Welsh Affairs Committee

Oral evidence: Silk Commission and financial devolution in , HC 896 Tuesday 10 December 2013

Ordered by the House of Commons to be published on 10 December 2013.

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Members present: David T. C. Davies (Chair); Geraint Davies; Glyn Davies; Stephen Doughty; Jonathan Edwards; ; Simon Hart; ; Mr Mark Williams

Questions 1-79

Witnesses: Rt Hon David Jones MP, Secretary of State for Wales, and Glynne Jones, Director of the Wales Office, gave evidence.

Chair: Good afternoon, Secretary of State for Wales and Mr Jones. Thank you very much for coming along this afternoon. We know one another very well, so I do not think there is any need for preambles and introductions. Because the Children’s Commissioner is visiting at the invitation of one colleague later this afternoon, I would like to begin by calling Jessica Morden to ask some questions.

Q1 Jessica Morden: Could I begin by asking you why it took the Government so long to respond to Silk? You were supposed to respond some months ago.

Mr Jones: We weren’t supposed to. We did give an indication that we would respond by the spring. We had a number of representations, most particularly about stamp duty land tax, which made it clear that we needed to consult further, and we did consult further. As a consequence of that, we gave our formal response last month.

Q2 Jessica Morden: Do you accept that that has frustrated people, because it has meant, for instance, that on things like the M4 there has been little —that it has all been delayed because of that?

Mr Jones: No, I do not accept that at all. In fact, the started their scoping exercise before we made our announcement on 1 May. The announcement that we made on 1 May with regard to borrowing powers actually went beyond Silk and gave the Welsh Government the confidence they need to go ahead with the exercise, so I do not believe there was any delay at all.

Q3 Jessica Morden: Can you explain a bit more about what will happen from now in terms of the M4—when and how it will happen?

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 1 Mr Jones: That, of course, will be a matter for the Welsh Government, because highways are devolved in Wales.

Jessica Morden: But in terms of the borrowing.

Mr Jones: We have made it clear that we will allow the Welsh Government to use their existing borrowing powers to help finance the project. As I said, that will give the Welsh Government the confidence that they need to proceed with the upgrade.

Q4 Jessica Morden: What is the next stage of that? What happens next?

Mr Jones: In respect of the legislation?

Jessica Morden: In respect of pursuing it, yes.

Mr Jones: Very shortly we will publish a draft Bill. It will come to this Committee for pre- legislative scrutiny, which I hope will be completed during this session of Parliament. Then we aim to proceed with the Bill in the next session of Parliament.

Q5 Geraint Davies: The answer you just gave presupposes that the money for the M4 should come from borrowing. Would you not agree that Wales does not get its fair share of transport investments to start with, and that we should sort that out now, rather than leaving it for Welsh funds to fund what UK funds should be funding in the first place?

Mr Jones: To begin with, roads are of course wholly devolved. To be absolutely frank, the Welsh Government should have been improving the M4 long before now, because that is part of their remit—that is part of the devolution settlement.

To answer the wider aspect of your question, I do not accept that either. In fact, the investment that this Government have put into rail infrastructure is very significant. As you know, we have announced that we will proceed with the electrification of the Great Western line as far as Swansea whereas, with respect, there was absolutely no electrification under the last Labour Government. In north Wales, we are working on proposals for the electrification of the north Wales coast line and the Wrexham to Bidston line, so I would not accept your question at all.

Q6 Geraint Davies: As you have mentioned railways, could I take the example of HS2? Our proportionate share of HS2 will be just under £2 billion. You will be aware that the Welsh Government are investing in an airport and that there is some talk about a railway system for Wales. Should not the costs of transport infrastructure like that come from the UK as a fair share rather than being taken from health and education needs in Wales—new schools and hospitals?

Mr Jones: Not at all. You mention HS2. That is a project of national significance.

Geraint Davies: North-south, not west—

Mr Jones: Forgive me, but if you live in north Wales you will immediately see the benefit of HS2, because there will be an interchange at Crewe. It will be possible, when, as I hope, the north Wales coast line is electrified, to take electrified trains all the way through Crewe to Holyhead, so there is a significant benefit there. As far as south Wales is concerned, there will be an

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 2 interchange at Old Oak Common, which will benefit south Wales. As far as mid-Wales is concerned, there will be journey time improvements of about 41 minutes.

Chair: Order. I am afraid I will have to suspend the hearing for a few moments. Hopefully, we can all try to get back within 10 minutes.

Sitting suspended for a Division in the House.

On resuming—

Chair: We will resume, as most of us are back.

Q7 Geraint Davies: Leading on from the previous question, may I ask whether you feel that, without fixing Barnett first, the idea of arguing that there is financial accountability is not really meaningful in terms of moving forward new borrowing and tax powers?

Mr Jones: I think that the Welsh Government themselves welcome the powers that we propose to devolve to them. In fact, Jane Hutt herself said that this was “a good deal for Wales” and that it moved devolution on further. I do not think I would agree with you; possibly just as important, I do not think the Welsh Government would agree with you either.

Q8 Geraint Davies: Finally, do you not feel that the mechanism will end up meaning a need for borrowing, which will have to be paid for from an income stream that will come from income tax that is devolved? There is a real risk that capital expenditure will end up with less revenue spend being available, because it is paying for borrowing—for health, education and other core services— which will begin to drive up tax rates, instead of our getting our fair share of UK money, as I said at the start.

Mr Jones: I will make several points on that. First, it is very healthy for any legislature or elected Assembly to have some form of accountability for the money that is spent, as well as the money that it receives. I think that we will get increased accountability, which everybody will welcome and recognise as important.

The second question is really an issue for the Welsh Government. What we intend to do is to devolve the competence to the Welsh Government to hold a referendum on this issue. The Welsh Government have to make the decision on whether or not to hold that referendum. If the referendum is not held, devolution of income tax will of course not happen.

Q9 Jonathan Edwards: You have already said in your evidence—and, indeed, in your response to the Silk commission—that the Welsh Government will get limited investment powers, specifically in relation to the M4 project.

Mr Jones: Borrowing powers.

Jonathan Edwards: Yes, investment borrowing powers.

Chair: I am sorry, I did not quite catch that.

Mr Jones: Mr Edwards was saying that the Welsh Government would have limited borrowing powers in connection with the M4.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 3 Jonathan Edwards: Can you inform the Committee how much the Welsh Government would be able to borrow with the WDA powers that you have now allowed them to use and the minor taxes, and how much they would be able to borrow following a successful income tax-sharing arrangement referendum?

