I think the Minister deliberately misunderstood part of my last intervention. Our interest in the Labour Party is in doing what is the best for Wales. We are not necessarily opposed to lock-step; we simply say that we have to proceed with extreme caution. We would abstain, if pushed, as we did in the Commons. We are simply saying be careful, this is a slippery slope and you have to do this in the context of the broader UK discussion. The second lock we would want to look at is to allow for a system that would ensure that there would be no change in terms of income tax powers unless and until we could be assured that Wales would not be worse off. We want to see a period of assignment to carry out an assessment to see what the real costs and benefits are to Wales of the introduction of income tax. The third lock, of course, is the one to which my noble friend referred just now—a fair funding mechanism for Wales. Until everybody understands that Wales is being short-changed by Barnett and something is done
about it, it would be a very unpopular move in Wales in the long term—we would be locked into a system where we were permanently disadvantaged. I am sure that we will come on to this later in the debate.
Baroness Randerson: I thank noble Lords for their contributions to this debate. The Government have been consistently clear that the decision on whether to trigger a referendum on the devolution of income tax is a matter for the Assembly and the Welsh Government. I say that in response to the noble Lord, Lord Elystan-Morgan. Clause 13 empowers the Assembly to trigger a referendum to ask the electorate in Wales whether they want some of their income tax to be devolved. The Government agree with the Silk commission that the 2011 referendum on full lawmaking powers for the Assembly provides the best model for conducting such a referendum. Clause 13 replicates for the most part Section 104 of the Government of Wales Act. The clause provides for the Welsh Government to move a resolution in the Assembly to trigger a referendum. If the Assembly passes the resolution by a two-thirds majority, the First Minister must ensure that notice of the resolution is given in writing to the Secretary of State. The Secretary of State or the Lord President must lay a draft order before Parliament within 180 days. I refer the noble Lords, Lord Wigley and Lord Elis-Thomas, to Clause 13(3)(a) and (b) on page 18 of the Bill:
“the Secretary of State or the Lord President of the Council must lay a draft of a statutory instrument … the Secretary of State must give notice in writing to the First Minister of the refusal to lay a draft”.
The first thing I asked when I read the Bill was, “In what circumstances could the Secretary of State refuse?”. I was advised that the only sorts of grounds on which a Secretary of State could refuse would be where there was genuine doubt about the procedures of the Assembly that led to the two-thirds majority being obtained or whether it had been obtained.
Lord Wigley: Where in the Bill does it say that those are the only circumstances in which the Secretary of State can refuse to do so? Why must it take up to 180 days for such a decision to be taken?
Baroness Randerson: The Bill does not give those reasons. The legal advice I was given related to tried-and-tested constitutional principles. Dare I say it, the noble Lord is now asking for more to go into the Bill and in the previous debate he was asking for it to be reduced.
Lord Elystan-Morgan: My Lords—
Baroness Randerson: I will just answer the noble Lord’s intervention and then I will certainly give way.
The noble Lord, Lord Wigley, asked, both in his speech and just now, about the 180 days. I remind noble Lords that the previous referendum in 2011 took 246 days, albeit with the intervention of a general election—but we have them quite regularly. It could be that another referendum would be interrupted in such a way. I am sure that the noble Lord, Lord Elis-Thomas,
recalls that there was a tremendous scramble to make that timetable of 246 days. Our 180 days is therefore an amendment to take account of experience. I reassure the noble Lord that it is a limit, not a target.
Lord Elystan-Morgan: With great respect, I wholeheartedly agree with the noble Baroness that that is the only circumstance in which there could be any dubiety at all. My question is not irrelevant: who decides? Is it the Secretary of State who decides whether there has been a valid two-thirds majority, or it is the courts?
Baroness Randerson: That would depend on the circumstances, would it not? Someone may wish to test such a matter before the courts; I speculate here, but there might be objections lodged by certain Assembly Members. I emphasise to noble Lords that the driving seat is occupied by the Assembly in this process.
Lord Elis-Thomas: I will not pursue this matter, but I tell the Minister that if she has been given legal advice that procedures of the Assembly are in doubt, she must know that those matters are for the Presiding Officer and the Assembly itself, and must be so.
Baroness Randerson: That is exactly the view of the Government. The Assembly, as I have just said, is in the driving seat in this process.
I resume my response to the initial speeches in this debate. I point out that by opposing the question that the clause should stand part of the Bill and through Amendments 41 to 45, 47 and 48, noble Lords are of course seeking to remove important parts of a tried-and-tested mechanism which was recommended by the Silk commission. Silk is the basis of consensus. The noble Lord, Lord Elis-Thomas, referred to the importance of agreement, and so on, and the characterisation of consensus as something that the Assembly has sought on many occasions. Silk is the basis of the consensus behind the Bill. I ask noble Lords to recognise that we sometimes need a bit of choreography in order to maintain unity. That means that there has to be agreement to work in unison, although it may not always be exactly what we would prefer at any one time.
Amendments 41 to 45 would remove the need for Parliament to approve the draft order that sets out how a referendum is to be conducted, and the right of the Secretary of State to consult before such an order is laid. I repeat that all this is based on the experience of the 2011 referendum for lawmaking powers. It is the mechanism that has been agreed.
Through Amendments 47 and 48, noble Lords are seeking to provide a mechanism by which the Assembly could resolve to commence income tax provisions in this Bill without a referendum. I realise that there are those who do not believe that a referendum is necessary, but I recognise entirely the arguments put forward by the noble Baroness, Lady Morgan, that the original referendum did not include a tax question. It is therefore important that people are engaged in this debate and given the opportunity to make their voice heard. It is a fundamental, far-reaching issue and therefore the people of Wales need to be consulted.
The noble Baroness, Lady Morgan, was concerned that I had deliberately misunderstood her, which I find a distressing accusation. I invite the noble Baroness to reread what she said earlier in the debate; she might then understand why it is possible to have misunderstood her.
I therefore ask the noble Lord, Lord Wigley, to withdraw the amendment, and not to oppose the question that Clause 13 stand part of the Bill.
Lord Wigley: My Lords, I am grateful to every noble Lord who has taken part in this debate and to the Minister for her response. There has been clarification on some points, such as the 180 days and so on, which is useful.
There is, however, a central point here: whether or not this House trusts the National Assembly for Wales, the elected parliament of Wales, to take decisions such as this. I have every faith in its Members that, if there is doubt as to whether they can carry the people of Wales with them in their decision within the Assembly, they know that they may need to revert to a referendum. Of course, they have as much intelligence to provide that as we do in this House.
Lord Wigley: More, my noble friend says. In many ways, he is right: they are in Wales dealing with the circumstances of Wales. With all the good will in the world, what is done here is done for Wales and what is done in Cardiff is done by Wales. We want to ensure that they take that responsibility on their own shoulders. That is one of the driving forces towards getting a consensus of approach.
The noble Baroness mentioned choreography in getting agreement. There must have been a lot of choreography in getting all four party leaders to sign up to the Motion that is coming before the Assembly next Tuesday. It is a substantial step in the right direction. The way in which we are doing these things in Wales is different to the way in which they are being done in other parts of these islands. I think that, in many ways, we are doing them better and they will stand the test of time. We have to trust the people in a referendum, yes, but also the representatives to come to a sensible decision in regard to such matters.
I accept what the noble Lord, Lord Elystan-Morgan, said about the Barnett formula. We will be coming on to that in a later bank of amendments. Of course there has to be an acceptable basis before one moves into the income tax provisions, but we are going to have to go there. Otherwise we are not going to get the answerability that we need. Any hurdle that we put between the present position and getting those powers means that we are imposing a delay, a built-in roadblock, that stops the movement towards a more responsible and transparent national parliament for Wales. That is the background to the tabling of the amendment, and the Government should take it on board not just in the context of this debate but in the generality of the Bill. On that basis, I beg leave to withdraw the amendment.
Amendments 42 to 45 not moved.
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Clause 14: Commencement of the income tax provisions etc if majority in favour
Amendments 47 and 48 not moved.
Clause 15: Welsh tax on transactions involving interests in land
Debate on whether Clause 15 should stand part of the Bill.
Lord Rowlands: My Lords, there is a consensus that both stamp duty and landfill tax should be devolved. I have no intention of questioning that consensus. The purpose of my seeking a debate on these clauses is to ensure that we know the implications of devolving these taxes, particularly on the block grant. To date, I do not think we have concentrated on that issue.
I have some questions, first, about stamp duty. Stamp duty revenues were £115 million in 2010-11, according to the Silk commission. This represents only 2% of the total. The Silk commission makes the obvious point that stamp duty is a very volatile tax. It can vary from year to year depending on the state of the housing market. No form of indexation such as has been developed to deal with income tax devolution was recommended; in fact the recommendation was for a fixed reduction. How is the fixed deduction from the block grant going to be determined? What will be the arrangements and process, and how will it be assessed? What impact will the devolution of stamp duty have on the block grant?
The second tax that we are devolving—the landfill tax—is very different. It is a tax that is not really aimed at raising revenue. It is intended to encourage waste saving and recycling. In fact, the success of this tax would be if the revenue declined. Indeed, the Silk commission points out that that is exactly what is happening: the taxable base—that is, the volume of waste sent to landfill—is declining. Across the UK, the taxable base for landfill has fallen by 33% in the last five years, and so the value of the block grant offset would need to reflect a declining tax base. Again, there is a serious issue about what impact the devolution of this tax would have on the block grant: how it will be assessed and how it will be decided what the deduction will be.
There are a couple of other complications with the landfill tax, as listed in paragraph 24 of the March 2014 White Paper. There is a UK Landfill Communities Fund attached to the landfill tax. This fund is financed by contributions from the landfill site operators, who receive an LfT credit worth 90% of any contribution they make. This is a UK fund and a UK landfill tax
credit arrangement. However, once devolved, the operators in Wales will no longer be eligible for UK tax credits. As I understand it—and it is clearly stated in paragraph 24 of the White Paper—once we devolve the landfill tax, the eligibility for the UK-based landfill tax credits will disappear. I am not quite sure but I thought that the Minister implied in an earlier remark that in fact it would not, but according to paragraph 24, that is the case. It says:
“Once LfT is devolved to Wales, operators of landfill sites in Wales will no longer be eligible for a UK LfT credit”.
So that credit would fall. Are there powers in the Bill to allow a Welsh Government to create an equivalent landfill tax credit scheme of this kind?
In Wales, there are 24 registered landfill site operators, of which 15 were in receipt of tax credits during the financial year 2013-14. HMRC will not disclose information relating to how much the individual operators receive but the landfill communities contributed £4.19 million in 2010-11, £4.3 million in 2011-12 and £4.3 million in 2012-13 towards environmental projects in Wales.
Paragraph 24 on page 11 of the White Paper explains that there is going to be a transitional period. Will the Welsh Government, if they wish to, be able to establish an equivalent landfill tax scheme, of the kind that has been operating and which has successfully ensured that in some areas—where these landfill sites are often very controversial and have impacts upon local communities—they are able to make contributions and maintain some kind of local community fund?
The second problem identified in paragraph 24 is that:
“LfT is a key lever for the UK Government to achieve its 2020 landfill reduction target under the Landfill Directive (relating to the biodegradable municipal waste). Member states may be fined if they fail to achieve their target. In the unlikely event that the UK fails to meet its landfill reduction target solely because of changes to landfill tax policy in Wales, the Government will seek to recover this cost from the Welsh Government”.
There is an uncertainty hanging over this issue and the impact that it will have.
We are advised in paragraphs 31 and 32 of the Government’s White Paper on the question of how we are going to determine the reduction in the block grant. I would be grateful if the Minister could elaborate and explain paragraph 31 in more detail, as I have not fully understood it. It indicates some kind of proposition for the way they will handle the assessment of the reduction in the block grant once these taxes are devolved.
“The Government continues to discuss this proposal, and other options, with the Scottish Government and has now opened similar discussions with the Welsh Government”.
Could the Minister update us on these discussions? How close are they to coming to some real understanding and agreement on the basis for reductions in the block grant as a result of devolving these taxes? I hope that the Minister will give an assurance that when we come to Report, these two important implications of how the block grant will be reduced will be much clearer
and we will be able to approve these clauses in the full knowledge of the impact they will have on the block grant. I hope that the Minister will be able to reply.
Lord Anderson of Swansea: My noble friend as usual asks some very probing and cogent questions. On the face of it, these transfers of tax responsibility are relatively symbolic because, on the “bucket and the well” principle, what is gained on the one hand is lost on the other in terms of the block grant. It would be helpful if that could be elaborated on. Perhaps the best answer is that these transfers give a basis for the borrowing powers, which are very welcome, and which are contained in the Bill. Just a word of caution, however: the idea of a transfer of stamp duty has already been seized upon by other groups, notably by the Mayor of London, Boris Johnson. London, of course, has far greater resources and far more wealthy houses and land than Wales. If this were to move along the spectrum in the UK, it could have substantial implications, not least for Wales. Therefore, I utter a word of caution. However, on the other side of the coin, the borrowing powers, and the use to which they will be put—pace the noble Lord, Lord Thomas of Gresford, who feels that north Wales is likely to lose out in terms of the borrowing powers—are indeed welcome in principle.
Baroness Morgan of Ely: My Lords, Labour supports the move to devolve stamp duty land tax to Wales as it would be an obvious candidate due to the highly immobile nature of the tax base. The other issue to consider is the fact that housing is already a devolved issue. Devolving this tax would allow the Welsh Government to have a more comprehensive approach to housing needs in Wales. I echo the concerns of my noble friend Lord Rowlands about the impact on the block grant. Obviously, there would be an impact. The Command Paper states that the Government continue to discuss this proposal. However, the problem is that we are back to a negotiated agreement based on subjective decisions, so it is not as clear as we would like it to be.
As my noble friend Lord Anderson said, we have to be very careful about this issue. If Scotland and Wales opt for this measure, what will happen when London, with its £1.3 billion of stamp duty, starts to ask for it? If we go down this route, we must be very careful and do so with our eyes open. I am not saying that we should not go down this route but we should be aware of the floodgates that we might open in doing so. However, we support this tax.
