Oral evidence: Pre-legislative scrutiny of the draft Wales Bill, HC 962-iiiMonday 20 January 2014
Oral evidence, 20 January 2014.
Witnesses
Jocelyn Davies AM, Chair, National Assembly for Wales Finance Committee, Martin Jennings, Researcher, and Joanest Jackson, Lawyer, gave evidence.
Chair
Ms Davies—Jocelyn—thank you very much indeed for coming along today. I should call you ‘Madam Chair’, I suppose, given your current capacity. I understand that you want to just give us a very quick overview of how you see things. Is that correct?
Jocelyn Davies
I am quite happy to go straight into questions, if it suits you.
Chair
We can move straight to questions. That is fine. I am sure that you will find a way of getting in everything that you want to, with your experience. I will start with Mark Williams.
Mr Williams
I think that my two questions might help you to do that. I am going to ask about one of your committee’s reports in a moment, but before I do that, the UK Government’s stated aim with the draft Bill is to improve financial accountability in Wales. How important is it that the Welsh Government and the Assembly need to be accountable financially as well as through the ballot box?
Jocelyn Davies
I think that holding Governments to account for spending plans is central to democracy. Of course, the Welsh Government is accountable to the Assembly on behalf of the people of Wales, in between election times, if you get to vote just once every five years. You might want to keep an eye on things in the meantime and, of course, how we spend money is important. We have to remember that it is the public’s money; it is not just public money. I think that that is why, every year, we have a budget vote. As I say, the money is not the Government’s money, so it has to ask the legislature for permission to spend it. Transparency around that is vital, and we have been working with the Welsh Government to improve that. We are not there yet, but there have been significant improvements. We have been engaging with the public and stakeholders. The committees now have been trained; Assembly Members are offered training on a regular basis. So, we are raising our game as far as that is concerned and trying to embed financial scrutiny in the work of the committees. Of course, in difficult times, the focus on finance is even more important. I think that, looking at the draft Bill with increased powers in terms of tax and borrowing powers, we need increased accountability, not just on the spending but on the collection. I think that we will need to get to grips with that as Assembly Members.
Mr Williams
In that sense the Bill does represent an important step—not a stride—in the right direction?
Jocelyn Davies
Yes, I think so.
Mr Williams
Okay. Turning to borrowing powers and specifically to your committee and the report that you published in July 2012, prior to the publication of the Silk report—your report on borrowing powers in Wales—do the provisions in the draft Wales Bill meet the expectations of your committee and that report?
Jocelyn Davies
No, it does not, but we did do the work before the Bill was published. We had envisaged something slightly different, so it does not entirely meet our expectations. In fact, I was a little bit surprised to see that our current budget process is just preserved as it is. There is no mention of it in this Bill, so I am assuming that the budget process that we have at the moment will be the one that we will go forward with. That is what is contained in the previous legislation, and our Standing Orders have to fit with that. I am not sure that our current budget process will allow us to be as effective as we should be, going forward, with the new powers that is contained in this. I have doubts over the mechanism for reporting to the Assembly after the fact, in terms of how borrowing powers have been used. I think that after the event is not how it should be. You made reference to our report. When we undertook our inquiry we fully recognised the Treasury’s macro-economic responsibilities. We noted how important that was. So, we envisaged the Government negotiating the overall limits, but with the Assembly annually approving the borrowing limits of the Welsh Government as part of the annual budget process. For those who have been able to read the report, I am sure that you have had a lot of stuff sent to you, but what we looked at was local government’s prudential borrowing framework. We liked that because of the emphasis on affordability and sustainability and, of course, any prudential borrowing by a local authority has to be approved by their full councils. So, we looked at that and we thought that we could use the best of that. We recognised the Treasury controls in terms of their macro-economic responsibility, negotiating on the limits because of that responsibility and, of course, controlling the interest rates at the Public Works Loan Board, but having discussions with the Welsh Government here perhaps enabling them to draw forward from future budgets and, of course, having controls in relation to the budget exchange system. So, we were surprised to see the £500 million limit on the face of the Bill. That did not fit with what we had thought, and, during our inquiry, I have to say, nobody suggested in evidence to us that there should be a limit on the face of the Bill. I suppose that the budget process is a concern for us. The Welsh Government must be accountable to the Assembly and must need the approval of the Assembly for its borrowing. We expected to see inter-governmental negotiations respecting both constitutional responsibilities in terms of the limits and we wanted to see the prudential framework for borrowing. Of course, we also made a recommendation that the Government here should be allowed to issue bonds.
Mr Williams
I was going to ask you very quickly about that. Paul Silk was quite clear that he also agreed with you on that—that the Welsh Government should be able to issue bonds. How significant is that omission from the Bill?
Jocelyn Davies
Well, we had evidence that a number of local authorities had got together at one time, because the interest rates at the Public Works Loan Board had risen—thus the UK Government being able to control the borrowing extent. However, because the interest rates had come down, they had not gone ahead with that, but they had that option that they could consider, and we thought, ‘Well, why would local authorities have a power that the Welsh Government here wouldn’t?’ However, I do agree with many who say that it is unlikely that the Welsh Government would issue bonds. However, sometimes, it is worth while considering something you can do so that you can see that something else is a better course of action—so it is worth while even if you choose not to do it.
Chair
Do you have a fear that, if and when the Assembly gets borrowing powers of any sort, the Government of the day may borrow to the limit and that that will basically be it—that, forever and a day, every other Government that follows will be servicing the debt, but will have no further powers to borrow further because the limit will have been reached?
Jocelyn Davies
Yes, I would, and that is why it is an important part of the budget process every year. That would have to be timely; we would have to have enough time to consider that. Transparency is important there. After our budget last year, after the committee had looked at it, in the Government’s narrative that it gives in relation to the tables, there was mention of innovative finance models, so we had asked for a note on the extent of that borrowing. I have got that letter of 6 November; I can leave it with you, Chair. We were surprised at the extent of the borrowing. Of course, this is using third-party borrowing powers where the Government has entered into agreements with third parties to enable it to borrow. It is like the local government borrowing initiative. Members will know that it enables them to do highway works. Housing is another one; they have been able to use housing associations’ borrowing powers. So, currently, according to this note that we had on 6 November, since 2011, that comes to £958 million. However, you can see that the Government here has tried to find novel ways of using other people’s borrowing powers. I have no idea how long these commitments are for. They might be spread over many, many, many years, but there is a need for the legislature to keep an eye on the extent of the borrowing, obviously, and I think that that should be contained in our budget process.
Chair
If I may, you appear to be making an argument that the borrowing powers—although you are obviously in favour of borrowing powers—are a bit restrictive as they are at the moment, if I understand you correctly—
Jocelyn Davies
Yes—based on the report that we agreed, yes.
