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Wales Bill

Volume 620: debated on Tuesday 24 January 2017

Consideration of Lords amendments

The National Assembly for Wales passed a legislative consent motion on 17 January, copies of which are available with the Bill documents online and in the Vote Office. I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendment 9. If it is agreed to, Mr Speaker will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

After Clause 17

Lending for capital expenditure

I am pleased to open the debate on the amendments made to the Wales Bill in the other place. Given the number of Members who wish to speak in this relatively short debate, I shall aim to keep my comments relatively brief.

First, I place on record my gratitude to the peers who contributed to the scrutiny of the Bill during its passage through the House of Lords. It would be dangerous to try to name them all for fear of forgetting some, but a number who regularly attended briefing sessions and gave feedback throughout the process helped to get this important Bill through the other place without any Government defeats. I thank in particular Lord Bourne of Aberystwyth for steering the Bill so ably through the other House on behalf of the Government, supported by Baroness Mobarik as Whip for the Bill.

I also take the opportunity to place on record my thanks to a number of right hon. and hon. Members of this House. My right hon. Friend the Member for Chesham and Amersham (Mrs Gillan) started the process when she established the Silk commission in 2011. My right hon. Friend the Member for Clwyd West (Mr Jones) expertly guided through Parliament the Wales Act 2014, which implemented the Silk commission’s fiscal recommendations. I pay particular tribute to my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb). In his time as Secretary of State he took a number of bold decisions, most notably the establishment of the cross-party St David’s day process, which put in place the framework of the Bill. That was a bold move, as I have suggested—one that sought to bring all parties together to make a constitutional agreement that would bring both Houses together, understanding the politics of both sides of this House and of the other place.

My right hon. Friend was unstinting in his belief in the importance of the Bill and subjected himself to immense scrutiny with respect to its contents. I pay tribute to his work in setting the framework that has allowed my hon. Friend the Under-Secretary of State for Wales and I to take it through the Chamber.

It is also appropriate to pay tribute to Members on the other side of the House who played an important part in the scrutiny of the Bill, especially the former shadow Welsh Secretary, the hon. Member for Newport West (Paul Flynn), and his predecessor, the hon. Member for Llanelli (Nia Griffith), who was involved in the work, negotiations and discussions throughout the process, as well as the current Opposition Front-Bench team.

I wanted amendments 9 and 44 to be spoken to separately, to give right hon. and hon. Members the opportunity to consider the fiscal framework agreed between the UK Government and the Welsh Government. The amendments are directly linked to that agreement.

The agreement reached between the UK Government and the Welsh Government is an historic agreement that is fair for Wales and fair to the rest of the UK. During scrutiny of the Bill last summer, this House approved the removal of the requirement for there to be a referendum before Welsh rates of income tax were implemented, and the fiscal framework paves the way for the devolution of those historic tax powers from April 2019.

The block grant adjustment mechanisms that will take account of the devolution of stamp duty land tax and landfill tax are also part of that agreement, ensuring that the replacements for those taxes in Wales, which the Welsh Government are already legislating for, come on stream in April 2018.

While the Secretary of State is talking about the fiscal framework, may I welcome the lifting of the cap on borrowing for capital expenditure to £1 billion? That is not quite the £2 billion that Front-Bench colleagues in the other place asked for, but I welcome it as a step forward. Does the Secretary of State agree that that measure will give the opportunity to continue investment in infrastructure in Wales, both digital and physical, and can also contribute to increased productivity?

I am grateful to the hon. Gentleman for the scrutiny he provided at previous stages, and for his comments just now. I will come to the numbers later, but I hope he recognises that there was a mature discussion between two institutions, and he is absolutely right that this measure paves the way for the Welsh Government to use their new borrowing powers to legislate for and finance things that really matter to the Welsh people.

The agreement ensures that, when tax powers are devolved, the Welsh Government will have fair funding for the long term, taking into account Welsh tax capacity and treating population change consistently across tax and spending. In doing so, we are delivering on the independent Holtham commission’s ambition of a long-term fair funding settlement and agreement for Wales.

Indeed, I spoke to Professor Holtham only last week, and he is clear that this is a “very fair settlement” and that there is now no case to argue that Wales is underfunded. The Government previously stated that Wales receives a fair settlement. This cements that in place and enhances the settlement.

Does not the Secretary of State agree that the fiscal framework is already out of date because it is pre-Brexit and we now know that Wales will suffer severely if we come out of the single market? Is it not true that the Bill is just another stepping-stone on the way to a new Bill, which we will get when the terms of Brexit are declared?

The hon. Gentleman is well aware that we have a positive dialogue with the Welsh Government on the nature and framework of the process and the ultimate outcomes of exiting the EU. I was happy to receive yesterday from the Welsh Government a paper outlining their proposals, and we will of course give it close consideration. It will be subject to a future Joint Ministerial Committee for the European negotiations.

