I hear what the shadow Immigration Minister has said, but Labour did nothing to tighten up the system, and it has fallen to this Government to introduce further stringent measures. It appears that, despite all that—despite the serious issues highlighted in my statement today—

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Labour now want to introduce blunt targets to increase international student numbers. Indeed, I think the shadow Immigration Minister wants to take students out of the net migration numbers altogether. We will take no lectures from the Labour party about immigration and controlling the issuing of student visas.

The shadow Immigration Minister managed to ask some serious questions, and I will address them now. On the investigations that have taken place, I can say that we have taken significant steps to follow through on identifying, locating and removing those responsible. Hundreds of visits have already been conducted and removals have begun. The criminal investigation is ongoing, and he will understand that I cannot comment further on those cases.

We are taking steps in relation to Glyndwr, and have suspended its highly trusted sponsor status. We are keen to provide support for genuine students whose institutions are affected by this. From today, there is a designated student helpline available specifically for all students at the affected institutions. Dedicated staff will take calls on the helpline to ensure that students have an avenue for their questions to be answered and their concerns alleviated.

We are also setting up a working group with relevant education establishments, including Universities UK—[Interruption.] I am sorry, but the Opposition do not seem to care about what is happening to the students who are involved in this. They might want to listen. We are setting up a working group with Universities UK, the UK Council for International Student Affairs, the Higher Education Funding Council for England, the Higher Education Funding Council for Wales, the Scottish Funding Council and the National Union of Students to enable the sector to support those genuine students who may eventually need to find a sponsor.

The right hon. Gentleman tried to make his general point about university applications, but the truth is that, while we have cut out much of the abuse in the student visa system, the number of overseas applications to study at British universities is up by 17% since the election, and that figure is based on genuine students. We are attracting the brightest and the best while, at the same time, resolutely focusing on ensuring that those who should not be here are stopped.

I was struck by what the right hon. Gentleman said about the immigration system not working, but I have to tell him—as we have done many times before—that it will take years to fix fully the system that we inherited from his party. We are making the difference. As the former UK Border Agency chief executive, Rob Whiteman, said last week, the agency that Labour set up was never going to work and it was right of this Government to break it into smaller pieces, because staff and managers can now get on with trying to put it right. If the right hon. Gentleman does not want to listen to Rob Whiteman, he could listen to the shadow Business Secretary who said that when he used to work in his predecessor’s surgeries, he could see how chaotic the UKBA was. “Hands up,” he said, “That was under my Government.”

All the facts I have outlined today are a direct legacy of the Labour party. A significant proportion of the students who have been caught cheating came to this

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country through a student visa system created by Labour. Under the previous Government, bogus colleges flourished, student visas were used for economic immigration and students did not even need to prove that they could speak English. The Government are focused on controlling immigration. Sadly, the Opposition still do not get it; it is as simple as that.

Mr Mark Harper (Forest of Dean) (Con): I normally have great respect for the shadow Immigration Minister, but his tone today was not right. When this Government came to power, they had to deal with a legacy of hundreds of thousands of bogus students coming to this country. I commend my hon. Friend for the firm steps he has taken to root out abuse and to work with the sector to protect the genuine universities, higher education institutions and the genuine students and this valuable industry. He should carry on that work and not listen to the Opposition party.

James Brokenshire: I am grateful to my hon. Friend for his support. He is right that we are focused on a system that attracts the brightest and the best to this country while rooting out abuse. The step that this Government have already taken in closing down 750 bogus colleges is striking, and there is more work to do. That is what we are focused on delivering.

Keith Vaz (Leicester East) (Lab): This is a shocking report. I welcome all the steps taken by the Minister to try to get to the root of what has happened. We are of course grateful to the BBC for the investigation it conducted. However, the Home Affairs Committee has been saying for years to successive Governments that there should be 100% unannounced inspections of these colleges, some of which have been fostering a climate of deceit. At the moment, the last report suggests that only 37% were unannounced. Secondly, we must have face-to-face interviews with people abroad before they come to the United Kingdom. If that was done, the bogus students would never get here in the first place.

James Brokenshire: I am grateful to the Chair of the Home Affairs Committee for his comments. He is right about the issue of interviewing those who are intending to come to this country to take up student positions through the student visa system. In the past year, we have conducted 100,000 interviews to root out abuse, identify those who do not necessarily have the language skills and provide that extra check. In respect of the continuing providers, we have stepped up announced and unannounced visits to check what services they are providing, and we are considering further what steps may need to be taken in relation to any re-procurement of the services to place safety and security right at the heart of the system.

Dr Julian Huppert (Cambridge) (LD): Abuse is clearly unacceptable, and the Minister is right to be firm on those who cheat their way in, and on those organisations that actively help people to defraud the system. But we must not forget that around the world people are listening to the tenor of the debate here and the rhetoric that is used. Will the Minister make it clear, both now and in the future, that we still welcome bona fide students and

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that we are still open for business and will not take action against universities unless there is evidence that they are complicit in some of this fraud?

James Brokenshire: As I said in my statement, we have not taken this action lightly, and it has been based on visits to the various institutions and a detailed examination of the evidence before us. We seek to attract the brightest and the best, but my hon. Friend should be aware that applications from students sponsored by universities rose by 7% in the year to March 2014 and applications from students going to Russell Group universities by 11%. It is right that we focus on preventing abuse and that we have a rigorous system that seeks to attract genuine students to this country while ensuring that those who should not be here are rooted out.

Mr Frank Field (Birkenhead) (Lab): I thank the Minister for his statement and ask him to share his thoughts on abuse that is occurring by those graduates who break their visa conditions by staying here after they should have left. Is he aware that a number of universities have difficulties over some students—presumably they can speak English—who do not pay their bills at the end of their courses? Those universities do not now award their degrees until the bills are paid. Might he not enter negotiations with the universities to consider that they should also have the responsibility of seeing that students go back home, according to their visa conditions, that degrees will not be awarded until those students are back home, and that the number of visas they can have, which could then be unlimited, will be linked to the numbers who actually return home?

James Brokenshire: The right hon. Gentleman makes an important point about the responsibilities of the academic institutions as part of the immigration system. They should ensure that students are attending and that they hold the right information in respect of them. We are seeking to work with the university of Portsmouth and others on the process that we need to put in place to ensure that students leave at the end of their course. It is right to underscore the role that the institutions have and the responsibilities that they hold in accommodating foreign students.

Alistair Burt (North East Bedfordshire) (Con): I share the view of colleagues that the Opposition’s failure either to understand their role in what has happened or even to acknowledge it is one of the things likely to weigh heavily in the minds of the public as we run towards next May. In particular, on attracting the brightest and the best, will my hon. Friend look carefully at some of the problems raised by Gulf states that are looking for more sponsorship for specialist applications in science, engineering and medicine and at the fact that the visa restriction is quite heavy in relation to them? Will he also look carefully at any evidence presented, because those students represent an advantage to this country and to the states that they come from?

James Brokenshire: My right hon. Friend underlines again the need for the Government to continue to focus on the problems that we were left by the previous Government. Their lack of appreciation of the scale of what they handed on is striking. He makes some important points about the some of the detailed applications and

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courses. I will, of course, look at any representations that he may wish to make on the nature of the points that he has raised, particularly in medicine.

Mr David Lammy (Tottenham) (Lab): UK universities contribute 2.8% to our GDP. The last time we had concerns about student visas, just one university in London was involved. This involves many colleges and universities. How long will this continue? As it continues, students from countries around the world who are contemplating coming to England will decide to go elsewhere. The Minister mentions hundreds of visits: 48,000 people are out there who should not be. Can he give us some time scales, please?

James Brokenshire: I appreciate the right hon. Gentleman’s knowledge of the university sector. This will take time to work through on the evidence and information available. It is right that meticulous work is conducted by our immigration enforcement officers to pursue their leads and lines of inquiry, where students who have relied on bogus certificates have sought to go on to university or college studies. I should like to reassure him of the Government’s commitment to supporting the whole universities sector. Indeed, I have had conversations with Universities UK and the Russell Group more generally on the excellent work that many of our universities do. They are world leading, and we should be proud of what they achieve and their ability to attract genuine students from overseas. We support that, but clearly we will rigorously focus on the abuse. I will certainly provide regular updates to the House on progress with the work to remove students and on further information that we may receive from ETS, as it continues to analyse its results from other centres.

Angie Bray (Ealing Central and Acton) (Con): I totally support this statement. Of course, all colleges and universities must fulfil all their legal responsibilities when they sponsor students from abroad. The university of West London plays an important role in the local community in Ealing, as well as in the wider world of higher education, so can my hon. Friend provide some reassurance that, where investigations have to continue, they will be conducted speedily, so that we can get a speedy resolution and, we hope, get that university back on track?

James Brokenshire: I assure my hon. Friend that discussions are ongoing with each institution that has been affected by my announcement. I recognise the desire to gain certainty and, indeed, for the measures and steps that those institutions are taking to put right abuses and to put their systems in place. This is something for those institutions, for the community and for genuine students who may be affected. That is why I made the points about the support that is being provided to them. I am conscious of the impact on them, too.

Emily Thornberry (Islington South and Finsbury) (Lab): I share the concern expressed across the House about the abuse and about the fact that the Home Office seems to be relying on the BBC to undercover it. May I raise a case with the hon. Gentleman that I have raised with his boss? I have yet to receive the courtesy of a reply. St Mary Magdalene academy is a very ambitious school, with a big sixth-form centre. It teaches Mandarin.

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It wants to run an exchange programme with Chinese students from Peking. It has applied to have 10 students come over. It will not charge them. It hopes to have a reciprocal arrangement. It expects these kids to bring language skills and an attitude that will really help inner-city children. The opportunity that those inner-city children will have to go to Peking will be extraordinary. The fly in the ointment is the Home Office, which has not allowed them to have the visa. Will the hon. Gentleman please deal with this matter now?

James Brokenshire: There is the student visitor route, which is separate from the normal student visa route that applies for universities and further education colleges. I am, of course, happy to look into the specific case that the hon. Lady highlights. I am not familiar with the detail, as I hope she appreciates, but I am happy to look into the matter, if she can give me some more information, and to consider what might be appropriate.

Mr Nick Gibb (Bognor Regis and Littlehampton) (Con): Is not ETS the same company that grossly mismanaged the standard assessment tests in primary schools in 2008? If so, why was it originally given the contract in 2008 to test English language competencies? Will the Minister initiate a check across Whitehall to review any other ETS contracts with Departments?

James Brokenshire: ETS was a supplier and provider of services to the last Government and checks were undertaken in respect of the award of the contract, but I can give my hon. Friend a further assurance about work that we have commissioned to review all the suppliers of English language testing services. A review is being undertaken by the independent auditor Moore Stephens LLP, which is due to report next month. Additionally, it has been asked to undertake a wider review of other contractual or licence arrangements, including those relating to language testing services on which immigration, citizenship or other entitlements rely. We are focused on ensuring that there is such testing and audit across the board to give assurance internally and externally about the processes in operation and, indeed, to enable us to reflect further about contracts that might be awarded.

Ian Lucas (Wrexham) (Lab): This is a very grave statement for Glyndwr university and for Wrexham. Will the Minister please clarify whether the withdrawal of status that he refers to applies to the whole university or only to its London campus? What discussions has he had with the Welsh Government, who are, of course, responsible for that devolved institution?

James Brokenshire: The suspension applies to Glyndwr as a whole. It is a suspension, not a revocation, but its ability to take on new foreign students is stopped. There is the potential to move to revocation if it is unable to demonstrate that it has put in place systems and processes to guard the immigration system as a whole. We have had discussions with Glyndwr for some time about the investigations and the audit of its records. We will continue to do so, and we will engage with other relevant partners, including the Welsh Government, as necessary.

Alok Sharma (Reading West) (Con): I of course welcome all that the Government are doing to clamp down on bogus colleges and bogus students. Certainly,

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we do not need to take any lecture from the Labour party on controlling our borders. I welcome the Minister’s confirmation that the UK is open to genuine students and that there are no limits. Will he ensure that that message is delivered in some of the key markets from which students travel to the UK, because this is an important industry for us and one that is clearly growing?

