My Lords, I am glad to follow the noble Baroness in addressing these questions. First, let me say how glad I was to see the Minister arriving in the Chamber. I was fearful that we might be losing all the last few months’ work if we stumbled at this last stage.
Before I address the amendment in my name, I would like to comment that everyone must be glad that progress is being made on the fiscal framework and that there has been some agreement, but only time will tell whether that agreement is adequate. One problem is that, over the past 17 or 18 years since the establishment of the National Assembly, there has been a shortfall of more than £5 billion due to the effect of the Barnett formula on the Assembly’s funding, and therefore we are starting from a position where we will have to work very hard indeed to make up that loss. Clearly, the formula now forthcoming may or may not work in the future, but it does nothing to recoup that loss. Also, a central question in relation to the capital programme, which I will talk about in a moment, is the availability of a revenue stream to fund the interest on capital borrowing, and I suspect that that has not been adequately dealt with within the framework.
Amendment 73, which was spoken to by the noble Baroness, Lady Morgan of Ely, seeks to raise the Welsh Government’s capital expenditure limits to £2 billion, in line with other devolved settlements. The arguments on this issue are well rehearsed. We know that, as in many other areas, the UK Government have failed to honour the wording of the Silk commission and have given Wales a settlement that is less than adequate when compared with those of the other devolved nations. Therefore, perhaps I may once again outline precisely what we seek in these amendments.
The independent Silk commission, on which the Minister sat, agreed that the Welsh Government should have borrowing powers comparable to those of their Scottish counterparts. As outlined by the noble Baroness, Lady Morgan, taking into account considerations relating to PFI, this would take us to around £2 billion. As noble Lords will know, the recently agreed fiscal framework, which sits alongside the Bill, is seen by some as making progress on this issue, but under the framework £1 billion will be the Welsh Government’s capital expenditure upper limit. The lead amendment in this group—government Amendment 72A—incorporates this figure into the Bill. However, it is difficult to see how that represents anything like adequate progress. The Welsh Government will be short-changed
by £1 billion compared with what they should have, and Plaid Cymru Members, both in another place and in the Assembly—regard this as totally unacceptable.
Although the parsimony of the UK Government on this matter is staggering, I am afraid that some of the blame must be laid at the door of the Government of Wales. If the noble Baroness, Lady Morgan of Ely, who spoke to the amendment, really believes in what it says—that the limit should be £2 billion—why did her Labour colleagues in the Assembly settle on the figure in the fiscal framework? Surely we should be fighting for £2 billion from the Assembly end as well.
That said, I shall conclude my remarks on this amendment by highlighting some rather remarkable comments made by the Minister on Report. He urged us not to push an identical amendment to a vote on the basis that,
“we do not want to constrain the figure in case the discussions lead to it going higher than that”.—[Official Report, 7/11/16; col. 927.]
Was the Minister deliberately leading us down the garden path, or had he himself been led down that path by Treasury officials promising to write cheques which they knew they would never cash? Perhaps he knew that a higher figure was never going to be delivered as part of the fiscal framework—a carrot that in his heart he knew could not be delivered. If that was the case, it was somewhat reprehensible, although I might say out of character. If he himself had been misled into believing that the money was there, he has surely been put into a totally impossible position. Some explanation is needed and some Treasury heads should roll. However, if he was indeed right that such money was available but the Welsh Government made an inadequate case to secure it, then Wales needs to know. Whichever it was, it seems that Wales will not get the resources it needs to stimulate investment-led economic growth and, compared with Scotland, it is getting second-class treatment.
I now turn to Amendment 74, which stands in my name and concerns the apprenticeship levy. The amendment relates to the devolution of the funds generated through the apprenticeship levy and the way in which it will be implemented. It seeks complete transparency surrounding the levy and how it is rolled out in Wales by making separate provision for the levy in Wales in consultation with the Assembly. We debated this issue in Committee and, although I got the impression that the Minister recognised that there were some problems, particularly in cross-border circumstances, he does not appear to have brought forward any proposals to tackle the issue. The amendment seeks greater clarity regarding the implementation of the levy in Wales and how the Government intend to work with the Assembly to ensure that this tax, which straddles not only national boundaries, but also both devolved and non-devolved areas of policy, works in practice. Greater clarity is essential so that the levy works effectively in both countries to provide high-quality, effective apprenticeships.
I am grateful to the noble Lord, Lord Bourne, for his letter, which he sent to all noble Lords on 14 November, attempting to shed some light on the Treasury’s intentions. This confirmed that the agreement would,
“provide the devolved Administrations with a population share of the Office for Budget Responsibility’s latest apprenticeship levy forecast”,
meaning that the Welsh Government will receive £128 million in 2017-18, £133 million in 2018-19 and £138 million in 2019-20.