No doubt, then, the Secretary of State would disagree with the hon. Member for Brecon and Radnorshire (Chris Davies), who said yesterday in an interview with me on ITV Wales that Wales should simply get in line with the Brexit process and just kowtow to the Prime Minister’s agenda?

I did not hear my hon. Friend’s comments, but should there be any attempt to frustrate the process of exiting the EU by the Welsh Government, the Welsh population would not expect or want it. After all, Wales voted to leave the EU, and it is only right and proper that we act on that instruction and direction, which came from the public in Wales. I would hope that the Welsh Government continue to engage positively in the way that they have.

Given the respect that the Secretary of State says there is between the institution of the National Assembly and the Government here at Westminster, should he not be disappointed that the Supreme Court has not ruled today that there should be a formal consultation with Wales via the National Assembly?

We have maintained that the views of the Welsh Government are important, but the views of other stakeholders in Wales are also relevant to the discussion. The Welsh Government will rightly form their view, and the UK Government will come to a conclusion that serves all parts of the United Kingdom, including other stakeholders in Wales, as part of the process. The legal action that the Welsh Government took was a matter for them. We have had the judgment, and we need to respect and act on it.

I shall return to the fiscal framework and the funding settlement for Wales. I have already mentioned Professor Gerry Holtham, but it is appropriate that we pay particular tribute to him for the work that he did. We should also pay tribute to my right hon. Friend the Chief Secretary for the part he played in the negotiations, and to the way the Welsh Government and Mark Drakeford, the Cabinet Secretary for Finance and Local Government, went about the negotiations with my right hon. Friend, whereby two mature institutions discussed serious matters that will have long-term positive consequences for Wales.

Building on the existing funding floor, the Welsh Government will continue to have a fair level of funding for the long term, taking into account Welsh tax capacity and treating population change consistently. For the first time, we have agreed to add a need-based factor of 115% into the Barnett formula, as Holtham recommended. We are embedding the funding floor that we announced in December 2015 into the mechanisms that decide how Wales is funded. The significance of this measure should not be understated: the Labour party called for it from Cardiff Bay for many years while it was in power in this place, but it has taken a Conservative Government to introduce that needs-based factor and deliver on Wales’s needs. I hope that the shadow Secretary of State, the hon. Member for Cardiff Central (Jo Stevens), will recognise the significance of bringing the needs-based factor into the Barnett formula.

Does not the Secretary of State share my concern that the needs-based factor will be based on sums ascertained in 2009-10, which will be effectively 10 years old when it comes into effect? There should be a review before it starts.

I am grateful to the hon. Lady for her intervention, and for the scrutiny and interest she has rightly given the Bill, but I hope she recognises the significance of the fiscal framework. The needs-based factor to which she refers is 115%, and the current level is well above that. It will fall to 115% over time, recognising the fair settlement that Wales gets because of its needs. It is significant that that needs-based factor is being introduced into the Wales settlement for the first time. It is something for which the hon. Lady and her party have been calling for some time, but it took a Conservative Government to deliver it.

My right hon. Friend has done a fantastic job of steering the Bill through its Commons stages. The hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) says that the figures are out of date, but when I sat down with Professor Holtham to think about how to scope out a fair funding floor for Wales, he was absolutely clear that there was no reason to think that just because of the passage of time the figures that he had in mind were somehow incorrect. The level that has been set by the Treasury is exactly right for Wales’s needs at this time.

My right hon. Friend played an important role in ensuring that we have the needs-based factor by framing the debate in such a way as to make possible a successful conclusion. Ultimately, the Welsh Government would understandably have rejected the Bill unless it was associated with an appropriate and fair funding settlement. I hope that Opposition Members will recognise the significance of the settlement, because it really does matter to the long-term funding of public services in Wales.

Does the Secretary of State accept that, as the First Minister set out yesterday in the White Paper published with the support of Plaid Cymru and the Liberal Democrats, there is a difference between the Barnett funding formula and funding arrangements of the sort that we currently have under the common agricultural policy and the structural funds? As things are moving on very rapidly, will he make a commitment that Wales will not be left a penny worse off as a result of leaving the European Union?

The hon. Gentleman tempts me to go down a route for which no decisions have been taken. We are keen to engage and discuss those matters and, as we have already said, we are keen to engage with the Welsh Government and the other devolved Administrations on future funding arrangements. I hope that the hon. Gentleman will recognise the fairness of the way we have approached the Barnett settlement and the fiscal framework, and that that will give him confidence that, as we hope, we will achieve a fair settlement for Wales and all parts of the United Kingdom as we exit the European Union.

I would like to make a little progress, but I will happily give way later if time permits.

We have agreed a fair way for the block grant to be adjusted to take account of tax devolution and the devolution of a portion of income tax, and a transitional multiplier of 105% in the Barnett formula that will give the Welsh Government additional money, over and above current levels, whenever we increase spending in a devolved area. That 105% demonstrates the even longer-term transition to getting down to the floor of 115%. We are doubling the Welsh Government’s capital borrowing limit, so that they will be able to borrow up to £1 billion —as the hon. Member for Torfaen (Nick Thomas-Symonds) pointed out a moment ago—to invest in infra- structure throughout Wales.