James Brokenshire: Absolutely. I can certainly confirm that to my hon. Friend. He makes a number of important points about presentation and how others seek to present a false picture of our immigration system and the important requirements that we have. We can puncture some of the myths that are perpetrated overseas. Ministers visiting those key countries seek to underline that, but we have firm processes and procedures in the visa system for a purpose—to prevent abuse—and that is why steps such as interviews are important safeguards against those who are not legitimate, who are not genuine and who seek to abuse our hospitality.

Paul Blomfield (Sheffield Central) (Lab): We clearly all welcome the action against bogus colleges taken by this Government and their predecessor, but is the Minister concerned that, contrary to the Prime Minister’s declared objective to increase international student numbers, for the first time in 29 years bona fide international student numbers are falling and our competitors are benefiting? When will the Minister listen to the recommendations of seven Select Committees of this House and the other place on the action needed to restore our competitive advantage?

James Brokenshire: The latest report from the Higher Education Funding Council for England, published on 10 April, shows a 3% increase in the number of undergraduate entrants between 2012-13 and 2013-14, a 1% increase in postgraduate course entrants and a 5% increase in postgraduate research entrants. We are focusing on ensuring that genuine students are attracted to the UK for study and that we continue to attract the brightest and the best, but it is important also to focus on the substance of what I have said—on ensuring that we are rigorous in our approach to those who seek to exploit our system. I know of the hon. Gentleman’s personal interest in the matter, and I respect his point, but his party appears to want to set an arbitrary growth target, which only risks further abuse.

Mr David Ruffley (Bury St Edmunds) (Con): I congratulate the Minister on an excellent and robust statement that will not spoil the export market for higher education but will ensure its integrity. What additional sanctions, other than suspension or revocation of the special sponsor status, can be deployed against the minority of higher education institutions that have behaved wrongfully?

James Brokenshire: As I have indicated to the House, we have taken firm and decisive action in relation to a number of the institutions involved. I want to underline the point about responsibility. Many, many universities and academic institutions take their responsibility incredibly seriously. They do the work; they perform the checks, and they keep their records appropriately. The issue is

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those that do not, and it is right for the Government to take appropriate action in those cases, including referral to regulators, which will also help to ensure that academic standards at those institutions are raised.

Pete Wishart (Perth and North Perthshire) (SNP): I know that for this Government it is all about numbers, and about tracking down all these bogus students, but will they not listen to bodies such as Universities Scotland which are telling them, month after month, about the damage being done to universities in Scotland and the perception that it creates for overseas students, who have options and are using them? What is the point of educating overseas students to such a high standard in our Scottish universities, only to kick them out when they could make such a valuable contribution to our economy and they are welcome in our nation?

James Brokenshire: I say very clearly to the hon. Gentleman that the point of having a student visa is to study, not automatically to work. The problem is that, too often, people were abusing the student visa system simply to work, not to study, gain an education and make the contribution that he desires. There are postgraduate routes to remain here and study. We need a robust measure to ensure that our systems are not abused. It is the conflation of university education with an automatic right to work that lies behind the mistakes of the Labour Government and the abuses that we are dealing with.

Chloe Smith (Norwich North) (Con): I welcome the balance that my hon. Friend showed in his statement. The number of colleges whose licence is being suspended appears to me to be a small proportion of the overall total. Will the QAA examine all London sub-campuses of universities, such as that of UEA London, to see whether further action should be taken, or does my hon. Friend have specific ones in his sights?

James Brokenshire: We are speaking to the QAA, as I said in my statement. London campuses have been highlighted, so we have asked the QAA to look at the matter in broad terms to give reassurance. It is important that we do so.

Huw Irranca-Davies (Ogmore) (Lab): With 48,000 students and scores of institutions affected, this is criminality on a truly industrial scale. I was not clear about the Minister’s response to my right hon. Friend the Member for Delyn (Mr Hanson), so although we welcome the package of stringent measures that he has announced today, can I ask him at what point he and his Department were aware of the issue, bearing in mind the earlier warning signs, and whether the measures have been taken as a response to what we saw in the programme or whether they were already under consideration by his Department? I saw the programme, and I was appalled by the blatant and widespread criminality that was going on.

James Brokenshire: Action has been taken against colleges that were not meeting their standards. I referred to a number of 400. It has become clear that there was a link to the ETS tests, and we are now able to see the issue from a different perspective. The abuse that was uncovered by the “Panorama” programme provided a different angle, on another route of abuse, which is why

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we have carefully and rigorously been pursuing all lines of inquiry arising from that—with ETS on validating its data and by looking at the colleges themselves, where further issues had been highlighted. It is right and proper that we have done so, and we will continue to do so in the weeks and months ahead, as further information comes to light and we pursue outstanding lines of inquiry, including the criminal investigation.

Mr Philip Hollobone (Kettering) (Con): I welcome the Minister’s clampdown on the scandal of student visa abuse. Will he name the six countries from which most of the students have come, and will he call the ambassadors from those countries into his office to make it clear to those countries how seriously Her Majesty’s Government takes this issue and ask them what they will do to help the Government combat the problem?

James Brokenshire: The primary issue is to ensure that there are rigorous measures in place for new applicants coming to this country, with interviews supporting the testing regime, so that we have an additional step to give a sense of reassurance. The point at issue is the student visa system created by the previous Labour Government, and the fact that a number of people who have been identified as being caught up in that sit on the Labour Benches means that a great deal of the responsibility lies there.

Jim Shannon (Strangford) (DUP): I welcome the Minister’s statement. Education visas are worth £10 billion to the economy, and we need to retain that contribution. However, Migration Watch UK says that up to 60% of students do not return to their own country when their visa expires. In 2012 the number was 50,000. What action is the Department taking to deal with those students who seem, at least on paper, to go missing? What contact does he have with the devolved Assemblies, particularly the Northern Ireland Assembly, to address the issue?

James Brokenshire: One step that we have taken is to create Immigration Enforcement as a separate command within the Home Office, to have that rigorous focus on pursuing those who should not be here. We are also working with the university sector to see how it can continue to play its part in ensuring that students leave at the end of their studies. We will, as part of that, have discussions with the devolved Administrations and others to ensure that we continue the work and have the rigorous system that we all want.

Mr Julian Brazier (Canterbury) (Con): I am proud to represent the university of Kent, Christchurch university and the university for the Creative Arts, with more than 30,000 students in my constituency. I strongly welcome the firm action that my hon. Friend is taking, and I commend to him the point made by the right hon. Member for Birkenhead (Mr Field). It would be helpful if, in our longer term deliberations, we could have detailed figures as to the proportion of students coming to this country to study who return to their own country at the end of that study.

James Brokenshire: My hon. Friend makes an important point about the responsibilities that universities and other academic institutions have within the immigration system. Many of them take those responsibilities very

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seriously indeed and I commend them for their work. My hon. Friend highlights the need for rigour within the system and the need to ensure that people rightly play their part, and that is what the Government are committed to achieving.

Simon Kirby (Brighton, Kemptown) (Con): Foreign students are important to the economy of Brighton and Hove. Will my hon. Friend join me in thanking those universities and colleges that have done the right thing, put their house in order and are working with the Government, not against them?

James Brokenshire: Absolutely; I commend those bodies that take these issues seriously, and there are many that do so. We want a thriving, flourishing sector, and the Government are committed to that. The Home Office is working with the Department for Business, Innovation and Skills in telegraphing that clear message so that educational institutions are doing their best in representing this country and showing it at its best.

Henry Smith (Crawley) (Con): I commend the decisive action that my hon. Friend and his Department are taking in closing down the abuse of the student visa route, which is already significantly reducing overall immigration. Is it not right that we also extend the closing down of abuse to some foreign nationals who are wrongly using the NHS?

James Brokenshire: I hope that my hon. Friend will recognise the steps that have been put in place through the Immigration Act 2014, and welcome the financial contribution that students and others who will be in this country for a period of time will need to make as part of the visa process. We are focused now on ensuring that that is effectively implemented to deliver what I think my hon. Friends and others across the House will want to see, recognising the contribution that should be made to our NHS from those who are coming to stay here for a period of time.

Roger Williams (Brecon and Radnorshire) (LD): I am sure that everyone will welcome the identification of the abuse and the plans to eliminate it. The Minister has already said that some genuine students following genuine courses will be caught up in the process. Does he agree that the reputation of this country and our universities and their ability to recruit in the future depend on how genuine students are supported at this very difficult time for them?

James Brokenshire: I recognise my hon. Friend’s point, which is why in my statement and in some of the answers to questions I have underlined the support that is being provided to students who, through no fault of their own, may have concerns or be affected. We will certainly keep information on gov.uk up to date. The new hotline has opened this afternoon, so students will be able to contact that. As I have said, we will be working with the sector more generally to ensure that support is provided appropriately.

Richard Fuller (Bedford) (Con): The Minister has suspended the right of the university of Bedfordshire, which has a campus in my constituency, to sponsor foreign students. Will he clarify whether that is because

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of its involvement with ETS, or because of broader aspects of abuse of student visas? Has he had an opportunity to speak to the vice-chancellor so that he may reassure students throughout the university on valid foreign visas that their studies will not be affected?

James Brokenshire: We are in regular contact with the university of Bedfordshire. There has been a conversation with the vice-chancellor this morning and a meeting has been arranged either for later today or within the next few days for the precise purpose of assessing the next steps and to see what may be required in relation to reassurance for students. The action taken by the Government has been linked to ETS in terms of the certificates provided that were questionable or incorrectly issued. It is as a result of looking at the records and the way in which that academic institution has been fulfilling its responsibilities as a highly trusted sponsor that we have taken the action today in respect of its inability to take on new students. We will clearly be working with each of the institutions that I have identified in my statement.

Dr Matthew Offord (Hendon) (Con): I strongly welcome the Minister’s statement today and the action that he has taken, but I echo the words of my hon. Friends the Members for Forest of Dean (Mr Harper) and for Reading East (Mr Wilson) in that there is a vibrant community of language colleges in this country that provide great opportunities for many people. I have several in my constituency that I have visited, which have been sidelined and disadvantaged by some of the so-called bogus colleges. Will my hon. Friend consider introducing a hotline to resolve some of the minor administrative errors that occur during genuine applications, so that the main focus can be on bogus colleges and applications?

James Brokenshire: My hon. Friend makes an interesting point about the many institutions that are working hard, meeting their responsibilities and ensuring that they rigorously apply the set standards. It is on those that are not meeting such requirements that additional

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focus is required. We are considering broader work around the tier 4 student visa system, but I will reflect further on my hon. Friend’s point.

Rehman Chishti (Gillingham and Rainham) (Con): I welcome what the Minister had to say and the work that he is doing. Under the previous Government’s shocking administration of the student visa system, individuals were able to come to this country as a student, register as a student, but never attend an institution while being marked present by that institution. What steps are being taken to address the issue of absence and the failure of records, so that they correctly reflect what has been going on?

James Brokenshire: Again, my hon. Friend highlights the need for those academic institutions to fulfil their responsibilities and to know that students are attending their courses. It is precisely such measures that our inspectors investigate when they check whether those institutions are meeting their responsibilities. Ultimately, as a highly trusted sponsor, they should know where students are residing and whether they are attending their courses. That is precisely the purpose of the system and why we monitor it in the way that we do.

Mr Deputy Speaker (Mr Lindsay Hoyle): Last but certainly not least, I call John Glen.

John Glen (Salisbury) (Con): To what extent are London campuses opened by universities based many miles from London simply devices to harbour bogus students, and how can we be sure that we will not see many more bogus students siphoned through those campuses in future?

James Brokenshire: As my hon. Friend will know from my statement, we have, with the specific universities that I have identified, highlighted the use of campuses. It is why we have brought it to the attention of the QAA, and it is important that it does its work to analyse the situation further and assess the position of those host academic institutions to ensure that appropriate standards are being met.