The most obvious problem with the landfill tax is that the more successful the policy of using the tax as a means of getting people not to use landfill is, the less income will be derived for the Welsh Government. The other problem is that the current system of landfill does not identify the geographical location of the taxable activity, so we would have to bring in a whole new administrative mechanism as it does not exist in the UK at the moment. A danger could arise of the cross-border disposal of waste if there were a change in the rate of tax between one country and another. We need to be aware that these things could cause problems. However, as I said, the benefit is that this is
a relatively immobile tax and waste management is a devolved responsibility so there would be opportunities to co-ordinate policy, particularly in respect of the environmental aims of the Welsh Government. We are in favour of devolving these taxes given their importance in providing an independent source of income to borrow against but we should be aware of the floodgates that might open in the rest of the UK.
6.45 pm
Lord Newby: My Lords, I am grateful to the noble Lord, Lord Rowlands, for raising these questions, which are central to how these two devolved taxes are administered. As he said, stamp duty land tax is a somewhat volatile tax and is not as steady as some others. However, there is a borrowing power to deal with any volatility. As with any other body, it will be available to the Assembly to build up cash balances which could be used should it find that in a particular year stamp duty brings in less than it expected. However, the volatility is not all one way. As with the UK Government more generally, in some years the Welsh Assembly will do very well out of stamp duty land tax and may choose in such a year to set aside a certain amount against any potential property downturn.
The noble Lord’s most fundamental question concerned how one decided what the block grant off-set should be for both these taxes. As he pointed out, the Command Paper says that there is a two-part process. First, you make an initial reduction to the block grant which is based on current takings from those two taxes. That is straightforward; it is just a mathematical calculation. Secondly, you have to decide how you amend the block grant in every subsequent year. As we say in the Command Paper, a logical way to do it is by having smaller Barnett consequentials every year. However, that may be an unacceptable way of doing it from a Welsh perspective. There are other ways of doing it. For example, it could in theory be linked to overall changes in public expenditure. However, this is one of the key issues to be discussed by the Joint Exchequer Committee, which will have its first meeting next week. Therefore, I hope that by the time we reach Report there will be something further to report on all this. However, that is the mechanism for deciding exactly how the subsequent year adjustment is calculated. The key point is that it is something that will be agreed with the Welsh Assembly, rather than being imposed by the UK Government.
The noble Lord, Lord Rowlands, asked about the eligibility for UK tax credits, or rather how tax credits will be treated. It will be for the Welsh Assembly to determine what sort of tax credits it wants. If it wants to set up the same operation as we have had with the Landfill Communities Fund, it has the power to do so.
Lord Rowlands: Where is the power? Is it in the Bill?
Lord Newby: It is in the Bill. I will correct myself if I am wrong but I am sure that this flows from the point I made earlier about the ability for tax credits to be assigned to these taxes in the same way in Wales as they are in the UK.
The noble Lord, Lord Rowlands, asked what would happen in respect of the existing Landfill Communities Fund and possible contributions to Wales. The fund is financed by contributions from landfill site operators. Obviously, once the Welsh landfill tax is in operation, the eligibility under the UK fund will eventually dissipate. However, I understand that this will not happen immediately. I believe that the Joint Exchequer Committee will determine the exact mechanism for dealing with that, bearing in mind that the Welsh tax is not envisaged to be operational until 2018, so there will be a transitional period and projects that are already in the planning process, or where allocations have already been made, will go ahead.
Questions were asked about how you determine whether somebody is an eligible landfill operator. My understanding is that 13 landfill operators have all their landfill sites in Wales and would need to register for the new Welsh tax and deregister from the UK landfill tax, and that another 11 have landfill sites in both Wales and elsewhere in the UK and would need to register for the new Welsh landfill tax in respect of their sites in Wales but would remain registered for the current UK landfill tax.
The noble Lord, Lord Rowlands, asked what would happen if, as a result of Welsh decision-making, the UK failed to meet its landfill reduction targets under the landfill directive. He also asked about the meaning of the statement,
“the Government will seek to recover this cost from the Welsh Government”—
that is, if the UK were fined. Obviously, if the Welsh Government were to say that they were setting the landfill tax rate at or near zero, and as a result all English landfill operators were rushing to landfill in Wales, and we therefore missed our target, it would be reasonable for the UK Government to say, “We are being fined only because of that decision and therefore it is reasonable that the Welsh pay any fine”. We are talking about a very remote possibility, not least because we are making reasonably good progress in reducing landfill across the UK. We do not believe that we are in danger of being fined under that directive in the foreseeable future.
The noble Lord, Lord Anderson, raised a word of caution and talked about borrowing powers and their limits. All I will say is that the sooner the Welsh Assembly agrees to have a referendum, that referendum is won and an element of income tax is devolved to Wales, the greater the borrowing powers for the Welsh Assembly will be.
The noble Baroness, Lady Morgan, raised a couple of problems. I am new to this debate, but I am slightly surprised at the tone of the noble Baroness. She speaks of problems, of everything being difficult and of unforeseen circumstances. It is quite depressing. She asked about what would happen if London asked for control of its own stamp duty land tax. The English regions—not just London but the Core Cities Group, which represents all the northern cities as well as London—have argued that all property taxes should be devolved to them in the same way that stamp duty land tax will be devolved to Wales. I cannot see it being a problem for Wales as, in cash terms, stamp
duty land tax is a very small proportion of the total tax take. It will not have a significant impact on the overall level of public expenditure by the UK. Therefore any Barnett consequentials, for example, of London having control of its own stamp duty land tax, would be minimal. I would have thought—and I know that this applies to my colleagues—that Wales would welcome the thought that England would benefit from a degree of devolution in the same way that Wales expects to benefit.
Baroness Morgan of Ely: If you just look at stamp duty in London, the estimate is that £1.3 billion is collected there. That is quite significant. It is worth pointing out that that is a concern. We want to see this devolved, but I thought that the whole point of the House of Lords was that we look at something and say that there may be a problem here—let us check it out. I thought that was the point of this place.
Lord Newby: We like to do it in a positive spirit. The truth is that stamp duty land tax is a very small proportion of the overall UK tax take compared to income tax, national insurance and VAT. It is only a couple of per cent of that. It is a small tax. It is important for local areas, and it will be interesting to see what Scotland proposes to do, now that it has powers over its stamp duty land tax, to shift the balance of where that tax is borne. One of the advantages of devolving the tax to Wales is that the Welsh Assembly can choose to do something similar if it wishes.
Lord Rowlands: I apologise for interrupting the Minister, but he has mentioned Scotland. Presumably the discussions between the Government and Scotland on how the reductions will take place in the block grant to Scotland are much further down the road. May we assume that our arrangements will be very similar to, if not the same as, what will be agreed in Scotland?
Lord Newby: There is a Joint Exchequer Committee in Scotland, as there is in Wales. It will be for the Welsh Assembly representatives to decide whether the approach that is eventually adopted in Scotland makes sense for Wales. I think that there is a presumption that it probably will. The less complexity that there is in how we do these things, the better. Although there may be a presumption in that respect, there is no rule that requires it. It will be for that committee to look at Scotland and other examples in making up their minds.
I hope that I have answered the principal questions that were raised and, on that basis, that the noble Lord will remove his objections to the clauses.
49: After Clause 19, insert the following new Clause—
“Responsibility over fuel duty
Her Majesty may by Order in Council provide for the transfer of responsibility for varying fuel duty to the National Assembly for Wales.”
Lord Wigley: My Lords, I will also speak to Amendments 50 and 51, which each seek to transfer financial powers and hence strengthen the Assembly’s tax base.
Amendment 49 would transfer powers over fuel duty to the Welsh Government, so allowing that institution to address the concerns of the electorate relating to fuel costs, a problem which is particularly stark in rural areas, where people are forced to spend significantly more on fuel than in urban areas. The Office for National Statistics recognises that poorer families in rural areas spend more of their income on petrol than richer families. Plaid Cymru has long pushed for a genuine fuel duty stabiliser to cap prices at the pump when prices rise above expectations.
Amendment 50 provides the mechanism for a review of the tax receipts from Welsh natural resources. We believe that this should include the Crown Estate, which we believe should be the responsibility of the Assembly. Wales is an energy-rich nation, yet too many of its citizens live in fuel poverty. We believe that Wales should be properly recompensed for its natural resources.
Amendment 51 is aimed at transferring powers over corporation tax to Wales, in the event of this power being transferred to Scotland or Northern Ireland. I should point out that the draft Motion, standing in the name of all four party leaders in the National Assembly, supports the approach taken in Amendment 51 in relation to corporation tax, stating:
“The National Assembly for Wales … calls for the UK Government to ensure that the same powers are given to Wales regarding the devolution of corporation tax if they are provided to Northern Ireland and Scotland”.
Those are the words that are supported by all four party leaders in the National Assembly and that will be discussed on Tuesday.
We recognise that the Silk commission in its report did not support the transfer of corporation tax to Wales due to its volatility, but said that it should be considered if corporation tax were devolved to Northern Ireland, which was seen as most likely at that stage. We believe that it would be wholly unacceptable if these powers were granted to other countries and not to Wales. The amendment is drafted to ensure that, if these powers are given to those other countries, the same would happen for Wales to ensure that we are not left behind in this matter. I beg to move.
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Lord Rowe-Beddoe (CB): My Lords, I wish to speak to my Amendment 51A, which relates to air passenger duty devolution. I draw the attention of the Committee to the register of interests, in particular the reference to my chairmanship of Cardiff Wales Airport.
The UK Government’s stance on APD remains bafflingly inconsistent with the devo-zeitgeist, if I may call it that, that has so enraptured everyone over recent months. The decision to cherry pick parts of the Silk recommendations is a sad example of the short-sightedness that seems continually to put Wales behind. The Bill provides an opportunity to redress this state of affairs. I shall quote the relevant passage from Silk 1, so that I can put it on record. It states:
“We have also recommended the devolution of long haul rates of Air Passenger Duty, and consideration of full devolution in the future. We do this in the context of the wider consideration of regional airport developments across the United Kingdom associated with the independent commission on airport capacity, chaired by Sir Howard Davies”.
The UK Government position currently is that:
“APD devolution will distort competition”,
when applied to Cardiff and Bristol. This is unsound and I put it to your Lordships that that position is not supported by the European Commission guidance that defines the laws on support of regional airports. The European Commission in its latest guidelines on state aid to airports and airlines made it clear that airports with more than 5 million passengers per annum can and should run on their own steam, without any government support. Bristol has more than 6 million passengers. The Commission recognises that there is a case for government state aid being offered to smaller regional airports, and defines them as those that have between 1 million and 3 million passengers per annum. Cardiff currently handles just over 1 million. The Commission also states that if airports are more than 100 kilometres apart, then they have, by definition, different core catchments, and aid to one will not affect aid to the other. I can assure noble Lords that Cardiff Airport is more than 100 kilometres from Bristol Airport—I have actually used my tape measure—and each certainly has different core catchments. It is my contention that aid to one will not affect the other. It is therefore my contention that the UK Government’s current position is flawed because they could not make a legitimate case, underpinned by EC guidance, that aid to Cardiff distorted competition with Bristol.
The Welsh Government have a long-standing policy of lobbying for full devolution of air passenger duty, with a view to abolishing it. I was informed this afternoon that all four party leaders have agreed to propose again the abolition of long-haul air passenger duty. The Commission on Devolution in Wales, Silk 1, recommended that long-haul air passenger duty should be fully devolved. So where are we? This is a very important factor regarding competition. Belfast was given such devolution on the basis that it is near to Dublin. I do not think that it is 100 kilometres distant but Belfast was given it anyway by the UK Government. I bet my bottom dollar, if I may use such vulgarity in your Lordships’ House, that Edinburgh will be after this in a flash when it gets whatever it is going to get in the future.
I put it to noble Lords and the Government Front Bench that this situation is very serious for us in Wales. The Howard commission recognised the importance of regional airports. This is the one regional
airport of our capital city in Wales, and has to be provided for and helped. That is the point of my amendment and I ask the Government to consider it.
Lord Anderson of Swansea: My Lords, I have two brief comments—one on the varying of fuel duty and the other on air passenger duty.
I hear what the noble Lord, Lord Wigley, says and the assumption is that we as a people are relatively poor in Wales in terms of prosperity when compared with much of the rest of the UK. That is certainly true and, therefore, the assumption is that he would wish to reduce fuel duty rather than increase it. If that duty were to decrease, I can imagine the Luxembourg precedent happening. Those of your Lordships who know that country will know that fuel duty is lower there than in the adjoining countries, so there are large queues at all the filling stations in Luxembourg of people who come across the border. One can imagine similar occurrences over the border in Cheshire, Herefordshire and elsewhere, the sorts of problems that would arise as a result, and the complaints that would be made if there were to be a reduction in fuel duty.
I hear what the noble Lord, Lord Rowe-Beddoe, said about air passenger duty and different core catchment areas. I come from Swansea and I should have thought that Bristol and Cardiff are, frankly, within the core catchment areas. I can see nodding from the direction of Newport. This is not like the precedent in Northern Ireland, where there is no immediate competitor. Bristol and Cardiff are very close and, in my judgment, the passenger catchment areas are similar. There is therefore a substantial difference in this situation and there could be real problems in seeking to provide greater competitiveness for Cardiff, which could only be at the expense of Bristol.
Lord Rowe-Beddoe: It is not my idea of a catchment area but the European Commission’s, and the figure of 100 kilometres between two regional airports is in the Commission’s guidance. I again submit that Cardiff and certainly Swansea are not within the Bristol catchment area, as defined by the European Commission.
Lord Anderson of Swansea: That may be the definition of the European Commission but I speak on a matter of reality and look at it from the perspective of those who travel from those airports.
Lord Rowe-Beddoe: With respect, the journey from Swansea to Bristol is considerably longer than the journey from Swansea to Cardiff.