Mr Jones: Those are issues that would need to be agreed between the Welsh Government and the Treasury. In fact, those negotiations are taking place even as we speak. I think that both the Welsh Government and the Treasury are comfortable that those borrowing powers would be sufficient to assist the Welsh Government to upgrade the M4.

Q10 Jonathan Edwards: What is the borrowing capacity available to the Welsh Government if they have the income tax powers?

Mr Jones: Again, that would be an issue to be agreed between the Treasury and the Welsh Government. At this particular stage, I am not able to give you a precise figure.

Q11 Jonathan Edwards: So I would be wrong to come to the conclusion that the borrowing capacity of the Welsh Government would be minimal without the income tax powers.

Mr Jones: That is a question of how you define minimal. There would be a significant income stream coming from the so-called minor taxes. SDLT, for example, is an interesting case. If the Welsh Government were to take measures to increase the SDLT take, or the take of the tax that would replace it, that would of course enhance their borrowing powers. Essentially, it is a challenge to the Welsh Government. Do they want to make Wales a more competitive place, which I think you and I would agree it should be, or do they want for ever to be the recipient of the block grant and nothing else?

Q12 Jonathan Edwards: Surely having information on what the borrowing capacity would be following a successful referendum will be key to the actual arguments put forward by both sides during the referendum.

Mr Jones: Absolutely. It would be, but I think that there would be other important arguments. If the Welsh Government decided to trigger the referendum, I think that at that stage they would have to indicate to the people of Wales what they would do with those powers. If they were to indicate that they would significantly increase income tax, they might find it difficult to win the referendum.

Q13 Jonathan Edwards: Lastly, can you confirm that if income tax powers were devolved—if there was a tax-sharing arrangement between both Governments—the capital stock available to the Welsh Government would be proportionate to that available to the Scottish Government under the Scotland Act?

Mr Jones: That is something that I think will be clarified when the draft Bill is published. No doubt, these are issues that you will wish to raise with the Treasury Ministers when they appear before you at the time of pre-legislative scrutiny.

Q14 Nia Griffith: On the same theme, can you give us a little bit more clarity? We have been hearing about the first tranche of borrowing powers for over a year. If we are looking at three separate tranches—the ones that have been talked about since last October, the ones that may be contingent on the minor taxes and the ones that may be contingent on the devolution of income tax

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 4 powers—do we have any idea of the proportions that might appertain to each of those? I did not really feel that you answered that question. Have you any idea of the time scale of the first one?

Mr Jones: I did answer the question, but I will repeat my answer. Very shortly—certainly, we hope, before Christmas—a draft Bill will be published. That will be of great assistance to you in answering the question that you have just raised. Furthermore, at the time of pre-legislative scrutiny you will of course be able to raise these issues with the Treasury Ministers who appear before you.

Q15 Nia Griffith: May I follow on from that? The first tranche of borrowing is not part of the Bill, as I understand it, so there will not be any detail on that.

Mr Jones: Do you mean the existing borrowing powers?

Nia Griffith: The existing borrowing powers.

Mr Jones: The ones that were announced in November?

Nia Griffith: Yes. The existing borrowing powers are not part of the Bill, so we are still very short of detail on those. Are you saying that the percentages, proportions and figures will actually be mentioned on the face of the Bill?

Mr Jones: A limit will be placed on the face of the draft Bill.

Q16 Nia Griffith: For both the borrowing that will accompany the minor taxes and the borrowing that would accompany the—

Mr Jones: Yes, for the taxes that it is proposed should be devolved.

Q17 Nia Griffith: Right. So we will see it on the face of the Bill.

Mr Jones: You will see a figure on the face of the draft Bill.

Nia Griffith: For both of those. Of course, we are still waiting to have more information, particularly on—

Mr Jones: In relation to the existing borrowing powers, as I said, these are matters that are currently being negotiated between the Welsh Government and the Treasury.

Q18 Nia Griffith: They have been for 15 months, but we are still—

Mr Jones: No, not for 15 months. We did not announce that the existing borrowing powers could be used for the purpose of upgrading the roads until 1 November. You may be confusing our announcement in November with the announcement that was made in October last year relating to the issue of convergence, which is a separate issue.

Q19 Nia Griffith: But the issue of the borrowing that is linked to the M4—

Mr Jones: As I said, those are issues that are currently being negotiated between HM Treasury and the Welsh Government.

Q20 Nia Griffith: Could I ask in a general way whether, if the Welsh Government wished to do anything else with the moneys that they were borrowing—if they wanted to do something with the

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 5 A55, say—they would have to come back to you each time, or would they have a power that would allow them to choose what they did with those moneys?

Mr Jones: If you look at the written ministerial statement, the existing borrowing powers—and the application of those powers—apply to the M4 and the north Wales expressway, which is loosely called the A55 but is actually the road that leads from the Cheshire border right up to Holyhead.

Q21 Nia Griffith: What I am asking is whether the precise details of any borrowing under the current scheme have to depend on those details being okayed by the UK Government. Is there any freedom for the Welsh Government to use the borrowing powers for something different?

Mr Jones: As far as the existing borrowing powers are concerned, the announcement that we made relates specifically to the M4 and the north Wales expressway. If the Welsh Government wished to extend those borrowing powers for some other purpose, clearly they would have to raise that with the Treasury and with the Wales Office. However, for the borrowing powers that would be granted as a consequence of devolving the so-called minor taxes—which are not really that minor—that would be a matter for the Welsh Government.

Q22 Chair: Basically, at the moment they can borrow on a case-by-case basis, by agreement with the Treasury. When these new taxes take effect, and if a certain amount of income tax is devolved, they will be able to use it for whatever they want.

Mr Jones: Yes.

Q23 Chair: Will they be able to borrow as much as the markets will lend them, based on the revenue from those taxes?

Mr Jones: As I said, the limit will be placed on the face of the Bill, which will be apparent when the draft is published very shortly.

Q24 Chair: Specifically on the M4 relief road, which is of interest to my constituents, there is already a suggestion—it comes from the green lobby, frankly—that rather than the M4 relief road we should have improvements to the southern distributor road. It is a suggestion that I never heard before from the green lobby in all the years that we were campaigning on the M4, but that is by the by. The point is, could the Welsh Assembly, if it wanted to, decide to use the borrowing powers that it already has and that you have given it for the M4 relief road to improve the southern distributor road instead? Mr Jones: The purpose of the announcement was to ensure that the M4 could be improved and upgraded. I think that everybody is agreed that the current M4, which passes through the Brynglas tunnels, is grossly inadequate.

Chair: Absolutely.