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Point of Order

2.17 pm

Wayne David (Caerphilly) (Lab): On a point of order, Mr Deputy Speaker. During yesterday’s Work and Pensions questions, I asked:

“How many people are now employed on zero-hours contracts?”,

to which the Minister of State, Department for Work and Pensions, the right hon. Member for Wirral West (Esther McVey), replied:

“Roughly the same number who were employed on zero-hours contracts under the Labour Government in 2000.”—[Official Report, 23 June 2014; Vol. 583, c. 14.]

According to the Office for National Statistics, 225,000 people were on zero-hours contracts in 2000. Today, according to the latest figures, 583,000 are employed on zero-hours contracts. Would it be appropriate for you to call the Minister of State back to the Chamber to correct her misleading statement?

Mr Deputy Speaker (Mr Lindsay Hoyle): It would not be, but the hon. Gentleman has put that on the record, and I know that, tenacious as the hon. Gentleman is, further questions will now be tabled, and everyone will have heard the point that has been made.

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Wales Bill

Consideration of Bill, as amended in the Committee.

New Clause 1

welsh taxpayers for social security or child support purposes

After section 155 of GOWA 2006 insert—

“155A Welsh taxpayers for social security or child support purposes

(1) The Secretary of State may by order provide for individuals of any specified description to be treated as if they were, or were not, Welsh taxpayers for all or specified purposes of—

(a) social security, or

(b) child support.

(2) The Secretary of State may by order provide in relation to any year of assessment that the Welsh basic rate, Welsh higher rate or Welsh additional rate in relation to the income of Welsh taxpayers is to be treated as being a specified rate for all or specified purposes of—

(a) social security, or

(b) child support.

(3) An order under subsection (1) or (2) may apply in respect of any individuals whether or not they have a close connection with Wales.

(4) An order under subsection (1) or (2) may make such modifications of any enactment, or any other instrument or document, as the Secretary of State considers appropriate in connection with the provision made by the order.

(5) No order is to be made under subsection (1) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.

(6) No order under subsection (2) which contains a provision making modifications of an enactment contained in an Act is to be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.

(7) A statutory instrument containing an order under subsection (2) is (unless a draft of the statutory instrument has been approved by a resolution of each House of Parliament) subject to annulment in pursuance of a resolution of either House of Parliament.

(8) In this section—

“specified” means specified in the order;

“Welsh basic rate”, “Welsh higher rate” and “Welsh additional rate” have the same meaning as in the Income Tax Acts;

“Welsh taxpayer” has the same meaning as in Chapter 2 of Part 4A of this Act.””—(Mr Gauke.)

An individual’s tax liability may be relevant to entitlement to social security benefits or to the level of child support payable. This amendment enables the Secretary of State, for social security or child support purposes, to treat someone as being (or not being) a Welsh taxpayer and the Welsh rates of income tax as being specified rates.

Brought up, and read the First time.

2.18 pm

The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move, That the clause be read a Second time.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this it will be convenient to discuss the following:

Government amendment 1.

Amendment 9, in clause 9, page 13, line 33, leave out “10” and insert “100”.

This amendment would make the Welsh Government responsible for 100 per cent of income tax revenue gathered in Wales.

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Amendment 10, in line 33, leave out “10” and insert “15”.

Government amendments 2, 3 and 4.

Amendment 11, in clause 28, page 30, line 20, after “except”, insert “sections 8 and 9”.

Amendment 12, in line 22, at end insert—

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

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

Government amendment 5.

Mr Gauke: It is a pleasure to return to the Bill. I will start with new clause 1 and amendments 2 to 5. These are principally technical changes that, taken together, are intended to address two possible scenarios that could occur if a portion of income tax is devolved to the National Assembly for Wales following a referendum. The first issue relates to the tax status of an individual. This is directly relevant to the calculation of certain social security benefits, state pensions and child maintenance payments, and could be affected by the introduction of a Welsh rate of income tax.

An issue could arise where information regarding the tax status of an individual has not yet been established or is not available—for example, if a person has newly become self-employed and it is not yet clear what rate of tax will apply. The new clause resolves the issue by allowing the Secretary of State by order, subject to an affirmative resolution, to deem a person a Welsh taxpayer for the purposes of calculating their benefits.

The second issue relates to a situation where the Welsh rate of income tax has not been set for the coming year at the time when certain social security benefits need to be calculated. New section 116D of the Government of Wales Act 2006 requires the National Assembly to pass a Welsh rate resolution before the start of the tax year, but this could be set late in the preceding tax year, thus not allowing the Government sufficient time to make the calculations that need to be made. In such cases it would be important for the Secretary of State to be able to deem a Welsh rate. This mirrors the position in the Scotland Act 1998, which includes a similar power in respect of the Scottish rate of income tax. The Bill needs to provide for the same contingencies in respect of the Welsh rate.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): In Committee, there was some confusion as to whether Kay Swinburne, the Conservative Member of the European Parliament who represents Wales but lives in England, would be eligible for the Welsh tax rate. Can the Minister clarify that?

Mr Gauke: I fear that the hon. Gentleman may not recall that debate correctly. There is no confusion about the definition of a Welsh taxpayer. A Welsh taxpayer includes anybody who represents Wales or a Welsh constituency. I hope that repetition will provide some clarity for him, but the position was already clear.

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Owen Smith (Pontypridd) (Lab): The Minister is right: there is no confusion. He clarified the position in Committee. Does he agree, though, that the people of Wales might think it slightly peculiar that a Tory Member of the European Parliament who lives in England should be deemed a Welsh taxpayer?

Mr Gauke: All I can say is that Wales has a very good MEP in Kay Swinburne and I am delighted that she has been re-elected—[Interruption.] Indeed: by the people of Wales.

I return to the new clauses and amendments before us. However rare the circumstances that I set out a moment ago might be, the potential hardship that a delay in the calculation of entitlements would cause to individuals makes it essential that we make these amendments to cater for such circumstances.

Amendments 2 to 5 are consequential and relate primarily to the commencement of the new clause. As I said, these amendments are minor and technical, but they address an important set of circumstances that could have a serious impact on some of the most vulnerable in society. I urge all hon. Members to support them.

On Government amendment 1, clause 6 gives effect to the Silk Commission’s recommendation that the Welsh Government should be funded from a combination of a block grant and some devolved taxes, with the clause conferring the required competence on the Assembly to legislate for these devolved taxes. Amendment 1 slightly alters new section 116A of GOWA, inserted by clause 6, to correct the possibly misleading impression that those taxes listed in chapters 3 and 4 of part 4A are the only taxes for which the Assembly has competence. The Assembly already has competence for local taxation, which includes council tax and business rates, and this minor amendment clarifies the position.

On amendments 11 and 12, we have been working closely with the Welsh Government in relation to Welsh funding. In particular, the Government recognise that there has been convergence between the levels of funding in Wales and England since devolution, and that this is a significant concern in Wales. As a result, in October 2012 we agreed to implement a joint process to review the levels of funding in Wales and England in advance of each spending review. If convergence is forecast to occur during a spending review period, options will be discussed to address the issue in a fair and affordable manner, based on a shared understanding of all the available evidence.

In advance of the 2013 spending round, a joint review was therefore undertaken by the two Governments and the outcome set out in a written ministerial statement. The review determined that funding levels are not expected to converge during the period to 2015-16. In fact, an element of divergence is forecast to occur. The review also determined that relative funding levels in Wales are within the range recommended by the Holtham Commission. These arrangements ensure that we have a shared understanding of funding levels in Wales, and that a process is in place to consider options if convergence is forecast to resume. There is therefore a firm basis for proceeding with the new financial powers in the Bill, and I hope that when the opportunity arises, hon. Members will withdraw amendments 11 and 12, but I look forward to hearing them make their case.

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I turn now to amendments 9 and 10. When it comes to the extent of income tax devolution in Wales, there is a careful judgment to make. Devolving an element of income tax would increase the financial accountability of the Assembly and the Welsh Government in three important ways. First, it would enable the Assembly to fund more of the spending for which it is responsible. Secondly, the Welsh Government’s budget would be directly linked to their economic decisions in areas such as education, skills, housing and planning. Thirdly, the Welsh Government would be able to vary the levels of tax and spending in Wales. However, creating the link between the Welsh Government’s decisions and their budget involves transferring some risk to the Welsh Government. Specifically, the Welsh Government’s budget would benefit if the income tax base grew faster in Wales than the UK average, but would be adversely affected if growth in Wales was slower.

The larger the proportion of income tax we devolve, the greater the potential impact on the Welsh Government’s budget. Devolving 15p of income tax would increase the size of these impacts by 50%, compared to devolving 10p. Devolving all income tax to Wales, which is the stated aim of amendment 9, would increase the potential impacts even further.

Jonathan Edwards: In the light of what the Minister has just said, why has the Prime Minister made a manifesto pledge, should there be a no vote in Scotland, to devolve 100% in the case of Scotland?

Mr Gauke: No, my right hon. Friend the Prime Minister has not made a manifesto pledge. The Strathclyde Commission has put forward recommendations, which will be considered in due course by my party for the next Parliament. I should point out with regard to the amendment tabled by the hon. Gentleman and his colleagues, which suggests replacing 10 percentage points with 100, that the effect would be to produce negative tax rates—a minus 60% tax, a minus 55% tax and a minus 80% tax. I am not sure that that was quite what the hon. Gentleman sought to do, but I appreciate that he was trying to devolve all income tax to Wales. I take the opportunity to point out that there is a technical problem with amendment 9.

There is a balance to be struck between risks and rewards. At this stage we see no evidence that suggests we should move away from the Silk Commission’s recommendation to devolve l0p of income tax.

Wayne David (Caerphilly) (Lab): Will the Minister give the House an assurance that what the Government propose today has the full support of all the Conservative Members of the Welsh Assembly?

Mr Gauke: It is for this Parliament to determine what we should put in place in the Bill. We believe that our proposals strike the right balance. We support the powers. In the time that I have been involved with the Bill, it has not yet been made clear to me whether the hon. Gentleman’s party supports or opposes these measures, but perhaps we will find out today. This Government believe that the powers should be in place and that there should be an option, following a referendum, for devolution of an element of income tax to the Welsh Government. I hope, therefore, that hon. Members will accept the

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balance contained in the Bill and recommended by the Silk Commission, and that they will withdraw amendments 9 and 10.

2.30 pm

Owen Smith: It is a pleasure to serve under your chairmanship, Mr Deputy Speaker, and to do battle once more with the Exchequer Secretary, who seems to have been permanently seconded to the Wales Office—he is like a ringer, to use football parlance. We welcome him and the opportunity he now has to clarify some of the things that he was unable to clarify when we last debated the Bill.

On income tax, the Opposition’s priority is very clear: we believe that we ought to have a fair and progressive tax system across the whole UK. For us that means reinstating the 50p rate and having a starting rate of 10p. That will be far fairer for the people of Wales, and indeed the people of every other part of the UK, than the tax cuts for millionaires that the Exchequer Secretary has overseen at the Treasury.

In the context of the Bill, we have three further priorities. Our first priority—this is why we will support the Bill this evening—is to ensure that Wales has access to borrowing powers in order to offset the £1.6 billion that the Conservatives have cut from the budget for Wales. That is linked to the taxation powers set out in the Bill.

Our second priority is to ensure that Wales is not further disadvantaged by potential additional cuts to the block grant that might be associated with the transfer of tax powers, as we heard a moment ago from the Exchequer Secretary, and as I will test in a moment.

Our third priority is to test properly the costs and benefits to Wales of the transfer of additional powers, particularly in respect of tax, because one of the truths about the Bill thus far is that the Government cannot really be taking this seriously. If they took it seriously and thought that it would really benefit Wales, they would have done a bit of the work to determine what the net costs and benefits would be for Wales. They have undertaken no such analysis, which I think calls into question the seriousness with which they address it.

Hywel Williams (Arfon) (PC): The hon. Gentleman has outlined three priorities. May I ask him, perhaps a little cheekily, which of those priorities is his priority?