“Beyond 2019-20, once the levy is embedded, the normal operation of the Barnett Formula should provide a similar outcome”.
It went on to say that the Welsh Government would then,
“decide how to allocate this funding to their devolved responsibilities”.
I thank the noble Lord for this note confirming the Treasury’s intentions, although this has left it rather late for the Assembly to consult widely and to formulate an apprenticeship policy in tandem with the commencement of the charges being imposed on organisations when it comes into force in April.
However, in the previous debate, the noble Lord, Lord Bourne, when questioned regarding the Barnettisation of the levy to Wales, conceded that he was,
“not sure that Barnett would present the right answer”.—[Official Report, 7/11/16; col. 904.]
If the intention of the levy is for companies to be able to “get out” what they “put in”, then this should have been communicated from the start. Now we are left in a position where organisations in Wales are waiting for the Welsh Government to play catch-up and announce how they intend to allocate their revenue in a race against time before April. Due to this lack of communication, several organisations in Wales which will be eligible to pay the levy are still in doubt as to whether or how they will benefit from the levy. There is a danger that some organisations may wish to relocate their training operations over the border to England, where they may have greater certainty and where they will be more certain of securing direct benefit from the levy that they pay.
I acknowledge that some of the blame lies at the other end of the M4, with Ministers in the Welsh Government dragging their feet as to how they intend to use the funds. In a letter to the Assembly’s chair of the Economy, Infrastructure and Skills Committee in November 2016, the Welsh Retail Consortium expressed concern that,
“Levy-payers in Wales will not have any opportunity to see a direct return from their contribution to the Apprenticeship Levy”.
The consortium contrasts the situation in Wales with that in Scotland, where the Scottish Government have consulted extensively with stakeholders, whereas the Welsh Government have given very few assurances. It is clear that the UK Government are introducing legislation that has been England-centric in its planning and implementation and as the noble Lord, Lord Rowlands, eloquently put it during the last debate,
“This levy has added confusion and uncertainty, and sadly is a terrible example of a non-consultation with devolved Administrations on issues that are fundamental to such Administrations”.—[Official Report, 7/11/16; col. 903.]
I hope that our experience with this levy will serve as a salutary lesson about the need to formulate clear and distinct devolution, where it is transparently clear as to where responsibility lies and not to be fudged, as
in this instance. This half-devolved, half-reserved policy is an example of how the UK Government should not conduct their business in future.
Finally, I turn briefly to Amendment 80 on air passenger duty. I support Amendment 80, which is tabled in my name and the names of the noble Baroness, Lady Randerson—I am not sure whether she will be moving it—the noble Lord, Lord Rowe-Beddoe, who as I understand is indisposed and unable to take part in this debate which is so close to his heart, and the noble Baroness, Lady Finlay, who I am glad is here with me to support it. On the third day in Committee, we had a vigorous debate on this issue, in which an amendment previously tabled by my party colleagues in the other place was moved by the noble Lord, Lord Rowe-Beddoe. I am glad to see that he has put his name to this slightly narrower amendment. I say narrower because, whereas the previously tabled amendment on APD sought to devolve the whole tax, this amendment, as the noble Baroness, Lady Morgan, stated, would devolve powers over air passenger duty only for long-haul flights. Although I would like to see power over the whole tax devolved, as is the case in Scotland, I can appreciate that this narrower form of devolution for APD was the recommendation of the Silk commission.
3.45 pm
I will not restate what has already been said so expertly in previous debates on this matter, but I would like to take the opportunity to respond to some of the Minister’s comments in Committee. As I am sure the Minister will be aware, it comes as a surprise to many that the Wales Office also seemingly has jurisdiction over Bristol. I fail to see how the Minister is putting the Welsh economy first when he asserts that the devolution of APD should not go ahead as it may damage the commercial interests of Bristol Airport.
The other repeated protestation of the Minister was that this would simply benefit south Wales and do little for the north of the country. I am sure the Minister himself knows that this is a bit of a red herring. The economic benefits of a competitive international airport would benefit the economy of the whole country. Inevitably, policies have greater and lesser effects in different regions. Would he refuse to invest in the M4 because it is irrelevant to the north or to upgrade the A55 because it does not help the valleys? Let us apply the Minister’s logic to a directly comparable circumstance—that of expanding Heathrow, or Gatwick for that matter. Clearly, such projects directly benefit the south-east of England much more than any other region. But I expect that the Minister, like most of his party colleagues, will be making the case for airport expansion in the south-east on the grounds of its wider benefits to the whole economy.
At a time when Wales must show that it is open to the world, when international links are arguably more important than in any period in recent history and when the speed of globalisation has created a necessity for goods and people to travel by air, in these circumstances the need to ensure that Wales has all of the levers necessary for creating an effective international airport is patently obvious. I therefore ask the Minister to heed the calls of Members across parties, both here and in another place, and support this amendment.