Mr Jones: I have heard from business organisations, including the CBI, that it is one of the top three or four pieces of national infrastructure that need to be improved. It would be a question of determining what is an M4 upgrade. That is the issue.

Q25 Chair: The indication you have from the Welsh Assembly Government is that they want a new M4 extension of some sort.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 6 Mr Jones: That is certainly the understanding that I have. I am aware that other alternatives have very recently been proposed, but, of course, it is a matter for the Welsh Government.

Q26 Chair: You said that the Welsh Government will be given early access to limited capital borrowing in order to begin work. Can you give us a timetable? When will the diggers go in?

Mr Jones: Again, it is a matter for the Welsh Government. One thing that does concern me is the fact that extended periods have been talked about in the press. In the Western Mail recently, there was a suggestion that the road might not be completed until after 2020, which I think most motorists in south Wales would regard as very disappointing.

I recently wrote to the First Minister to draw his attention to the fact that the single consent regime that was provided by the Planning Act 2008 does not apply to roads in Wales. I suggested to him that the upgrade of the M4 might be a lot quicker if the Welsh Government were to adopt the provisions of the Planning Act 2008, and I offered to assist him in finding a suitable legislative vehicle that would enable him to do that. Everybody would be very concerned if we were to have a lengthy public inquiry and then had to have compulsory purchase orders and so on, when all those things could be comprehended in an order under the Planning Act 2008.

Q27 Chair: I appreciate that we are focusing in and out a bit on the M4, and talking about borrowing. Bringing it back to the general borrowing issue, would the amounts of money borrowed by the Welsh Assembly in future be underwritten by the UK Government? If yes, the UK Government will basically be taking on the responsibility for the debt. If no, presumably the Welsh Assembly Government might be expected to pay higher rates of interest than Her Majesty’s Government.

Mr Jones: I hope that lenders would regard the covenant of the Welsh Government as reasonably strong. It has to be said, of course, that the United Kingdom Government are the lender of last resort in these respects. However, I am sure that if there were any concerns there would be some fairly urgent discussions between the Welsh Government and HMG.

Q28 Chair: But HMG would actually be underwriting that debt.

Mr Jones: No, not specifically, but if the Welsh Government were to default on their obligations—I think there is very little danger of them doing that—then clearly HMG would be the lender of last resort. However, that is such an unlikely eventuality that it is not going to keep me awake at night.

Q29 Geraint Davies: You have made the point that the M4 relief road is a part of our national infrastructure and is essential for our economy. Would it not be appropriate for you, as Secretary of State, to argue in Cabinet that we should get that money directly, as part of our fair share of capital, rather than messing around with all this borrowing and further delays? We could then get more people in work and get the tax revenues back. Are you arguing that case, or are you just bending back and saying, “All right then, we’ll do borrowing in Wales.” Are you standing up for Wales, and asking for the money for that relief road now?

Mr Jones: The extent to which the Wales Office is standing up for Wales is evident from the large number of infrastructure announcements that have been made over the last 12 months, which I am sure will not have escaped your notice. The fact is that, under the devolution settlement, the Welsh Government have the responsibility to maintain roads. The sad fact is that this road has not been maintained in a proper condition, and I think that the Welsh Government are grateful to

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 7 HM Government for coming forward with these arrangements to enable them to carry out this work.

Chair: Let me bring in Simon Hart and then Jessica Morden, both of whom have to leave shortly.

Q30 Simon Hart: I would like to ask a more general question about devolution. The reason for that is that I was quite frightened the other day when my colleague for Carmarthen East bounded up to me in the Lobby and said, “They will be putting up a statue of you in Carmarthen shortly.” That was just after the Prime Minister’s statement on M4 improvements. The implication was that we had done more for independence in the last three years than has done in many generations.

My question is, where does this all end? Is this not independence by another name? As you know, I worry that devolution is a one-way ticket, and that eventually we will get to where we do not want to be, sort of by mistake.

Mr Jones: What we are doing is trying to increase the level of accountability of the Welsh Government, who, frankly, have hitherto just been a recipient of money from Westminster with no responsibility for the way that the money is raised. Accountability is extremely important, but I think that Welsh people generally understand the importance of being part of a strong United Kingdom. For example, it is fairly clear that the M4 would not be improved at all under an independent Wales. Certainly it has not been improved in a devolved Wales so far, so if you take it one step further, it is very unlikely that it would happen.

The infrastructure investment that the United Kingdom Government have put in place over the last few years indicates the importance of being part of a strong UK. We have had not only the M4 announcement but the Great Western announcement. We have the work that is going on on the west coast main line and the announcement of UK guarantees for the new nuclear power station at Wylfa—and, interestingly enough, it appears that Plaid Cymru on Ynys Môn is in favour of Wylfa. Of course, we are undertaking a lot of other exercises, such as the north Wales prison. All this is of benefit to Wales, and it would not be there if Wales were independent.

Q31 Simon Hart: Being less flippant, I agree with that—

Mr Jones: That is very reassuring, Mr Hart.

Simon Hart: But I would not have started from here. The reason I want to go back to the devolution point is simply this. Turning the clock back, when the Scottish Parliament was formed I remember Donald Dewar saying that this would be the end of the debate about Scottish independence, whereas it turned out really to be the beginning. Here we are in a build-up to a referendum on an independent Scotland, which is precisely the opposite of what Donald Dewar said would be the case when the Scottish Parliament was set up.

How confident are you that in 20 years everything that we are doing, which you might argue is justified in terms of accountability, will not ultimately lead to a situation where we have no choice but to have a vote on an independent Wales? All the same arguments that you quite rightly put about Wales are the same ones that were put in Scotland, yet here we are arguing about the break- up of the Union and a referendum—which, hopefully, will result in a no vote—in the next few months.

Mr Jones: Wales and Scotland are very different places. One thing that, frankly, irritates me is those occasions when the Scottish and the Welsh situations are conflated, because Wales is an

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 8 utterly different place from Scotland. I think that people in Wales generally value the strength of the United Kingdom. We had a recent poll that showed support for independence at 7%, which is within the bracket that one normally sees of between 5% and 10%. Frankly, I very much doubt whether Wales has any appetite for independence. In fact, it is interesting to see that some senior Plaid Cymru figures have themselves recently said that they were never in favour of independence anyway.

Chair: Jessica Morden has to go in a moment, so I will bring her in next.

Q32 Jessica Morden: I want very quickly to go back to the M4. You said earlier that you wanted to be helpful to the First Minister and to expedite the planning process for the M4 relief road. Are you clear that that is not running roughshod over local people who might have concerns about their properties, the environment and so forth on that route, and that they would get a full say in the process even though it is not a Welsh Government process?

