Oral evidence: Pre-legislative scrutiny of the Draft Wales Bill, HC 962Tuesday 21 January 2014

Oral evidence, 21 January 2014.

Chair

Good morning, Mr Chairman.

Mr Allen

Chairman, how are you? It is nice to see you struggling with vibrant and interested members on these issues; I thought it was just me.

Chair

I suppose there is no point in my trying to put you at your ease and explaining what is expected in front of a Select Committee. You did say to me a few times that you wanted only 10 minutes of our time. I am sure we can overrun a little bit if necessary, but we will try to get through this fairly quickly. Tell us what you think of it and give us your views, please. We will then have a few questions afterwards.

Mr Allen

I speak as Chair of the Political and Constitutional Reform Select Committee, but I am speaking now in a personal capacity. Obviously, I have not cleared all my words with my Committee, so I speak personally on this occasion, although much of what I will refer to has been approved by my Committee. I start from the premise that the UK is the most massively over-centralised of all the western democracies. I find that deeply unhealthy. I find that it damages creativity and the ability of people to get on with doing stuff locally in a way they see fit, and it makes people risk averse and dependent. That is a pretty long list of reasons why devolution is a very important issue for us all politically, but I think devolution has been used as an expedient, often to buy off people who have been making a lot of noise, rather than being used as a principle. As you see from my evidence, I believe that all party leaders would benefit from signing jointly before the next election a declaration that they believe our democracy should be based upon two principles—Union and devolution. I welcome this Bill very strongly because it is a step—not a leap—in the right direction. There are some very good things in the Bill that move us in the right direction, towards greater devolution, not merely for Wales—I will come on to that point, if I am allowed, a little later—but for the other countries in the Union.

Chair

But how is it good for England? We can argue about whether or not the powers that it gives are significant, but certainly everyone agrees that it is a step in the right direction if you favour devolution. How does that help you, Mr Allen, in England? It is not doing anything at all for you, is it?

Mr Allen

I think it is. If you have the principles and if you work on the basis of the Union—of wanting to keep the Union and keep the Union strong—but you see that devolution done in a principled way is the best way of doing that, there are very obvious consequences for England. Currently Scotland has the right to assign or retain the product of 10p of income tax. This is now on offer to Wales. I would urge all my friends in Wales to seize that opportunity.

Chair

But how does this help you in England?

Mr Allen

It helps England because England, similarly, could retain—initially—10p of income tax. My Select Committee has done a serious report on this. The vehicle we propose, or the way in which we have outlined this could be done in England, is through local government, not an English Parliament, and not English regions now; sadly, I think that issue was mishandled before and probably will not arise again. We should use English local authorities as the vehicle for devolution. In a sense, I am keen that these proposals find favour in general, although there are a number of amendments that I would propose you consider when putting forward your report, before the Bill goes to the Floor. I think that would assist the whole process of devolution. I urge colleagues not to feel that everything has to be done just so before we move on. I think a counsel of perfection actually stops good happening.

Chair

This is my last question, as I know it will trigger a debate. Essentially, you are saying, “Wales is going to get some powers that we would like in England, so we fully support Wales having them because we will get them soon enough in England.” In reality, what makes you so sure of that? We have had an Assembly since 1999, and since 1999 Wales has had significant powers, but you have had absolutely nothing. What makes you think that this extra tranche of powers is going to mean that suddenly you will get something in England and start catching up?

Mr Allen

I do not think we are suddenly going to get anything. We need to get our local areas—our local councils, in particular—wanting an answer; I think the daily indignity of having their grants cut by central Government may push them in that direction. I think the debate that will take place around the Scottish referendum will also open up some of the eyes in England as to what their possibilities are. Fundamentally, in terms of political power, I hope that all party leaders see that this is no longer a system that is fit for purpose, and that the man in Whitehall does not know best when it comes to telling people—in my case—in Nottingham or the east midlands what is best for them or when they should empty their bins. In that sense, Wales is much further down the evolutionary development road than the English. I would like us to catch up.

Mr Williams

I agree with you that this is a step rather than a stride. Obviously I would like bigger steps, and that may well be the substance of amendments in the course of the Bill, when we get it formally. The key argument has been about increasing financial accountability; Silk talked about the need for that to build a mature democracy. Do you agree with that?

Mr Allen

Yes. I think—

Mr Williams

I agree with you; my party has always believed in devolution for the English regions as well. But how would that fit into what you have been saying about the English regions?

