as indeed is Chapeltown. They have already provided 188 additional places, and that number will grow to 460 by September 2014. However, one of those institutions—Parkwood—has had to postpone its recruitment of sixth formers because of a lack of demand for places. In addition, Bradfield school, which is just six miles from Chapeltown in the north of the city, has failed in its first year to meet its initial allocation of 50 places.

Bradfield is the most popular school in the north of the city. Places in its years 7 to 11 are oversubscribed every single year, and its reputation drives that popularity. I am confident that it will fill its sixth form in the end, but at the moment it is failing to do so. The underlying reason is the demographic decline, which is beginning to bite in Sheffield and, based on birth rates from years ago, is forecast to continue until 2020. In the seven-year period from last year to 2020, we will suffer a 12% decline in the post-16 population, and the cohort will not be restored to 2012 levels until after 2023. The fact that attainment levels are going up all the time should lead to greater demand for sixth-form places, but that demand will not sufficiently replace the lack of demand produced by the demographic decline.

30 Apr 2014 : Column 964

That all calls into question the establishment of the new, post-16 free school—Chapeltown academy—which hopes to open this September. For a start, the academy is not locally driven: it was not initiated or suggested by local people, educationists or employers. Moreover, based on the demographic decline and the fact that our new sixth forms are not being filled, the demand just is not there, despite the assertions of the academy’s proposers to the contrary. My statistics are based on those provided by the local authority of Sheffield city council, which does all the measuring, and there is no evidence whatsoever that there is demand for these additional sixth-form places. The increasing demand that does exist in the city, in common with other boroughs in the area, such as Barnsley, is for primary school places.

We also need to continue the work of building the skill set of young people in the region, given that our city, and the Sheffield city region more generally, is still broadly an engineering-based economy. On top of that, we need to ensure that we develop more fully the whole range of post-16 opportunities, because we want to develop the talent of all our young people, not just those who want to be professionals or academics. That is important, but all the evidence shows that, if we need to provide extra post-16 opportunities, the emphasis has to be on further investment in vocational training and skills.

That point is underlined by the fact that 1,200 young people in Sheffield are not in education, employment or training—the awful acronym NEETs is overused nowadays and I prefer to use the full term. That is clearly where the city needs to place its emphasis. We need more provision to help meet the needs of those 1,200 young people, who have fallen behind and need extra support to get themselves work-ready and skilled for the workplace. Clearly, there is no statistical base for opening the new academy.

There are also problems with the proposed location of the new academy. I visited the site at the weekend—I knew where it was, but I just wanted to have a good look at it. It is in the middle of an industrial park. It is a big warehouse, with office space attached to it. It is not possible to enter the area at present, because it is gated by an electronic barrier, which has a gatehouse attached to it. It is surrounded by other businesses, including a repair garage that seems to specialise in repairing heavy goods vehicles. When we visited on Sunday, a host of container-type lorries were parked in the area around the garage, which is adjacent to the proposed academy building.

The local authority planners, who are professionals, have raised serious concerns about the site’s sustainability. They are also concerned about the highways implications of the proposed site and the associated safety of students. One of the problems is that the planning process is abandoned—it is not applied—when it comes to new free schools. That does not prevent Sheffield planners from having a view and their view is absolutely clear.

The site is approximately 2 acres. The academy’s proposers suggest that there will be very minor amendments in the office space part of the building for the first year 12 intake in September. During the first year of the new institution, phase 2 site development will take place, which be in the huge warehouse—the industrial unit—attached to the office space. The proposers claim

30 Apr 2014 : Column 965

on their website that the building works will not affect or disrupt existing classroom space, which I find very hard to believe, indeed.

The industrial park is off the road that takes traffic from junction 35a of the M1 down into Ecclesfield. It is a very busy road. The travel route for many students getting to the academy from Elsecar and the rest of Barnsley will involve going to Chapeltown railway station. The website for Chapeltown academy claims that Barnsley to Chapeltown on the Penistone line takes six minutes, which is great, but it does not say that there is a further 1.7 mile walk to get from Chapeltown railway station to the academy. That walk involves going up the busy road to which I have just referred, which is not safe. Alternatively, there is a slightly shorter route up Cowley lane in Chapeltown, but that is equally busy and will involve crossing the road twice as the footpath runs out on either side. I can absolutely understand why the planners in Sheffield have serious concerns about the safety of students in accessing the site, which is entirely unsuitable.