Mr Jones: What I am suggesting is that Wales should have the benefit of the Planning Act 2008, which applies in England, and which was extensively debated in this House.

People always have to have their say, but at the end of the day it is about striking a balance between individual interests—frequently, individual property interests—and the greater good of ensuring that you have a modern transport system. I am sure that you as a local MP would weigh those considerations very firmly in the balance.

Q33 Mr Williams: I have an important point to raise on the back of what Simon Hart asked about referendums. You talked about the differences between Scotland and Wales, but the recommendation for a referendum on the Silk proposals differentiates between Wales and Scotland in terms of Silk and Calman. Why did Scotland not have a referendum on tax-raising powers, and why are you having one?

Mr Jones: Scotland did have a referendum on tax-raising powers. The original referendum for devolution in Scotland comprehended tax-raising powers—or tax-varying powers, to be more accurate. Wales never had that opportunity. It is right that, if the Scots had that opportunity, so should the Welsh.

Q34 Mr Williams: So you feel that the issue of income tax-varying powers specifically merits a referendum.

Mr Jones: I think so. Given that it was a specific aspect of the referendum in Scotland all those years ago, I think that it would be wrong to deny the people of Wales a similar vote.

Q35 Mr Williams: We will have had three referendums—assuming that our Labour friends allow us the opportunity in the next Parliament. Are we going to have another referendum for Silk part 2, when Paul Silk reports in March on extending powers in one way or another? Will every aspect of devolution be plotted by a referendum campaign? I am not sure that we are going to get to where Mr Hart thinks we are going to get—another referendum, presumably—but that is four already.

Mr Jones: Paul Silk’s commission has not reported yet, and I am not going to second-guess what it may say. It may report that there is no need for any substantial change. I think it would be wrong to speculate as to what processes we would put in place off the back of that report.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 9 Q36 Mr Williams: Do you have sympathy with people across the country that tire of these constant referendum campaigns? I am not characterising it as such, I hasten to add, but do the dots of all the i’s of the devolution settlement have to be prefixed by lengthy campaigns and the establishment of yes and no campaigns, at huge cost to the taxpayer, when some of us would say that there is perhaps an inevitability about the process towards devolution—or, as some of us would like to say, home rule within a federal context?

Mr Jones: You are suggesting that people think they are having too much democracy, I guess. It is a question of the individual issue. If it is a substantial constitutional change, I would say that yes, broadly speaking, people should have a vote on that, because you are changing the constitution of the United Kingdom. More minor matters, of course, are not subject to referendums. In fact, as you know, we regularly see statutory instruments going through this House that are effectively administrative procedures. I think it is all a question of degree.

Q37 Mr Williams: In your discussions with Assembly Ministers, you are very keen to advance this; you have talked about it, and many of us look forward to campaigning on the same side for the tax- varying changes when we have that referendum. Do you detect any enthusiasm from the Assembly Government to crack on with this?

Mr Jones: The answer is that it is fairly muted. It is quite interesting, given that the Assembly Government were strident in asking that all the recommendations of the Silk commission should be accepted in full, that they now appear to be a bit chary about implementing the powers that are about to be devolved to them. We are giving them the power to call a referendum, and there will be a debate. As I have said on the Floor of the House—I repeat it now—my own feeling is that Wales needs a competitive advantage. I think that the Welsh Government should be bold and go for tax-varying powers. When they campaign in the referendum for a positive vote, they should tell the people of Wales what they intend to do with those powers and should indicate that they intend to reduce taxes.

Chair: I had better bring in people who have not spoken or have not spoken very much.

Q38 Glyn Davies: It is always quite interesting to me that, when I do not altogether agree with the Secretary of State, it makes things a lot easier. I am on record as not being in favour of a referendum on this issue. However, everybody would agree that it is crucial that the people of Wales should have a view on tax-raising powers and that they be consulted. General elections are for that. If the people who form the Government have made it clear in their manifestos that this is what they are going to implement, that seems to me to be a proper consultation with the Welsh people. We have seen it happen before. You have a referendum on an issue, and it goes off into all sorts of other issues, and people do not vote on the specific point. I have an antipathy towards referendums in general. I think they are a convenient way of not taking full responsibility for the change.

Mr Jones: Broadly speaking, I agree with you. On the whole, I am not in favour of too many referendums. Having said that, it seems to me that the people of Wales would feel aggrieved if the people of Scotland had a discrete vote on this important issue and they did not.

Q39 Glyn Davies: That is what I expected you to tell me; I dare say, from what we have said in the past, that you expected me to ask the same question.

I want to ask you a specific question. Do you agree with me that the core of what is being proposed is fiscal accountability to the Welsh Government? If the Welsh Government are going to become a proper Government, they have to have fiscal accountability. To have that, they have to have power

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 10 over income tax, which is a substantial amount of fiscal accountability to the Welsh people. Can you envisage giving any more powers to the Welsh Government if they are not going to grasp fiscal accountability for themselves? Instead of just whingeing about the M4 and the fact that they cannot do anything, they should be responsible. Until we get there, we do not have a Welsh Government.

Mr Jones: If they decided not to trigger the referendum once the competence had been devolved, that would be a very hard question for them to answer.

Q40 Stephen Doughty: Following on from that question, we have a very interesting debate here about the possibility of future income tax powers, tax revenues more generally and where those might come from. In terms of your view on the Welsh economy, and on tax revenues now and looking forward into the future, who do you think are the backbone of the Welsh economy? Where will future tax revenues come from?

Mr Jones: From businesses, and from people working in businesses, people who are paying their taxes and people who are given the opportunity by the Welsh Government to make a success of their lives. This is a theme I have spoken about a lot recently, because I feel very disappointed at the economic performance of Wales. GVA is only three quarters of the national average. Really, the Welsh Government should be using devolution to give Welsh businesses and everybody else who is trying to make a living in Wales a competitive edge. I think that a more competitive rate of tax would be part of that process, but there are a lot of other things that they need to do in order to give that competitive edge.

Q41 Stephen Doughty: Obviously we could get into a debate about corporation tax and small businesses. I would argue that the measures that the Welsh Government have taken on have been far more impactful for Welsh businesses than, say, cutting corporation tax for the highest earners. I have a copy of a very interesting letter that the leader of the , Andrew Davies, sent to the shadow Secretary of State the other day, in which he says that “those who pay the 40p tax rate are the backbone of the Welsh economy”. Would you associate yourself with that view?

Mr Jones: I would point out that only about 89,000 people in Wales actually pay that rate of tax, which is disappointingly low.