Chair
So my question would be: theoretically, there is nothing that constrains the UK Government from borrowing but, in reality, it has to try to borrow less and the European Union would be surprised, shall we say, if it went over a certain limit, and the Bank of England obviously has an influence on it as well. So, although there is nothing that legally constrains it from borrowing what it wants, there are informal constraints. What would be the informal constraints, if any, were the Welsh Assembly to have unlimited borrowing powers? Would you like to see that, or would you like to see something put in place that would limit absolutely the amount of money that a future Assembly Government could borrow?
Jocelyn Davies
Yes, and, in fact, we say in our recommendations in our report that there must be a control framework negotiated between the Welsh Government and the Treasury, and that could be contained in the statement of funding policy. Obviously, the UK Government has macro-economic responsibilities, and it must be allowed to stay within those. I suppose that you could make a comparison with the way in which the Welsh Government has an influence on prudential borrowing at local authority level. It never has to step in, but there is a possibility that it could.
Chair
Thank you. Geraint Davies is next.
Geraint Davies
From what you have said, I understand that you believe that the arbitrary, if you like, figures of £500 million for capital and £500 million for revenue in terms of borrowing are not enough for the flexible needs of Wales. Secondly, the Bill suggests that, if there is devolution of income tax, there will be more borrowing. Do you think that there is a direct link between the income—? First, can you confirm that you do not think that £500 million and £500 million are sufficient? I think that you said that. However, do you think that there is a link between income tax powers and borrowing? After all, capital and revenue now come out of the overall Welsh block grant, and, if income tax is devolved, there will be no extra money, so would your argument be that the borrowing proposition is separate, and how big do you think that the borrowing limit should be?
Jocelyn Davies
When we did our report—and I am here to represent the committee, which has not had a discussion over whether it should be £500 million or whatever—we envisaged that there would be negotiation between the two Governments in order to decide what that limit should be. That is why I am surprised to see it on the face of the Bill.
Geraint Davies
It is £500 million and £500 million here, and I think that Scotland has £2 billion, but it also has the 10p income tax. However, there is no ballpark figure that you have been thinking of in your committee.
Jocelyn Davies
No, we saw that as being negotiated and that perhaps it would change over time, and perhaps there would be factors to allow that to change over time, in order to futureproof—
Geraint Davies
Do you believe that you could have more borrowing, even if you did not have devolved income tax?
Jocelyn Davies
We took evidence from the Chief Secretary to the Treasury, and I have brought a note with me of what he said. He said that he definitely saw a link between borrowing powers and the ability to raise revenue independently to support borrowing. The Welsh Government took the view that a Government should decide for itself how it finances its debts. In Scotland, borrowing is not related to the varying of income tax, and Scotland will start borrowing from 2015 without raising taxes. To be honest, the committee saw the value in both points of view; we thought that fair points were being made by both sides. The Government was saying, ‘We should decide for ourselves how we repay our debts,’ and the Chief Secretary was saying, ‘Of course, if you have an independent revenue stream, it is easier to justify and to support your borrowing.’ So, we did not come to any firm conclusions. As I said, this report was done some time ago and we thought that it was a matter for the Commission to look at, but, on the whole, I think that the committee felt that it depended on the extent of the borrowing as to which of those viewpoints was more credible. However, we felt that both viewpoints were credible.
Chair
Thank you very much. Nia Griffith is next.
Nia Griffith
You are Chair of the Finance Committee, but you have been Deputy Minister for Housing and Regeneration. In the Bill, there is a power for the Treasury to set a cap on the total amount of debt that could be held by all the local authorities across Wales in respect of housing. What is your view about that cap?
Jocelyn Davies
I think that it is fair enough, because, generally, the debt is with the UK Treasury, because the local authorities have borrowed from the Public Works Loan Board. We have a new housing Bill that will put the Welsh housing quality standard on a statutory footing, if enacted. The Welsh Government will still have controls on individual local authorities, because that Bill will allow it to issue directions for each—because we have about 11 local authorities. I have to say that, when I was a Deputy Minister, this was one of the biggest headaches, because you are talking about large sums. The Welsh housing quality standard was created and set up a very long time ago, and all local authorities were supposed to reach that by 2012; 2012 has come and gone, and it has not happened. That standard has not been reached. Only now are we seeing those 11 local authorities have viable business plans. We have had that confirmed—this is the first year, I think, that they have had viable business plans, and those last over many years. I think that the new date for meeting the Welsh housing quality standard is 2020. I cannot imagine that local authorities will be keen to be borrowing again, because they already have considerable debts, but I think they will take advantage of coming out of the housing revenue account subsidy system in order to achieve the Welsh housing quality standard. Looking at the housing Bill, I think that getting to that standard is going to have to be their first priority. You have the Treasury with overall control of the overall debt, but the Welsh Government here able to decide how that debt is spread among those 11 authorities, and able, in the new Bill, to issue directions directly to individual councils. I think that all those added together give fairly good controls over that.
Nia Griffith
So, in respect of the Wales Bill, with reference to housing, is there any additional improvement that you wish to see, or do you think that it does the job?
Jocelyn Davies
With my old hat on, I think that it does the job. Obviously, my committee has not looked at it in detail. We probably will look at it in detail. Going on all the evidence that we have heard before, we were pleased to see local authorities coming out of the housing revenue account subsidy system, but obviously we would recognise that there need to be safeguards there, and I think that the Bill probably does reflect that.
Chair
Very briefly, Geraint Davies.
Geraint Davies
Obviously, there are significant constraints on local authorities in terms of housing and, as you have mentioned, the quality standard. There is also an urgent need for new houses. Would you, in principle, be in favour of schemes whereby, if local authorities have empty land, a developer would come along and build the houses at their cost and then have a shared equity, which would provide both social housing and a share of the income stream from the private sector part of the development? With that sort of thing, there would not have to be any extra public sector borrowing, be it from the Welsh Assembly, the UK or the local authority, but there would be some sort of partnership.
Jocelyn Davies
When I was Deputy Minister, I did see some very good examples. You will always find good practice, but it is usually quite patchy. It is about trying to spread good practice, where local authorities perhaps gave land over to developers and in return had an equity share of a number of those properties. That did seem a very good way of the local authority getting value for money in terms of parting with the land and still ensuring, in perpetuity, that those properties were affordable.
Chair
Thank you very much indeed. Glyn Davies is next.
Glyn Davies
Devolving financial accountability to the National Assembly, particularly in tax-raising powers, makes a big difference to the Assembly. I would have thought it is the biggest change in the Assembly since it has been created. What I wanted to ask you about is the capacity of the Assembly to cope with that. I suppose, on the official side, that there will be a demand for expertise, but specifically on the Members’ side, we have heard that there would need to be 80 Assembly Members to provide proper scrutiny. What is your view on the number of Assembly Members needed to provide an adequate level of scrutiny if income tax powers are devolved to the Assembly?
