I am grateful for that clarification.
Plaid Cymru tried to include APD devolution in the Finance Bills of 2013 and 2014, I recall, but we did fall to some very England-centric comments by the Treasury officials at the time. These arguments have not yet satisfied us, or I imagine the 70% of the people of Wales who support the devolution of APD, as reported in recent opinion polls—as I said in Committee, that is an extremely impressive opinion poll rating.
On Second Reading of the Bill, the Minister said it was right and proper for Wales not to have the same rights regarding APD as the other devolved nations, and he has reiterated that this evening. Why would the Wales Office seek to deny Wales the same powers as Scotland and Northern Ireland? Why would it deny our only international airport in Wales the potential to use those fiscal levers to expand and develop, and why would it deny the ability of the Welsh economy to grow?
Clearly, increasing footfall at the airport would generate substantial revenues elsewhere in Wales, primarily by boosting economic performance across the whole of the economy, not least of course in the Secretary of State’s constituency, Vale of Glamorgan. Let us remember also that, as Members have said, Cardiff airport is owned by the people of Wales. The Welsh Government effectively
nationalised the airport and this additional lever would further enable them to utilise a huge asset in the direct ownership of the people of Wales. It is highly regrettable that we have an airport in England, Bristol airport, effectively deciding UK policy, to the detriment of Wales.
While on the subject of Bristol airport, perhaps I should correct a statement I made in Committee, and I am happy to do so. I said Bristol airport could not accommodate long-haul flights and therefore there was no reason not to devolve long-haul APD. I received a strongly worded letter from Bristol airport—as we can imagine—a few days after the debate; it can accommodate long-haul flights. I am happy to correct the record, therefore, but what it cannot accommodate is the world’s largest aircraft, which Cardiff airport can, given the length of its runway. With the prospect of Wales being dragged out of the biggest and most successful trading bloc in the world, now, more than ever, it is important that we connect Wales to the world, and clearly devolving APD to Wales would enable the Welsh Government to do that more effectively.
New clause 7, in the names of my parliamentary colleagues and myself, seeks to equalise the situation between Wales and Scotland on VAT revenues. I will not be pressing it to a vote, due to the time left this evening. However, I remind the House that there is a consensus that devolution of public spending responsibilities should be accompanied by the assignment of significant own sources of revenue. That principle has now been accepted as this Bill progresses, and therefore the debate in Wales between the political parties is about what that fiscal package of tax powers should consistent of.
Wales’s funding framework has been highly unusual from an international perspective: there are not many Governments in the world with significant legislative and spending powers who do not also have a correspondingly important responsibility for raising tax revenues. If the UK Government are serious about securing a lasting devolution settlement for Wales, VAT should be seriously considered as part of the package of devolved fiscal powers.
The Scotland Act 2016 stated that revenues from the first 10 percentage points of the standard VAT rate would be devolved by the 2019-20 financial year. The current UK VAT rate is 20%, and half of all the VAT raised in Scotland will be kept in Scotland. A recent article published by the Wales Governance Centre confirms what I said in Committee, stating that Welsh VAT revenues have
“been far more buoyant than other major taxes, such that VAT has become the largest source of revenue in Wales.”
This is in contrast to the rest of the UK and Scotland, where income tax remains the largest source. The Government Expenditure and Revenue Wales report concluded that around £5.2 billion was raised in VAT revenue in Wales in 2014-15. A similar deal to that of Scotland would mean around £2.6 billion being assigned to the Welsh Government. This would mean that more than a third of total devolved expenditure would be financed by devolved and assigned taxes. By my calculation, that would represent an increase of about 13% compared with the amount to be raised under the current proposals.
I presume that as long as we have a Conservative Government in charge of the Treasury here, economic growth will continue to be driven by consumer spending.
If that is the case, it is all the more important that the people of Wales benefit directly from that growth and from their own spending power. By devolving proportionately low revenue yielding taxes compared with the UK average, such as income tax, without devolving proportionately high revenue yielding taxes compared with the UK average, such as VAT, the UK Government are setting the tone in the Bill for an unfair and unstable fiscal position for Wales.
The devolution of VAT rates has been dismissed in the UK in the past on the ground that European Union rules prohibit the variation of VAT rates within a member state. Although we are calling only for parity with Scotland in this instance, the UK’s exit from the EU could open a debate on devolving rate-setting powers to Wales. If, as the International Trade Secretary and the Brexit Secretary seem to want, the UK does not remain part of the single market, that could open up a world of possibilities for fiscal policy. Setting VAT rates could give Welsh Ministers a powerful macroeconomic lever, and could perhaps be used in conjunction with other tax powers in considering the overall progressivity of the tax system in Wales.