Stephen Doughty: So you would not associate yourself with that view.

Mr Jones: Hang on; can I finish my answer? I think that Mr Davies is probably trying to suggest that we would all like to see Wales richer, with more people pushed into the higher rate of tax. Sadly, and partly as a consequence of what I think are unambitious policies pursued by the Welsh Government, the tax take from that bracket at the moment is disappointingly low.

Q42 Stephen Doughty: I beg to differ, because he says very clearly that, far from being the wealthiest Welsh men and women, “those who pay the 40p rate are the backbone of the Welsh economy”. That betrays a certain viewpoint about those who contribute. I would argue that it is the 1.3 million who pay 93% of Welsh taxes—those on lower and middle incomes and small businesses. There seems to be a little bit of confusion here.

Mr Jones: I would say that corporation tax payers are important, too, because all the small and larger businesses that are incorporated pay their taxes in Wales. The more successful those

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 11 businesses are, the more people they employ. To a certain extent, we are seeing an improvement in the unemployment rate in Wales, but I would like to see it move a lot more quickly.

To get back to the theme, I really do feel that one of the biggest things that the Welsh Government could do would be to reduce the regulatory burden upon businesses and allow them to fly. Frequently, of course, we are seeing an increase in regulation that is actually holding businesses back.

Q43 Nia Griffith: You say again today what you said at the last Welsh questions in the Chamber— that you would like to see the referendum come forward, and that you would like to see proposals for a cut in income tax in Wales. A story then ran in the media that if there were a penny off income tax in Wales there would be a shortfall of, perhaps, £200 million to the Welsh Treasury. My friend put these points to Andrew R.T. Davies, the leader of the Opposition in the Welsh Assembly. He made the comment, “I do not recognise the comments you attribute to the Secretary of State for Wales.” It seems to me that there is a mismatch between your view of what you would like to see happen and his view. Who is going to be setting policy for the Welsh Conservatives, and what plans are they really going to be offering the Welsh people?

Mr Jones: I find it hard to see how anyone could not recognise what I have said, since I made the statement on the Floor of the House.

Nia Griffith: We found it hard to understand that, too.

Mr Jones: Nevertheless, I think that you will find that senior Conservatives, from the Prime Minister down, are very enthusiastic about Wales being more competitive.

We must revert to the principal point. The competence to reduce the rate of tax will be in the hands of the Welsh Assembly Government. First, they will have to call a referendum. Secondly, they will have to be bold enough, if there is a positive outcome to the referendum, to reduce the rate of tax. We need to decide what sort of Government we are going to have. Are we going to have a timid Government who are for ever going to be a supplicant to the Treasury here in London, or are we going to have an innovative, ambitious Government who want to make Wales richer? Of course, the Welsh people will be watching this debate with great interest as it unfolds over the next few years.

Q44 Nia Griffith: Particularly so when we have a letter from the leader of the Conservatives in Wales saying precisely the opposite of what you are saying.

Mr Jones: Mr Davies can answer for himself. I can answer only for myself and for the position of the Conservative party here in Parliament.

Q45 Jonathan Edwards: I do not want to go over old ground from the debate we had during Welsh questions, but basically the lockstep completely undermines the policy of the Liberal Democrats and the Conservative party in Wales. Do you accept that it is far more difficult to bring forward innovative taxation policy on income tax with the lockstep than with the mechanism envisaged by Silk?

Mr Jones: No, not at all. We have just debated the fact that, sadly, we have a very low tax take from the higher and top rates of tax in Wales. In fact, the top rate of tax in Wales has only 4,000 people paying it. It would be of far more benefit to Wales to spread the benefit of a tax cut right

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 12 across all the taxpayers in Wales. As I said, this is a matter for the Welsh Government; they must decide what they want to do with it.

Q46 Jonathan Edwards: Is it not the case that the Treasury has insisted on a lockstep because it knows that, basically, it is impossible to use? The only possible benefit that I can see of the policy that you are bringing forward on income tax is that it would increase the borrowing capacity. You will not be able to do anything with the actual income tax powers.

Mr Jones: No, I would not agree with that. That, of course, is what prevails in Scotland, and we have not heard complaints of that sort from Scotland.

Jonathan Edwards: They have not used it. It is impossible to do.

Mr Jones: That is a matter for the Scottish Government, just as it will be a matter for the Welsh Government.

Q47 Jonathan Edwards: Lastly, on the questions from Mark Williams and Glyn Davies about the trigger, why is it up to the Welsh Government and not the National Assembly to trigger the referendum?

Mr Jones: Forgive me; let me clarify that point. Clearly, the Welsh Government would put it to the Assembly. There will be provisions in the Bill, which you will see very shortly in draft, to provide for votes of the Assembly. I suggest that you wait until you see the draft Bill. We will be very happy to answer more questions at that stage.

Q48 Jonathan Edwards: How would you overcome a possible situation in 2016, following the next set of Welsh elections, whereby you had a minority Government who were opposed to income tax powers, as the Labour party currently is, and three Opposition parties that fought on a manifesto of proceeding with the referendum?

Mr Jones: You will have to wait to see the draft Bill to see how the arithmetic pans out, and make your comments in pre-legislative scrutiny.

Q49 Chair: Your rationale for giving the Welsh Assembly powers to vary income tax is that it needs to take responsibility for its financial affairs. That is pretty much the case, is it not?

Mr Jones: That is the principal reason, certainly.

Q50 Chair: If that is the principle—if it is about empowering the Assembly, giving it that control and making it take that responsibility—why was the Treasury so keen to implement the lockstep, which prevents it from varying taxes as it wishes? Is it because there was a fear that, in reality, if it was given too much freedom it would simply whack up tax on high earners with all of the consequences that you and I, as supporters of free markets, know would follow?

Mr Jones: We have to look also at the Scottish scenario. In frankness, it was regarded as desirable to mirror the Scottish settlement. As I say, it has been accepted in Scotland—we have not had arguments such as this in Scotland—and we think that it is a significant advance for Wales.

Q51 Chair: Is it not the political reality, as we believe, that an old-fashioned, socialist, old-Labour Government would actually put up income tax, not bring it down? We therefore want to limit their ability to do that, which is why it was so important to bring in that lockstep.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 13

Mr Jones: We have made it very clear, in terms of the progressivity of income taxation in this country, that that decision resides with the United Kingdom Government. That is why we have come down in favour of the so-called lockstep, as opposed to what was proposed by the Silk commission.

Q52 Stephen Doughty: I have two questions. To follow up on the last points you were making about taxation, I am still confused about the different positions between yourself and the leader of the Welsh Conservatives in the Assembly.