Jocelyn Davies
My committee did not take a view on that. We did not take any evidence on it, and we did not take a view, so I would not like to express one here. I think there was a big change when we ended the corporate body and became a legislature and a Government. That was a big change, and a step change. What we would like to see, from my committee’s point of view, is a budget process that is transparent, robust and gives enough time for Assembly Members to consider everything that they will need to consider in this new world that we are about to enter. So, it has to be able to be modified over time, I think. Obviously, it will be a step change, but Assembly Members will have to be trained up. I have an excellent committee. It used to be, in days gone by, that we had just one or two Assembly Members who were really interested in finance, but I think that is changing now. With training, it is possible, and we will have to do it, and we will have to do it well.
Glyn Davies
You have talked about budget processes, and I think that, again, it was the Presiding Officer who talked about legislative control over budget processes. You have talked about the continuation of budget processes from where they are now. Do you have a view at all about greater legislative control over budget processes being vested in the Assembly?
Jocelyn Davies
My committee did not take a view on it, and we did not take evidence on it. It was not something that we looked at, because, I think, we just assumed that there would be a budget process that was suitable and effective, following any changes. So, that is what we would call for: something that was transparent, that gave us enough time and that allowed us to make changes if we needed to, over time. You have to have a process that will be futureproof. For once, we will have to think about how money is raised and not just how money is managed, and that will have implications for the budget process. So, I would go for a robust, transparent system. As I have said, there have been improvements, but we are not quite there yet. However, for it to be effective—and everybody wants to come to work and do an effective job—it has to be.
Chair
Thank you very much. Very quickly, Simon Hart.
Simon Hart
I just want to try, I hope, to draw you out a little bit on the initial part of Glyn’s question about the capacity that you have here. Other witnesses have very clearly stated, whether they are Members of this institution or just observers, that the existing number of backbenchers in particular is insufficient to provide the scrutiny that you referred to. In a way, I am really just asking you whether you think you can proceed much further from where you are at the moment as a committee and as an individual without having to address this particular issue. Is the existing number sufficient? If it is not, what you would move to, and how would you justify that and value it in terms of individual voters and small businesses?
Jocelyn Davies
We have to be able to come here and do the job that we are supposed to do. I know that some Members are at full stretch. I chair the Finance Committee, and I also sit on the Public Accounts Committee and on a subject committee. If your subject committee is dealing with legislation, it can take up a lot of your time. The budget process, of course, is normally confined to a specific part of the year when we approve the budget. Since I have been the Chair, I have had good attendance and a good committee, and the committee members are all interested in doing their jobs. We are now embedding the finance work into the other committees’ work. So, if we have to do it, we have to do it. Obviously, having more Members means that people have fewer other things to focus on. However, if that is not possible, it is not possible.
Chair
Thank you very much. Siân James is next.
Mrs James
I would like to continue this discussion. In the Finance Committee’s report on borrowing powers, you talk about having the right skills and the capacity in place to manage this and to undertake the work. Are you happy that those skills are there, and could you tell us a little more about that? Also, are Welsh institutions ready for this?
Jocelyn Davies
Many Welsh institutions, when we took our evidence, were very keen on it and saw it as an exciting step forward. I do not think that we came across anybody who was negative about it. We made a recommendation in the report about skills, which was specifically about the Government having skills and expertise, because mistakes can be very expensive, although you can learn a lot from mistakes. That recommendation was accepted in full by the Government. In fact, it told us that it now has a dedicated team working on the innovative finance models that I mentioned earlier. Obviously, that has been very successful, because it has brought forward finance at a time when investment is needed. So, it was not in the least bit defensive about this, and I know that it has external expert advice as well. So, it seems to me that this was something that the Minister was keen on. With regard to local government and others, you can tell from the partnerships that they have entered into that they are also keen on this and are trying to find new ways. So, there is definitely an appetite for it. We just need to step up to the plate and invite people in, without being defensive about what expertise we need. If we do not have it ourselves, we need to look at whether we can develop it; otherwise, let us find others who have this expertise, and not jump in the deep end without even having armbands on, as it were. I think that Assembly Members will also step up to the plate. They have taken very well to the new financial training that we have had. So, we have new principles attached to our financial scrutiny—affordability, prioritisation, value for money and process. Each of the committees has to focus on that.
Mrs James
Very quickly, because I think that it is quite important in light of what you said, Silk found that sufficiently detailed Welsh economic statistics were not available. Statistics, and that information, are going to be key to future planning and everything that we do financially in Wales. How confident are you?
Jocelyn Davies
There is an issue about data, I think, because very often what we do is just extrapolate from data on an England and Wales basis, and they might not be wholly reliable. So, we need better data. Martin might have a better view on this, because he does the research for this. Sometimes, if you just extrapolate data, expect them to be accurate and then base decisions on them, you could be in for misconceptions and perhaps a surprise later down the line. That is something that will need to be addressed; I agree wholeheartedly with that. I do not know if you have anything else to add, Martin.
Martin Jennings
The GVA figures are out very late—the 2012 Wales GVA figures came out in December 2013. It is clear that, in the public domain, there is very little. It comes late and it is not always that robust.
Chair
Thank you very much once again, Madam Chair, Jocelyn. The sitting was suspended. On resuming— Examination of Witnesses
Witnesses
Rt Hon Carwyn Jones AM, First Minister of Wales, Jane Hutt, Minister of Finance, Welsh Government, Hugh Rawlings, Director, Constitutional Affairs, and Andrew Jeffreys, Deputy Director, Strategic Capital Investment, Welsh Government, gave evidence.
Chair
May I begin by welcoming the First Minister and the Minister for Finance to our session on the new Wales Bill? I will call Mark in a moment, but I understand, First Minister, that you or the Minister of Finance—or both of you—would like to have a couple of minutes to give an overview of where you stand on this.
Carwyn Jones
Thank you, Chair. By way of a general introduction, I understand that you have received a paper from us—a summary table—giving the Welsh Government’s responses to each of the Bill’s clauses. Some are more technical than others; there are some issues of legal competence that will need to be resolved as the Bill goes through Parliament. In terms of the Bill itself, we broadly welcome its thrust, although there are areas where we would have some disagreement. For example, the maximum borrowing limit for capital is set at £500 million, which compares unfavourably with Northern Ireland, at £2.2 billion, and Scotland, which is at the same amount. Northern Ireland, of course, has no power to raise revenue. We made the case to the Silk commission that we wished to see the devolution of air passenger duty. The Silk commission accepted that submission in part, but only insofar as long-haul flights were concerned. An issue over which there has been much debate is the issue of the lockstep approach to income tax devolution. That is something that we do not believe will provide us with enough flexibility in the future. No doubt, members of the committee will have heard me say publicly on several occasions that I would not be supportive of income tax devolution without the issue of fair funding being addressed first. The base has to be firm before we build upon it. There are other issues that we are happy to agree with, such as the change of name to ‘Welsh Government’; that makes it clear and is the title that we have been using since 2011. In terms of the issue of dual candidacy, I would have to say that I would not support that. If that is the view of the UK Government, then I would ask: if it is the case that MPs should not be allowed to be AMs at the same time, and vice versa, why does that not also apply to MEPs, peers and councillors? If the issue is that of a dual mandate, in terms of being an elected member, I would submit that it must apply across the board. We welcome the full devolution of non-domestic business rates, and we also welcome the reforms to the housing revenue account subsidy. I think that that outlines it very briefly, building on the written submissions that we have already provided to the committee on where the Government stands at the moment. Jane, do you want to add to that?