Owen Smith: If I understand the hon. Gentleman’s question correctly, the answer is borrowing powers for Wales, because we have seen £1.6 billion cut from the budget for Wales, which is money that could usefully be made up by borrowing. Of course, all the tax powers set out in the Bill—income tax and, more immediately, stamp duty and landfill tax and other minor taxes—are directly associated with those borrowing powers. We are keen to see those borrowing powers afforded to Wales, and therefore to see the Bill passed.

However, we have never said that income tax-varying powers are a Labour priority for Wales. We remain sceptical about the benefits they would afford to Wales. Our scepticism is entirely factually based. The Silk commission’s report looks extensively at the revenues Wales receives from taxes and compares them with expenditure in Wales. It determines, to put it in blunt

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terms, that Wales currently spends around £35 billion in public moneys and nets in revenues from tax receipts of around £17 billion. That leaves a significant deficit that would need to be made up by a Welsh Government, were they to be reliant to a greater extent on their own tax receipts.

The Minister explained a moment ago that, under the terms of the formula outlined in the Bill and in some of the explanatory material, Wales would of course benefit if the growth of GDP in Wales outstripped that of England, but he also said that it

“would be adversely affected if growth in Wales was slower.”

Although in recent years the rate of GDP growth has been faster in Wales than in England, he will know that historically—if we look at the past 20 years, for example, and certainly over any longer period—the rate has been lower in Wales than in England, for all the obvious demographic and industrial reasons. We need to be certain that Wales would not be worse off, in both the short and the long term. We remain suspicious that tax competition, which seems to be the Government’s driving ideological imperative on the matter, will not benefit Wales, for the reasons I have given.

Mark Tami (Alyn and Deeside) (Lab): As someone who represents a border constituency, I think that my hon. Friend touches on a very important area. Tax competition, which might mean people moving their office across the border to take advantage of where the rate was better, will not do the overall economy in England or Wales any good.

Owen Smith: Absolutely. On previous occasions in the House I have outlined the difference between Wales and Scotland, in terms of the populous nature of our border, as well as the far greater problems that we will experience in Wales. I will touch on that later.

Huw Irranca-Davies (Ogmore) (Lab): I agree with my hon. Friend on the Front Bench. There is an ideological difference between the idea that tax competition will inspire a race to prosperity and to the top, from which everyone benefits, and the opposite, in which nations and regions compete with each other in a race to the bottom. We do not want that for our constituents.

Owen Smith: I entirely agree. I have been at pains throughout our deliberations to make it clear that, in this Bill, we are being accommodating with regard to borrowing that we understand, but there are real concerns—they are not frivolous—about the benefit for our constituents of Wales having powers that could be misused, particularly by the Conservative party, to cut taxes in Wales in order to engender tax competition across the UK. We think that would bring little benefit but many risks.

Alun Cairns (Vale of Glamorgan) (Con): Is the hon. Gentleman telling us that he is absolutely against lower taxes in Wales, and is he therefore ruling out any Labour Administration using these powers to reduce taxes in Wales at all?

Owen Smith: The latter part of that question would of course be a matter for the First Minister, were those taxes to be devolved to Wales, but I think that I have

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been absolutely clear that we are not in favour of Wales undercutting the rest of Britain to afford benefits to itself. We do not think that would be beneficial to Wales in the long term. Let me be clear: were that to happen, we do not imagine that Wales would continue to enjoy the same degree of welcome support that we receive from the rest of the UK.

Mr Mark Harper (Forest of Dean) (Con): I am now thoroughly confused about the hon. Gentleman’s position. If he is in favour, as I think he is, of devolving these tax powers, but not of their being used to reduce taxes, he can only be in favour of them being used to put taxes up. Is he really saying that he wants Wales to have tax powers, but only so that people living in Wales can pay higher taxes than those living anywhere else in the United Kingdom?

Owen Smith: That is a misrepresentation of my position, but I have come to expect little else from the hon. Gentleman or, as he is also known, the shadow shadow Welsh Secretary—well, shadow shadow Foreign Secretary. [Interruption.] Maybe, but he seems to be auditioning these days for the Welsh Secretary’s job. Perhaps he will move on to the Foreign Secretary’s position at a later stage.

The Secretary of State for Wales (Mr David Jones): Can the hon. Gentleman clarify whether the Labour party in the Assembly will be pushing for an early referendum on tax-varying powers?

Owen Smith: It was well worth waiting for the Secretary of State to intervene, but I think that the answer is no. Had he been paying attention, he would know that the First Minister has been very clear—[Interruption.] He says “Ah!”, but I think that there is no surprise in hearing that the First Minister has said that income tax-varying powers for Wales are not a priority, for all the reasons I have enumerated many times in this Chamber. If the Secretary of State was to debate some of these issues with me, rather than standing behind the Exchequer Secretary when it comes to all these detailed parts of his brief, perhaps we would have a clearer idea of his understanding of these issues.

Jonathan Edwards: Is the hon. Gentleman therefore concerned that the 22 local authorities in Wales can all put forward different levels of business rates?

Owen Smith: That is a tendentious and off-piste point, and I do not intend to busy the Chamber by bothering to respond to it.

We are still suspicious of the Government’s motives, not least because the leader of the Conservative party in Wales, Andrew R.T. Davies, has said explicitly that he wants to cut taxes for the wealthiest people in Wales. That is what we suspect that the Tory party would do if, heaven forfend, it were ever to assume power in Wales. We also still have suspicions that the Government are not really serious about doing this for Wales; in truth, we feel that it is more evidence that Wales is of interest to them only as a stick with which to try to beat the wider Labour party. We have heard this on health, on housing, and on education. Again, their perspective is to try to drive wedges into gaps that do not exist.

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If the Government were serious about this, they would have undertaken some of the work that they have done in Scotland. When we last met here to debate this Bill on 6 May, we were anticipating a report by the Government—in fact, it was late by then—on the costs of implementing a similar scheme in Scotland. It did not come out on 30 March, as promised, but on 6 May—on the day, slightly unfortunately, of our debate. The report is entitled “Second Annual Report on the Implementation and Operation of Part 3 (Financial Provisions) of the Scotland Act 2012”. It contains welcome news, because it concludes that the total cost for Scotland will not be the £40 million to £45 million originally anticipated, but a mere £35 million to £40 million. That is what it will cost not Her Majesty’s Government but the Scottish Government to implement a separate Scottish tax regime.

One would have thought that if the Government were serious about implementing this, the cost to Wales should be measured, but the Treasury and the Wales Office have undertaken no such analysis. That is particularly troubling because of the point made by my hon. Friend the Member for Alyn and Deeside (Mark Tami), who is no longer in his seat. There is more complexity in implementing this scheme in Wales because of the greater population density on the border between England and Wales—on either side of Offa’s Dyke, or the line between life and death, as the Prime Minister refers to it. Just 4% of the Scottish population and 0.5% of the English population live within 25 miles of the Scottish border, whereas 48% of the Welsh population and fully 10% of the English population live within 25 miles of the Welsh border.

In Scotland, such measures would potentially affect just 450,000 people who travel back and forth across the border, whereas in Wales the number is likely to be closer to 6.5 million. The implementation costs for Wales are therefore likely to be greater, if not the volume of communication that the Government will have to undertake. Were they serious about this, we might have heard some analysis from them today, but we have heard not a jot.

Glyn Davies (Montgomeryshire) (Con): I would like some clarity about the Opposition’s position. We are being told that they will vote in favour of the Bill, which is very good news, but the whole discussion on income tax devolution to Wales suggests that they are completely against it. There will inevitably be differences—we know that the border areas are more difficult in Wales than in Scotland—but the Opposition’s entire rhetoric suggests that they are against the devolution of financial accountability to Wales.

Owen Smith: I say again that we will support these measures. We will not press amendments 10 and 11 to a vote because we see value in greater accountability and, in particular, in the borrowing powers that are associated with income tax and other taxes. Nevertheless, there are all sorts of reasonable questions to be asked about the impact on the hon. Gentleman’s constituents and mine. The Government are being remiss, if not incompetent, in failing to deal with those questions and failing to come to this House with a proper explanation of what they think the impact will be, as opposed to using the issue merely as a stick with which to beat Labour.

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2.45 pm

Mr David Jones: I think that everyone in the House is now even more confused as a consequence of what the hon. Gentleman has said. He said that he sees the value of borrowing powers associated with income tax, but given that Labour will never hold a referendum on income tax powers, how does he hope to access those borrowing powers?

Owen Smith: I suspect that that reveals why the Secretary of State cannot speak to his own Bill and instead relies on the Exchequer Secretary. The Secretary of State will know, of course, that irrespective of whether there is a referendum in future, the volume of income tax powers to be extended to Wales has a direct link to the amount of borrowing, because the Government have chosen to introduce a different rationale for affording Wales borrowing powers from that which they used for Scotland. The Scotland Act 1998 draws a connection between the amount of capital expenditure—the budget for capital—and the amount of borrowing. In this Bill, for some reason, the Government have chosen to pursue a different rationale, whereby the ratio of borrowing is to be equal to the ratio of income tax devolution. It is very important that the Government consider amendment 10, because it would increase the volume of income tax that could potentially be exercised by the Welsh Government, and should therefore, under the logic employed by the Government, increase the amount of borrowing above the £500 million that is currently envisaged.

Mr Gauke: In moving on to borrowing, the shadow Secretary of State is finding whole new areas in which he is confusing the House. Does he not appreciate that there is a link between the revenue streams that the Welsh Government will have independently, including income tax, and the maximum borrowing levels that they will have? If an element of income tax is devolved, the borrowing cap will be higher than if it is not devolved. Does he understand that, and, if so, will he attempt to reconcile it with his earlier comments?

Owen Smith: I will forgive the Exchequer Secretary’s slightly patronising tone and simply say that I absolutely understand it. Perhaps he has not understood my point. Why does this Bill draw a causal connection between the quantum of income tax and other taxes to be devolved to Wales on the one hand, and the amount of borrowing that can be afforded to the Welsh Government on the other, when that rationale was not employed explicitly in the Scotland Act? Would he like to come to the Dispatch Box and tell us why that is different? Obviously there is no explanation—none whatsoever. Clearly, the Government have chosen to employ a totally different rationale in order to justify the lower level of borrowing that they will give to the Welsh.

The shift from 10p to 15p would not only increase the amount of borrowing that Carwyn Jones’ Government could undertake to fill the £1.6 billion gap left by this Government, but afford greater symmetry between what Labour is proposing in Scotland and what we are proposing in Wales. That shift is another positive thing about the Bill, although it will be superseded by the next Labour Government introducing even greater tax devolution in Scotland.

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Mr David Jones rose

Owen Smith: I can see that the Secretary of State is champing at the bit. Why he did not simply do this in the first place is beyond me.

Mr Jones: The hon. Gentleman does not seem to understand that if there is never a referendum on income tax powers, the Welsh Government will not be able to access an income stream of either 10p or 15p. Does he not understand that point?

Owen Smith: Absolutely, so perhaps the Secretary of State could come back to the Dispatch Box to explain why that connection was never made in Scotland, and why, in Scotland, the powers relating to the amount of borrowing were a function of the capital expenditure budget. Can he explain why that difference occurred? Obviously, he cannot, so once again, we know that the Government have simply made it up as they went along.

My last point deals with our fair funding amendments. We remain convinced that the Government do not intend to provide fair funding for Wales, and that any extension of devolution of taxation to Wales ought to be subject to a clear understanding, and agreement by the Welsh Government that the fair funding issue has been dealt with. The Exchequer Secretary acknowledged earlier that the issue of convergence has been accepted by the Government in the floor that has been put beneath the Barnett formula. The Holtham commission said that there was a shortfall of about £300 million—perhaps it is now as little as £150 million—in Wales, but we are convinced that the Welsh Government ought to be the arbiter of whether that fair funding test has been met. That is why we would encourage the Government to adopt our proposal of a back-stop power for the Welsh Government to determine whether fair funding is afforded to Wales.