Lord Thomas of Gresford: Surely the distance between Bristol and Cardiff and the services provided from Bristol are such that Bristol sucks people out of south Wales to use the additional services that fly there. That is why it seems to be in competition. What we are after is the development, the building-up, of Cardiff. If it comes within the European definition, that must be good enough.
On the issue of fuel duty, I understand that provisions have been made in Scotland to reduce fuel duty—I stand to be corrected—if you are more than 100 miles away from an oil refinery. In Wales, we have rural areas and people who are very much dependent on the use of
motor vehicles—almost exclusively so in parts of Wales. However, Milford Haven, which is not built to supply Wales, happens to be within that 100-mile area in the south; and, of course, we have Ellesmere Port in the north. Consequently, the reduction of fuel duty, as happens in Scotland, does not happen in Wales. However, that ignores reality. It ignores the fact that the needs of the rural population of Wales are just as great as those in the highlands of Scotland. They suffer the same impoverishment as they do in the highlands of Scotland, perhaps even more, and accordingly there is a case for taking fuel duty under the wing of the Welsh Assembly. That does not necessarily mean applying it to the whole of Wales, so that we have queues of English people in Gresford from across the border, which is not something that I would wish to see. That is not the idea at all. It would enable the Welsh Assembly to vary fuel duty with regard to the needs of the people of Wales, which I think is very sensible.
Baroness Morgan of Ely: It is worth putting on record the Labour position on some of these points. First, in relation to fuel duty, we think it will be impossible to organise separate fuel duties within the United Kingdom and probably very difficult to comply with European Union rules within countries. Those cross-border issues we have just heard about could be quite complex and difficult to police. That would be a problem for us. Of course we have genuine sympathy for the problems relating to the cost of fuel in rural areas, but we do not think that this is the mechanism by which we should be addressing it.
On natural resources tax-sharing arrangements, we do not agree that this is a good idea. Wales is not sitting on vast quantities of oil like Scotland’s and a key point to remember is that we do not tax energy production from wind, wave and water in the same way as we do barrels of oil, so there would probably not be much in terms of tax return anyway—we would probably have to invent new taxes. On the issue of corporation tax, one of the most disappointing aspects of the Scottish referendum campaign was to see Plaid Cymru members actively supporting independence for Scotland. It was not surprising but was a little disappointing, because we know that one key thing Alex Salmond wanted to do was to reduce corporation tax 3% below that of the rest of the UK. That would have done untold damage to Welsh companies. It would have adversely affected Welsh companies, so we did not understand why Plaid Cymru was quite so enthusiastically supporting independence.
Lord Elis-Thomas: I spoke on this matter in this House during a debate in June. Let me make it clear that my support was for the right of the Scottish people to express their own self-determination. They have done so, with marvellous consequences for the rest of us. We would not be debating in the way we are tonight if they had not done that.
Baroness Morgan of Ely: That is great to hear, but there are some aspects of Salmond’s policy commitments that I think would have been problematic for Wales and it is worth noting those.
Lord Thomas of Gresford: Does the noble Baroness agree that all the things we have been discussing tonight are levers—things such as airport taxes—that we can use to increase prosperity in Wales to an equality with the rest of the United Kingdom? These are levers that would achieve a balance between the various nations in the United Kingdom. That is what it is all about. If you have a power to vary corporation tax, for example, it may be something that you exercise for a certain period in order to pull in industry, and then you may feel that you face competition from elsewhere and you should drop it. These things are all economic levers to achieve equality of prosperity in the United Kingdom.
Baroness Morgan of Ely: I understand that, but I also think that we should be aware of the dangers of a race to the bottom. That is my real concern. We have already seen that it is hard enough to get many of these corporations to pay their taxes at all, so for us to encourage corporation tax competition within the UK would be very problematic. The problem is that if you reduce the tax take, you start to have to cut services, and that becomes a problem. It means that our schools and hospitals have to be reduced.
On the issue of air passenger duty, it is worth noting that this is another issue where there has been cross-party agreement on devolution, on the basis that if this is provided to Scotland and Northern Ireland in the same way as corporation tax is, then we should be allowed to review it in Wales as well. The point is that if they are going to do it, of course we want to be part of that game. What we cannot have is them going off by themselves. That would be problematic. It is why Scottish independence was a problem for us.
Lord Wigley: I am grateful to the noble Baroness for giving way. She has warned about a race to the bottom as a reason to avoid this, but she then says that Scotland might do it, that that is the first step in a race to the bottom and that we should then do it. Is she not embarrassed by the fact that her party leader signed up to this in the Assembly and she has difficulty in selling it to her group here?
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Baroness Morgan of Ely: Not at all. Let me be clear: we in the Labour Party are not encouraging this; we do not want it to happen. At the moment we are not in charge of the government of this country. If it is introduced by the Government, then, of course, we want to make sure that we have a fair crack of the whip, so that Wales can compete as well. We are not encouraging this, though.
Lord Newby: I shall take the amendments in turn. Amendments 49 and 51A seek to include explicit provision in the Bill for fuel duty and air passenger duty to be devolved to the Welsh Assembly. First, I remind noble Lords that Clause 6 of the Bill already contains the power for further taxes to be devolved to the Assembly by Order in Council and therefore the Bill does not rule out in perpetuity any tax being devolved at a future point if there is agreement to do so. I shall explain why we are not devolving these
powers in the Bill, starting with air passenger duty. As has been pointed out, the Silk commission recommended that long-haul rates should initially be devolved with devolution of all rates considered subsequently. In the Government’s response to the Silk commission we highlighted HMRC research which suggested that differential rates of APD could end up redistributing passengers rather than creating additional growth. This potential distortion, despite what the noble Lord has said, is particularly acute in relation to Wales, given the short distance between Cardiff and Bristol airports. As the noble Lord, Lord Anderson, pointed out, for many people who fly from south Wales and just across the Severn there is a real and immediate choice between those airports, which they see as close competitors.
Lord Rowe-Beddoe: Let me just point out that Cardiff—perhaps noble Lords do not know—has lost more than 1 million passengers to Bristol in the past five years. This happened because of the management of the airport at the time and the company that owned it, but there was a bleeding of that number of people. We have got to get the passengers back. It is not a distortion of competition; it is to restore the services. You require two things for an airport: good customer experience and a plane that goes where the passenger wants to go. We are desperately trying to bring people back; this is a levelling to help that situation. It is not a question of distortion. We have heard about the 100 kilometres, or whatever. Forgive me—go around the Midlands and see where the airports are. It is not a question of distortion in that sense.
Lord Newby: The noble Lord has just made my point that they are part of a single market for passengers in south Wales, or there would not have been that bleeding away. Passengers are not bleeding away from south Wales to Manchester airport because it is just too far. The point is that Bristol is within a relatively easy ambit and people are going there. The noble Lord discussed the question of distortion in respect of strict EU law, but the kind of competition we have been debating—and, indeed, his description of what has happened and how he wishes to reverse it—suggests that if we were to devolve this power and APD was reduced it could and probably would contravene the third principle of devolution, which we discussed earlier, that any change in one part of the UK should not be to the detriment of another part of the UK. The noble Lord wants it to be to the detriment of Bristol, so that there will be a balancing away from Bristol towards Cardiff.
Lord Thomas of Gresford: If I may interrupt, the noble Lord, Lord Rowe-Beddoe, does not want to do something to the detriment of Bristol—he wants to do something for the people of south Wales so that they have easy access to an airport and do not have to go more than 60 miles down the road to Bristol. I really do not see why it is not possible for the Assembly to have this power of setting a lower airport tax so that it attracts people in. It might then be possible to balance, with the use of that lever, the number of passengers going to Bristol or Cardiff; those coming from Swansea or further west may think, “Well, I’d rather go to Cardiff than to Bristol”. Eventually, you could start
equalising the airport tax again, if the economics are correct. I am sorry to repeat myself, but we are talking about putting levers into the hands of the Welsh Government. I should have thought that the Government of the noble Baroness, Lady Morgan, in Wales would welcome levers of that sort to try to do something about the Welsh economy—otherwise we are just stuck with what we have got.
Lord Newby: Noble Lords are, as ever, extremely eloquently making a case for preferential treatment for Wales, which would benefit Wales. I am just making the point that it might well benefit Cardiff Airport but that would be to the detriment of Bristol Airport. That only stands to reason. There is not going to be a sudden explosion of long-haul traffic because of a tax change.
Lord Rowe-Beddoe: In my definition of a regional airport, I made it very clear that it had between 1 million and 3 million passengers. We want to develop regional airports. Howard Davies’s commission refers to this. That is what we are talking about. Of course it would benefit Wales, if it were ever to happen. Cardiff Airport falls exactly within the categorisation made by Howard Davies and the EU.
Lord Newby: My Lords, I am sure that the Welsh Assembly, which I believe—including the Labour element of it—is in favour of devolution of air passenger duty to Wales, will continue to make the case. However, I am afraid that the Government are not at this point persuaded of it. The situation in Northern Ireland is completely different, in that it shares a land border with the Republic, which has a significantly lower rate of air passenger duty. That is its competitor.
The Silk commission recommended against devolution of fuel duty largely on the basis that member states must set a single rate for each fuel under the EU energy products directive. It also highlighted that fuel duty is a highly mobile tax base—no pun intended. As noble Lords have made clear, we could very easily see queues of motorists across the border if there was a significant disparity, which in itself makes it an unlikely candidate for devolution. So the Government accepted the Silk commission conclusion on that.
The noble Lord, Lord Thomas of Gresford, referred to the issue of whether the rural fuel scheme in Scotland might be extended to Wales. The Silk commission recommended that the Government assess whether the rural fuels scheme should be extended to remote and rural areas of Wales. It now operates in the Scottish islands and the Isles of Scilly. The Government have applied to the European Commission to extend the current scheme to areas on the UK mainland that meet strict criteria around pump price, population density and cost of fuel transportation. However, no areas in Wales were included, because they were not felt to meet the objective criteria. The Government believe that areas should experience similar characteristics to the islands in the current scheme to make the strongest possible case to the European Commission. The Government have yet to receive a response from the Commission to their existing proposal.
Amendment 51 would devolve corporation tax to the Welsh Assembly if it is devolved to either Scotland or Northern Ireland. The Government have been consistently clear that the devolved countries are different and that it is therefore right that decisions on devolution are treated on their own merits. In relation to corporation tax, the Government are committed to making a decision on devolving rate-setting powers to Northern Ireland by the time of the Autumn Statement. However, similar to the position on long-haul rates of air passenger duty, the potential devolution of corporation tax to Northern Ireland is being considered in the light of two unique features. First, Northern Ireland is competing against the Republic, which has a much lower headline rate of corporation tax. Secondly, the stated purpose of tax devolution in Northern Ireland is to help to rebalance the Northern Ireland economy. In Wales, as noble Lords will be aware, the principal aim of devolution is to increase the accountability of the Welsh Assembly and Welsh Government. Different objectives potentially require different decisions on devolution; it is therefore right that the UK Government retain the flexibility to take the right decisions for each part of the UK.
Finally, I turn to Amendment 50, which would require the publication of an independent report on options for the UK and Welsh Governments to share tax revenues from natural resources in Wales. The noble Lord in moving the amendment spoke about the resources available potentially to the Crown Estate and referred to energy. With regard to the Crown Estate, there are no provisions in the Bill to change its status, and I find it difficult to envisage circumstances in which that would happen. Therefore, I am not sure how relevant that is. On energy, I can only agree with the comments of the noble Baroness, Lady Morgan, about the fact that one does not tax wind power in the same way as one taxes a barrel of oil, and it is very difficult to envisage that we ever would do so. So I do not think that an independent report as proposed by the noble Lord would be of any real value.
In the light of my remarks, I hope that all noble Lords who have proposed amendments in this group will feel able not to press them.
Lord Wigley: I am grateful to noble Lords who have taken part in this short debate. On the amendment proposed by the noble Lord, Lord Rowe-Beddoe, on Cardiff Airport, of course we need intervention—that is the whole point of government. If we just leave it to free market forces, those areas that have difficulties with the economy will get worse and worse. I am amazed that the Government look at devolution and powers of the Assembly only in terms of answerability and do not see the central need to have intervention in the economy to build it up. In Wales, the GDP per head is 25% below the UK average, so something is going wrong. If London is not capable of sorting that out, and Westminster is not capable of sorting it out, we have to do the job ourselves. But we need the tools to do that job and to intervene, as the noble Lord, Lord Thomas of Gresford, said. Some tools may be more appropriate than others, but in the case of Cardiff Airport, when all the effort that is being made to rebuild it at the moment is in question, I find it staggering that they want just to turn it down on that basis.
On the other amendments and the reasons given against them, with regard to petrol charges we already have a massive differential. We do not see people queuing from north Wales to Chester to find cheaper fuel because there is a cost involved in travelling. The need to get fair play in rural areas should be recognised by the Government. Goodness only knows that life is difficult enough as it is without the very high petrol taxes that we have.
On the natural resources of Wales, we hear so much about fracking coming along, and we know it is a matter of considerable concern. That is a new source of energy, and it may be something that comes into the purview of government in those terms. We need those powers to be there.
On corporation tax, I again underline that there is unanimity within the Assembly to have those powers, if they are going to Scotland and Northern Ireland, and the Government in fairness should allow it for Wales, which is in competition for inward investment against the Irish Republic. The Irish Republic has this advantage, so why do we not? We need that in order to rebuild our economy. It is something that the First Minister of Wales has very reasonably asked for and I hope that the Opposition Front Bench will support the First Minister in those representations.
I was heartened by the comments made by the Minister that there are provisions for other taxes to be devolved by order. We shall have to look to the order-making system to try to ensure that we have the tools necessary to do the job.
Lord Thomas of Gresford: Does the noble Lord not agree that, if the Welsh Labour Government are not prepared to use the tools, there is no point in having these powers?
Lord Wigley: That is true of all the powers, and we have to look to the Assembly to take a responsible attitude. Obviously there are questions to consider—cross-border questions and all the rest—and the Assembly needs to make these powers work, so it is not going to do stupid things. It will take up the powers and use them in a way that moves our economy forward. I am quite happy to trust that people who give priority to the needs of Wales will do this, from whichever party they come. All I want them to have is the tools to do the job. I beg leave to withdraw the amendment.