Jane Hutt
I was the Minister leading the discussions with the Treasury on the Silk proposals. I want to say that it is important that, throughout this process, we have enjoyed very broad cross-party consensus in Wales and, obviously, that was clearly reflected in Silk. All parties have played a very important role in getting us to this position. I am seeking, in terms of taking my discussions forward here in the Assembly and inter-governmentally as well, to secure the best possible deal through ensuring that we maintain that goodwill across parties. This goes beyond party politics. There is a great deal of support from the business community, particularly, as you will recall, from the Confederation of British Industry on our discussions about stamp duty land tax, and also, in terms of construction, from the Federation of Master Builders. So, there has been a great deal of impetus behind this, in terms of our partners and the wider society—business and civic society. I will just add one point to what the First Minister said. In terms of those issues that we feel can be improved upon in the Bill, in terms of borrowing limits, APD and the lockstep, these are areas on which I am having discussions with the Chief Secretary to the Treasury, Danny Alexander. I hope that you, through your evidence taking, will be able to see the case for arguing for improvements to the draft Bill in due course. However, overall, it is an important step forward for the funding of devolution in Wales.
Chair
Thank you very much indeed, First Minister and Minister. I turn to Mark.
Mr Williams
Thank you and good morning. The UK Government’s stated aim of the draft Bill is to improve financial accountability in Wales. How important is it that the Welsh Government and National Assembly are financially accountable as well as accountable through the ballot box? The second question, following on from that, is how far along the road do we go with these proposals as presented in the draft Bill to achieve financial accountability and empowerment?
Carwyn Jones
First of all, I would argue that accountability is already there, through the election process. Secondly, we are accountable for the money that is spent in Wales, and that is something of which the Welsh public and media take close notice. From our point of view, we are happy to accept new responsibilities where it can be shown that those responsibilities would benefit the people of Wales. With stamp duty, I believe that that is the case. With landfill tax, and the aggregates levy, I believe that that is the case, as indeed with APD generally. The issue with income tax is that is it difficult to demonstrate, given the plan that is before us at the moment, how that would benefit the people of Wales. We know, through the work of the Holtham commission, that Wales is underfunded to the tune of £300 million. The report itself has never been in dispute, and the basis of the report has never been questioned. So, it remains that case that that underfunding is there. Until that underfunding is addressed, I would certainly be most reluctant to look at income tax devolution, because it would simply lock in that underfunding. Why? I suspect that, with the devolution of some income tax powers, whenever the issue of fair funding would be raised in the future, the answer would simply be ‘You’ve got powers to raise money yourselves; get on and do it’. Bearing in mind that roughly three-quarters of the funding for Wales would still come via the consolidated fund, via the block grant, that issue would remain unresolved. To my mind, the immediate issue to be addressed is the issue of fair funding. Once that is addressed, of course, it might be possible to look at how fiscal devolution works in the future.
Mr Williams
So that is why, without the resolution of that issue, Gerry Holtham last week, in his evidence, described the proposals as they stand now, without the settlement of fair funding, as a gesture. Would you agree with that?
Carwyn Jones
I do. It is not the view expressly of the Silk commission; the Silk Commission expressed a different view, in terms of how income tax devolution might work. We do find ourselves—I noticed the comments last week—in a position where, if Scotland does not have it, Wales cannot have it. That much is absolutely true, and that is unfortunate. The problem with a lockstep approach is that, if income tax is to be used as a fiscal tool, it is an immense straightjacket on the ability to exercise powers flexibly. I just do not believe that it would be the sort of power in its present form that would do any good, as far as the people of Wales are concerned. If there were to be more flexibility, and if the issue of fair funding were to be addressed, the debate changes, but we are not at that stage yet.
Chair
First Minister, you are cleverly anticipating some of the questions that we are about to put to you. May I just go back to Nia, who may want to bring something else up?
Nia Griffith
First Minister, you have already confirmed that you would not want to see income tax devolved until this issue of fair funding is sorted out. Is there anything further that you want to mention on that? Do you think that the Silk commission’s suggestion that 2017 might be a possible date for a referendum is realistic, and do you think that fair funding can be sorted by that time?
Carwyn Jones
The issue of fair funding, of course, is a matter for the UK Government, and not for us. It is a matter that does not just affect Wales—we all understand that. I think that 2017 is an ambitious target; it is difficult at this stage to see that being possible, in terms of there being a referendum in 2017. There are matters in Scotland that need to be resolved first, I suspect, before the issue of fair funding is addressed once more. However, that will need to be addressed, as will the issue of the straightjacket of the lockstep, before there can be a rational debate, I believe, on income tax devolution. The difficulty is that this will be a matter for a referendum. I suspect that I am someone who is regarded as fairly strong in terms of seeing the further devolution of powers. However, on this issue, I cannot see how I could make a case to the people of Wales that would illustrate that devolution of this particular model of income-tax-varying powers—without there being a reform of the funding system—would be to their benefit.
Jane Hutt
I wonder whether I could come in on that, as the Minister for Finance. I will briefly go back to Mark’s point about financial accountability. As the Minister for Finance, I am held to account, quite rightly. I am sure that the Chair of the Finance Committee talked to you about the ways in which we are held to account, and are held to account, I believe, in a very transparent way—and moving towards a deepening transparent way—in terms of our budget. However, clearly, we have moved on to the constraints, in terms of the lockstep, but we are constrained hugely because we cannot borrow. I look forward to the time when I can be held to account for the borrowing power that we seek through the draft Wales Bill. However, as we move on to the issue of fair funding, it is absolutely clear in that recommendation of Silk that it is conditional that there is fair funding before we move to the devolution of tax-varying powers. Again, I think that that point of the cross-party commission is very important. In terms of the lockstep, where is this accountability and responsibility when we are being constrained in this way?
Chair
May I bring in Hywel on this? I think that you had a few questions on the lockstep, Hywel.
Hywel Williams
[Translation.] Yes. Good morning, First Minister; good morning, Minister. I would just like to ask more questions about taxation. First, I take the point that you make about accountability through elections, and I think that that is a very strong point. However, in terms of being able to share 10p of income taxes, does that, in your opinion, give any kind of accountability, in a financial sense, in this context?