Jonathan Edwards: Diolch yn fawr, Mr Deputy Speaker. It is a pleasure to serve under your guidance as we discuss this vital Bill, which will empower the Welsh Government with an element of fiscal responsibility for the first time. I would have hoped that all MPs representing Welsh constituencies were united in the view that one of our major roles as elected Members is to ensure that the Welsh economy is able to perform far better than it has in the recent past. Considering the incredible wealth inequalities that exist within the UK, with Welsh communities all too often at the bottom of the wealth league, I would have hoped that every political party was united in a mission to turn around the decades of neglect served upon Wales by successive UK Governments.

Far too many politicians in Wales rejoice at the underperformance of the Welsh economy, as it enables them to preach that Wales is far too poor, too small and too weak to succeed as an independent country. Their assertions are plainly ridiculous; Wales has all the ingredients to be a successful nation. We are a country that is rich in natural resources. Our people are highly talented, producing global leaders in science, academia, sport, culture and economics. The real question we should ask ourselves in Wales is: how do we find ourselves in such a predicament? Are we, as a people, content to languish at the bottom of every performance table and at the top of all poverty measurements?

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If I was a unionist, I would be ashamed of the fact that gross value added per head in inner London is 12 times larger than that in west Wales and the valleys—the communities I represent. Westminster is not working for Wales, which is why my party believes that the potential of the people of Wales can be achieved only if our own democratic institution has the tools to move our country forward. History shows that changing the colour of the Government in Westminster will make no difference: the Westminster parties are all signed up to the same economic agenda that has failed Wales for far too long, and the people of Wales increasingly understand that. All polling indicates that they want the National Assembly empowered with more political responsibility. A poll by the Silk commission found that 64% believed that income tax should be devolved to the Welsh Government, so it is disappointing, to say the least, that the efforts of Plaid Cymru to improve and strengthen the Bill in Committee hit the infamous Westminster wall. In Committee, we endeavoured to preserve the integrity of the proposals of the Silk commission, which of course were the foundation for this Bill. Disappointingly, all the Westminster parties reneged on the cross-party agreement that had been made during the commission. The Bill undermines what was agreed in the Silk commission, cherry-picking from a comprehensive package. On more powers for Wales, the three Westminster parties are three peas in a pod, despite the protestations of their representatives in the National Assembly.

In Committee, Plaid Cymru put forward sensible and reasonable amendments that would have improved the Bill. Those included removing the damaging lockstep on the proposed income tax-sharing arrangement between the UK and Welsh Governments; inflation-proofing the borrowing powers included in the Bill; and empowering the Welsh Government to issue bonds and tax credits, as has been done in Scotland. We also tabled a series of constitutional amendments on matters as simple as enabling the National Assembly to determine its own name; to set its own number of elected Members; and to determine its own electoral system. Needless to say, none of the amendments was accepted by the UK Government and neither would Labour offer its support, preferring instead to table wrecking amendments that would further dilute the effectiveness of this Bill. I suspect that has something to do with the anti-devolution cabal currently ruling the roost in the Labour Westminster shadow Wales Office.

Wayne David: Can the hon. Gentleman answer this simple question: are he and his party in favour of tax competition and the race to the bottom among the nations and regions of the United Kingdom?

Jonathan Edwards: Enabling the Welsh Government with tax-raising powers would incentivise the Welsh Government to improve the Welsh economy. At the moment, they are a spending body, in essence; there is no incentive for them to improve the economy. That is why these fiscal powers are so important.

Mr Harper: It might help the House if we thought for a moment about what Opposition Members mean when they talk about a “race to the bottom”. They mean that we allow hard-working families and other people to keep more of their own money so that they can make decisions about spending it, rather than having it taken

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off them and spent by the Welsh Government. That is what Opposition Members mean and it indicates all too clearly what they are about.

Jonathan Edwards: Well, that is the hon. Gentleman’s position. But if the Labour party’s position were to hold true in Wales, there would be a uniform business rate across the 22 Welsh local authorities. There seems to be a slight misunderstanding in Labour’s position.

Alun Cairns: Extending that logic beyond business rates, the same would apply to council tax rates. We have seen a 12% increase in council taxes in Wales since 2010, whereas there has been a broad freeze here in England.

Jonathan Edwards: The hon. Gentleman makes my point for me. He says that there are 22 local authorities in Wales, all with fiscal powers to change council tax rates and non-domestic rates. The Labour party does not seem to think that is a problem in Wales in terms of tax competition.

In my opening remarks in Committee, I also said that events in Scotland would supersede the second part of the Silk commission’s work and probably this Bill. Although it might appear that I have fortune-telling abilities, I reassure you, Mr Deputy Speaker, that I have yet to acquire such powers. Earlier this month, the Tory Strathclyde commission recommended that in the increasingly unlikely event of a no vote in Scotland in September, the Scottish Government should be given full income tax powers, and powers over VAT and the welfare system. The proposed new powers would make the Scottish Government responsible for gathering 40% of the money they spend. Crucially for this Secretary of State and this Bill, the Prime Minister has fully backed the commission’s proposals and promised to include them in the Conservative manifesto for next year’s general election. Contrary to the Minister’s remarks, the Prime Minister said that there was no reason why these powers should not be transferred to Scotland after the general election. Ruth Davidson, the leader of the Conservative party in Scotland, has said that this was going to be in its 2015 manifesto. Therefore, Treasury Ministers’ revelations might be revealing in terms of the debate in Scotland over the next few weeks.

The Secretary of State finds himself in an uncomfortable position, as this Bill represents the Tory offer for Wales. The people of our country can easily compare and contrast what is on offer for Wales with what is on offer for Scotland. Furthermore, the BBC is reporting that all three Westminster parties are pledging an agreement of joint travel, promising more powers for Scotland. Yet, this Bill does not even take us in Wales to where Scotland is now. Wales is not a second-class nation and there is no more powerful message in Welsh politics than equality with Scotland. This Bill is far from being a settlement that will last a generation; if the Tories want to survive in Wales next year, this Bill is unlikely to make it past the Lords in the autumn.

Only last week, none other than the Financial Times stated in its editorial that the UK should move to a federal model, noting that

“the status quo is not an option.”

It added that Wales should be included in proposals for full fiscal and policy autonomy. Today, we will endeavour to put forward amendments that will strengthen the Bill

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considerably. As the Westminster parties have decided to torpedo the Silk commission, we will also put forward amendments that go beyond its recommendations and reflect the rapid change of the constitutional debate within these isles. We will seek to divide the House on our later amendments in the next group, so that the people of Wales can contrast Plaid Cymru’s ambition for Wales with the apathy of the Westminster parties.

First, however, I will speak to our amendment 9, which is a straightforward, probing amendment. It would make the Welsh Government responsible for 100% of the income tax revenue gathered in Wales, rather than having the meagre 10%-90% split income tax-sharing arrangement on offer in this Bill. My Plaid Cymru colleagues and I have already tried to maintain the integrity of the original cross-party Silk commission recommendations. We tabled relevant amendments to the Bill in Committee, but they were either voted down or abstained on by Labour MPs who would not support what their colleagues in the National Assembly had been saying.

I mentioned the fact that the Tory Strathclyde commission has reported its conclusions. It recommended 100% devolution of income tax to Scotland. The report was fully endorsed at the highest levels of the Conservative party, with the Prime Minister himself giving it his full backing and saying that its recommendations would be included in the Conservative manifesto at the next UK general election. I need not point out to the Secretary of State, therefore, that what his party is offering to Scotland reveals what is on offer here to be completely behind the times.

3 pm

As I said earlier, equality with Scotland is one of the most powerful messages in Welsh politics. Why should we not have the same powers as Scotland? Are the other parties content for Wales to have inferior powers to those of the other nations of the UK? The Labour party states, through its First Minister, that it wants the same powers for Wales as for Scotland, yet it does precious little about getting them. Only now is Labour meekly saying that it is standing up for Wales to get the powers that were given to Scotland a generation ago.

Wayne David: Is there not a contradiction between what the hon. Gentleman is now arguing for and his total support for the Silk recommendations? Surely he must choose one or the other.

Jonathan Edwards: I appreciate the hon. Gentleman’s intervention. As I have said, we endeavoured to preserve Silk during the Committee stage, but our attempts were completely torpedoed by the Government and by Labour. We are therefore saying that we are going to go beyond Silk in the remaining stages of the Bill.

Even the Financial Times says that the UK should move to a fully federal constitution. As I said earlier, it stated in its editorial on Monday last week:

“A shift to far greater fiscal devolution north of the border would have to be mirrored across the rest of the union. It would require a whole new constitutional settlement whose purpose would be to create a more federalised Britain...First, Wales and Northern Ireland would need to gain similar powers to those in Scotland to raise, and vary, tax rates.”

Crucially, it ended by saying that

“the creation of a new constitutional settlement...is not something that can be left on hold”.

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Last week we also learned not only that 55% of the peoples of the UK want greater fiscal and policy powers for Scotland, but that 54% want Wales to have those same greater freedoms, according to an ICM poll commissioned by the Evening Standard.

We are moving towards a far looser Union, and that is why this Wales Bill is a major missed opportunity. I have always said that the powers on offer in the Bill would be completely overtaken by events in Scotland and I have been vindicated, not least by the fact that there is an increasing likelihood of Scotland voting yes in September, thereby making the Bill look like a sticking plaster put over a burst dam.

All the Unionist parties are now falling over themselves to offer increased devolution in Scotland, despite having previously said that that should not be an option in the referendum. They must be kicking themselves that they did not include it as a third option on the ballot paper. Who will believe a word they say when they promise jam tomorrow? I would say, based on past evidence—and on what the Exchequer Secretary to the Treasury has said today—that the only way for the people of Scotland to guarantee more powers for Scotland is to vote for independence.

I would draw the people of Scotland’s attention to the Wales Bill. Here we have a Government who set up a cross-party commission to bring forward a consensus which carefully put together a fully endorsed package of reforms. The Conservatives and the Liberal Democrats then reneged on their word by cherry-picking and watering down the recommendations of the cross-party commission. They added restrictions and caveats further to render the powers unusable via mechanisms such as the lockstep. The UK Government’s attempt to strangle the cross-party Silk commission’s original recommendations by adding caveats, restrictions and locksteps should be a salutary reminder to the Scottish people of the sincerity of Westminster’s promises regarding further devolution. If the Wales Bill is anything to go by, the Government here will make a big headline-grabbing announcement promising more devolution, only to reveal a paltry offer when the surface is scratched away.

Wayne David: I take the hon. Gentleman back to his comments a moment ago, when he said he was supporting Silk. He is now saying that he is not supporting Silk. Is he behind Silk or not? Does he want to see those proposals taken much further? He cannot have his cake and eat it; he must decide one way or another.

Jonathan Edwards: I am grateful to the hon. Gentleman for that second attempt, but I think I answered his question when he first intervened on me.

It is interesting that Labour Front Benchers have only now tabled amendments to the Bill to give Wales control over 15% of income tax revenue gathered in Wales. That proposal is in amendment 10. Admittedly it is better than the 10% on offer in the Bill as it stands, but it is still meagre and shows a lack of ambition and vision for Wales. That is symptomatic of the Labour Government in Cardiff and their puppet-masters here in Westminster. Of course, 15% is better than 10% and we shall be supporting the amendment if it is pressed to

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a vote, especially as it does not include the lockstep-plus mechanism I referred to in Committee. However, it still reflects Labour’s lack of dynamism. Why only 15%? That figure seems to have been chosen simply because it is ever so slightly better than the Tory and Lib Dem offering.

I see that Labour’s other amendments are more concerned with delay, obfuscation and preserving its own positions than with trying to get the best deal for Wales and its economy. On the vote in Committee to remove the lockstep restriction, Labour abstained, despite the Labour First Minister and Finance Minister having said that it should be removed. Where is Labour’s consistency? Again Labour Members say one thing in Wales and do another at Westminster. They are now saying that Wales should have control over 15% of income tax revenue, yet their amendment says nothing about the removal of the lockstep.

When the Westminster Government announced in November last year that Wales would be getting new powers, they stated that the powers would make Wales an “equal partner” in the UK. Nothing could be further from the truth. The Secretary of State for Wales has previously argued that Wales must be given “equal respect with Scotland”, yet his actions run completely against that. His party is effectively offering Scotland full income tax devolution, yet he is maintaining the lockstep in the Bill for Wales and proposing that we should have control of only 10% of the income tax revenues raised in our country.