Amendments 50 to 51A not moved.
House resumed. Committee to begin again not before 8.31 pm.
Energy: Onshore Wind Farming
Question for Short Debate
7.31 pm
To ask Her Majesty’s Government what is their assessment of the extent of onshore wind farming in the county of Northumberland.
Lord Gardiner of Kimble (Con): My Lords, perhaps I may respectfully remind noble Lords that we are very tight for time in this forthcoming debate. When the clock says four, noble Lords will have had their time.
Baroness Quin (Lab): My Lords, I am delighted to introduce this debate about onshore wind farming in the county of Northumberland. I should say from the outset that the idea of having such a debate was not mine alone but that of a group of Members of the House who live in Northumberland or who are very familiar with it and who care passionately about its landscape and its communities. I am pleased that members of that informal group are in the House today and plan to take part in the debate. The noble Lord, Lord Walton of Detchant, the noble Viscount, Lord Ridley, the right reverend Prelate the Bishop of Newcastle and the noble Lord, Lord Wrigglesworth, have all been part of a combined effort to express concern about some of the negative effects the proliferation of wind turbines in Northumberland and the number of applications for further schemes which are in the pipeline have caused. I know, too, how concerned about these issues are the noble Lord, Lord Vinson, the noble Lord, Lord Shipley, and other Members of this House.
In bringing forward this debate, I should like to stress that we have had strong support from the Northumberland section of the Campaign to Protect Rural England and the Northumberland and Newcastle Society—an organisation now in its 90th year and which has, throughout its proud history, promoted the historic buildings and the special and beautiful landscapes of our part of the world. I know that the views of these organisations are shared by many local communities and by people in Northumberland who have been affected by inappropriate onshore wind farm developments. I also recognise the role of the local and regional media in highlighting these issues. The Newcastle Journal and the Northumberland Gazette have supported many local communities in their efforts to get a fair hearing for their views.
Let me say from the outset that, in my view, this debate is not about energy policy generally or about the role that renewables can and could play in our energy mix. Among the members of our informal group, we have not discussed these matters and probably have different views about them—certainly about the energy priorities that the UK Government should have. Speaking for myself, I see an important role for renewables. By coincidence, in the week that I was involved in lobbying a Minister in opposition to a particular wind farm scheme in Northumberland, I was also having solar panels installed on the roof of my home in that county.
I am also proud to be one of the city of Sunderland’s ambassadors. I applaud the efforts of that city in seeking to establish itself as a low carbon hub—indeed the Government have recognised it as one of the low carbon economic areas. I applaud its efforts in offshore wind development and its commitment to the Dogger Bank project which could be important both to our renewables commitments and also in terms of jobs in
manufacturing and maintenance. Indeed, the four north-eastern ports of Sunderland, Seaham, Blyth and Tyne are all well placed to support offshore projects of this kind.
No, my Lords, this debate is essentially about onshore wind farms which are in the wrong places and which we feel should not have been given planning permission. It is also about expressing concern over the disproportionate amount of onshore wind in Northumberland and the fears of many of us that more and more developments are going ahead, despite the near unanimous objections to them from the county council and from local communities. I look forward to the Minister’s reply in due course, but she will appreciate that some of the issues raised in this debate also relate to the work of her colleagues in the Department for Communities and Local Government. I ask her to commit herself to discussing our debate and the contributions made with her colleagues in the other department so that our concerns can be fully considered.
A lot of statistics have been produced by the Minister’s department and by interested organisations which, I believe, show how much wind farming there is in Northumberland compared to other counties of England. I shall refer to some of these. However, it is not just a question of numbers because, in a county such as Northumberland, with its distinctive landscape of sweeping views to distant hills and to its magnificent coastline, even just one wind farm inappropriately placed can have a damaging effect over a wide area.
Indeed, I first became involved in this issue when I took a friend up to the ancient hill fort, Ros Castle, to admire the outstanding view of coast and countryside from the top. It was a clear day and I promised my friend a superb view of Dunstanburgh Castle. I was utterly dismayed to find that the view of Dustanburgh’s very distinctive silhouette was totally obscured by phalanxes of turbines.
Another striking example concerns the ancient monument which we, rightly in my view, refer to as Northumberland’s Stonehenge—the Duddo stone circle in its tranquil and timeless setting. I was delighted when the Government decided not to defend the legal challenge in that case earlier this year, but the threat to this very special monument has not gone away as a further appeal to install a tall turbine has been lodged. Obviously I hope that this will be unsuccessful. I ask noble Lords not from the north-east to imagine what the national outcry would be if a similar proposal were being envisaged for Avebury, or indeed for Stonehenge itself.
Northumberland’s contribution to onshore wind capacity in our country is already very considerable and we produce far more than we consume. Northumberland’s consumption of electrical energy is just over 0.5% of total consumption, yet it accounts for 10% of all consented onshore wind power. From the department’s own figures, we see that our county has virtually twice as much onshore wind consented in our one county as in all seven Home Counties—Berkshire, Buckinghamshire, Essex, Hertfordshire, Kent, Surrey and Sussex combined.
The Northumberland and Newcastle Society points out that over half of the counties of England have approved less wind than a tenth of that approved in Northumberland. In a perhaps entertaining statistic, Northumberland has apparently over 100 times as much wind capacity as that permitted in the home counties of Ministers of the Department of Energy and Climate Change. Yet, despite such figures, there is an argument for saying that the terrain of Northumberland—due to the Pennine hills and the Cheviots—is not ideal for onshore wind because the fundamental wind resource is not strong. So why is there such huge pressure on this unspoilt county to accept more and more unwelcome developments?
Particularly worrying are the figures which seem to show that there are more examples in Northumberland of schemes which have been opposed both by local people and the county council and then subsequently overturned and allowed by national inspectors and therefore by national government. My understanding is that Northumberland has been overruled at a rate twice that of the next county in that particular league table.
We have also seen that the level of subsidies for such onshore wind schemes have proved particularly attractive to outside investors, but these same investors often have little or no loyalty to the local communities who have to live daily with the effects of the investment. It is true that such subsidies can be accompanied by pledges on the part of the investor to give a financial donation to some local amenity. However, this is little consolation to those communities where over 90% of the people objected to the scheme in the first place, and indeed such promises of local financial aid are often viewed as little more than a bribe. Sometimes these investors are seen as the new generation of Border Reivers—making a quick raid, for huge profit, and then disappearing without suffering the consequences.
Consumers ultimately have to pay for such generous subsidies, and this does look like an example of the poor subsidising the already well off. I should, however, like to pay tribute to those landowners in Northumberland who have resisted the temptation and refused the sizeable carrots dangled in front of them, and who have shown their concern for our landscapes, for our communities and for the future of tourism, which in recent years has become such an increasingly important part of our economy.
There is one other point which I have become aware of in the battles that have taken place on this subject. It is difficult in a county of low density and low income such as Northumberland to mount expensive legal challenges to the planning process. Therefore, I believe that those of us who are aware of these problems need to take every opportunity to highlight them.
I realise that time is short, so I say in conclusion that I hope that the Minister will be able to respond positively not only to the points raised by speakers today but to the concerns of the people of the affected communities. Indeed, I hope that the Minister and her colleagues will visit the county, see the actual and planned projects that I have mentioned, engage fully in tackling the problems which have already been
created and act to prevent further damaging schemes going ahead. I look forward to hearing what other contributors have to say in this debate.
7.41 pm
Viscount Ridley (Con): My Lords, I congratulate the noble Baroness, Lady Quin, on securing this debate and on her eloquent introduction to it. She is truly a great champion of Northumberland and the north-east.
I declare my interests in the energy industries as listed in the register, and that includes an interest in opencast coal, so I am not against development in the countryside per se. As long as it provides good jobs, supplies affordable energy, does not stick up above the horizon and does not last for very long, I think it is an excellent idea.
Northumberland, as the noble Baroness, Lady Quin, said, is an incomparable county. It is the county of Cuthbert and Hotspur, of Cheviot and Bloodybush Edge, and of Delaval and Dunstanburgh. The battles of Otterburn and Flodden, which are redolent of our history, have now been joined by less bloody but still very contentious battles, such as Fenrother, Wandylaw and Middlemoor. These are names of wind turbines that have been bitterly opposed by local communities. Virtually no community in Northumberland has been unaffected by these battles, and often it has split them, and families, right down the middle.
Yet Northumberland is, on the whole, bearing this pain on behalf of others, because there is no great net benefit to the county itself. These wind farms do not create great numbers of jobs, most of the profits do not stay in the region or even in the country, and they leave a legacy of high electricity bills, which go to subsidise the rich and are mostly paid disproportionately by the poor. Therefore, I challenge the party opposite to follow the courage of the noble Baroness, Lady Quin, in questioning whether it really is such a good idea to champion this regressive policy.
Meanwhile, I would say that this form of energy is having very little measurable effect on the climate and is unlikely to do so. It produces very little measurable benefit for the bird life—in fact, on the contrary, birds such as eagles are often killed by these turbines—and there is no benefit for the landscape. Indeed, in particular it is blighting tourism in many parts of the world. Many people believe that Northumberland’s potential for tourism is being seriously affected by wind turbines.
And all this to provide electricity for others, because the juice goes south from Northumberland to provide other people with light. We are delighted that people in the south want to turn their lights on but, as the noble Baroness said, Northumberland consumes just 0.6% of England’s electricity but produces 10% of England’s wind energy. It is doing far, far more than its share. From wind electricity it produces 172% of its total electricity needs—in terms of ratio, double that of Scotland.
This issue is of course for the planners but the county council is often overwhelmed by applications. There are many of them. The council finds it very hard to get the resources together to deal with them, and it is in a very difficult position. It needs support
and guidance from a national level on how to cope with this flood of applications. As the noble Baroness, Lady Quin, said, the county has a relatively small population to support battles of this kind.
I hope that the Minister will agree to look at this iniquitous imbalance, which was never envisaged when we embarked upon the dash for wind. We never envisaged that the weight of this industry would fall so heavily on one county rather than be distributed equally across the country. I hope that she will agree to look at the planning system to see whether there is some way of equalising the balance. Why must the people of Northumberland bear the brunt of this often bonkers policy? Why must we spoil our landscape so that rich landowners can grow richer and rich Greens can look more smug? As the noble Baroness, Lady Quin, said, here is the final irony: Northumberland is not even that windy a county.
7.45 pm
Lord Giddens (Lab): My Lords, I, too, congratulate my noble friend Lady Quin on having initiated this debate so ably. I want to take an unusual and, one might think, improbable tack in this debate.
Everything today is simultaneously local and global, so I am going to look at the case of Northumberland in relation to countries that have a lot of experience of wind power: Denmark, Portugal, Germany and Japan. There is a remarkable similarity across the world in terms of the dilemmas and struggles that arise. I shall mention three here. The first is “Not in my back yard”, which is more or less universal. Most people in most countries are in favour of wind power but much less so if it is very close to them. The second, which is the opposite to that and has just been referred to by the noble Viscount, Lord Ridley, is also found almost everywhere. It does not have an acronym, so I invented one. I call it GMPML, which stands for “Get maximum profit from my land”. It pits landowners against local communities everywhere. Thirdly, there are real and justifiable concerns in many cases about the harm done by wind farms to areas of natural beauty and wildlife. All three are visible in Northumberland.
We can and should learn a lot from other countries that have a longer experience of these problems than we do. Against this backdrop, it is not surprising that there has been so much turmoil in Northumberland, given the haphazard and erratic relation between the wind farm companies, local communities, local councils and national government. In my view, it is right that an increasing number of projects have been blocked. Radical localism, suggested by some, is not the answer. I agree with the recent report produced by the Campaign to Protect Rural England, which calls for:
“A strategic, plan-led approach to developing renewable energy infrastructure, locally and across planning boundaries”.
We should note that there have been very rapid developments in offshore wind power—these are not remote; they are here—such as those involving floating platforms. Investing in developing or appropriating such innovations should be a key part of national energy strategy. Problems of corrosion are being resolved. Moreover, out at sea there can be far higher continuity of operation, compensating in some part for the higher
initial start-up costs as compared with onshore wind power. What is important in Northumberland, as it is throughout the country, is to get an appropriate mix of all these elements.
To conclude on a comparative note, however, I suppose that I feel more favourable towards wind power than the noble Viscount, Lord Ridley. There are some days, famously, in which Portugal has supplied more than 90% of its electricity from wind power alone, and that shows what can be achieved. However, I fully support the sentiments that have been echoed by the first two speakers.
7.49 pm
Lord Wrigglesworth (LD): My Lords, I strongly endorse the remarks made by the noble Baroness, Lady Quin, by my noble friend Lord Ridley and just now by the noble Lord, Lord Giddens. In case people think that we are protesting as nimbys who do not want these in our back yards, we are not. We do not mind having some in our back yards, but we do not want them stacked full of these wind farms. We are perfectly happy to have some, but we want a fair share rather than the massive numbers which have already been mentioned by the noble Baroness, Lady Quin, and others.
I want to dwell for a moment on the impact which this is having and will continue to have upon the very important tourist industry in the north-east and in Northumberland. I have been quite heavily involved in the tourism industry over recent years. I was chairman of the NewcastleGateshead Initiative, the destination marketing agency for Newcastle and Gateshead. I was chairman of the BALTIC Centre for Contemporary Art in Gateshead, the second largest arts space in the United Kingdom after the Tate Modern, and I was chairman of the Port of Tyne until 2012. All of those organisations had a direct interest in tourism in the north-east. It is tremendously important, accounting for more than £1 billion coming into the north-east. In a region suffering from deep economic problems which is trying to move rapidly into the 21st century with modern industries, the tourist industry is tremendously important to us.