Carwyn Jones
[Translation.] In terms of accountability, it is extremely important that the responsibility that is devolved is sufficiently broad to ensure that any Government can demonstrate accountability, and can demonstrate that it is possible to use new powers for the benefit of the people of Wales. I do not think that this model is going to actually achieve that. Accountability, yes, of course, but what we have here is a debate on accountability on a very narrow issue, in terms of how it might work.
Hywel Williams
[Translation.] I will move on now. You have voiced opposition to the lockstep, and I share that view, as do other Members on this committee. Do you think that the Welsh Government would be willing to move forward with varying income tax rates if that lockstep continued after this Bill is passed, or would you want to use it under those conditions?
Carwyn Jones
[Translation.] I do not see how we can actually use this model in relation to taxation. I do not see that it would be broad enough in terms of its impact upon the public in Wales. However, in saying that, I have to return to this point: it is extremely important that the situation in terms of funding, and fair funding, is considered first, before we consider anything on the devolution of income tax.
Hywel Williams
[Translation.] I was going to ask you a question about that later on, if that is acceptable, Chair. We had evidence last week from a number of people, including Gerry Holtham, who used a very striking term when he talked about taxation powers, namely ‘unusable’. Would you agree with that term?
Carwyn Jones
[Translation.] I believe, generally speaking, that that is correct. If you are saying that the Government should be accountable then it is important to provide that Government with the powers to demonstrate that accountability. I do not think that this is the case in terms of this model. It is true to say that accountability on raising up to £2 billion would be in place, but what would not be there would be any sensible system of implementing or using this power as a fiscal tool. That is not what this model provides for. What this does, to all intents and purposes, is to allow a Government to raise funds without doing much else.
Hywel Williams
[Translation.] Thank you. I will move on now to the lockstep idea. The UK Government has put a lot of emphasis on making the debate the same throughout the UK, particularly in reference to Scotland. Do you agree with that, or would you like to see some variation within the UK, specifically in terms of Wales?
Carwyn Jones
[Translation.] This is not something that other nations see as a problem, such as the United States of America and other parts of Europe, where there are variations in terms of taxation, particularly income tax. We would not want to see any sort of competition within the United Kingdom in terms of taxation rates, but, in saying that, we have to bear in mind that council tax varies from one county to another. It is lower in Wales, for example, than it is England. There are divergences and there will be when land tax is devolved, but that is part of the devolution process, of course. On the one hand, the UK Government is saying, ‘You will have certain powers over income tax, but your powers on a practical level will be very restricted indeed’. It is not possible to put forward the same argument and say, ‘On the one hand we want to devolve income tax, but we don’t want you to use that power in any way that is going to be innovative or different to the rest of the UK’. So, why have that power in the first place?
Hywel Williams
[Translation.] On the point about Scotland, they have put a specific emphasis on keeping the situation in Wales the same as Scotland. Do you see the power of that debate? Do you agree with that argument?
Carwyn Jones
[Translation.] No, I do not see that there is any force in the argument that says that if Scotland does not have it, Wales should not have it. My personal opinion is that the mechanism for devolution should be the same across the UK, namely the way that powers are devolved, and also the model of devolution. I am not saying that the powers should be the same in the constituent parts of the UK, but in terms of the way that devolution actually happens, that should be considered.
Chair
May I just turn to Stephen Doughty for a moment, and then we will go back to Guto and Geraint if we have time?
Stephen Doughty
Turning to the borrowing powers for a moment, First Minister, you made it quite clear that you do not feel that the £500 million limit that is set out is adequate. What view do you have as to what would be adequate, and would that change if, at some future, point income tax was devolved?
Carwyn Jones
I think that there is a reasonable argument to say that if income tax powers were devolved, there should be an increase in the limit. Our estimates are that it could potentially go up to £1.3 billion. However, that it still not enough. If we look at Northern Ireland, where the limit is £2.2 billion, Northern Ireland has no revenue-raising powers. It is true to say that, historically, councils in Northern Ireland have not borrowed, so that is reflected in the overall capital limit for Northern Ireland. However, Scotland has a £2.2 billion level, and Scotland is not even twice the size of Wales. While we welcome the £500 million limit in terms of capital borrowing and also the £500 million limit in terms of dealing with variations in tax take, it still seems too little to us. I think that we should be looking at closer to £1 billion.
Stephen Doughty
At the moment, before income tax is devolved?
Jane Hutt
This is about powers for a purpose, is it not? We need borrowing powers in order to develop and invest in our infrastructure. Clearly, we have a capital departmental expenditure limit of £1.23 billion. If we look at the equivalency with Scotland, we should be able to borrow up to that limit, as the First Minister has said. Looking at our Wales infrastructure investment plan, we have projects in the pipeline of up to £5 billion. We need to have the ability and to be empowered to borrow. Of course, this is a point that we are already making in terms of our response to the draft Bill; that that limit should be increased. The other important point, which was reflected in the Silk evidence, is that we have very low repayment on PFI, for example. It is very low. We have the capacity. Clearly, we have to be prudent—‘prudent’ is the new word—in terms of the risk, so that we can be clear about our repayment ability within the overall fiscal envelope of the UK Treasury.
Stephen Doughty
I would share your view on the need for the Welsh Government to be able to borrow to invest in the way that you described, and I am also pleased to hear what you said about the prudential framework that would surround that. Some evidence should quite rightly ask the question about whether there is a danger that the first Welsh Government to have borrowing powers would simply borrow right up to the limit, constraining the ability of future Governments to borrow. How do you see that working? How do you see the relationships with the UK Government overall and other devolved administrations, regardless of the political affiliation of those Governments, working in order to maintain an overall prudential approach to the UK finances and those of the devolved administrations?
Jane Hutt
We have got to this point not just through a great deal of cross-party consensus and engagement of business and partners, but through very close and constructive inter-governmental engagement. It led to our inter-governmental statement on fair funding and borrowing powers back in October 2012. We have continued in that engagement. Clearly, we are accountable. We are part of the UK fiscal Treasury arrangements, and I think that there is respect for the way that we are handling our reducing budget—a reducing budget in terms of capital and revenue. We would expect that to continue in terms of that prudential approach. However, we are already taking responsibility, and not just in terms of the reducing capital budget, by being innovative and assisting local authorities, for example, in their borrowing with our local government borrowing initiative, which is helping with extensive highways improvements and moving that into twenty-first century schools. We are also working with our registered social landlords in terms of developing Welsh housing finance. Therefore, we can be held to account as a Welsh Government, in terms of the way that we are working within the constraints and recognising that we have responsibilities in terms of the UK Treasury.
Stephen Doughty
That is very helpful. I have one small question. Do you think that the Welsh Government should be able to issue its own bonds, rather than simply borrowing from the Secretary of State, or, indeed, borrowing from commercial banks, which has been suggested?
