My Lords, I always enjoy the conversion of the Labour Party to the idea that the Barnett formula is unfair. The noble Lord, Lord Howarth, made a very important point, which is that it is scandalous that this formula has lasted for so long without anyone inquiring into it. I can assure noble Lords that the Government are aware of the issues and have taken measures to ensure that they are addressed.
This amendment would make the devolution of an element of income tax conditional on changes in funding arrangements. Specifically, the First Minister has raised this issue on numerous occasions, saying that he would not be prepared to recommend devolution of income tax unless fair funding were obtained. The amendment suggest that the Welsh Government have to confirm that they are content with the way in which funds are allocated to Wales from the UK Government before the element of income tax can be devolved.
This Government have already recognised that there has been convergence between the levels of funding in England and Wales since devolution. We took steps in
the matter just two years after taking office. In October 2012, we set up a joint process with the Welsh Government to review the levels of funding in Wales and England in advance of each spending review. If convergence is forecast to occur over the spending review period, there will be a joint discussion of options to address the issue in a fair and affordable manner. That system worked well in advance of the 2013 spending round and confirmed that spending is not forecast to converge during the period up to 2015-16. It also established that relative funding levels in Wales were within the range that the Welsh Government’s own Holtham commission regarded as fair. In that context, the noble Baroness, Lady Morgan, quoted the 114% figure that my noble friend Lord Newby referred to last week. I am happy to write to her, and to set out further detail on that figure.
In relation to ongoing discussions about the funding situation, following the first meeting of the Joint Exchequer Committee between the UK and the Welsh Governments last month, we have now further committed to revisit jointly the review process in the light of the powers in the Bill. In other words, we have agreed to find a way of facilitating fair funding. The Government therefore believe that there is a sound basis for an early referendum to be called and I urge the Welsh Government and the Assembly to do so as quickly as possible.
I hope that I have assured noble Lords that the Government are aware of the issues on funding and are addressing them in discussions with the Welsh Government, who are fully conversant with our plans. I urge the noble Baroness to withdraw her amendment.