In conclusion, I want the same powers for Wales as the other nations of the British state either have or are being offered. If the main party of Government here at Westminster has full income tax devolution for Scotland as its party policy, why on earth should Wales not have those same powers? The changing context of the Scottish independence referendum debate vindicates what I have said all along—namely, that its rapid development will ensure that the powers on offer in the Bill will not be the settlement for a generation that the Government are suggesting.

The Welsh economy needs those powers now, never mind in three years’ time—the earliest point at which they would come on stream. Ultimately, the powers on offer in the Bill pale into insignificance in the context of how the constitution of the British state will alter in the coming years. That should be noted by this Government and all the parties, and we should begin with full devolution of income tax, so that the Welsh Government can determine their own bands and rates.

Mr Gauke: I shall briefly respond to a number of the points raised in the debate. The first related to the cost of implementing the Welsh rate of income tax. HMRC is looking to develop a specific estimate for that cost but, because the timing of the introduction of a Welsh rate is uncertain and because it would depend on the outcome of a referendum in Wales, it is difficult to do so at this time.

I want to make two comments in regard to the comparisons with Scotland. First, the Scottish population is obviously larger than the Welsh population, so that will reduce some of the costs. Secondly, however, a counteracting element is that the number of people living close to the border might result in an increase in the number of people contacting HMRC to seek

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clarification. The hon. Member for Pontypridd (Owen Smith) mentioned the concern about the number of people working in Wales but living in England, and vice versa. We must remember that the definition of a Welsh taxpayer is based on where they live, not where they work. For the vast majority of people, it will be clear where they are, so we should not overstate those costs. As I have said, however, it is difficult to come up with a precise number at this point.

On the Strathclyde commission, I have made it clear that that will relate to what happens in the next Parliament. We certainly welcome Lord Strathclyde’s recommendations; there is much to take from them.

Jonathan Edwards: Given the comments of the Prime Minister and, especially, of the leader of the Conservative party in Scotland, does the Minister think that Ruth Davidson was being rather exuberant—for want of a better word—in proclaiming that those measures would definitely be in the manifesto?

Mr Gauke: I would say to the hon. Gentleman that what the Prime Minister says will be in the manifesto tends to be in the manifesto. That is a fairly wise approach.

The Opposition have set out their views and I think we have finally got some clarity. I think that Labour’s position is that we should not devolve any element of income tax to Wales, but that devolving 10p is not high enough and it should be 15p. In other words, it is saying that 15p is better than 10p, but nothing is better than anything. Labour also supports the Bill because it wants the Welsh Government to have access to borrowing powers that come as a consequence of having independent revenue streams, but it does not support the Welsh Government having access to the biggest independent revenue stream that might be available, which is income tax. I hope I have characterised Labour’s position correctly. It is simultaneously both for and against, on at least two different grounds.

With those points of clarification, I hope that the Government new clause and amendments will be accepted and that the Opposition amendments will not be pressed to a Division.

Question put and agreed to.

New clause 1 accordingly read a Second time, and added to the Bill.

New Clause 2

Infrastructure guarantees in Wales

‘Her Majesty may by Order in Council provide for the transfer of responsibility for providing infrastructure guarantees in Wales to the Welsh Ministers.’—(Jonathan Edwards.)

Brought up, and read the First time.

Jonathan Edwards: I beg to move, That the clause be read a Second time.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this it will be convenient to discuss the following:

New clause 3—National Assembly ability to hold binding referenda

‘Her Majesty may by Order in Council provide for the transfer of responsibility for holding binding referenda to the National Assembly for Wales.’

New clause 4—National Assembly for Wales: reserved powers

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‘(1) The Secretary of State will lay a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales and shall lay the report before each House of Parliament within nine months of this Act receiving Royal Assent.

(2) Part 2, except the referendum-related provisions and sections 19 and 20 shall not come into force until the report has been laid in accordance with subsection (1).’

Amendment 8, in clause 19, page 22, line 8, at end insert—

‘(1B) Welsh Ministers may set their own capital expenditure priorities.”

This amendment and amendment 5 enable the new clause inserted by new clause NC1 to come into force by order of the Secretary of State if the majority of voters in a referendum held under clause 11 vote in favour of clauses 8 and 9 (the income tax provisions) coming into force.

Jonathan Edwards: We should be using this Bill to empower the Welsh Government—with an arsenal of powers to enable them to intervene in the Welsh economy. During our discussions on the Bill, we have debated fiscal powers and different elements of borrowing powers. However, we have not debated one lever that could be of enormous use to the Welsh Government and that might not necessarily cost a penny, but that would allow them to provide security to various infrastructure projects that might not take place without such backing.

New clause 2 would allow the Welsh Government to issue financial guarantees for private projects that they choose to support in such a manner. Government guarantees are useful for companies that are then able to draw down private investment to fund their projects. As I have said, these guarantees would cost the Government nothing, unless the project fails.

Effectively, guarantees mean that the Government financially underwrite a project. In many cases, guarantees are more useful for helping projects get off the ground than borrowing powers. It is a simple measure that would help the Welsh Government kick-start infrastructure development in Wales, boosting jobs and growth.

I need only quote what the Chief Secretary to the Treasury had to say about the importance of guarantees when he launched the most recent outline of UK Government-backed projects:

“The offer of a guarantee is helping to get projects going…There is a lot of infrastructure happening in this country because of this programme.”

The Institute of Civil Engineers said that the guarantee scheme had enabled

“viable projects to secure finance in difficult market conditions…It is an excellent example of government making creative use of its resources to get projects moving,”

Last October, the UK Government announced their £40 billion guarantee scheme. Projects earmarked for support included a £300 million biomass energy generation plant in Avonmouth in Bristol; a £400 million gas-storage facility in Islandmagee in County Antrim; two gas-fired power plants in Lincolnshire and Essex; mixed-use development of homes, offices and shops in Aberdeen; a wind farm on the Forth estuary; a renewable energy port facility in north Lincolnshire; a low-carbon fuel plant for commercial vehicles; development of the university of Roehampton campus in Surrey; a wood-fired generation plant in Tilbury in Essex; relocation of Northampton university; a Five-Quarter Energy gas plant in the north-east of England; and ethane storage facilities at the Ineos Grangemouth plant near Falkirk in Stirlingshire.

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If we look at the UK Government’s list of prequalified projects, which was updated on 16 June, we will see that none of those projects is in Wales. Despite heady announcements from the UK Government about “co-operation agreements” and the inclusion in the national infrastructure plan of projects in Wales, not one has even reached the prequalified stage, according to the publicly available list.

The UK Government guarantee scheme should not be confused with the national infrastructure plan, which is a wish list of future projects. The plan does include the proposed Wylfa B, with a promise of UK Government financing help following planning approval. The national infrastructure plan of December 2013 mentions

“a new cooperation agreement with Hitachi and Horizon with the aim of being able to agree an in-principle guarantee by the end of 2016 to support the financing of a new nuclear power plant at Wylfa, subject to final due diligence and ministerial approval.”

It has, therefore, still not reached the prequalified stage.

Returning to the UK Government guarantee scheme, the eagle-eyed will notice that none of the prequalified projects is located in Wales. Therefore, the Treasury is using Welsh taxpayers’ money to underwrite projects in other parts of the UK, and Wales has so far seen precious little, despite being desperately in need of better infrastructure to drive forward the Welsh economy. Driving forward the Welsh economy would be a real effort to rebalance the UK economy geographically, yet this Government have no real interest in doing so. They should either bring more infrastructure projects to Wales, or give the Welsh Government more tools to do so. I and my Plaid Cymru colleagues believe that it is for the people of Wales, through their democratic institutions, to decide which infrastructure projects to underwrite and where.

3.15 pm

The UK Government have pledged to underwrite the £4 billion Thames super-sewer here in London. Some might regard that project as especially high-risk, considering the widely recognised indebtedness of Thames Water, a company that failed to pay any corporation tax last year, despite its profits increasing 79% to £259 million.

A few months ago, Welsh Members were invited to a meeting by the £280 million Circuit of Wales developers in Blaenau Gwent. They informed MPs and peers that one of the measures they needed above all else to get the project going was a Government guarantee. Hardly a week goes by without some Labour MP, Assembly Member or Lord saying that the circuit could be the saviour of the Welsh valleys. Today, Labour MPs will have their opportunity to give the Welsh Government the power to issue the guarantee required to get the project going. As ever, I do not hold out much hope that Labour MPs will put the communities they represent first, but the way they vote will be a matter of public record.

Our new clause 2 proposes that the Welsh Government should have the ability to issue guarantees—ultimately guaranteed by the Treasury—worth 5% of the UK Government scheme. That would enable the Welsh Government to underwrite £2 billion-worth of infrastructure projects, which would inevitably provide a significant boost to the Welsh economy.

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Technically speaking, a guarantee gives rise to a contingent liability for the Government. In other words, it is a potential liability depending on something happening that will trigger the guarantee and require funds to be paid in full or in part to satisfy the guarantee. Given the uncertain nature of such liabilities, the Government do not score them against departmental expenditure limits, unless and until they result in payments being made.

The major infrastructure projects announced, or semi-announced, for Wales by the UK Government—the M4 relief road and rail electrification—will not come through infrastructure guarantees, but via puppet-master strings. The UK Government are seeking to force a future Welsh Government to use their borrowing capacity for the first, and the second is a complete shambles because neither Government can agree on who said what they would pay for.

Ultimately, Wales should get its fair share of economy-boosting infrastructure projects and the Welsh Government should be empowered to provide guarantees, without the constraints placed on them by Westminster as with the other cases I have just mentioned. If used prudently, the guarantees need not cost the Welsh taxpayer a single penny. It is a simple and effective mechanism.

The UK Government’s proposals in the Bill effectively handcuff the Welsh Government. They are saying, “You can have tax powers, which can’t be used because of the lockstep, and you can have borrowing powers as long as you spend them on our preferred projects.” They are treating the Welsh Government and the people of Wales with contempt.

In these remaining stages, the Secretary of State needs to rethink his position. The leader of the Conservatives in Scotland has described the current Scottish fiscal arrangements as those of a “pocket money Parliament”. Surely there should be a better deal on offer for the people of Wales. A Bill genuinely aimed at helping the Welsh Government to drive economic growth would at the very least include this new clause.

My Plaid Cymru colleagues and I also tabled amendment 8. We remain concerned that the UK Government will seek to shackle the ability of a future Welsh Government to use the borrowing-for-investment powers as they see fit. The case in point is the plan to use the new borrowing capacity for a new M4 road. Plaid Cymru has long advocated infrastructure investment as a means of creating jobs and developing the Welsh economy, which still languishes at the bottom of the UK economic league table. However, it would be a dereliction of duty by any future Welsh Government if they agreed to use their borrowing capacity solely to fund a new M4 road, because, first, there are far better ways of relieving congestion on the existing M4 in south-east Wales; secondly, any future Government of Wales will have a duty to the whole of Wales, not just the south-east; and thirdly, if the powers are to be devolved, surely it should be a matter for the democratically elected Government of Wales to determine their own priorities, not a matter of command and control from the Treasury.

The Bill as drafted says that the Treasury will have the final say on any infrastructure projects in Wales paid for via the borrowing powers. Our amendment 8 would enshrine the right of a future Welsh Government to choose as they see fit. Ultimately, as in other areas of the Bill, the Westminster Government are saying, “You can

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have the power to do x, y and z, but we still retain the right to overrule you or to attach conditions and caveats so that the power cannot be used freely.” We have seen that with the Government’s addition of the lockstep, the cherry-picking and the complete failure to give to Wales any devolved powers that match those for Scotland and Northern Ireland.