Jane Hutt
Clearly, borrowing from the national loans fund is the best way forward, and we have the ability to borrow from other sources—from banks. We would like to be able to issue our own bonds, as well. This is about growing in confidence and maturity in terms of progressing devolution and showing that we are responsible. Indeed, I have given you examples of how we are doing that with partners, because we are constrained by not having borrowing powers. But, it would certainly be helpful if that was added into the Bill.
Chair
Thank you very much. Stephen, I understand that you have an important meeting in a few minutes. I will go back to Guto and then bring in Geraint, who will ask the next series of questions.
Guto Bebb
[Translation.] Thank you, David. I have two or three questions to ask later on, but I want to bring you back, First Minister, to a response that you gave to Hywel Williams. You were arguing very strongly on the issue of the lockstep that you did not think that the lockstep provided the flexibility to use income tax powers, but in the same answer, you said that you did not want to see competition in terms of income tax within the UK. I cannot see the consistency in those two answers.
Carwyn Jones
[Translation.] First, my opinion is that I am not in favour of devolving income tax powers at the moment without a resolution of the funding situation. However, I do not see the point of devolving a system that is so narrow that it does not allow for any kind of flexibility for a Government to do things. I am not saying that there should not be any barriers at all. If you are talking about competition between the different parts of the UK, you could have a system that would have no barriers at all. I am not saying that that would be the correct way to go about things, but in terms of the fact that it may not be possible, for example, to change the bands independently, I think that that is too limited in terms of powers.
Guto Bebb
[Translation.] Just to confirm, therefore, you are in favour of a certain amount of income tax competition, but not too much.
Carwyn Jones
[Translation.] That happens now. It happens with the council tax. It happens with—
Guto Bebb
[Translation.] No; I am talking specifically about income tax.
Carwyn Jones
[Translation.] There is a model already.
Guto Bebb
[Translation.] No. I just wanted to confirm, in a way, that the argument that you are making, therefore, is that you are in favour of having some sort of competition in terms of income tax. That is just to confirm.
Carwyn Jones
[Translation.] That is reasonable, just as there is competition at present with council tax. However, in terms of whether we should have a situation where there are no barriers at all, the answer is ‘no’. I think that that would be excessive.
Chair
[Translation.] May I just confirm something? If we were to resolve the funding issue throughout the UK, you would then support the devolution of taxation powers to Wales.
Carwyn Jones
[Translation.] I think that that would help. First, it would mean that the foundation for devolving income tax would be set, but then we would have to consider the model. I do not think that the model that we have at present, which is in the Bill, is sufficient.
Chair
[Translation.] I call on Hywel Williams, very briefly.
Hywel Williams
Yes, very briefly. This is a draft Bill, of course. If the Bill is introduced and ultimately passed, and still insists on retaining this lockstep, will the Welsh Government support it?
Carwyn Jones
[Translation.] Not without consideration of the funding system. That is critically important in terms of ensuring that Wales is funded fairly.
Hywel Williams
[Translation.] Wearing your party hat, therefore, can I tempt you to give us the view of the Labour Party and to give us some sort of timetable on Barnett reform?
Carwyn Jones
[Translation.] I am, of course, leader of the Labour Party in Wales, and I have given my opinion.
Chair
I call on Geraint to speak.
Geraint Davies
First Minister, you mentioned how fair funding had to be established before we move ahead on tax. Is there a similar case to be made on borrowing, namely that Wales does not get its fair share of capital investment across the UK? Should we not try to sort that out, to avoid the Government saying, ‘If you want some more capital spend, raise your own borrowing’?
Carwyn Jones
In terms of capital investment, there are few areas where the UK Government has responsibility for capital investment. One area, for example, is the railways. We very much welcome what the Prime Minister has said: that the UK Government will fund the electrification of the main line to Swansea and the Valley Lines network. That is to be welcomed. When it comes to other infrastructure, such as health, education and the road system, that is devolved anyway. There would not be any capital investment by UK Government—
Geraint Davies
In the case of HS2, there are those who have said that Wales should get £2 billion, because it is a north-south, not east-west, bit of infrastructure. There are those who say that we should get more of a share. Would you sympathise with that?
Carwyn Jones
I am not going to argue against Wales getting a higher share of capital investment. That much I have to say.
Geraint Davies
Okay. That is very helpful. An argument has been put that the borrowing limits for Wales—and I agree with more borrowing for Wales because, obviously, you can spread capital projects across a number of years; they do not tend to occur in one year—should be linked to income tax devolution. Would you not agree that the overall amount of money that is servicing that debt will not change, whether or not there is income tax devolution? There will either be the whole block, or the block less the income tax. So, in other words, you could argue that you should have more borrowing in any case, irrespective of this income tax argument.
Carwyn Jones
We have to understand, of course, as the Minister for Finance has said, that prudence is essential. This is not Christmas. We have to ensure that what is borrowed can be financed through revenue streams. We understand that very well indeed, of course. A link has been made by UK Government, not by us, between revenue raising and tax varying. That is not a link that exists in Northern Ireland. It is a link that exists to an extent in Scotland. The £500 million limit is not a limit that we could see any rationale for, especially when it compares so unfavourably with Scotland and Northern Ireland.
Geraint Davies
Indeed, Scotland has not used its income tax powers to service debt. It has not changed the tax at all, yet it has over £2 billion, as you have pointed out, and Wales is being offered £500 million. Do you not think that there is a case for Wales to be offered more borrowing powers irrespective of this conversation about income tax?
Carwyn Jones
We do think that the overall borrowing limit should be increased, that is right.
Jane Hutt
Perhaps I could just add that, of course, one of the areas that we negotiated, alongside the Silk commission, was to have early access to borrowing. Given that we already have the WDA powers, we anticipate that we are going to be able to access borrowing—albeit that we want to lift the £500 million limit—to enable us to get on with the infrastructure projects that, obviously, are so important to the Welsh economy.
Geraint Davies
May I ask, finally, whether, if you had early borrowing and greater borrowing powers, that would help you to lever in conversion funding in terms of match funding through borrowing?
Jane Hutt
Not necessarily. Clearly, on our budgetary arrangements for EU match funding—not just us, but our partners as well—we have to do that within our fiscal envelope in terms of our budget. Certainly, it is not a relevant point as far as the borrowing is concerned.
Chair
Thank you very much, Minister. Simon Hart is next.
Simon Hart
I hope that we can move on to the capacity of this institution to deal with all of this. It has been put to us in previous evidence here and in Westminster that, for you to be able to take on what these additional powers may require you to take on, the result may be a different size in terms of the numbers of Assembly Members. My first question is whether you agree with the other evidence that has been given that you cannot cope with 42 backbenchers—that you would need more. If you do need more, how many do you need? Would you go from 60 to 80? Would you go, as some people have suggested, to 100? If you do do that, how do you justify that in the eyes of taxpayers and small businesses in Wales?