Mr Jones: I suggest that you ask Mr Davies yourself. I can answer only for myself.

Stephen Doughty: We did, but one would assume you spoke to each other.

Mr Jones: All I can answer for is what I am doing as Secretary of State for Wales. I cannot answer for anybody else.

Q53 Stephen Doughty: Let me ask you a specific question. Given that you have recommended a 1p cut in income tax, how would you see that being funded?

Mr Jones: Let me make this clear; I gave that as an example.

Stephen Doughty: As an example, how would you see it being funded?

Mr Jones: The Conservatives are a party of low taxation. We believe, by and large, that a low-tax economy is a more vibrant economy and that people actually earn more money. If people are allowed to keep more money in their own pockets, they will spend it in the local economy.

With respect, Mr Doughty, I am afraid you are looking at this very much from a socialist perspective. The Chairman and I look at it from a Conservative perspective. We believe that encouraging people to keep more of their own money is a really good thing. It encourages them to spend money in their own economy; and, in the Welsh context, it would give a significant competitive edge to Wales. To repeat, Wales needs all the competitive advantages it can get.

Q54 Stephen Doughty: How does this fit with the Prime Minister apparently suggesting the other day that there would not be any tax cuts until after the next election, and the refusal of the UK Government to countenance a business rates cut for small businesses? These three things do not seem to sit together. Where is the coherence between what you, the Chancellor and the Prime Minister are saying?

Mr Jones: They actually sit together beautifully, because there is then an enormous opportunity for the Welsh Government to give that competitive edge to Wales. It is a matter for them. At the end of the day, if they do not want to go for a referendum and do not want to give Wales the benefit of lower tax rates, that is a matter for them. I am not forcing them; all that I am telling you is what I feel about the benefits of lower rates of tax.

Q55 Stephen Doughty: I would like to ask a separate question regarding the other likely content of the future draft Wales Bill that will come before us for scrutiny. There has been a lot of speculation that the proposal to allow dual candidature again for National Assembly for Wales elections will now be dropped. Would you clarify your position on that? Are we going to have dual candidature back, or is it going to be dropped?

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 14

Mr Jones: Yes, it will be restored. We made that very clear in our response.

Stephen Doughty: It will be restored?

Mr Jones: Yes. We made that clear in our response to the Green Paper.

Q56 Stephen Doughty: So it will be in the Bill.

Mr Jones: Yes. I and many other commentators felt at the time that it was a very partisan step on the part of the Labour party to ban it in the first place, but in pre-legislative scrutiny you will be able to make all the points you want to make.

Stephen Doughty: I intend to do so.

Chair: We look forward to that pre-legislative scrutiny.

Q57 Geraint Davies: Can I ask again about the lockstep? You pointed out that only 4,000 people in Wales pay the 45p rate—those who earn over £150,000. It seems to me that, if the Welsh Government reduced the lower rate, we would lose a lot of revenue that would otherwise go to health and education, and that would not be a popular thing to do. On the other hand, if the top rate for people on over £150,000 were lowered on its own from 45p to 40p, and we got another 4,000 millionaires into Wales spending money, that could be good for the Welsh economy. Why do the UK Government not give those options to the Welsh Government to consider?

Mr Jones: I thought I had answered, but I repeat that we want to maintain the issue of progressivity at the UK level but want to avoid enormous distortions between the two economies. You have to bear in mind that England and Wales are essentially one combined economy.

Q58 Geraint Davies: You said that we do not have enough rich people in Wales. That would enable us to get a few in, would it not?

Mr Jones: I repeat that we believe that the issue of progressivity should be maintained at United Kingdom level.

Q59 Geraint Davies: You mentioned inward investment and all that sort of stuff. You say that you want taxes to go down and that other people want them to go up, but would you not agree that, from a business point of view, giving the opportunity for taxes to go up or down in Wales would cause a lot of uncertainty and undermine inward investment? Either the rates go down and there is less money for health and education, or they go up and put people off, so there is no value for inward investment. It is completely counter-productive.

Mr Jones: You appear to be telling me that you do not want tax-varying powers.

Geraint Davies: It should be either the whole lot or—

Mr Jones: Of course, Jane Hutt, your colleague in the Assembly, welcomed the announcement and said that it is “a good deal for Wales”, so it appears that you are at odds with your colleague.

Geraint Davies: I do not speak for Jane Hutt.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 15 Chair: Let me give the Secretary of State a little bit of warning that a number of questions may come up now where he may not see an immediate link back to Silk.

Mr Jones: Chair, that is not a huge amount of warning.

Q60 Glyn Davies: I want to ask a question that I have raised several times in the Chamber, but you are in a better position than anybody else to deal with this. As a consequence of devolution, cross- border schemes cannot go ahead. There is often a priority on the Welsh side because it wants access to English markets, but there is no priority whatsoever in England because the Welsh do not offer a market. Those schemes are just defunct. In effect, devolution is delivering an end to cross-border schemes.

Will you talk to the Department for Transport and the Secretary of State, and tell him that we are still part of a United Kingdom? Even if it is devolved, we have to have a system of making the devolved Government work with the UK Government so that the process of devolution does not kill off cross-border schemes, which is very damaging to Wales.

Mr Jones: I agree that this is one of the unforeseen consequences of devolution that, frankly, we are trying to reverse-engineer. The help that we are providing for the M4 is an indication of the fact that we understand the importance of that cross-border route. Similarly, in north Wales we have provided for the expressway to be part of the borrowing powers that we have given to the Welsh Government. You are absolutely right.

There is a railway line I am particularly interested in and have mentioned before—the Wrexham to Bidston line. If electrified, it would make the most enormous difference on both sides of the border. That is an area where we need to work together. Some months ago there was a very sensible report from Elizabeth Haywood for the Welsh Government, which suggested that there should be a quasi-city region straddling the border in north Wales. I think that is a very sensible idea. I have agreed with the First Minister that it is something we can work on.

You mentioned the cross-border routes the last time I came before this Committee. Yes, we do have it in mind. I have a meeting with the Secretary of State for Transport coming up very shortly after Christmas at which, among other things, I will be raising that issue.

Q61 Mr Williams: I have a question about a completely unrelated point—the prospective derogation of fuel duty in rural areas. I was hoping that you could tell us how engaged the Wales Office was in that process. You will know there is a lot of disappointment that what we believe to be the prospective bid going to the Treasury in January does not include areas in Wales. You and I have constituents who are very perplexed about this. I know the Wales Office has been working on this, so how much of that is criteria that the Treasury is stipulating, and how much is criteria coming from Brussels?