Independent research by VisitScotland showed that wind farms are very unattractive to visitors, and indeed that they avoid staying in areas with wind farms. However, you do not need independent research to demonstrate the damage which these things are causing to the county. Some of the sites which have been affected by turbines have been mentioned, such as the site of the Battle of Flodden, Dunstanburgh Castle. Holy Island, of all places, cannot be seen from some sides without seeing a wind farm. Frankly, this is outrageous; we are seeking to attract many people to come to a region which is known for its outstanding natural beauty and its wonderful environment but which has been badly damaged by the turbines that have been erected.
I hope that the Government will respond positively to the plea we are making on behalf of Northumberland. We think we have our fair share, and are making an adequate contribution. I am in favour of the renewable energy sector, but I can tell you that in the Port of
Tyne the interest is in offshore wind farms. As was said by the noble Lord, Lord Giddens, this is a rather better form of renewable energy than those turbines which are on land. The Dogger Bank is just off the mouth of the Port of Tyne. If substantial wind farms are built there, which I hope will happen—it is a pity that it has not started happening already—it will ensure a tremendous number of jobs and a tremendous industry based on the Tyne, which has strong engineering traditions. I hope that that will happen, but I hope that the Minister will give us some reassurances that this unfair and damaging incursion into Northumberland will be restrained in the future.
7.53 pm
Lord Walton of Detchant (CB): My Lords, I, too, am most grateful to the noble Baroness, Lady Quin, for enabling us to have this debate. I am a proud Northumbrian. I live in Belford, at the heart of some of the lovely Northumbrian countryside. I am also a past captain and chairman, and now president, of Bamburgh Castle Golf Club, which was described by a national newspaper some years ago as arguably the most scenically beautiful golf club in the United Kingdom.
Looking down from the top of that course, one can see the grandeur of Bamburgh Castle and out to sea the wonderful bird sanctuary of the Farne Islands, where St Aidan spent some time as a hermit, and even beyond that to Longstone Lighthouse, made famous by the exploits of Grace Darling. To the left of that are Holy Island and Lindisfarne, with the priory that was one of the cradles of the development of Christianity in northern England. There is also a lovely castle designed and built by the Lutyens family, and a wonderful walled garden designed by Gertrude Jekyll. If one then turns to the west, one can look at St Cuthbert’s Way and St Cuthbert’s Cave, where the monks carried Cuthbert’s body from Holy Island on its way to Durham Cathedral. Beyond that is Ros Hill, where Earl Grey sat when he was Foreign Secretary and looked at his land that lay all around him and at the timeless beauty of Northumbria, which he adored.
However, if one now looks down to the south, there are 24 rotating monsters at Wandylaw and Middlemoor. Their approval by the planning authority as the result of an appeal strikes me as amounting to arrant environmental vandalism. They have destroyed the views of some of the loveliest countryside in Britain. As others have said, this is crucial because Northumberland has borne more than its fair share of these developments. I admit that the past captain of Bamburgh golf club once said that it is not windy at Bamburgh when the ball will stay on the peg on the 15th tee. We have some wind, but that does not justify the desecration of these views and of these important cradles of Christianity, which have been damaged by this development.
There was recently a proposal to put up a whole series more of these wind farms at Belford Burn. Happily, the county council planning committee rejected this application. There were 500 letters of opposition from people in the local community, and five letters in support. However, it is probable that, again, this particular
application may be subject to appeal. One of the problems in Northumberland is that more appeals on applications for wind farm development have been allowed than in any other county in England.
I invite the Minister to draw to the attention of the inspectors the clear recommendation made last year by the Government that, when considering planning applications, more account must be taken of the views of the local community. The local community in Northumberland is implacably opposed, not to wind farms on brownfield sites or where they do no great damage to the environment, but to those which damage the untold beauty of a wonderful piece of scenery.
7.57 pm
The Lord Bishop of Newcastle: My Lords, last Friday I took a relatively short train journey from Waterloo to Winchester, in the heart of the Hampshire countryside. The journey took little more than an hour, about the same time as it takes me to travel through my diocese from Newcastle to the Scottish border. There was a striking difference between those two train journeys. Obviously, there was no beautiful coast or even the odd castle on my trip to Hampshire, and yet to me the most striking difference was that there was not a wind turbine—let alone a wind farm—in sight at all. This is hardly surprising when you consider that Northumberland now has more wind power capacity installed than 16 counties in the south of England put together. It is then hardly surprising that a recent survey claimed that 70% of the British public support onshore wind. The truth is that 70% of the British public live in places where they will never have to put up with the sight or the sound of a wind turbine, unlike the people who happen to live in the beautiful county of Northumberland. During my time as bishop, wind farms have proliferated across the countryside to an alarming degree.
The level of Northumberland’s contribution to the Government’s onshore wind targets has been disproportionately high, as we have heard. We contribute more than 10% of all England’s wind energy but consume just over 0.5% of England’s electricity. Nobody should accuse us of nimbyism. It is hardly surprising then that the message from this short debate is simply: enough is enough. The good people of Northumberland have had enough of onshore wind farms. That point has finally, if belatedly, been recognised by DCLG in recent guidance, which states that it does not mean that,
“the need for renewable energy … overrides environmental protection and the planning concerns of local communities”.
Of course, we all recognise the need for a greater reliance on renewable forms of energy. Our countryside needs to be protected, which is why the recent refusal of two more wind farm developments in Northumberland was so welcome, despite in one case more than £3 million being offered by developers to a small village community. Thankfully, the huge financial inducement—I will not call it a bribe—did not sway the local people. Money cannot buy what the residents are being asked to give up. That was the message of the local people. The trouble is that so many of the most beautiful parts of the Northumberland landscapes have already been
scarred and disfigured, despite the fact that, as we have heard, the wind does not blow as well as in other areas of the country, and there being no evidence that I have seen that wind will ever provide the reliable, controllable energy that we need.
We all have a duty and responsibility to care for our environment and to exercise wise stewardship over God’s creation. We are custodians of the future for our children and our children’s children. That is why I urge the Minister to take back to DECC the case for ending any further subsidies for onshore wind, especially in Northumberland, and for deploying those funds more sensibly and more wisely on other forms of renewable energy.
8.02 pm
Lord Vinson (Con): My Lords, this debate is on a serious matter because, bluntly, government-subsidised foreign companies are destroying Northumberland’s heritage. This must be prevented. We are grateful to the noble Baroness, Lady Quin, for raising the matter so eloquently.
Like so many things in life, it is the unintended consequence of a poorly thought out government programme being rushed through to try to save the globe from overheating through excessive CO2 emissions caused not just by fossil fuels but by the consequences of the huge growth in world population—an aspect that is seldom mentioned. It is quite proper in this debate to ask whether it is sensible for taxpayers and all users of electricity to continue massively to subsidise the erection of wind turbines, which can produce only sporadic energy and need coal-fired polluting back-up to support them, when there are alternatives. If the wind programme were going to save the globe, many of us might accept its harmful consequences, but the whole exercise serves no good purpose. It is estimated that it will cost some £4,000 per family over the life of the turbines. Consequently, many now doubt the wisdom of this regressive programme. That is the background to our county’s problems.
From the turbine developers’ point of view, Northumberland is a sitting duck because it has fewer people to complain and who can afford to challenge their subsidised ambitions. That may explain why Northumberland is chosen, but why do so many of its appeals against development fail when examined by departmental inspectors? These inspectors may be ex-lawyers or judges but they are human beings. They are encouraged by their departmental brief to help the Government meet their targets. Many cases that come before them are obviously borderline. They obviously regard the development near our historic Duddo Stones as a borderline case.
Like our local planners, they are wrestling with the two-way pull of government advice on the one hand and citizens’ objections on the other. So I hope this debate will be brought before them and will help them to take a more considered view of the two-way pull now that the Government’s targets have been met and Northumberland has had more than its fair share of development—a point so well raised hitherto in this debate. To date, they have taken insufficient account and failed to recognise adequately the seething anger
within our county. The Government’s pledges on localism and respect for the regional view have been overridden, and with them our custodianship of our wonderful historic landscape.
The inappropriateness of the wind turbine programme should be at the back of every inspector’s mind when weighing priorities, as there are alternatives. In Northumberland, we have lived for 40 years within a few miles of massive nuclear power stations, which have quietly and safely produced some 7% of the country’s need for electricity throughout that period. New forms of nuclear power—small modular reactors, factory-built and inherently safe—are on their way. America and other countries are pouring billions into their development, seeing this as a long-term solution to producing abundant energy that is relatively cheap and CO2-free. We can do the same in the north-east and create many jobs.
There are better, longer-term and more effective ways of reducing the world’s CO2 output. For that reason, we do not want to see the heritage of our beautiful county destroyed wholly and unnecessarily. The Duddo Stones are the north of England’s Stonehenge and just as old. We have had our fair share of wind turbines. As the right reverend Prelate said, enough is enough on all counts. Finally, this debate will have been worth while only if the Minister undertakes to make certain that any new briefing given to the planning inspectors draws their attention to the balanced arguments have been put forward today in the Chamber and suggests that they well regard them. Will the Minister assure us that that will happen?
8.06 pm
Lord Shipley (LD): My Lords, I thank the noble Baroness, Lady Quin, for initiating this debate.
I received a few days ago a copy of the National Trust members’ magazine. In it was an article entitled Powering the Future. It talked of the role of that great industrialist and inventor Lord Armstrong, who introduced renewable energy to his home at Cragside in Northumberland, which is now owned by the trust. It was encouraging to read of the National Trust’s pledge to generate 50% of its energy use from renewable sources by 2020. I was also pleased to read the comment against a photograph of wind turbines on the Cumbrian coast near Whitehaven which said that,
“the trust supports the sensitive use of renewables such as wind turbines”.
I agree with the National Trust. The crucial word here is “sensitive”, which is at the heart of the debate. We should not allow visually intrusive development in areas of outstanding natural beauty. We should not lose the tranquillity that Northumberland is renowned for, and we should not damage tourism, which is such a fundamental part of Northumberland’s economy. I am pleased that Northumberland County Council is doing an impact study of wind farms on tourism to assess the perceptions of visitors.
The north-east like all regions needs to play its part in energy generation. However, I am grateful to the Campaign to Protect Rural England and to the Northumberland and Newcastle Society for pointing out in a letter earlier this year that while they are
supportive of the development of renewable energy they feel that too many wind farms are being built in Northumberland, which has twice the megawatt consents for onshore wind generation of the nine home counties put together. They have a point; the wind does blow in the home counties.
We have to think very carefully, however, about energy security. I do not want the lights to go out and so I believe that we need to promote every form of sustainable energy that we can. We should note that last year, onshore wind turbines produced 5% of our electricity. They help to keep the lights on, supplying 3 million homes. A recent poll I saw showed that two-thirds of people support onshore wind energy production. However, as has been pointed out this evening, local people quite rightly want a bigger say over where onshore wind installations are permitted, and I am pleased that the Government have responded, delivering a fivefold increase in the benefits that communities in England can receive worth up to £100,000 per year for a medium-sized development. The crude block on onshore wind energy that some are calling for would seriously risk investment in the UK’s renewable energy market, which has the potential to create 200,000 new green jobs by 2020.
There are very few sources of energy that do not arouse strong opposition. Nuclear, wind and shale all have active opposition, but banning wind farms would drive up consumers’ energy bills because onshore wind is the cheapest type of renewable energy. At the same time, we have to protect our natural environment, so we need a balance between keeping the lights on and protecting areas of natural beauty.
In conclusion, I hope that the Minister will think carefully about what has been said this evening and I hope that it will be possible to have the discussion that the noble Baroness, Lady Quin, asked for. I find it hard to understand why Northumberland is producing 10% of onshore power while consuming well under 1% of the electricity generated by onshore wind. We have heard very clearly what the impact has been in some areas of outstanding natural beauty in Northumberland, and I hope that the Minister will take note.
8.10 pm
Lord Berkeley of Knighton (CB): My Lords, I know and love the Belford area and I objected to the wind farm there, just as I did to one in mid-Wales which is close to Offa’s Dyke and the grade 1 Repton-designed gardens at Stanage Park. Everyone has made the point that this is not about denying the need for renewables, but about trying to look at their value, particularly when we do have offshore as another possibility and, in the not too distant future, I am sure, wave power. Nothing is more certain in life than that while we are here, the waves will continue to come in. We need to look at these things because I feel that the dice are loaded against local people who try to object to a wind farm.
We have just heard an example of the kind of money people turn down in order to protect their local countryside. That should be combined with how much
money people raise from their own pockets to fight these schemes. It really is a David and Goliath situation. I feel that one thing the Government could do is try to encourage inspectors to up the power they apportion to local opinion and beautiful landscapes. Trying to encourage further investment in wave power would immediately take a lot of pressure off the desire for onshore wind farms.
Like in Northumberland, there are a lot of wind farms in Wales and therefore in sensitive areas. I have to admit that the wind farms on old coalfields and in mining areas look beautiful and do not destroy the landscape, so I am certainly not against them per se. I just want us to look at those wind farms that are in sensitive areas that may not have been declared to be areas of outstanding natural beauty. That is a very important point. At the moment it is a loophole by which inspectors tend to find against objectors.
I was shocked to hear people who have been objecting in my area say that the only party that is representing little groups is UKIP. The Government should take note of that because it is a rather shocking thought. The noble Lord, Lord Gardiner, sitting opposite has said in the past that we must be sensitive about landscape and local opinion. My plea to the Government echoes the words used by the most reverend Primate the Archbishop of Canterbury at the finish of last night’s debate on bringing in women bishops. He simply said, “Listen, listen”.
8.14 pm
Lord Grantchester (Lab): My Lords, the decarbonised power sector is a prerequisite to tackling climate change and to achieving domestic and international commitments to reduce the UK’s carbon emissions. There is a place for all forms of renewable power in the UK’s energy mix, but they should be in the right place. Onshore wind is the cheapest form of generating low-carbon electricity and therefore must continue to be an essential part of the UK energy mix in order to limit the impact on consumer bills. Within this overall policy statement, however, there must be a balance between the various interests to establish the best solution in each individual development and locality. The planning system is meant to enable these contrasting interests to be taken into account. Guidance makes it clear that the need for renewable energy does not automatically override environmental protections.