My final point about the location is that the site has no green space around it whatsoever. The website claims that there is recreational space in front of the building for students and staff alike. At the moment, that recreational space is a car park. Where recreational space and opportunities for sport will come from is absolutely unimaginable. I know that Ecclesfield park is down the hill in the centre of Ecclesfield village, which is what the academy claims on its website, but if that is the best it can do for green space, I am sorry to say that that is just not sufficient, and many local parents and young people will feel the same.

We have concerns about the transparency of Chapeltown Academy Ltd’s development of the proposal. Of course, the planning process does not apply in relation to getting planning permission for the site, but a consultation has to take place instead. The consultation, which was online, is now closed. There were a few questions asking for all people’s details and their e-mail address, but the consultation consisted of one question: “Do you agree with the premises chosen for Chapeltown academy—yes or no?” There was also a little box for additional comments. If the local authority tried to undertake a consultation as shabby and inadequate as that, it would rightly be pilloried by elected representatives, such as me, and by local media, parents, young people and the local community. It is absolutely astounding that the academy can think that that constitutes a proper consultation on a site as controversial as this one.

In addition, at the moment there is a shadow governing body, but the details of the permanent governing body have had to be extracted from the academy bit by bit. In the end, I had to write to the Minister to start to get any kind of detail at all. Even now, the detail of how the permanent governing body will look is not complete. We have the details of only four or five of the individuals involved, which is just not acceptable. On top of that, we have very few details about the staff. The names of just three members of staff and the principal-designate have been announced.

Yet we expect young people and their parents to put their faith in this venture. It is untried, untested and unknown—and it may never happen. I quote from a letter dated 25 March that I received from Lord Nash:

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“I will carefully consider before entering into a funding agreement with the Chapeltown Academy Trust. Making certain that there is sufficient demand from students and that the institution will be financially viable are two of the factors that I will look at when making my decision.”

I come to the most important point of all. My understanding is that only 12 Sheffield students have accepted a place at Chapeltown academy as their first preference. Given that just 12 young people have taken a place at the academy, there is a strong possibility that the funding agreement will not go through. It is absolutely immoral to encourage young people to take up offers of places at an institution that might never open. What will happen if it does not open? Those young people will be left without a sixth-form place and will have limited choices from what is left. They will have the crumbs from the table when trying to find another sixth form to attend in September. Is that acceptable? I do not think so.

In summary, Chapeltown academy is not needed, it is not locally driven, it is in an inappropriate location, there is very little transparency in the development of the venture and it is risky. It threatens to let down the young people who have put their faith in the institution. Even though there are only 12 of them from the city of Sheffield, that is 12 too many as far as I am concerned. Chapeltown Academy Trust has no track record. It has come from nowhere. It is not a chain or a charity. It has no background whatever. It is untested, untried and unknown. I ask the Minister to make a commitment tonight seriously to consider backing out of the venture before it is too late and young people are left adrift in September, not knowing where to go to further their education.

9.2 pm

The Parliamentary Under-Secretary of State for Education (Mr Edward Timpson): I congratulate the hon. Member for Penistone and Stocksbridge (Angela Smith) on securing what is an important debate not just for the students, but for the communities that she represents in Sheffield, and on ensuring that the proposed free school at Chapeltown in Sheffield is scrutinised properly. It is right to acknowledge that she has made a long and distinguished contribution to education in the House and in her constituency. I believe that she was also a teacher of English at Dearne Valley college until 2003, so she speaks with authority on this subject.

I will endeavour to respond to as many of the points she has raised as possible in the short time that we are allowed for this debate. If I do not manage to do so, I will ensure that she gets the answers in writing from either myself or the Minister who is responsible for this area of policy, my noble Friend Lord Nash.

I begin with a statement on which I hope we can all agree: every child and young person should have the opportunity and choice to go to an excellent local school. That is why we are committed to providing all parents with a diverse choice of high quality provision, including free schools. One hundred and seventy-four free schools have opened and another 120 are in the pre-opening phase and are due to open in 2014 and beyond. Once they are all approved, open and full, those free schools will offer 150,000 pupil places.