Mr Jones: I am sure that you will be pleased to hear that I have written to the Chief Secretary to the Treasury about this. The criteria were established by Brussels. Frankly, when you look at the criteria, I cannot think of an area in Wales that would fall within them. As a north Wales MP—like you as a mid-Wales MP—I was disappointed about that, but if one looks at the criteria that were set, there is certainly nowhere in Wales that meets them. I do not think that any representations were made on this by the Welsh Government, either.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 16 Q62 Mr Williams: In the comprehensive spending review last week, the Chancellor said that he is challenging the European Union rules that are constraining policy change in this area. How satisfied are you that that robust challenging to those EU rules is taking place?

Mr Jones: We certainly need to look at our relationship with Europe. As you know, these are negotiations that the Conservative party proposes to make. If there is a bright spot here, one should also look at what was announced in the autumn statement, which was the freezing again of fuel duty. I am sure that it will have come as a relief, as much to your constituents as to mine, that they will now be paying some 20p less per litre than they would have paid if the last Government’s escalator had progressed.

Q63 Chair: The Welsh Assembly has the power to remove powers from local authorities if they are failing in certain areas, does it not, and these powers have been used on a few occasions over the last 15 years, have they not? Is there any scope for the UK Government to remove powers from the Welsh Assembly over devolved matters if it is seen to be failing to meet the minimum requirements for delivering service?

Mr Jones: If I remember rightly, there are powers vested in the Attorney-General. Rather than give you an off-the-top-of-my-head answer, it would probably be better if I undertook to write a fuller letter to the Committee setting out what powers there are.

Chair: I should be very interested in that.

Q64 Stephen Doughty: You have clearly had a lot of conversations recently with Cabinet colleagues about matters affecting Wales. What conversations have you had recently with the Secretary of State for Energy and Climate Change about the particularly high levels of fuel poverty and energy debt that people are getting into in Wales—those figures are increasing all the time—as well as about the impact on businesses? I met a lot of businesses on Small Business Saturday that complained that the two biggest issues that they faced were business rates and energy prices, as well as the energy price being a major factor for domestic customers. A lot of them feel that the Government’s so-called cut—in fact, the price will continue to rise—is a bit of a con. What do you have to say to those businesses and members of the public?

Mr Jones: What is actually a con is to pretend, as an apparently responsible political party, that you can control world fuel prices. Clearly, you cannot. What we can control, however, are certain taxes and levies. The announcement that we made recently will result, on average, in a £50 cut per annum to consumers. It is very dangerous when a Labour politician talks about a con in relation to energy prices, because it seems to me that the biggest con is to suggest that world fuel prices are within the control of a particular Government when they are not.

Q65 Stephen Doughty: Of course, it is a cut in a rise. Have you had conversations specifically with the Secretary of State for Energy and Climate Change—or, indeed, with any of the energy companies that operate in Wales—about Wales’s particular deepening and worsening situation with regard to energy prices?

Mr Jones: I speak regularly to energy companies operating in Wales. I also speak regularly to the Energy Secretary.

Q66 Stephen Doughty: What are you telling them?

Mr Jones: I do not tell him anything that he does not already know as Energy Secretary.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 17 Q67 Stephen Doughty: What about the energy companies?

Mr Jones: The energy companies are fully aware of the Government’s concerns. We have already seen the announcement by one of the big six that prices will be frozen—for about 18 months, if I am correct. They are aware of our concern but, as I said, one has to be wary of suggesting that wholesale prices are under the control of any particular Government.

Q68 Chair: I know that one or two people will want to ask questions after the vote, and that you have promised to be here until 3.45 pm.

Mr Jones: I am very happy to come back.

Chair: We could try again and get in a few quick questions. I suggest that we start as soon as three or four people are back here. I will then call others.

Sitting suspended for a Division in the House.

On resuming—

Chair: We are now quorate. I know that a few of us have further questions to ask the Secretary of State, so we will just jump straight in, if that is all right. We have 14 minutes of your precious time, so we will make the most of it.

Q69 Geraint Davies: I want to ask you some questions about bank lending in Wales to small business, and what you might be able to do—possibly in conjunction with this Committee—to encourage further bank lending. I am thinking particularly about businesses that have approached me in Swansea. A particular business trying to build 300 houses on a plot of land that it owns has planning permission from the local authorities, but the banks, including RBS and Barclays, will not provide the funding.

Mr Jones: On what grounds?

Geraint Davies: There is a focus on banks generally—this is across the UK—providing more funding through the funding for lending scheme for mortgages and for consumer debt. In fact, overall bank lending is at the 2008 level for that. Lending to business, however, is 30% below the 2008 level, partly because there is more risk in lending to businesses, and there are more complications in working out the business plan. Businesses are approaching me to say both that they are not getting a fair deal, and that it is worse in Wales because we are a step away from London. Is there anything you can do?

Mr Jones: There is a significant problem in terms of bank lending to construction companies in Wales, which you have identified. To be absolutely frank, one of the problems is the degree of regulation that is applied in Wales. This is something that concerns me, and I know that it concerns a lot of business organisations. In fact, there was an interesting study very recently that indicated that the level of regulation in Wales was deterring builders from building in Wales.

As far as funding for lending is concerned, a couple of weeks ago that was refocused, as you probably know, to provide more support for small businesses. Dylan Jones-Evans recently did an interesting exercise for the Welsh Government on Finance Wales, and made some interesting suggestions for refocusing and restructuring Finance Wales. All of this work is going on. I certainly

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 18 believe that the Welsh economy is improving, but the banks have a large part to play. I believe that bank lending is freeing up a bit now, but in certain areas of Wales it remains a problem, particularly in the construction industry, which you have identified. That is why I was interested in finding out the grounds upon which the banks had refused to lend.

Q70 Chair: I will give everyone one question each until we run out of time. I am going for myself next; hopefully, that is not too unfair.

The number of Scottish MPs was reduced significantly because of the extra powers that Scotland had in comparison with Wales. It now seems likely that the Assembly will have the powers recommended by Silk—or most of them—including, possibly, after a referendum, tax-raising powers. Do you think there would then be a strong argument for reducing the number of Welsh MPs?

Mr Jones: I do not think that the powers that are comprehended by Silk 1 would have that effect. Clearly, it remains to be seen what powers may be recommended by Silk 2. The answer at the moment is that I do not believe that it would as a consequence of what is now proposed to be devolved.