When the UK Government announced that they would make money available for investment in a new M4 relief road, it was unclear which funds would be allocated. As the Bill’s contents were gradually revealed, it became apparent that the Westminster Government intended to bind a future Welsh Government’s hands on the borrowing powers available by funnelling the new power into the project that they saw as the one worthy of investment—namely, the priority from a Treasury perspective. It is highly telling that the Government here want the money to be spent on the M4, as they see Wales through a colonial lens. For Westminster, Wales is worthy only of mineral and natural resource extraction and as a source of labour, which means that its only interest is in maintaining east-west links and that it has no interest in developing infrastructure internally in Wales.

In a close parallel, the UK Government stated that they would electrify the great western line to Swansea and the valley lines, but then reneged on their word. That also revealed the incompetence of the Labour Government in Wales, who completely failed to nail down the Westminster Government on the precise terms of the agreement. All along, the people of Wales are being let down by unionist parties who squabble among themselves and who deliver only mealy-mouthed promises and an economy in Wales that is still languishing.

Mark Tami: Will the hon. Gentleman please explain or elaborate on the imperialist nature of the M4, because I am slightly at a loss?

Jonathan Edwards: The point I am making is that all the investment seems to be on an east-west basis, rather than on a north-south basis.

Hywel Williams: Apropos of that intervention, I would have thought that the hon. Member for Alyn and Deeside (Mark Tami) was rather more interested in developing the A55 than the M4.

Jonathan Edwards: I am sure that that very useful intervention will be noted by the constituents of the hon. Member for Alyn and Deeside (Mark Tami).

Plaid Cymru recognises the issue of congestion on the M4 corridor around Newport and wants investment to take place. However, the current Labour Welsh Government’s preference for a new M4 to the south of Newport at a cost of £1 billion is a disproportionate solution to the amount of congestion. According to Friends of the Earth and Professor Stuart Cole, the Welsh Government consultation documentation overestimated traffic growth in 2012 and 2013. The flows were lower than the Welsh Government predicted, so they do not have a strong enough statistical base on which to justify such a huge financial and environmental cost. As the Federation of Small Businesses has pointed out, committing the vast majority of Welsh borrowing capacity and

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money from outside the borrowing limit in the Bill to one single project is misguided and does not serve the whole of Wales or the whole of the Welsh economy.

Paul Murphy (Torfaen) (Lab): I am listening with extreme interest to the hon. Gentleman’s points. It seems to me that Plaid Cymru is therefore actively opposing the development of the relief road around the M4, which he will have to explain to those who vote for Plaid Cymru in Gwent and Glamorgan.

Jonathan Edwards: I have huge respect for the right hon. Gentleman. I will outline two alternative proposals that would be a better use of the borrowing capacity of the Welsh Government than blindly following what the Treasury wants.

The new M4 will not be a quick and decisive solution, despite what its supporters say. It will not be completed until 2031, according to the Welsh Government. The £380 million blue route, an upgrade of the A48 corridor that includes flyovers, would represent better value for money and would avoid the environmental damage caused by building on the Gwent levels to the south of Newport. The road upgrade would be accompanied by modern traffic management methods, such as signage to direct traffic flows between the A48 and the existing M4, depending on congestion levels. The blue route is future-proofed until 2035 and, if needed, it could be developed further beyond 2035. Money saved by developing the blue route could be invested elsewhere in Wales. In our previous transport consultation, Plaid Cymru identified transport needs in north, mid, west and south Wales. Above all, Plaid Cymru’s proposal to support the blue route is more innovative and balanced than the proposal with which the Labour and Conservative parties are trying to push ahead. Wales must not get tied into the UK Government’s deal on the M4.

Ultimately, although a new route is needed to relieve the pressure on the M4, what is really needed is the development of a metro system for south-east Wales and the valleys. Early estimations have put the costs at about £1 billion. The reality is that the M4 is used as a local road in south Wales, as the right hon. Member for Torfaen (Paul Murphy) well knows: 40% of journeys made on the M4 in that area are local ones of less than 15 miles. This means that—in one act—commuter journeys could be transferred to a metro system to relieve the pressure on the M4. The great thing about a metro system is of course that, after the initial outlay, a ready stream of revenue is provided through ticket sales that could be used in part to repay the initial expense and reinvest in services and upkeep. The success of the Newcastle and Tyneside metro could be repeated in south Wales if we had the necessary vision.

In conclusion, it appears that the Westminster Government are intent on binding the Welsh Government’s hands on how they utilise the borrowing capacity. The M4 relief road is a case in point. Unfortunately, the current Labour Welsh Government lack the ambition and vision to do something different, and are blindly following the UK Government’s lead. Amendment 8 would make sure that a future Plaid Cymru-led Welsh Government were not bound in the same way but could prescribe more intelligent solutions to infrastructure problems and provide a boost for the whole of the Welsh economy, rather than just the primary corridor

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routes in and out of Wales that concern the Westminster Government. With your permission, Mr Deputy Speaker, I will therefore definitely push amendment 8 to a vote at the appropriate time.

Paul Murphy: It was interesting to hear the points made by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), but I want to concentrate on my party’s new clause 4 on reserved powers. I very much welcome the new clause, which relates to the laying of

“a report before each House of Parliament on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales”.

[Interruption.] Perhaps I should give up for a second while negotiations are going on behind the Speaker’s Chair.

I repeat that I support new clause 4 on reserved powers for Wales. I remind the House that the Leader of the Opposition, who was in north Wales for the Labour party conference some months ago, said that the next Labour Government would introduce a

“new Government of Wales Act, with powers assumed as devolved to Wales, unless specifically reserved. Bringing Wales into line with Scotland—modernising and advancing the devolution settlement for generations to come.”

I do not see why the Government, and particularly the Secretary of State for Wales, should reject such a proposal. In an earlier incarnation, I was probably more sceptical about devolution than even he is now, but the world changes. As the hon. Member for Carmarthen East and Dinefwr mentioned several times, the world has changed with regard to what might or might not happen in Scotland in a few months’ time. Let us assume, as I hope will be the case, that the voters of Scotland vote no. If that happens, we know that the Government—not the Opposition—will make far-ranging changes to Scotland’s constitution, with its Government being given extra powers as a consequence of his Government’s commitments. The Secretary of State also knows that it is quite likely that a future Labour Government would agree to such proposals. I therefore cannot understand why he is opposed to reserved powers for Wales only a matter of weeks before the possible introduction of a new Bill for Scotland that would give extra powers.

That argument is simple enough, but in a sense it goes back to our previous debate about borrowing. The Treasury Minister tried to make the point, rather heavily I thought, that borrowing could not be greater in Wales because we did not have sufficient streams of income. However, the shadow Secretary of State pointed out that Scotland and Northern Ireland were given borrowing powers for different reasons. Therefore, it is strange that, within Government, Wales is going that way and Scotland is going another way. There is no reason why that should be the case.

3.30 pm

This is a modest measure. The new clause calls for a report to come to Parliament looking at the issue of reserved powers. It will avoid the need for the Secretary of State to keep going to the Supreme Court when there are disputes on, for example, the Agricultural Wages

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Board and other issues. This measure seems a simple solution to the problem. What happens in Scotland will have an effect. The Silk commission recommended this. Granting reserved powers to Wales—in other words, it would have all the powers it needed except those that are reserved to Westminster—is a way in which we can overcome the differences between Wales and Scotland.

Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): I am following the right hon. Gentleman’s argument and I fully accept what he says about the benefits of a reserved powers model. However, it seems to us that the problem with the new clause is that it relies on a report some time in the future to bring that in. Accepting what he says and the obvious benefits of a reserved powers model, why do we need that report?

Paul Murphy: I hope that my hon. Friends on the Front Bench will elaborate a bit more on the matter, but my guess is that they discussed the issue of reserved powers at earlier stages and a new clause is necessary to revive the debate on that on Report. I agree that this measure is relatively modest in asking that a report be laid, but I am sure that my hon. Friend the Member for Llanelli (Nia Griffith) will clarify that we are in favour of reserved powers, as described by the Leader of the Opposition in north Wales. There is no equivocation at all about whether we want reserved powers. We do. The new clause is framed in this way so that the House can debate what is an important issue.

Hywel Williams: From my reading of new clause 4, it does propose a reserved powers model, but that is contingent on a report not on the reserved powers model, but on borrowing by Welsh Ministers. The Opposition seem to be yoking two different things together. I suspect that it is a delaying, or even a wrecking tactic.

Paul Murphy: It certainly is not a wrecking tactic. I have made the position clear. I am just a Back Bencher, but Labour Front Benchers will also make it clear that the Labour party is committed to reserved powers for Wales. In the light of what is likely to happen in Scotland, that becomes much more important.

The Parliamentary Under-Secretary of State for Wales (Stephen Crabb): I am grateful to the former Secretary of State for giving way. He is definitely not just a Back Bencher, but does he genuinely believe that moving to a reserved powers model is a panacea for all the difficulties and challenges of a devolution settlement between England and Wales—issues such as water, transport, and the populous border, which the shadow Secretary of State described earlier? Does he genuinely believe that moving to a different starting point is a panacea to overcome the challenges in the current devolution settlement?

Paul Murphy: I do not think for one second that the model is a panacea for all the issues and problems that we face, but I think that it will give tools to the National Assembly and the Welsh Government that they currently may not have and make it easier for them to resolve various issues. I do not suggest for one second that the model means that we will have to end the important cross-border co-operation that exists, or that there will be no need for the Governments to discuss matters. Of

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course that will have to happen, because of points Members made earlier; large swathes of the population live on the border in Wales, in contrast to Scotland. I agree with the Minister that this model is not the complete answer but it is an answer. It is also an answer in the light of what both parties are thinking with regard to Scotland. Whatever happens in Scotland—like me, the Minister will argue for a no vote—it will undoubtedly change the political and constitutional landscape of our country and so Wales must be in a position to take part in that. Otherwise, we will be seen as an adjunct to a very large England, with Northern Ireland, with its own special issues, on one side.

Therefore, I agree with the new clause. I am sure that my hon. Friend the Member for Llanelli will be able to make the points that I have not made and that have been discussed by Members.

Nia Griffith (Llanelli) (Lab): The new clause calls on the Secretary of State to issue a report on the further legislative steps needed to move to a model of reserved powers for the National Assembly for Wales. It seeks to prepare the way for Wales to enjoy the reserved model of powers, so that legislation should set out the areas that are reserved for the UK Parliament, rather than trying to define all the areas that Wales can legislate on.

The current situation is that the model of devolution in operation for Wales is the conferred powers model. Following the referendum in March 2011, the National Assembly for Wales was empowered to make primary legislation in the 20 broad policy areas. Therefore, the areas where the National Assembly can legislate are conferred upon it and listed in the statute. However, Scotland and Northern Ireland enjoy the reserved powers model, which means that the legislation sets out the areas where the devolved legislature cannot legislate—areas that are reserved to the UK Parliament.

Mr Mark Williams (Ceredigion) (LD): At least three parties in the House support the reserved powers model, but can the hon. Lady explain what is meant by subsection (2) of the new clause? The hon. Member for Arfon (Hywel Williams) made this point. It says:

“Part 2, except the referendum-related provisions and sections 19 and 20 shall not come into force until the report has been laid in accordance with subsection (1).”

What is that caveat? What is the hold up in moving towards a reserved powers model in the new clause?

Nia Griffith: That provision is to ensure that the report is actually laid. That is the point of it. It says, “Let us make sure that this is a genuine part of what happens during the passage of the Bill, rather than the issue being kicked into the long grass.” Otherwise, the danger is that the new clause, which asks for further progress on reserved powers, would just be kicked into the long grass. That would be the problem. It is integrally linked now with the progress of the Bill.

Mr Williams: Is there any link with the point made by the hon. Member for Arfon about the financial provisions of the Bill?

Nia Griffith: The whole point is that this is what we want to see. We are committed to a reserved powers model and that is what we would like to see progress on. It seems a missed opportunity not to have that in the Bill, so we want to put it in.

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Mr Williams: I share the passion for the reserved powers model. The point the hon. Lady is making about the contrast with Scotland and Northern Ireland is an admirable one. My party leader has said that. So has Plaid Cymru and elements of her party, but why do we need subsection (2) of the new clause? I do not understand. Why can we not proceed with the reserved powers model anyway?