Carwyn Jones
In answer to the first question of whether the institution, with the current number of Members, can cope with these new powers, the answer is, undoubtedly, ‘yes’. The same argument was raised in 2011 at the time of the referendum on primary powers and we have managed very well. In terms of the workload on Members, it is extremely difficult, that is true, because, for a backbencher here, it is nothing to be on three committees a week—that is normal, because of the size of the institution. So, the workload is enormous. That said, in an ideal world, I think that 80 Members would be the right number. However, I am realistic enough to understand that, proposing to the public that there should be more politicians is not an attractive argument. [Laughter.] So, yes, we can manage with 60; ideally, we would have 80, but 60 is—we can do it.
Simon Hart
May I just make a suggestion, or put an idea to you? In order not to cause total confusion with the boundary changes that would result as a consequence of your getting your 80 Members, some have suggested that it would be best to have a 40/40 split to coincide with the Westminster constituency boundaries. What would you say to this argument: for the 40 elected Members, the situation would remain the same but, for those who are regional Members, who would constitute the other 40, is there justification for the level of expenses and resource that they currently receive given that the constituency casework is largely absorbed by the sitting Member of Parliament or the sitting first-past-the-post AM? Do the regional 40 need the resource that they currently have? Could you sell your argument to the public on the basis that you need more people but that you could actually reduce the overall cost?
Carwyn Jones
I suspect that that argument would not find favour with at least three parties in this Chamber. In my own party, of course, I have two regional Members. I do not see that there is a case for Members to be treated differently. I would not support the idea of there being 40 directly elected Members and 40 regional Members. We all have our reasons for that, of course, but, from my point of view, the people of Wales voted for a particular system in 1997 and there would need to be further consultation with them if there were to be changes, in my view. However, I see no reason why Members should be treated differently. I think that it is right to say that Members who are elected to constituencies have a higher case load—that is probably correct—but, on the other hand, the burden in terms of committee work is the same. Indeed, many regional Members are able to devote themselves to committee work and to scrutiny because of the different nature of their duties. So, I do not believe that there is less of a workload, but it may well be different.
Simon Hart
I would like to ask one last question, if I may. Back in the days of the devolution settlement being agreed in Scotland, Donald Dewar was on the record in those days as saying that that would bring an end to the argument about devolution versus separatism—a sentiment supported by Tony Blair at the time. However, not many years on, we are in a year where there is going to be a referendum on an independent Scotland. Do you believe that all of this has an inevitable consequence for Wales? Does it take us a step closer, even by accident, to a long-lasting and potentially economically damaging debate about an independent Wales?
Carwyn Jones
You should be careful about using the phrase, ‘For Wales, see Scotland’. We wait to see what the result will be in Scotland this year, but the reality is that, in Wales, support for independence has not really changed.
Simon Hart
Those were Tony Blair’s words, rather than mine.
Carwyn Jones
As far as Wales is concerned, there has been no increase in support for independence in the polls since devolution. That is because devolution has grown organically here and has been supported by the people—in one referendum, narrowly, of course, but in the second referendum, clearly.
Chair
First Minister, just before I turn to Siân James, if I may, I will slip something in. I seem to recall that, after the last referendum, you said that Wales now had all of the tools in the box—I believe that was the phrase you used—to get on and do the job. So, is any of this necessary?
Carwyn Jones
I believe that I said ‘more tools in the box’, rather than all of them. It depends how big the box is and how many tools you want. From my point of view, I approach devolution on the basis of what is best delivered in Wales and what is not best delivered in Wales. I do not believe, for example, in the devolution of social security, nor in the devolution of defence, obviously. There are some issues, overall fiscal policy, for example, that are best dealt with at a UK level. However, if we look at borrowing, the difficulty that we have at the moment, until this Bill is passed, is that there are capital projects that could go ahead in England, Scotland or Northern Ireland, but could not go ahead in Wales because they are in Wales. That is a competitive disadvantage that we need to remove.
Mrs James
The Bill allows for Wales to establish its own tax-collection agency, if it wishes to do so. Would you take this approach, or is it an approach that you would like to take in the future?
Jane Hutt
This is where we are looking very closely at all the options. It is very helpful the way in which the Bill gives us that flexibility. I am in discussions with HMRC, because it is a clear opportunity for us to look at the ways in which we could engage with it to deliver on our taxation powers. Clearly, there is the option of setting up our own body, as they have done in Scotland. However, once again, it has to be about what is most appropriate for us, and we are continuing those discussions.
Mrs James
Where does that leave a constituency like mine, which has the Driver and Vehicle Licensing Authority based within it, which is a big tax-raising organisation, as you can imagine. It is not strictly income tax, but certainly you can understand the concerns in a constituency such as mine about how that might have a long-term effect.
Carwyn Jones
Of course, none of the powers proposed in the draft Wales Bill affect the DVLA in any way; they are taxes that will remain non-devolved. We are not looking for the devolution of vehicle excise duty, or indeed any of the taxes that affect motoring.
Mrs James
Okay, thank you.
Jessica Morden
The Welsh Government, in its written evidence, does not support the removal of the ban on dual candidacy. Would you like to elaborate on your earlier comments regarding the Government’s view on that?
Carwyn Jones
We do not support the removal of the ban on dual candidacy. We take the view that the public did not understand the system where somebody could stand in a constituency and then reappear elected from a list. That situation has not changed. However, I reiterate the point that I made earlier: I do not see, for example, when it comes to dual mandates, which is a different issue in terms of being an AM and an MP at the same time, why that is different from being an AM and an MEP at the same time, an AM and a councillor at the same time, or an AM and a peer at the same time. If there is to be consistency, then all of those would need to be addressed as well.
Jessica Morden
When the Assembly was set up, there was one system in terms of dual candidacy, then in 2006 there was a ban, and now we are looking at it again; do you believe that there is a danger that all of these electoral changes just confuse people more?
Carwyn Jones
I have not had many representations from members of the public demanding an end to the ban on dual candidacy. [Laughter.]
Jessica Morden
In your written evidence, you also say that you consider changes to the Assembly’s electoral arrangements to be a matter for the Assembly. Do you want to elaborate on that?
Carwyn Jones
Yes, I do. I think that this institution should control its elections. I am not saying that that should extend as far as the franchise necessarily, but in terms of the issue of the Assembly’s term, for example, this was a debate that we had some years ago now, namely whether the Assembly should sit for four or five years, and also the effect of what were then proposed changes to parliamentary constituency boundaries on the way in which Assembly Members were elected. The position that I have always taken is that it would be wholly wrong for the UK Government to change the method of election to the Assembly, or indeed to change the number of Assembly Members without any consultation with the Assembly itself, and that remains the case today.