Before free schools are allowed to open, the free school proposers receive a significant period of support and challenge from the Department for Education.

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There is a rigorous application process that involves a paper assessment and an interview with the proposer group. Where required, there are specific conditions for the approval. There is then the pre-opening period when groups such as Chapeltown are supported by officials as they develop their proposal further, consult the local community and work towards signing a funding agreement with the Department.

Quite rightly, as they are brand new schools, there is greater oversight of open free schools than other academies, at least until their first successful Ofsted inspection. It is worth noting that most free schools are performing well. For example, recently in Yorkshire and the Humber, Dixons Trinity academy was rated outstanding by Ofsted, despite opening only 20 months ago.

There are already six free schools open in England that cater for 16 to 19-year-olds. The first of those to open was the London Academy of Excellence, which has been rated as good by Ofsted. The others, including Chapeltown academy, are looking to open in September 2014 and beyond. Chapeltown academy will be the first purely academic 16-to-19 free school—should it be accepted—for 300 students in the north of the city.

The trust’s vision as it is laid out is to provide young people in the area with the dedicated A-level provision and support that it believes is currently lacking in the north of Sheffield. That type of provision is needed by students who have aspirations to attend some of the top universities in the country. The academy aims to open in September this year with 150 students, and it will cater for a total of 300 students when running at full capacity.

Angela Smith: The Minister has just claimed that there is demand for high-quality sixth-form places in the north of the city, yet Bradfield school—one of the highest performing and most popular schools in the city—cannot fill its sixth form.

Mr Timpson: That is not my claim; that is the trust’s own vision that it has set out. I will come on to explain how we must take into consideration—along with a number of other factors—the demand in the city for this provision before deciding whether to go ahead with the project.

As the hon. Lady knows, the Department assesses the proposal for the Chapeltown academy, and it must approve it to proceed into the pre-opening phase, which it did in June last year. There has been significant progress throughout that phase, and we envisage that the Department will soon consider whether the Secretary of State for Education should enter into a funding agreement with Chapeltown Academy Trust. I emphasise that the Department places great importance on that decision, and it is also aware of the need to do it as soon as reasonably practicable if it does go forward, so as to provide increased certainty of a sixth-form place for potential students in the local area.

The hon. Lady alluded to the fact that she has already written to my colleagues, the Secretary of State for Education and the Schools Minister, on a number of occasions, to express her concerns about this academy, which she has also articulated extremely forcefully this evening. She has helpfully laid out some valid points before the House, and the Minister responsible for the decision will carefully consider such issues before entering

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into any funding agreement with the Chapeltown Academy Trust. I will also take this opportunity to address some of the specific points the hon. Lady has raised.

On evidence of demand, in its original proposal the Chapeltown academy had—as with all free school projects—to produce robust evidence of demand for its proposed provision from parents and prospective students, and make a strong case for its proposal, citing contextual factors including the breadth and quality of the local post-16 offer. The Chapeltown academy received more than 300 expressions of interest in spring last year from students who stated that they would choose to attend the academy were it to open in 2014. As I have said, the academy will have 150 places available in the first year, and even with the delays to the announcement of the site for the academy—I will come to that in due course—the trust has already made more than 130 offers, 81 of which have been accepted to date. That figure will obviously change in due course.

We are aware that some students may potentially hold a place at another post-16 establishment—a point raised by the hon. Lady—so it is difficult to predict precisely at this stage the number of students who will arrive should the Chapeltown academy open in September. However, the academy has a robust student retention plan in place that has been shared with the Department for Education, and it will continue to recruit students to ensure that sufficient numbers are achieved.

The hon. Lady also mentioned the decreasing demographic of the 16-to-19 cohort in Sheffield and the impact on existing providers. I understand that the 16-to-19 cohort in Sheffield overall may decrease in the coming years, and that all post-16 providers in the north of Sheffield will therefore be looking to attract potential students. Chapeltown academy will have a dedicated academic provision focus and will attract students who aspire to go on to attend some of the top universities in the country. Currently, if students in the local area wish to attend a purely academic education option they must either attend provision that provides both academic and vocational courses, or travel substantial distances across the city to seek it elsewhere.