Nia Griffith: The important thing is that we are firmly committed to the reserved powers model and we wanted to find a way to put that in the Bill. We have put it in the new clause in this way because that is what we have been advised.

The Silk commission part 2 makes the recommendation that Wales would be better served by the reserved powers model, and it therefore seems to us that the Bill provides an ideal opportunity to pave the way for that change. Not to do so would be a missed opportunity, which is why we are proposing the new clause. The model is already there for Scotland and Northern Ireland.

My right hon. Friend the Leader of the Opposition confirmed our commitment to a reserved powers model when he announced at Welsh Labour conference that Labour has a manifesto commitment for next year’s general election to introduce a

“new Government of Wales Act, with powers assumed as devolved to Wales, unless specifically reserved. Bringing Wales into line with Scotland—modernising and advancing the devolution settlement for generations to come.”

Labour is the party that brought devolution to Wales and Scotland. It remains the only party that is committed to and can deliver devolution in the UK and get the best deal for Wales. Therefore, let us look at why we believe that the reserved powers model would serve Wales better than the current model.

As the Welsh Government told the Silk commission:

“The reservation model is a technically superior method of devolving legislative competence on a devolved legislature. In our view, the conferral model is incapable of prescribing with any degree of certainty exactly what the Assembly can legislate about…The Welsh model therefore lacks…clarity and certainty, and much time is spent addressing potential arguments about whether provisions of a Bill relate to such undefined subject-matter.”

Indeed, the submission from the Hywel Dda institute of the Swansea university school of law also concluded that

“the reserved powers model is, in principle, superior in terms of accessibility, clarity, stability, sustainability, effectiveness and consistency with the principle of subsidiarity”.

Mr Llwyd: I am listening intently to the hon. Lady’s arguments about the benefits of a reserved powers model, and I fully agree with her. I was here when the original Wales Bill was drafted some years ago. Why was it not put in as it was for Scotland at that stage, rather than the conferred model?

Nia Griffith: I very much hope that the right hon. Gentleman will welcome the move forward that we are making in light of the referendum that showed that the people of Wales wanted to go that step further. I think it reflects the mood and the present situation in Wales.

I am very pleased to hear that the hon. Member for Ceredigion (Mr Williams) is offering his support, particularly as his hon. Friend the Member for Brecon

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and Radnorshire (Roger Williams) stressed his wholehearted support for a move towards the reserved powers model only a few weeks ago here in this Chamber. His thoughts were, of course, echoed on 16 June by the Deputy Prime Minister:

“So, what you will find in our manifesto is a commitment to implement Silk 2 in full.”

I hope today that we will see that support demonstrated in full by his party.

As for the Secretary of State for Wales, I think I will have a rather more difficult time persuading him to even contemplate moving to a reserved powers model for Wales. Indeed, he is on record as preferring the current settlement and I suppose even that is a big step forward for him from our days together on the Welsh Affairs Committee, when he wanted a referendum to make provision for turning the clock back and reversing the devolution settlement.

That brings me on to further evidence for wanting to move to a reserved powers model. As hon. Members will know, since the Welsh Assembly received its full law-making powers in May 2011, there have already been three referrals to the Supreme Court seeking clarification as to whether proposed legislation is within the competence of the Assembly. Two of those referrals have been made by the Attorney-General. The first of those was the Local Government Byelaws (Wales) Act 2012, which was passed by the Assembly in July 2012. The Supreme Court delivered a unanimous judgment in November 2012 that it was within the competence of the Assembly. That process both delays the legislation and comes with a cost.

In this case, the legal cost of the Treasury Solicitor’s Department for representing the Attorney-General in relation to the Bill was £59,000. The legal cost incurred by the Welsh Government was £30,000 and about £15,000 was spent on civil service time in the Wales Office. The First Minister’s spokesman called it a

“ridiculous situation that has arisen on what is a totally uncontroversial piece of legislation…The primary policy objective of the Bill is to simplify and rationalise how local authorities make byelaws to deal with nuisances in their areas…So why the UK government has decided to take this to the Supreme Court, at the last minute, is inexplicable.”

You really do have to ask yourself, Madam Deputy Speaker, why the Secretary of State even thought it necessary to ask the Attorney-General to refer it in the first place. It is difficult not to conclude that it had something to do with his general antipathy to any new steps in devolution.

The second referral by the Attorney-General was the Agricultural Sector (Wales) Bill, passed by the National Assembly for Wales in 2013, and we are still awaiting the outcome. That Bill seeks to retain in Wales an equivalent of the Agricultural Wages Board, which has been abolished by this Government in England. It therefore represents a difference in policy between the UK Government and the National Assembly for Wales.

Yet again, we saw it referred by the Attorney-General. You might almost suspect, Madam Deputy Speaker, that that was a referral made by the UK Government because they disagreed with the legislation and were unwilling for the Welsh Assembly to do things differently. But to most people, it just looks like wasting public

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money, fighting an expensive legal battle to try and stop the Labour Welsh Government retaining an equivalent board in Wales to protect Welsh farm workers—a move that has the support of the Farmers Union of Wales and people in Wales.

Furthermore, as my right hon. Friend the Member for Torfaen (Paul Murphy), who has direct experience of these matters, said in a previous debate, when he was Secretary of State for Wales, disputes between the devolved Administrations and the United Kingdom Government were resolved at a governmental and political level and they should never get to the stage where they are resolved by the courts. He stressed that there is machinery within Government for resolving disputes between the devolved Administrations and their Parliaments and the UK Government.

3.45 pm

The third referral was of the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill by the Counsel General. The Bill was introduced by a Back-Bench Assembly Member and passed by the National Assembly in November 2013, and again, we are still awaiting the outcome of that referral.

If we moved to a reserved powers model of devolution for Wales, that would help address any such issues in the future and afford the Assembly the respect it and the Welsh people deserve. That is why we are anxious to see the new clause included in the Bill.

Hywel Williams: With all due respect to right hon. and hon. Members who have spoken today, I would like to begin with a quote that, for me, exceeds anything that has been heard today for eloquence:

“The will of the people is the only legitimate foundation of any government, and to protect its free expression should be our first object.”

I quote that in support of our new clause 3, which stands in the name of my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) and my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd). The quote comes from Thomas Jefferson, third President of the United States, primary author of the declaration of independence and, as I am sure the Western Mail would remind us, one of 16 of the 56 signatories to the declaration who were of Welsh extraction. Jefferson’s argument is that the validity of any Government is bound up with their purpose of representing the will of the people. That could also claim to be the primary motive behind our new clause 3.

In Committee, we in Plaid Cymru tabled amendments, as my hon. Friend the Member for Carmarthen East and Dinefwr said earlier, that would grant further powers to the National Assembly, including the power for it to decide on the number of Assembly Members, change its name should it wish to do so, and make amendments to secure further financial powers. We were disappointed that more Members from other parties did not support those amendments, but this new clause encompasses them all.

We believe that decisions of this nature are better made when elected representatives have the backing of the people, and the most straightforward means of determining the will of the people on any particular subject is, of course, a referendum. New clause 3 would therefore give the National Assembly the power to hold

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binding referendums on issues already in its competence, and on questions relating to further transfers of constitutional or financial powers, such as those that have been proposed in respect of changes to income tax.

The National Assembly could ask the people of Wales questions such as how many Assembly Members they believe should sit in the Assembly, what the voting system should be, and whether new fields should be devolved if we do not get to the reserved powers model. That would give our people a clearer say in the Assembly’s decision-making process.

The Wales Bill allows for a referendum on the question of transferring to the Welsh Government power over 10% of income tax receipts, but the notion that there should be a new Bill in this place each time a referendum is needed on a reserved matter is convoluted, to say the least, and convoluted is not good: witness the wretched legislative competence order process. Plaid Cymru is not in favour of holding a referendum for the sake of it. For example, the transfer of minor taxes to Wales—as recommended by the Silk commission—without recourse to a referendum has set a precedent. We have argued that the planned referendum on income tax powers is not necessary, but circumstances will certainly arise in the future when holding a referendum will be the proper and practical way forward.

Unlike in other countries with written, codified constitutions, the transfer of such a power to Wales would require no official constitutional change; it could be done by an Order in Council. A recent precedent for that was signed into being by the Edinburgh agreement in 2012:

“The United Kingdom Government and the Scottish Government have agreed to work together to ensure that a referendum on Scottish independence can take place…the referendum should: have a clear legal base, be legislated for by the Scottish Parliament, be conducted so as to command the confidence of parliaments, governments and people, deliver a fair test and a decisive expression of the views of people in Scotland and a result that everyone will respect”—

an excellent set of principles. The agreement goes on:

“The governments have agreed to promote an Order in Council under Section 30 of the Scotland Act 1998 in the United Kingdom and Scottish Parliaments to allow a single-question referendum on Scottish independence to be held before the end of 2014.”

There we have the basis for a referendum for Scotland and, I would argue, the basis for a power of referendum for the Assembly. That Scottish agreement is valid for that one referendum, and no other referendum can be held under those specific terms unless they are renewed. Our new clause, however, would confer a continuing power to the Assembly.

According to a recent study published by the Political Studies Association, there have been 49 independence referendums worldwide, both official and unofficial, with an average turnout of 79%—far higher than the average turnout in UK general elections over past years. I point out that in democratic countries after 1945, the average yes vote in such referendums has been 62%. Not all those referendums have been recognised by national or state Governments; for example, in 1946 the Danish Government refused to recognise the result of an independence referendum in the Faroe Islands. After negotiation, however, the islands were granted what we would now call devo-max: all powers except foreign affairs and defence were devolved.

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The independence referendum due to be held in Catalonia on 9 November this year is highly likely to produce a yes vote. I suspect, however, that it will be ignored by the Spanish Government on their current form, as that has been Madrid’s response to the rolling programme of non-binding local community referendums on that subject, which have been held in hundreds of towns and villages across Catalonia from September 2009, and in which a large majority voted for independence. Madrid has ignored those developments to its cost: witness the enormous pro-independence demonstration by 1.5 million people out of a population of 7.5 million in Barcelona in September 2012. That was a huge show of public opinion, interest and support—we are talking about 20% of the entire population—and it perhaps would not have been quite so huge but for Madrid’s intransigence. That is why the Edinburgh agreement is so significant, and why I believe that, precedents having been set, Wales should have that same power. My discussions with Catalonian friends, and the attitude of the Spanish Government, bear out the superiority of the situation in the UK and the Edinburgh agreement. At least it is clear, and all sides are to be congratulated on that.

Guto Bebb (Aberconwy) (Con): I am slightly confused about the argument. As the hon. Gentleman rightly points out, the situation in Madrid is one of Madrid refusing to recognise the right of the Catalonian Government to hold a referendum. The situation in Edinburgh is of an agreement between the UK and Scottish Governments, which showed that the two Governments could work positively together. The argument in favour of the new clause seems to be based on the failure of another Government in another country.

Hywel Williams: My remarks, which will appear in print tomorrow, will repay close reading, as that was precisely the argument I made. The position in Catalonia and the rest of Spain is far inferior to that in the UK, and I am pointing out the superiority of that Edinburgh agreement as the basis of my arguments for a legally binding system of referendums to be established for Wales.

In the UK, the important referendums and constitutional changes have occurred over the last 10 to 20 years, including the devolution referendum in 1979, the one in 1997, and the more recent referendum on our electoral system. In 2011, the people of Wales were asked in a referendum whether they wanted the Welsh Assembly to be given full and primary law-making powers; 63.5% of those polled voted yes. That stood in stark contrast to the results of earlier referendums that right hon. and hon. Members will remember. In 1979, for example, 79.7% voted against devolution; in 1999, there was a narrow majority of 50.3%, secured on a small turnout of 50.1%. That is how it was, but since then, I would argue that the people of Wales have grown to favour devolution, as have some right hon. and hon. Members in this place. The Assembly has grown in confidence, and as it gains further powers, it should surely have the power to ask the people of Wales what they think. That would be in the interest of legitimacy and accountability.