Chair
Would you also agree, First Minister, that any Government here or in Westminster making changes to the way in which an election is carried out should be very careful to ensure that they are not doing so in a way that might give them an advantage, even if that is not the motive behind the change that they are trying to implement?
Carwyn Jones
I entirely agree with that. That is why, when this was debated in the Assembly, we were happy to agree to a system where, if there were to be changes, those changes would need to be endorsed by two-thirds of Assembly Members.
Chair
Would you agree, though, that the ban on candidates standing in first-past-the-post seats and also on regional lists was something that benefited one party—the larger party—more than the three smaller parties represented in the Assembly?
Carwyn Jones
No, I do not—it does not affect the arithmetic at all. The reality is that the same number of Members would have been elected for each party in any event, although there may have been an effect on individuals.
Chair
Okay, thank you very much. We seem to have scooted through most of our set questions, but I see that there are one or two points—[Interruption.] Guto caught my eye first, but I am sure that the First Minister will not mind us going back to some things.
Guto Bebb
[Translation.] Just a few questions on the issue of a referendum more broadly. First of all, we accept that your view as First Minister, and therefore as a Welsh Government, is that you do not want to call a referendum on income tax powers because you want to settle the issue of fair funding for Wales first, and that is fair enough. However, if there were to be a fair funding settlement for Wales, do you think that there would be a need for a referendum before transferring responsibility for income tax, or would a manifesto pledge be adequate?
Carwyn Jones
[Translation.] No, I do not think so. In terms of income tax, it is different because there has been a referendum in Scotland. I know that I have said that the situation in Wales should not be read through the prism of Scotland, but I think that that is an important principle. I have said that Scotland is going to have powers for income tax that are much broader than those that were on the table when the referendum came. I think that it is important that with something so fundamental we have a referendum, as happened with the further legislative powers for the Assembly.
Guto Bebb
[Translation.] My second question follows on from that. If you believe that a referendum is necessary for income tax—and your answer suggests that you do—another complaint that has been made by witnesses appearing before this committee is that we are in danger in Wales of having a referendum on every single issue out there. Do you think that a question on income tax could be framed in a broad enough way to enable the situation to be changed moving to the future, or do you think that the question would have to be very restrictive to secure the confidence of the people of Wales in terms of any change?
Carwyn Jones
[Translation.] Wales has had more referenda in its history than any other country in Europe—nearly every seven years. It is important to have referenda only on the fundamental things, but I think that income tax is a very fundamental thing, and I think that we should have a referendum. There is a template on principles in terms of what happened in Scotland, so I think that that is important to have in the future. In terms of the question, that is something for the Electoral Commission. The question in 2012 was a very complex one. It was a question that lasted three paragraphs, nearly. At the end of the day, what I asked the people of Wales was, ‘Do you want to ensure that the laws that affect Wales alone are made in Wales?’ That was the question, although that was not the question on the paper. However, I think that it is important that, where there is legislation, the question is tied into that legislation and is not too broad; people have to be able to understand what they are voting for in a referendum. [Translation.] However, in terms of income tax, once people have agreed the principle that the Assembly and the Government should have powers over income tax, namely once that is allowed by the people of Wales, I do not think that we have to have a referendum every time in order to change the powers.
Guto Bebb
[Translation.] This is my very last question. Taking you back to your response to Simon Hart on the possibility of having 40 first-past-the-post Members and 40 list Members, you stated that the Assembly was created as the result of a vote of the people of Wales and that there would be a need to confer with the people of Wales before changing the balance of the system to 40 first-past-the-post Members and 40 list Members. Does that suggest a referendum or do you have another way of seeking public opinion in mind?
Carwyn Jones
[Translation.] I think that it would be possible for the parties to put something in their manifestoes and then, if there is any change, it is important that it has been agreed across the parties. If I were in a situation, for example, where I had a majority as a First Minister, I would not be in favour of changing the system because of the fact that I had a majority of one or two. It is very important to have cross-party agreement, and that is why I wanted to see that 66% of Members here supported any change before it happened.
Glyn Davies
I wanted to ask a question that you have covered pretty well, I think, on the issue of double jobbing. The Presiding Officer of the Assembly has told us how the Assembly seems to be in favour of the proposal to ban anybody serving as an AM and as an MP. You seem to be against it, describing it as unnecessary, and you are speaking on behalf of the Government. Is there is a divergence of views in what the Welsh Government is saying on that issue and what the Presiding Officer has said? I will take the two points that I have together. The second point is that you have, quite rightly, I think, raised the issue of people serving at other institutions that takes up their time—you can extend that to the private sector as well, if it is a commitment issue, because if it applies to one double job, why should it not apply to every double job? That is perfectly logical. Discounting that and taking that side of the argument out of it altogether, as the Bill seems to do, are you opposed to the ban on people being AMs and MPs?
Carwyn Jones
On the first point, to make it absolutely clear, we as a Government would favour maintaining the ban on dual candidacy. The Presiding Officer—
Glyn Davies
I meant double jobbing, not dual candidacy.
Carwyn Jones
I take your point. We see no need for change, but if there is to be change, it has to be consistent, and that would mean ending double jobbing, as you put it, not just as AMs and MPs, but as AMs and other elected positions as well.
Glyn Davies
The point that interested me is that the Presiding Officer, speaking on behalf of the Assembly, made a clear case that she supported the proposal in the draft Wales Bill for the ban, and that you, speaking on behalf of the Government, are saying the opposite. Is that a fair reflection of the evidence that we are receiving today?
Carwyn Jones
I would not expect the evidence that the Presiding Officer has given and the evidence that I give to be identical. We have different roles. However, we have not, as a Government, made any submissions suggesting that there should be an end to double jobbing, and that remains the position.
Geraint Davies
To come to income tax for a moment, you have made a compelling case for borrowing powers in terms of infrastructure and the like, but do you think that devolving income tax might generate a certain amount of uncertainty for inward investors? They might think that, over time, the rate of income tax might be different in England and Wales and that that might be unhelpful to Wales in terms of inward investment.
Carwyn Jones
No, I do not think that that is an issue. There are other issues that investors look at, one of which is corporation tax, and we have not advocated the devolution of corporation tax. They will look at business rates and the level of support that is available as well. One issue—and I hope that I am not going to start hares running in saying this—that we are now getting is the uncertainty over the UK’s membership of the EU. So many investors come to the UK because we are EU members, and because of the access to that large market. That has certainly created a level of uncertainty, as I have heard from potential investors. I do not think that income tax would be a factor in their considerations.
Chair
Thank you very much indeed, First Minister and Minister for Finance, for answering our questions and being here today. We are grateful for your hospitality in the Assembly.
Carwyn Jones
Those comments, of course, should be directed to the Presiding Officer. The Government offers no hospitality, Chair. [Laughter.]
Chair
I am sure that that will be passed on. Pre-legislative scrutiny of the draft Wales Bill, HC 962-iii 2