Mr Allen

I think there are a number of things, including some immensely practical ones; for example, having on your wage slip that much of the base budget that is produced by income tax actually will go to Wales, actually will go to Scotland or actually will go to a local authority in England. I think that would wake people up. They would see, rather like they see their national insurance currently listed separately, that income tax to the Chancellor would be x, and income tax to their nation or to their area would be y. I think that would be an immense stimulus to people’s involvement. There is that very nitty-gritty thing, but on the bigger issue this is a political question. We get to it through financial accountability, but if 10p of income tax is retained by the nations of the Union, I think you will then start a process of interaction, negotiation and discussion, which may lead us in even better directions. That is why, in a sense, I would bank this Bill. In some senses, it is not as fulsome as some of us would like, but we are 470 days away from the next election, and another Bill will come along shortly after that general election where we can work through a number of other areas. I think this is a very good start. The other thing that I would suggest would be to look at the product of 10p income tax not being the product of the Welsh income tax take, but the product of the all-Union income tax take. I think that would help us on the equalisation questions because it would be a more significant sum. I was looking at it just before I came over, and it would raise an additional £800 million in terms of Wales and, equally, a fair amount in terms of Scotland. I think that would be an immense help to greater devolution financially and to greater transparency. The key thing at the moment is not whether rates go up or down, but the idea that you are clearer as an electorate about where the money comes from and who is in charge of it, which is a very great prize politically.

Hywel Williams

There is another aspect, of course, in Wales, in that the Government would be able to vary tax. This is a very difficult issue, because the Government here want to introduce a lockstep, with which you may be familiar. When you have been considering the retention of 10p for English local authorities, have you thought at all about this issue of a lockstep? Can you help us with it?

Mr Allen

Yes, I have. While it is better to have it as a lockstep than not to have it at all, I would strongly urge you to consider amending the Bill so that it is not a lockstep—so that, in fact, it is just the product of a 10p rate. I do not think that it will be helpful in the long term for it to be locked. It will be helpful in the short term to establish the principle that an amount of your base budget that you spend is not given to you as largesse from the Westminster-Whitehall machine but is your own and is ascribed to you, and you can look at that and feel that it is something you can do something with in terms of your own spending priorities. That is a first step.

Hywel Williams

Do you have any view on the issue of what is sometimes called tax competition? We had evidence from the First Minister yesterday in which he seemed to say that he wanted the ability to vary but he did not want tax competition, which seems to me to be what will inevitably arise. Between states in America—for example, on purchase tax or whatever—there is competition. Are you averse to that in the same way that some Members are?

Mr Allen

I am averse to there being competition in tax rates, because politically I do not think it is very helpful. However, I am not averse to the fact that you should be empowered to change your tax rates in a way that you and the Welsh people feel is appropriate, rather than in the way that I or Whitehall-Westminster feel is appropriate. Having the power and using it are different things. I hear that some people have used the word “useless.” I do not believe that is appropriate. I would say “not used,” for example, as in Scotland, which has had the power to vary for a considerable number of years. They choose not to do that, for obvious political reasons. I think that should be your choice, rather than a choice imposed upon you by someone outside Wales.

Nia Griffith

Can we look at the issue of things happening differently in different counties across the whole of the UK? Traditionally we have had different levels of council tax. Sometimes that has reflected a picture of more owner-occupiers in rural areas, paying a lower council tax and having fewer services. In urban areas, there has sometimes been a high proportion on council tax benefit, so those who pay have been paying more, often with a higher level of services in the more compact urban areas. How do you balance some of those variables and their effects on people’s behaviour with the central issue that, because since the middle ages London and the south-east have been such a central part of the economy of the UK, they are now the only areas contributing every year into the tax system, whereas every other area takes from the tax system? How do you balance that issue of local accountability with, perhaps, a greater redistributive element?