However, something is clearly going wrong in Northumberland, and I am grateful to my noble friend Lady Quin for drawing attention to this problem in her much-loved county. While it may be the opinion of a Conservative former Minister in this House that renewable energies can be hosted in the north-east—or was that the north-west?—because not many people live there, my noble friend has drawn attention to the overwhelming concern of local communities that a disproportionate number of wind farms are in the area, to the detriment of many amenities that are vital to the visitor economy and tourism, even when cities such as Sunderland plan their future as a low-carbon hub.
Other contributors to this debate have drawn attention to the lack of strategic planning that would give balance to Northumberland and wind power more
generally. In this it is instructive to look more critically at the guidance provided on renewables. Only last week, on 7 October, the Minister’s department published new guidance on community benefits and community engagement for onshore wind. It certainly recognises the wind industry’s commitment to local communities and it will encourage communities by providing a framework for communities, local authorities and developers to work together from the initial conception of a scheme. But what if there is widespread local opposition to schemes, as my noble friend has pointed out? Community engagement must work both ways, and the process needs to be seen to be accessible in order to give voice in areas where local residents lack the funds and expertise to mount a serious challenge to development. The guidance will go a long way towards reducing resentment and animosity, but it may miss the point if it is regarded only as an inducement to overcome serious local objections. Can the Minister clarify whether the guidance can provide a dialogue whereby the answer may be that the community would rather forgo the development altogether and that this will be noted in addition in the planning process?
While Northumberland can be congratulated on its embrace of new technologies, can the Minister confirm any evidence that Northumberland is being unfairly targeted from a desire to meet our national targets by a disproportionate predominance of refusals to developments in other, more Conservative-dominated counties? What is the Minister doing to encourage other areas to host their fair share of renewable onshore wind? The case stated tonight has come across very strongly and it needs an answer.
8.18 pm
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, I start by congratulating the noble Baroness, Lady Quin, on introducing this debate. All noble Lords have provided measured opinion and well-informed views of wind farms, and I think that there is general agreement around the House that wind has to be seen as part of the diverse energy mix that this country needs. But I listened carefully to everyone who spoke in the debate and of course there are concerns about where wind farms are located.
I know that the noble Baroness does not want to refer to the energy policy, but part of the debate has to refer back to why wind farms are part of the diverse mix. As the noble Lord, Lord Grantchester, said, we must have an energy policy that provides us with security of supply and ensures that we meet our national and international targets to reduce carbon emissions. The requirement for increasing renewable energy supplies is clear. Wind power provides clean energy and reduces our dependence on finite fossil fuel supplies. Also, as I have said, wind increases our energy security by reducing the need to import energy supplies from abroad. It also creates jobs and investment in the economy, with an estimated £29 billion invested in the economy since 2010. We need to increase the amount of energy produced by renewables to meet our legally binding targets by 2020 and the decarbonisation targets set for 2050 in the Climate Change Act 2008 by the previous Government. As the noble Lord, Lord Grantchester,
said, it is the cheapest large-scale renewable energy source. Onshore wind plays a vital role in its contribution to the balanced energy mix that we need. Renewables provided around 17% of our electricity in quarter 2 of 2014, with almost a quarter of this generated by onshore wind.
Of course, I will resist the comments of the noble Lord, Lord Grantchester, referring to my colleague, because those comments were not helpful. We are to look at how we can improve the powers that local communities have and I think that was what the noble Baroness was asking me to take away from this debate today. Of course, wherever turbines are going to be located, the communities concerned must have a greater say on whether they want them there. We must be clear that it has been this Government who have taken those concerns very seriously, listened hard to what communities have said and taken action to respond to those communities, given that a lot of the planning for those turbines was already in the system when we came into Government.
We estimate that we need 11 gigawatts to 13 gigawatts of onshore wind within the energy mix to meet our goals by 2020. The UK pipeline of projects in planning and awaiting construction gives us confidence that onshore wind will be able to make the contribution we need. In Northumberland, I am told that there are four onshore wind farms awaiting construction and eight in planning. However, we should be clear that we cannot know that all of these specific turbines will be built. We know that not everything in planning will get planning consent and not everything that receives consent will be built. The planning system ensures that only well sited proposals are developed. Moreover, in addition to the planning system, through careful management of the levy control framework, we can ensure that only the most cost-effective developments are built, ensuring that we meet our deployment ambitions while delivering value for money to consumers. Ultimately, we have to look at that part of this very complex debate: what is the cost to the consumer in the round of energy?
Furthermore, we understand that some people have concerns about developments. Every noble Lord who spoke today has raised those concerns. We have been clear that onshore wind planning applications will be accepted only where the impacts are, or can, be made acceptable. The right reverend Prelate the Bishop of Newcastle rightly referred to the new planning guidance for renewable energy that was published last year. That will help to deliver the balance required by the National Planning Policy Framework, making it clear that the need for renewable energy does not automatically override environmental protections and the planning concerns of local communities. Indeed, properly involving local communities in proposals that will affect them is a critical step in improving the quality of proposed onshore wind development. That is why we have made it compulsory for developers to have pre-application consultations with local communities for any onshore wind development of more than two turbines or where the hub height of any turbine exceeds 15 metres. This means that developers will need to engage very seriously with communities before even submitting a planning application.
Communities hosting renewable energy installations are playing a vital part in meeting a national need for secure, clean energy, including those in Northumberland. It is right, therefore, that local people should be recognised and rewarded for this contribution. That is why we worked with industry to secure a voluntary agreement that developers will contribute a minimum of £5,000 per megawatt per year to local communities hosting wind farms.
The tangible benefits from community benefits funds are clear to see. Some examples were quoted by my noble friend Lord Ridley and others of where they felt that turbines have been a blight, but Middlemoor wind farm in Northumberland has provided funding for roof repairs in the Eglingham village hall and learning resources, equipment and outdoor protective clothing for Little Acorns pre-school. There are other examples across the north-east and indeed the whole of the country where communities are seeing real benefits from hosting onshore wind farms. To improve the standards of engagement between developers, communities and local authorities for these developments, we published best practice guidance on 7 October. These documents will provide communities with information as to what to expect, in terms of both engagement and community benefits, and when to expect them.
There were a number of questions raised to which I would like to respond before closing my remarks. My noble friend Lord Ridley seemed to be a little pessimistic about the creation of jobs, but according to industry estimates, onshore wind has supported around 17,000 jobs in 2012-13 in the UK. We in the department estimate that about £7.6 billion has been invested in the UK in onshore wind between 2010 and 2013, in 2012 prices. Since 2010, we have recorded announcements of £1.9 billion worth of private sector investment in renewable electricity in the north-east. This has the potential to support an area where we need to see job creation and around 2,190 jobs will be supported.
My noble friend also raised a question on the impact of these turbines on birds. The Royal Society for the Protection of Birds has noted in its own reports that the majority of studies indicate that bird collision mortality rates per turbine in the UK are incredibly low.
My noble friend Lord Vinson talked about planning practice guidance. Protecting the local environment is just as much a concern for the Government as protecting the global environment, but we are bound by targets that have been set within the Climate Change Act 2008.
Lord Vinson: Will the Minister assure the House that this debate is brought to the attention of the planning departments, and in particular, the planning inspectors? Unless they read this debate, it simply will not have the effect that we all think it should have.
Baroness Verma: My noble friend is absolutely right, and I have made a note to ensure that the Department for Communities and Local Government has sight of this debate, because it is really important. The noble
Baroness, Lady Quin, asked for that too. This has been an informed debate and it had a lot of personal ownership behind it. It is only right, therefore, that it is seen by my right honourable friend Eric Pickles and his colleagues in the Department for Communities and Local Government, so I will ensure that it reaches them.
Last year, we published new planning guidance for renewable energy to help deliver the balance expected by the National Planning Policy Framework by making it clear that the need for renewable energy does not automatically override environmental protections and the planning concerns of local people. The new planning guidance has been published to assist local councils and, on my noble friend’s point, planning inspectors in their consideration of local plans and individual planning applications.
The noble Lord, Lord Walton, asked whether there was a way to check decisions after they had been made in line with new planning guidance. On 10 October last year, my right honourable friend the Secretary of State for Communities and Local Government announced a temporary change to appeals recovery criteria for a period of six months. On 9 April this year, he announced an extension to that temporary change—and that will continue. It allows him to consider recovery appeals for new energy developments for a further 12 months. There are processes in place that have been much better firmed up because we have taken the time to listen to those local community concerns raised by noble Lords here today.
In closing, the Government have three objectives for energy policy: to keep the lights on, keep energy bills affordable and deliver on climate change goals. Onshore wind will play a part in meeting those three objectives. To achieve the necessary change, we passed the Energy Act 2013 to provide the legal and financial mechanisms necessary to attract the investment we need. At the same time, we simplified and strengthened the planning process by creating the National Planning Policy Framework to ensure that only appropriately sited projects receive consent, taking into account the needs and concerns of local communities—I re-emphasise that: the needs and concerns of local communities. Taken together, this Act and our reforms will enable us to deliver the energy infrastructure we need to secure our future at the right price and in the right place. I thank all noble Lords for an excellent debate and will ensure that what has been said is taken back to the department.
Wales Bill
Committee (2nd Day) (Continued)
8.32 pm
Clause 20: Borrowing by the Welsh Ministers
52: Clause 20, page 23, line 19, at end insert—
“(5A) The Secretary of State shall make arrangements for an independent report to be compiled on the issuance of bonds by Welsh Ministers.
(5B) The Secretary of State shall lay a copy of the report specified in subsection (5A) before each House of Parliament within three months of this Act being passed.”
Lord Wigley (PC): My Lords, I will also speak to Amendments 53 to 55. This group seeks to bolster the Assembly’s economic accountability and resources. We in Plaid Cymru believe that the Welsh Government should be able to issue bonds, just as the Scottish Government can. Amendment 52 would hence provide for a review into whether this could in fact take place. It is a very modest amendment giving the opportunity for this to be further investigated. I should point out that this was a recommendation of the Silk commission and is supported by the Welsh Government as well as by my own party.
Having this power would allow the Welsh Government to use innovative, less volatile ways of borrowing such as the Build for Wales scheme that we have championed. Such a project would create a new entity to invest in public infrastructure. At present, if the Welsh Government want to undertake large amounts of capital expenditure to invest in building schools, hospitals, roads and so on, they are unable to borrow and cannot raise enough by way of tax to provide the necessary resources. If they save the funds, the Treasury may claw the money back if it is not spent within a certain period—as was so disgracefully done in 2011 when savings prudently accumulated by the Welsh Government were ruthlessly purloined by Her Majesty’s Treasury. It is surely against common sense that the Welsh Government are unable to borrow funds long term to fund capital assets.
Amendments 53 to 55 would ensure that the threshold for the Assembly’s capital borrowing powers is raised from the £500 million in the Bill to £1,500 million—that is, £1.5 billion—which would make the Welsh Assembly more closely aligned to the £2.2 billion threshold afforded to the Scottish Parliament. We would feel very unhappy if the Scottish Parliament were able to borrow four times the sum that we can in Wales. We arrived at our figure by taking into consideration Wales’s population base as well as the fact that we have fewer PFI commitments than Scotland, hence giving us greater flexibility over repayments. I beg to move.
Lord Howarth of Newport (Lab): My Lords, it is absurd that there should be a need for a review of such a matter. It is absurd that there should be limits on the ability of the Welsh Government to borrow. We all remember—I think we are all old enough—that in the 1960s and 1970s local authorities issued bonds, as did utilities. Much more recently, universities have issued bonds, notwithstanding that to a significant extent they are publicly funded. This is an elementary tool of financial management which, if the Assembly is to take serious responsibility for its own affairs, of course it ought to have.
My only complaint about Amendment 55, proposed by the noble Lord, Lord Wigley, is that he has been so modest. He wants to limit the amount that the Assembly is permitted to borrow to £1,500 million. There is a constraint on the amount of borrowing that rests in the ability of the Welsh Government to service the interest. That should be a sufficient discipline.
Baroness Morgan of Ely (Lab): I will speak to Amendments 53 to 55, which are about increasing the amount that the Welsh Government should be allowed to borrow. One of the key reasons why the Assembly is so enthused about this Bill is that, for the first time, the Welsh Government will be able to access those borrowing powers. This is particularly important at the present time as £1.7 billion has been cut from the Welsh budget and the capital budget has been slashed by 33%. If the Welsh economy is to grow, it needs to invest in essential infrastructure. That ability to invest has been choked off by government cuts. It seems unfair that the Government connected the amount that the Welsh Government are able to borrow to the taxation revenue stream of the Welsh Government. Revenue streams in relation to stamp duty and landfill—two taxes that are, it is proposed, to be devolved initially—have proved to be extremely volatile in the past.
How was it determined how much the Welsh Government are allowed to borrow? It strikes me that the approach to Wales is very different from the approach adopted for the borrowing powers in Scotland, where a connection was not drawn to the funding stream but to the capital budget. The Scotland Act allows the Government to borrow 10% of the Scottish capital budget in any year to fund additional capital projects. That would be around £230 million in 2014, up to £2.2 billion in total. Scotland seems able to borrow proportionately considerably more, despite the fact that it has considerable PFI commitments—unlike the Welsh Government. This is not the case for Northern Ireland, where no revenue stream exists apart from the block grant. Yet, it is allowed to borrow.
This Bill allows the Welsh Government to borrow up to £125 million per year, up to a limit of £500 million. However, if the same rationale were used in Wales as in Scotland, so that borrowing was based on capital budget not tax revenue stream, Wales would be allowed to borrow up to £1.3 billion—or £130 million per year—reflecting that £1.3 billion capital budget in Wales. Ideally, we would like the Government to allow flexibility so that the Welsh Government can increase their borrowing powers at a time when the economy looks like it is much more on its feet. Could the Minister outline whether there is any mechanism through which that would be possible?