Q71 Jonathan Edwards: I am sure you will be delighted with this question. In the recent spending review, the Welsh Government were awarded £35 million of Barnett consequentials for expenditure on HS2 to date. May I be mischievous and ask you to impress on the Prime Minister that he promote the officials and Ministers who were responsible for awarding those consequentials, to ensure that we get a fair share of all future expenditure on HS2?

Mr Jones: Mr Edwards, it is remarkable that every time I come to this Committee I have a bet with my officials that you will raise the issue of Barnett consequentials for HS2—and I always win my bet.

The answer is that the structure of the transport consequentials to the Welsh Government was determined at the start of this spending review. At the next spending review, the framework will be revised. I can only repeat, as I have repeated previously, that HS2 is a project of national importance—it is not an England-only project—and, therefore, that Barnett consequentials do not follow.

Q72 Geraint Davies: Could I link those questions? If the number of MPs relative to the number of AMs is changed because of Silk, will it not be the case that the balance of funding for Wales will be less from central UK coffers, with people arguing for our fair share of Barnett and HS2, and more “Make your own money, tax your own people,” on a lower GVA? Will that not push us in the direction of a divided Britain, something that I think you do not want?

Mr Jones: I would certainly hope not. I do not expect that it will.

Q73 Geraint Davies: Finally, you mentioned that you thought there was no appetite for independence in Wales, but would you agree that a yes vote for Scottish independence would fuel the fire for rabid nationalism in Wales?

Mr Jones: I think that there would be a lot of consequences to a yes vote, which makes it all the more necessary for there to be a no vote.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 19 One point that does have to be pursued is the question of the debate being a debate for the whole of the United Kingdom. I passionately want Scotland to remain part of the UK. I think that every Unionist Member of Parliament would want Scotland to remain part of it, but it is important for them to say so. It would really be rather regrettable if it were a debate that was confined within the borders of Scotland, or if it became a debate based on a London-Edinburgh axis. That is why I was extremely pleased to see the First Minister of Wales contributing to the debate by saying how important it was that Scotland remained. I have no doubt that he will repeat that argument over the months to come, and that you and your colleagues, as Unionists, will also engage positively in that debate.

Q74 Chair: You will be aware that the Mesothelioma Bill that is going through Parliament at the moment would ensure that those who have contracted this dreadful disease are given some form of financial compensation. The Welsh Assembly is trying to enact its own version of the Bill on the basis that it is a health matter. May I ask whether you agree with that or have thought about it? A lot of people, including the ABI, would argue very strongly that it is a financial matter, and that the Welsh Assembly doing its own thing will have an impact on Welsh businesses, which will end up footing the bill for something that they had not and could not have foreseen.

Mr Jones: That is a matter for the Assembly to debate. My understanding is that the various stages of the Welsh Bill are more or less complete. I can say that every piece of legislation that is proposed in the Assembly is scrutinised very carefully by the Wales Office and by the Attorney- General’s Office to ensure that it is within competence. That exercise will certainly be carried out with this particular Bill, as and when it completes its stages.

Q75 Geraint Davies: I know that you were involved in supporting the Swansea City of Culture bid. Clearly that is over now, but the journey must continue. What efforts might you want to make to keep the momentum going? Alongside that, what opportunities might the NATO summit in Newport next September offer, for example, for maximising inward investment in the defence industry in Wales? I know that defence is a separate issue to the City of Culture.

Mr Jones: The Wales Office supported the Swansea City of Culture bid very strongly. I went to Swansea and spent a full day there supporting the bid. You did a huge amount personally, Mr Davies, to support it, and I must commend you on holding the event in Portcullis House, which I was very pleased to support. Immediately after the bid had proved unsuccessful, I said that I did not think that it was at all a wasted exercise. The city of Swansea put together an impressive bid, and will have learned lessons from its sad failure on this occasion. It is very important that it maintains the momentum that it had.

There is an important event next year in the Dylan Thomas centenary commemorations and celebrations, and I know that the city of Swansea will naturally be involved in them. I very much want the centenary of Dylan Thomas’s birth to be an international event, not simply a Swansea or a Wales-only event, because Dylan Thomas was an internationally renowned poet and playwright. I am sure that the city of Swansea will be able to maximise the benefit of that particular event.

The NATO summit was a tremendous coup for Wales. It is the biggest event that has ever been held anywhere in Wales. Representatives of over 50 nations will be coming there, including many heads of Government. If the President of the United States attends, as I expect he will, it will be the first occasion on which a serving American President has set foot on Welsh soil. When the city of Chicago held the summit, the event created over 2,000 temporary jobs and had a positive

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 20 economic benefit of over $120 million. I am not suggesting that we will get that scale of benefit in Newport, but I very much hope that the city of Newport will do its best to maximise the benefit. I want this to be seen as a very Welsh event. I want it to have a Welsh stamp, and my Office is working on the project board to try to secure as much benefit as possible for the local economy. I would also like to see local people volunteering to be part of the exercise, in the same way as the volunteers for the Olympics, and we have had discussions about that. We need to maximise the benefit of the NATO summit.

Q76 Geraint Davies: Can you promise a NATO link to get people closer to Swansea?

Mr Jones: Exactly. If Swansea would like to put forward a bid for a major event for the heads of Government, maybe in conjunction with other local authorities, there could be an enormous benefit.

Q77 Chair: I hope that something like that happens, because I want to put on record that I think Swansea is a wonderful city. I mean that quite sincerely.

Mr Jones: May I second that, Chair? I think Swansea is a tremendous city.

Geraint Davies: Can we agree on that vote of confidence in Swansea?

Chair: We have time for one final question from Jonathan Edwards.

Q78 Jonathan Edwards: You said that you were happy that the First Minister had used his veto over the sterling currency when he made his rather strange intervention in Scotland. I was unaware that the Welsh Government had a strong influence on monetary policy, or that we had a veto over how the currency was used. Considering that he made that intervention, can you inform me what studies the Welsh Office—or the Welsh Government, for that matter—has undertaken into the impact on jobs in Wales if Scotland were to use a different currency?

Mr Jones: We have carried out a number of exercises, but I do not think we have carried out that particular exercise in the Wales Office. It may be that the Welsh Government have, but that is a matter for the Welsh Government. The difficulty that possibly you have, I assume, is that you are one of the members of Plaid Cymru who actually believes in independence, unlike some of your colleagues, so you will presumably be coming at the Scottish debate from a certain angle. It will be interesting to see whether the Unionist members of Plaid Cymru also join in the debate.

Q79 Chair: That is a great moment to end—a minute early. Secretary of State for Wales and everyone else, thank you very much.

Mr Jones: I wish you and your Committee a very happy Christmas.

Oral evidence: Silk Commission and financial devolution in Wales, HC 896 21