Mr Allen

I think we change the terms of the debate if we say that there is an end point here, which is a clear principle of devolution and Union, and we work towards that. In working towards that, all of us would need to adopt different attitudes and cultures in terms of the four nations of the Union working together. If you were to say honestly that this is, in fact, the federal Parliament and that the nations should work together effectively in that umbrella, there would be new, stronger mechanisms for those countries to work together; some mechanisms exist already. It would not be in anybody’s interest on a small island, unlike in the United States, to have competition wars across borders on terms of taxation. I talk about this in terms of England, but there is also a question to be addressed, perhaps, in terms of Wales and Scotland—that of double devolution. What powers should there be for local authorities? One might argue—some have argued this, perhaps unkindly—that in Scotland there has been greater centralisation in a devolved nation than people might have expected when that journey began. You may want to look at that and, perhaps, amend the Bill in the light of how you see local authorities being more independent and devolved. That is something my Select Committee has looked at. We feel that giving local areas more authority and more direct funding—which they retain as their own, rather than having it gifted from the centre—will help people blossom. It will help all our political parties grow and it will help the involvement of local people in their own affairs. In a sense, if we go this way, we will start to supersede some of those narrow arguments that are really saying, “If we are all told what to do by Whitehall, can we cannibalise our nearest neighbour?” I think we change that atmosphere completely and start to work together as mature nations within a federal umbrella.

Mrs James

To go back to the lockstep issue, the UK Government seem to believe that the lockstep will ensure that decisions about the progressivity of the income tax system are maintained at UK level. What do you think about that?

Mr Allen

I think progressivity can come in lots of different ways. If you have devolution, it means that people do things in different ways to suit their national circumstances. I think that is wholly commendable. I have never understood the idea, “Oh my God, we gave them devolution and now they are doing things differently.” I congratulate people who do that and make their own choices. That is the way things should be. At the end of the day—Scotland has proved this—I do not believe that the nations would want to use the power to vary. I think they would want to work together in a Union to make sure that we all got the best deal. A number of these things may be under consideration for your response to the Bill itself, but there are others. For example, there is the question of a referendum. I think it is ridiculous, frankly, that technical issues—detailed financial issues—are constantly put to referendums. The big constitutional things should be, of course—as in Scotland, or whether we have a written constitution and so on—but not whether you should have this or that variability, or this or that tax. If you go that way, you will tie yourself into neverendums on every detail. I have faith in colleagues of all parties around this table, and in Cardiff, who can decide as representatives how these decisions are taken. I would urge you strongly to look at the Bill in that light.

Stephen Doughty

I want to ask you a broader question. I apologise for not having read the recent report on a constitutional convention, but I want to respond to some of the comments you have made about the devolution process and what you have just said about referendums in general. On the question of the process and the way the UK constitutional settlement is developing, do you think there is a risk that because we have had this kind of piecemeal tinkering—a bit here and a bit there, a referendum here and a referendum there, a slightly different electoral system here and a slightly different electoral system there—we have effectively wasted a lot of political capacity time and official energy, rather than having a definitive moment where we say, “This is a settlement. This is where we are. This is why powers should be at this level of devolution and Union,” as you describe? I put the Scottish referendum question in a separate box here. Do you think that we have lost the public in a lot of places along the way and that they are not particularly engaged? Look at the turnouts in the recent Welsh referendum and so on. What are your wider thoughts on the process we have been through?

Mr Allen

I think we need to do this in a principled way. If you do it in a principled way, everybody knows what the pole stars are and what you are trying to get to. If you are trying to get to Union and devolution, some of these decisions become very, very clear very, very quickly. I do not want to go back over old ground, but it is arguable that had the two landslide Governments of 1997 and 2001 adopted that policy very early on, history would have been quite different. Had the English regions gone very quickly after Scotland and Wales, we would by now be in our 14th year of the nations and regions of the country working together. That is not the way it went, but let us not be sat here in another 14 years saying, “When the Wales Bill was produced and the Scottish referendum was about to happen, and when the chance came for all parties to say, ‘We commit ourselves to two principles that the man and woman in the street can understand. We like our Union and want to sustain it, but the best way to do that is to allow as much power as possible at the most appropriate level’”—subsidiarity, that horrible euro-word for that most beautiful concept—“we did not seize that opportunity.” I urge you, therefore, to support the concepts in the Bill as a start—and a helpful start—but also to consider very strongly whether you wish to amend things like the referendum provision, the lockstep provision and the provision about borrowing. Why on earth can you not, for example, use your own credit rating, if you run your own domestic economy effectively, to raise money and to do bond issues, to allow propositions—not referendums—on spending on particular things in Wales and to allow local government in Wales to join the devolution party and give them authority and power beyond the Senedd in Cardiff?

Chair

That sounds like a closing speech, so thank you very much, Mr Allen.

Mr Allen

Chair and colleagues, thank you for allowing me to address you this morning. I do appreciate it. Oral evidence: Pre-legislative scrutiny of the Draft Wales Bill, HC 962 17