Lord Newby (LD): My Lords, in this group of amendments on borrowing powers, I begin with Amendment 52, which would require the Secretary of State to lay an independent report on Welsh bonds before both Houses. As the Government have previously made clear, the subject of bond issuance by Welsh Ministers is something that the UK Government are willing to consider. Moreover, initial discussions have now taken place between the two Governments on the form that those considerations should take and we are keen to progress this work quickly and bring it to a conclusion.
The Government have previously committed to consider Scottish bonds and have agreed to make this source of borrowing available to the Scottish Government. Our record therefore demonstrates that we are able to
consider such matters without legislation, and I therefore ask the noble Lord to withdraw his amendment on that basis.
I turn to the proposed amendments to the borrowing limits. The Government have consistently been clear that capital borrowing must be commensurate with the level of independent revenue available to support the costs of borrowing. This is an important principle that ensures borrowing remains affordable in much the same way as mortgage lending must reflect the capacity to service borrowing. It is also worth repeating that the £500 million capital borrowing limit is already substantial relative to the level of independent revenues that will be available to Welsh Ministers when stamp duty and landfill tax are devolved. In particular, the limit is far higher than it would have been had we simply applied the tax and borrowing ratios implemented by the Scotland Act. Such an approach would have given the Welsh Government capital borrowing of only £100 million rather than £500 million. Although the noble Baroness talks about the relationship between capital expenditure and borrowing powers as the consideration that she wants to underlie the amount that the Welsh Government can borrow, it has to be related to the Welsh Government’s management of their taxes; otherwise, by the same logic—perhaps she supports this—large cities and the English regions could also have large borrowing powers if they were simply related to the fact that they are already spending money on capital. The link between borrowing powers and the Assembly is secured by the fact that the Assembly has its own sources of revenue.
Baroness Morgan of Ely: Will the Minister explain how Northern Ireland is allowed to borrow when it does not have this income stream?
Lord Newby:My Lords, as we have discussed in respect of virtually every tax we have talked about today, the considerations in Northern Ireland, and the situation in Northern Ireland, are very different from those in all other parts of the United Kingdom. The noble Baroness is aware of the history of Northern Ireland and why we do things differently there. Noble Lords have made good points about read-across from Scotland to Wales, but it is a lot less easy to do the same with Northern Ireland. Very different considerations apply, and the nature of the economic challenges facing Northern Ireland is rather different.
I fully understand the desire to see as much investment as possible in Wales, but we must ensure that it is manageable for the Welsh Government. Not only must the Welsh Government repay borrowing, they must fund the associated interest payments. That is why we need to ensure appropriate independent funding streams are in place. I remind noble Lords that for every 1% that the Welsh Government have to pay in interest on their £500 million borrowing—if they reach that level—they will have to take £5 million from their overall budget. The maths is clear. It is a very significant amount that the Welsh Government will have to provide from their overall budget in any event.
We should be encouraging the Welsh Government to hold a referendum on income tax powers. If an element of income tax is devolved to Wales, that
increased funding stream could allow Welsh Ministers to borrow around £1 billion. Our message to all parties in Wales is that it is time to get cracking, once we get this Bill through, and get that referendum held and the income tax powers devolved.
Finally, in order to manage forecast error, the Government have provided the Welsh Government with exactly the same £500 million of current borrowing as in the Scotland Act, despite the more limited tax powers initially being devolved to Wales. The Welsh Government’s current and capital borrowing limits are therefore relatively generous compared with Scotland, and I ask the noble Lord not to move his amendments.
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Lord Wigley: I am very grateful to the Minister. I certainly welcome his announcement that progress has been made with the bonds issue, and I hope that the National Assembly can move forward rapidly to take advantage of that opportunity.
With regard to borrowing, the capital budget of the National Assembly was reduced by just over 40% when the changes introduced by the Government were brought in. That put an immense squeeze on, among other things, the capital requirements of Governments, such as the Government in Wales, with responsibility for roads, schools, hospitals and all the rest. To get the economy moving, we have to get the capital injection, particularly into the economic infrastructure. I entirely accept that there has to be a cash stream to service this, and the Minister once again mentioned the income tax proposals. As he knows, I welcome those and want to see them used. Are the Welsh Government constrained to income tax? There are other sources of taxation revenue, and there may be other sources of revenue as well. For example, in the next four or five years, the M4 tolls will be reconsidered and renewed. Is it not possible for the Welsh Government to use sources other than income tax to service the capital borrowing that they need? Can the Minister give any indication on that?
Lord Newby: As the noble Lord knows, the Bill is permissive in terms of additional taxes being established in Wales. My working assumption would be that if such new taxes were devolved or established, there would be a commensurate rise in borrowing powers. However, many of the taxes that people sometimes talk about do not necessarily raise a huge amount of money. Therefore even if you got a commensurate increase in borrowing it would not necessarily be a transformative amount on its own. However, I think that the principle is very clear. The Bill is permissive in terms of additional tax powers for the Assembly and, as it were, borrowing follows income.
Lord Wigley: I am glad that the Minister has emphasised that there is a basket of possible sources of revenue which would justify the capital that is needed. No doubt the Welsh Government will need to use the capital responsibly as it is for capital investment projects and not just to subsidise revenue budgets that are running at a loss. As far as that is concerned we are
making progress. Can I just pick him up on the comments that he made about Northern Ireland when he said that the situation there is different. Of course the situation is different from Wales. I understand the historic difference and all the rest but in economic terms the challenges in Wales are just as great as those in Northern Ireland—they are in terms of the income per head, the GDA. Is the Minister aware that the GDA per head in areas such as Kensington and Chelsea is 10 times the GDA per head in the Gwent valleys and Anglesey? That is the scale of the discrepancy. We need to regenerate the economy, otherwise we are always going to be going down this spiral. We need the tools to do the job and quite clearly this will be a responsibility of the Welsh Government. All I would press for is for him to be as sympathetic to the economic needs of Wales as he clearly is to the economic needs of Northern Ireland. I beg leave to withdraw the amendment.
Amendments 53 to 55 not moved.
56: After Clause 23, insert the following new Clause—
(1) The Secretary of State shall make arrangements for an independent review of options for reforming the Barnett Formula in order to meet the objective of calculating the block grant funding for Wales on the basis of need.
(2) The Secretary of State shall lay a copy of the report of the review specified in subsection (1) before each House of Parliament within 3 months of the passing of this Act.”
Lord Wigley: This amendment stands in my name and that of my noble friend Lord Elis-Thomas. Noble Lords will be glad to know that this is the final amendment tabled in our names for today’s debate. It deals with perhaps one of the most central questions of all. We are coming to it last: the much-beleaguered Barnett formula which every party in Wales accepts must be replaced. Unfortunately, for what appear to be narrow political reasons the parties up here do not agree on that point. Those of us in Wales who know how much Wales misses out on funding due to this formula were horrified to hear the government parties giving pledges to the Scottish electorate that they would keep the discredited system in place in the event of a no vote. If it is to stay in place without amendment it will have very dire consequences for Wales.
As the Minister will know, in Wales an independent commission, the Holtham commission, has shown how we are disadvantaged by the implementation of the Barnett formula which, as noble Lords will be aware, calculates how much consequential funding the devolved nations get based on the spending levels in England. The Holtham commission argued in 2010 that we in Wales are underfunded by between £300 million
and £400 million every year. We believed at that time that it was probably an underestimate. Since 1999 the aggregate shortfall in Wales arising from the Barnett underfunding of the necessary services amounts to more than £5 billion. That is why our NHS, education system and local government have been inadequately financed. Services vital to the people of Wales are being squeezed because successive Governments at Westminster have not got to grips with this problem.
The Holtham commission argued that the formula should be replaced with a mechanism based on needs as opposed to the per head of population as is currently the case. This would allow for the fact that Wales has more vulnerable and disadvantaged people, including older people—many people retire to Wales—disabled people and those on benefits. The level per head of population is higher than the UK average. Even the noble Lord, Lord Barnett, has openly argued that the formula to which he gave his name should be replaced. A committee of this House came to the same conclusion.
Our amendment calls for a review of the options for replacing this formula. In the Motion to which I referred in earlier debates in the Chamber today there has been agreement between the four party leaders. There is a Motion coming up for debate on Tuesday in the name of the four party leaders, including the First Minister, Carwyn Jones. It states in the context of Barnett that the National Assembly for Wales,
“calls for bilateral talks that are informed by the Holtham and Silk 1 Commissions’ findings, including an updated assessment of the current level and likely future direction of Welsh relative funding”,
“calls for those talks, which should begin immediately and be completed by January 2015, to have a particular focus on fair funding, with the goal of securing rapid implementation of a funding floor which both addresses underfunding in a way that is consistent with Welsh needs and halts future convergence”.
There are three steps that can be taken to sort this out and I put to the Minister that they are within the Government’s easy competence and can be achieved. The first is to determine the extent of the shortfall at present. I accept that it has come down because of the economic patterns and it may now be at £150 million to £200 million rather than the £400 million back in 2010, but it is almost certainly still there. If the Government were also to commit to a one-off adjustment to sort that out and bring in a floor so that as the economy picks up again we do not get the Barnett squeeze hitting us in the way that it has, and if the Barnett formula is adjusted to a percentage basis rather than an absolute one so that we do not lose out every time the absolute figure in Wales gives a lower percentage of benefit than happens elsewhere, it would be possible to live with the Barnett formula although it still does not give us a needs-based formula.
Ideally, however, what Wales needs—and what all the parties in Wales have been calling for—is a needs-based formula. At some point we are going to get some daylight on this. We cannot go on from year to year with this underfunding. I press the Government very strongly indeed, even if they cannot accept these amendments, to please give us some ray of hope that we might find our way out of the hole in which we find ourselves in Wales. I beg to move.
Lord Anderson of Swansea (Lab): My Lords, my Amendment 59 has the same target as that of the amendment of the noble Lord, Lord Wigley, but approaches it in a different way. I ask that the tax reforms shall not come into force until a Welsh Government Minister has laid a report before the National Assembly containing a statement that the Welsh Government, with regard to the statement of funding policy, are content with the fairness of the allocation of funding arrangements from the UK Government to Wales. So this is effectively about fair funding, also known as the Barnett formula. I follow the noble Lord, Lord Wigley, in saying that in the current, somewhat depressed, economy, the gap has been narrowed. If there is positive economic development, that gap will be widened again.
The noble Lord, Lord Newby, asked us to be positive and not to be “moaning minnies”. I therefore turn to the front page of yesterday’s Western Mail, which quotes Shadow Welsh Secretary Owen Smith as saying after the discussions yesterday afternoon:
“I impressed on the Secretary of State the need for his Government to deliver fair funding for Wales”—
“and am pleased that he seemed prepared to address this issue”.
Well, if he is prepared to address it satisfactorily, I could sit down, I suppose. However, it is clearly a major issue in Wales.
Many years ago I sat at the feet of the noble Lord, Lord Morgan, who went on to become the vice-chancellor of Aberystwyth. He had come “al hoot” from Oxford and taught us poor undergraduates in Swansea new words such as “marginal”. He taught me about the great American labour leader Samuel Gompers, who was once asked, “What does American labour want?”. Some people expected him to suggest revolution or radical change. Samuel Gompers answered: “More”. If the grand public in north, south or mid-Wales were asked what they wanted, they would not enthuse about the proposed changes to landfill tax or income tax, or modified powers. They would say, “We want more”—because we are currently underfunded; the extent is uncertain, but we are certainly underfunded.
That was the position taken by the First Minister. I recall that immediately after the Scottish referendum he said something to the effect that Scotland has put the United Kingdom “through the grinder”—I think those were his words—and that the funding issue should now reappear: we should effectively shout more loudly. Scotland has been rewarded for it. Are we in Wales to continue to be taken for granted? We have played Mr Nice Guy and been ignored. Objectively, we have lost out financially.
Time is such that I will not detain the Committee, but I was impressed by an article by Alice Thomson in the Times of 24 September which—unusually, coming from a non-Welsh person—stated:
“While Scotland is being showered with largesse, Wales—failing and underfunded—has been pointedly ignored”.
She went on to give examples from Holtham:
“Last year under the Barnett formula, Scotland received £10,152 per head, while Wales, despite being much poorer, got £9,709. If Wales received the same levels of public spending per capita as Scotland, its public services would be boosted by £1.4 billion”.
Well, there may be argument about the exact amounts, but I cite what she says: Wales has been the orphan within the United Kingdom. She says:
“Wales is now barely acknowledged by politicians in Westminster … When I asked one English minister what the future held for Wales, he said: ‘Sheep and singing’”.
I hope that is not the attitude of other Ministers in this Government. I would ask noble Lords to read that article, which is very important.
It may well be that the shortfall could be remedied in other ways. I think it was the noble Lord, Lord Wigley, who mentioned a review of Severn Bridge funding. What is clear is that the Severn Bridge, with its substantial and increasing toll, is a major tax on Wales. There would be a big boost to the economy of Wales if that toll were to be removed. I would commend that to the Government. There may be other ways of making up that shortfall, but fair funding there should be.
I will end again on a positive note. I am encouraged by the way in which Owen Smith emerged from that conclave and said that he thought the Secretary of State was listening. Not just listening I hope, but ready to act.
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Lord Richard (Lab): My Lords, I start by declaring an interest. Some years ago, I had the privilege and honour of chairing the committee of your Lordships’ House that looked into the operation of the Barnett formula. It was an extraordinary committee. On it, among other people, we had a former Chancellor of the Exchequer, two former Secretaries of State for Scotland, assorted junior Ministers, and other Members of your Lordships’ House. The committee came to the unanimous conclusion, set out in a report, that the Barnett formula was out of date, inefficient, basically unfair and ought to be replaced. One of the most substantial parts of evidence we had was from my noble friend Lord Barnett himself. He said that he thought it was out of date and inefficient and was never intended to last this long—that it was introduced as a temporary measure in about 1977 or 1978 and not designed to be semi-permanent. It was meant to last a year or so and then expire. I put it to him whether it was fair to say that it ought to be replaced. He said, “Yes, perfectly fair.” He has persisted in that view.