Unfortunately, time does not allow me to elaborate on the various institutions available to students in the city, although the hon. Lady referred to some of them. Part of the whole ethos of the free schools programme is to provide competition for existing providers with the aim of driving education standards across the whole sector. That is something that the Chapeltown academy will want to be able to offer to the academic students in the area.

The hon. Lady also raised concerns about the capacity and experience of the proposer group for the Chapeltown academy. We are fully aware that the skills and attributes that are valuable in writing a proposal or successfully delivering a project are very different from the skill set required to govern an academy effectively. I totally agree that a strong and effective governing body is a crucial element in the success of any educational institution. As is the case with all free schools, we expect to see a strong governing body in which any conflicts of interest are identified and addressed. That is why we have asked the trust to consider its governance arrangements to ensure that its membership has both the skills and the experience to drive through any necessary improvements. That was reiterated to the hon. Lady in a letter from the

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Minister for Schools. To that end, the revised governing body now consists of two former head teachers—one being the chair of governors, who has post-16 leadership experience—a chief executive of a local charity, a senior human resources consultant, a former director of education and skills, and a chartered accountant. We are now satisfied that the governance structure has the capability to deliver an outstanding education to its students. I understand that full details of the governing body are available on the Chapeltown academy website.

Angela Smith: Will the Minister acknowledge that that is only five members of the permanent governing body? The rest of the governing body will not be announced until towards the end of the year.

Mr Timpson: I cannot contradict the hon. Lady’s comment, but I will look carefully at the point she has made. It will need to be considered as part of the process as it continues.

The Department is aware that some of the local post-16 providers in the north of Sheffield and across the city are not in favour of the proposed Chapeltown academy. Clearly, we would not necessarily expect that to be the case, for obvious reasons. We are also aware that some of those providers have liaised directly with the Chapeltown academy to request further information about its proposal. It is for the academy trust to determine what information or financial data it is appropriate to release at any given time. I understand that the Chapeltown academy has discussed its proposal with some existing colleges and has provided as much information as it feels is possible without releasing confidential information.

As for the financial viability of the Chapeltown academy, it has supplied financial plans as required at each stage of the project, along with a business model that further demonstrates the viability of the free school. The trust will produce revised financial plans again before we consider entering into a funding agreement. Rightly, those financial plans are rigorously assessed by the Department to ensure that they are viable both from a financial and educational perspective.

The hon. Lady raised concerns about the consultation carried out by the free school trust. That is something it has to do to establish whether it should enter into a funding agreement with the Department. The Department also consults local authorities in considering a free school

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proposal. The trust has worked to ensure that it consults as many stakeholders as possible, and I understand it wrote to the hon. Lady, inviting her to attend a consultation event, along with giving her a hard copy of the consultation document.

At the time of planning and launching the public consultation, the negotiations for the Chapeltown academy’s premises were commercially sensitive, so the trust was unable therefore to release the details of the proposed premises at that stage. Respondents to the consultation were informed that the trust would consult the public again regarding premises in due course. It has now run a separate public consultation regarding the premises, which opened on 12 March and closed on 2 April. The trustees are considering the responses received and will publish a supplementary report. I know that the hon. Lady will be interested in its contents.

Officials from the Department also sought the views of local authorities in Sheffield, Rotherham and Barnsley. As with all free school proposals, the responses from this consultation, along with the consultation undertaken by the trust, will be duly considered before we decide whether to enter into a funding agreement with the trust. The next steps are for officials to collate all the evidence in relation to the Chapeltown academy proposal, and for Ministers to consider whether to enter into a funding agreement with the academy trust.

I know that the Chapeltown academy has taken the approach of sharing as much information as it can publicly regarding the new academy. As the hon. Lady said, it is proposed that the free school will be located in an industrial unit on the Hydra business park. It is intended that temporary permitted development rights will shortly be applied for to enable the school to use part of the existing office space for one academic year. A full planning application for change of use and external alterations will also be submitted for the permanent building, so there will be some planning oversight of the facility.

As with all free schools, a wide range of factors is considered before entering into a funding agreement. We remain confident that the Chapeltown Academy Trust has produced the material necessary, but it remains for it to make its case.

Question put and agreed to.

9.15 pm

House adjourned.