Where are we on this issue? Here we have a formula, introduced nigh on 40 years ago, which still determines the basis of the block grants for Scotland, Wales and Northern Ireland. It is based on evidence garnered in the 1970s, and is not based on needs but rather on population. You hear the argument frequently that you cannot have a formula based on needs because it is too imprecise and difficult to do. I would commend that the people who veer in that direction of the argument read the evidence that we produced in that report about six years ago. There was a detailed examination of a needs-based formula and the evidence then seemed quite conclusive, as it does now. The Barnett formula is unjust and unfair. Wales is unfairly discriminated against as a result of the operation of the Barnett formula.
No Government in recent years have been prepared to take this issue on. In terms of the Labour Government which left office in 2010, the then Chief Secretary to the Treasury appeared before our committee and said that he thought the operation of the Barnett formula was broadly sort of fair. Indeed, the then Secretary of State for Wales even came in front of the committee and said he thought it was sort of fair. Of course, the Secretary of State for Scotland thought it was extremely fair. The Secretary of State for Northern Ireland also did not dissent from that general proposition. I was appalled, frankly, at the evidence that we got from the Chief Secretary to the Treasury and the Secretary of State for Wales. Nothing has changed. Things have not got better as far as the Barnett formula in Wales is concerned: on the contrary, they have got worse. Something has to be done about it. We really cannot go on with this.
Although I have held the view for some time that the formula’s time has come and that it should be quietly expunged from the public record, I was surprised and, indeed, somewhat appalled to see the three party leaders re-emphasise in the Scottish referendum campaign that it should continue to apply to Scotland. If it is said that it should continue to apply to Scotland, on what basis should it do so? Does that mean that it should continue to apply to Wales? If so, will Wales be asked to put up with what is, by almost everybody’s admission now, a basically unfair system of allocation of resources from central Government to Cardiff? Are we really going to be asked to put up with this because the party leaders went up to Scotland at the end of the referendum campaign and made what is, on the face of it, an extraordinary offer to the Scots? If the party leaders want to keep the Barnett formula for Scotland, so be it, but they should not be prepared to inflict it upon the Principality in perpetuity. It is basically unfair, unjust and out of date, and something should be done about it.
Lord Howarth of Newport: My Lords, it is enough to make one weep that, in the run-up to the Scottish referendum, political leaders felt themselves driven by expediency to pledge to retain the Barnett formula. As my noble friend Lord Richard explained to the Committee, it is one of the great injustices and malfunctions of government in this country over the past 40 years and a lamentable lack of statesmanship has prevented it being reformed. There was a great opportunity in 2010. The Conservatives had nothing to lose in Scotland. With universal recognition of the need for austerity, there was a political opportunity to deal with it then. That has been made infinitely harder now by the rash and unprincipled pledges that have recently been made.
The report of the committee of my noble friend Lord Richard is unanswerable. We debated it in your Lordships’ House and there was not a scintilla of a persuasive argument to defend the status quo. Indeed, I do not recollect anybody even trying to defend it. The pledges that have been made will come back to bite their authors because I cannot foresee how we can make progress towards new constitutional arrangements in this country following the referendum in Scotland and following the pledges that have been made in respect of devolution so long as there is such a
fundamental inequity in public financing. I cannot see how there can be a fair and acceptable new set of arrangements while the Barnett formula is retained.
The noble Lord, Lord Wigley, spoke extremely well and constructively with his practical suggestions as to how we might try to develop a sort of fallback position. My noble friend Lord Richard suggested that if the Scots are to retain their advantage, it may none the less be possible to find ways at least to reduce the inequity for Wales. However, it seems to me that that path also bristles with political difficulties because, if public spending is a zero-sum game, if there is to be more for Wales, then it has to come from somewhere and if the Scots are allowed to retain their present advantages, then it will come from Northern Ireland or, more likely, from England. However, there is, rather belatedly, a growing recognition in the regions of England that the Barnett formula is a lousy deal for the English. I cannot see that there is a path towards remedying at least a part of the injustice from which the people of Wales suffer if it is to be done directly at the expense of the people of England. Hasty pledges have placed us all in immense difficulty but I look forward to hearing from the Minister or the noble Lord, Lord Bourne, who may be able to pluck a solution out of the hat, although I somehow doubt it.
Baroness Morgan of Ely: Today, the First Minister called again for a new funding system that meets the public service requirements in Wales. He likened the Barnett formula to,
“fixing a hole in the roof with Blu Tack and cardboard”.
It is no secret that Wales does not do well out of the Barnett formula. However, we know, following the Scottish referendum, that that formula is not in danger of dying any time soon. Indeed, the Prime Minister made his sentiments on the issue quite clear last week, when he reiterated that he had no intention of reopening the debate on providing a fair funding mechanism for Wales. That seems very different from the position of the Secretary of State for Wales, who said yesterday that he is prepared to address the issue. It would be nice to hear which one of those statements is correct.
At present, the block grant provides 113% of the English level of spending on devolved services, while the Holtham report found that Wales’s relative needs were between 114% and 117%. The noble Lord, Lord Newby, has asked me to be more positive, so I will give it a good go. The good news is that an arrangement was put in place in October 2012 that established a process to review the relative funding of Wales to England in advance of every spending review. If it looked like convergence were happening—for example, if the level of funding between England and Wales looked like it was becoming more equal, despite Wales’s needs being greater, due to things such as ageing population and rurality—then the Government would discuss options to address the issue in a fair and affordable manner. That is the good news.
The problem is that there is no guarantee. It is purely up to the good will and subjective decision-making of the respective Ministers in Cardiff Bay and Westminster. The Labour Party has acknowledged that there is a specific funding problem in Wales and that we will address the issue when we are in office.
I am sorry, but I am afraid that I must return to my negatives. One of the problems with the income tax recommendations is that this issue is compounded by the problem of the devolution of income tax in Wales. It is clear from David Cameron’s insistence that Wales should just pick up that offer of income tax powers that he has not understood the link between underfunding in Wales and the method through which the block grant will be reduced in future, should Wales pick up the option of introducing the Welsh income tax. While it is worth re-emphasising that we agree with the principle of income tax devolution, it is also worth underlining the risks that Wales would be undertaking if we were to devolve income tax powers without changing the Barnett formula.
The idea is that, if the Government suggest that in the first year of operation 10 points of personal income tax receipts are yielded to Wales, then the equivalent amount will be deducted from the Welsh block grant. That cut is then adjusted proportionately in subsequent years. The Government have suggested that the indexed deduction method, as recommended by Gerry Holtham, is used as a method to determine what that proportional cut would be. The problem is that if the block grant fails to produce a fair level of funding relative to need at the outset, as every subsequent change will be based on that initial level of funding, any cut in grant in future, however it will be adjusted, will probably make matters worse as convergence happens.
On the one hand, we are saying that we need fiscal accountability in Wales. On the other hand, we need to ensure that before we set out on this path we start from a fair position. It is critical that a fair funding mechanism is established from the outset, otherwise that unfairness will be locked into the system for the long term.
I know that the Minister is intensely aware of this issue. She has her fingers all over it and has been discussing it for years. However, I ask her to reiterate what the Secretary of State said this week: that he is prepared to look at this issue.
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Lord Thomas of Gresford (LD): The noble Baroness said that a future Labour Government would address the Barnett formula. Well, they addressed it in the last Labour Government; they appointed the noble Lord, Lord Richard, and his commission to produce a report and then ignored his findings.
Lord Richard: That is not right. I was appointed by this House, in accordance with the usual rules for the appointment of chairmen of committees.
Lord Thomas of Gresford: I withdraw the term “appointed” but I am sure that the idea was generated by the Labour Government of the day. It was not something that this House thought up of its own accord.
Lord Richard: I am sorry but it was an ad hoc committee, which was set up after the Liaison Committee decided that that was one of the subjects on which the
House should have an ad hoc committee. That is how the committee came into existence and I was then asked to chair it.
Lord Thomas of Gresford: I had misunderstood the basis of that committee, so I withdraw what I said first of all—that the last Labour Government addressed the Barnett formula. They clearly did not and it was a committee of this House, chaired by the noble Lord, Lord Richard, which did address it. The Government then ignored its findings. That is what I am told. I am told that there was a second committee but I am not particularly aware of it.
Where the problem really arises is that the Barnett formula is used as an excuse for the failures of the Welsh Labour Government in the fields of education and other devolved areas. They say, “We don’t get enough money”. As soon as I read of the vows given to the Scottish people by the three leaders, it seemed to me that at that moment the concept of having a formula that could apply equally in Scotland and Wales was dead because one surely has to decouple whatever funding formula eventually applies in Scotland when it exercises its powers from whatever formula happens in Wales when it exercises different and more limited powers. Accordingly, we need something specific to Wales through looking at the needs of its people as opposed simply to dividing money on a population basis.
The whole point of the social contract is that taxes are paid—not to be divided equally per head of population but so that services according to need can be paid for by the government of the day. That is the principle that must be the basis of the way in which Wales is funded in the future.
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD): My Lords, as ever, a debate on the Barnett formula is interesting but I am afraid that from my perspective it is rather too well worn territory.
I start by responding to the comments of the noble Lord, Lord Wigley, in relation to the £300 million to which he referred as the funding gap identified in the Holtham report. The gap has indeed come down in size and it would be very useful to determine the current shortfall. It is particularly important to point out that when the agreement was made between Jane Hutt and the Chief Secretary to the Treasury in an exchange of letters in October 2012, it acknowledged that convergence had ceased to take place, that there was, in fact, divergence and that Welsh funding was within the region of what the Holtham report regarded as fair funding. Therefore, at the moment, there is not a major issue of unfair funding. There may be issues at the edge, but it is not a big problem at the moment, as was acknowledged by the Welsh Government. Of course, that does not solve the problem, because convergence is predicted to start again around 2018. That issue has to be addressed if the gap is not going to widen again. I agree that there is a need to deal with this in the scope of the devolution discussions because it distorts the political debate in Wales. Funding is quite simply blamed for every policy failure. Even if we take the
figure of £300 million, in a budget of £15 billion, £300 million is a significant amount of money, but it is not something that could possibly be blamed for every health failure, every education failure and every social problem within Wales. It is not so massive that it is fundamental to the problems that we all acknowledge are faced in Welsh society.
The noble Lord, Lord Anderson, is absolutely right in saying that it is the funding issue that the public are interested in. They do not worry too much in general about devolution, but they are interested in fair funding. The noble Lord, Lord Anderson, referred to the Severn tolls. I look forward to our debates on that in the next Government. Whoever wins the election, there will be debates on the Severn tolls because, of course, the end of that franchise is due in the mid-years of the next Government.
I strongly welcome the acknowledgment by the noble Lord, Lord Richard, that the Labour Party did not deal with the problems of Barnett. Indeed, the Labour Party refused for 13 years to agree publicly that there was any problem with the Barnett formula and it was in those years that convergence was taking place and the funding gap was really growing. It would certainly be the case that Wales would have fewer problems now if that had not been neglected. It is my view, and the Secretary of State certainly agrees, that it is time to look at the funding formula for Wales, and it is my view that one could do this even with the constraints of the agreement that Scotland will retain its current funding. One can look at Wales on a unilateral basis.
The noble Baroness, Lady Morgan, asked me to clarify the Prime Minister’s statement. He simply restated the oft-stated government position on funding in Wales, which is that because the problem of the deficit is our priority, no additional funding can be provided within this Government. That is in no way at odds with the Secretary of State saying that the long-term funding position of Wales needs to be looked at. There is an immediate situation and a long-term situation. The noble Baroness also asked for clarification on the impact of having income tax powers on the block grant and so on and referred to the index deduction method. The purpose of the index deduction method was to protect Wales from big swings in the economy as a whole and the sort of big swings that are due to UK government policy. However, I point out yet again that the Welsh Government have acknowledged that funding is fair at this point, within the region of fairness. Given that the Welsh Government acknowledged that we were in that sort of territory two years ago, it would be a good idea to go for a referendum on income tax powers as soon as possible to give the Welsh Government the maximum opportunities to use the taxation system to increase prosperity in Wales.
I shall very briefly look at the technical details of the amendments. Amendment 56 would require the Secretary of State to lay an independent report on options to replace the Barnett formula. Amendments 59 and 60 would seek to make the devolution of an element of income tax conditional on dealing with the funding formula. They specifically say that income tax can devolve only when the Welsh Government confirm
that they are content with how funds are allocated. The progress that this Government have made on working towards fair funding, with the significant exchange of letters in 2012 between the Ministers in the two Governments, can be built on. I urge the noble Lord to withdraw his amendment.
Lord Richard: Can I be perfectly clear as to what the Minister has just said? As I understand it, she is saying that the fact that a vow has been given to Scotland that the Barnett formula should continue to apply there is no bar to the funding arrangements for Wales being reconsidered, and that it is the Government’s position that those funding arrangements for Wales will be reconsidered.
Baroness Randerson: I am saying that I do not believe that it is impossible to overcome the issue of the commitments made to Scotland and that you can honour those commitments and look separately and independently at the funding for Wales. Northern Ireland is also funded via the Barnett formula but from time to time gets additional funding for specific things. I cannot see why Wales cannot be treated, as Northern Ireland is, as a separate thing, as a matter of principle. Having said that, I am simply arguing the case—it is not government policy to do that. I am firmly saying that the Secretary of State for Wales has made it absolutely clear that it is his view that fair funding needs to be looked at in the context of the devolution settlement and the discussions that are going on about it. In that case, I am confident that those discussions will encompass the issue of funding, although I cannot predict the outcome.
Lord Richard: So that is government policy—what the Secretary of State said?
Baroness Randerson: Yes, that is policy, announced by the Secretary of State for Wales.
Lord Wigley: And of course, every word uttered from the Dispatch Box is government policy, as well. What I am trying to reconcile from the Minister’s response are the comments that things are more or less right now and that there is a need to look at fair funding. There is something a little bit contradictory about that. They are not absolutely right now, or at least we do not know that they are. That is the argument in favour of having more investigation.