Lords amendment 9 puts the new capital borrowing limit in place now, so that it will be available as soon as the Welsh Government start to raise revenues through the taxes we are devolving. Lords amendment 44 ensures that Lords amendment 9 comes into force two months after Royal Assent, thereby putting the new borrowing limit into place well in advance of the devolution of tax powers. As the hon. Member for Torfaen rightly highlighted, that will allow the Welsh Government to get on with things that matter, and to legislate and use the new financial capacity that the Bill will grant. Taken with the Wales Bill, the agreement paves the way to making the Welsh Assembly a more powerful, accountable and mature institution, with greater powers and responsibilities to grow and support the Welsh economy.

The fiscal framework agreement resolves once and for all the perceived issues of underfunding that have overshadowed political debate in Wales for so long. It provides the Welsh Government with a powerful new borrowing limit to deliver much-needed infrastructure investment, and it ensures that the devolved Government in Wales can become truly accountable to the electorate by raising around a quarter of the money that they spend. Gone are the days when poor levels of public service in Wales could be blamed on perceived underfunding. For too long, funding was used as an excuse for poor outcomes, but not any longer. If they want big government, the Welsh Government could even raise taxes to pay for it. Or, if they want to reduce income tax levels, they could look to drive out inefficiencies and allow Wales to be seen in a new entrepreneurial light. I urge the House to agree to the Lords amendments.

In the spirit in which the Bill has so far developed, we will this afternoon see something of a rarity in my life: I will, on occasions, agree with the Government and some of the measures they are taking. Before the Secretary of State gets too excited about that, though, it has to be put on record that the Bill has had a chequered history. It started out very badly—so badly that the Government had to take it away and start all over again. The second attempt was better, and we have now reached a point at which although it is still far from ideal, there has been considerable movement by the Government as a result of pressure from the Opposition and in the other place.

I put on record my thanks to my predecessors, my hon. Friends the Members for Llanelli (Nia Griffith) and for Newport West (Paul Flynn), and their Front-Bench teams, for their work during the Bill’s passage. I particularly thank my colleague Baroness Morgan of Ely and our team in the other place for the sterling efforts they made to secure numerous improvements to the Bill through debate and discussions with the Government, who took a largely constructive approach to concessions. We therefore support the Bill in its current, improved form, and will not attempt to frustrate its passage.

I shall not detain the House longer than necessary on matters on which there is agreement, but I wish to make substantial points on the Opposition amendments at the tail end of the selection list, on which I may wish to test the will of the House. We are hopeful that we can make good progress and reach those amendments.

Given the importance of the consequences of Lords amendments 9 and 44, it is right to put something on the record about them. They will raise the Welsh Government’s overall capital borrowing ability to £1 billion, and from April 2019 the annual capital borrowing limit will rise to £150 million—15% of the overall figure. As the Secretary of State pointed out, all that stems from the fiscal framework agreed by the Government here in Westminster and the Welsh Assembly Government. It is welcome news; I congratulate the Welsh Government. Like the Secretary of State, I particularly congratulate the Cabinet Secretary for Finance and Local Government, Mark Drakeford, for working so hard to seal this important deal with the UK Government. I also pay tribute to the Government for moving on this issue.

The increase in borrowing ability is so important because the austerity that successive Conservative Chancellors have imposed on Wales has had severe consequences for the Welsh Government’s ability to invest, particularly in infrastructure. As has been pointed out, with the loss of European funding that Wales will experience once we leave the EU, the ability of the Welsh Government to invest in infrastructure becomes even more critical. Therefore, moves to enhance the Welsh Government’s ability to invest in and develop infrastructure for the future are of course welcome. It is all about investing in Wales and boosting our economy, and this measure will go a significant way towards doing that.

Sensible infrastructure investment led by the Welsh Government will help improve productivity rates in Wales and increase the gross value added of Wales. However, as Members will hear me say several times today, the Government plans do not go far enough. In the other place, my Front-Bench colleague, Baroness Morgan, tabled an amendment to raise the borrowing cap to £2 billion based on the Holtham recommendations. We accept £1 billion as a step forward, but it is clearly not enough to properly meet the demands of the Welsh economy. Before the Minister responds to that point, I caution the Government against viewing the cap as a target. The point is to see the flexibility and dynamism provided by the higher limit, rather than to look at only how much is borrowed.

Many successful businesses do not use 100% of their borrowing facility, but leverage their borrowing to a sensible percentage of the facility based on the economic context in which they are operating. The higher £2 billion that was sought would not necessarily have been used, but would have allowed greater flexibility and freedom for the Welsh Government to invest in a greater number and a greater scale of critical schemes and infrastructure projects.

I make these points to the Minister to put them on record and to push his conversations with the Treasury ahead of the forthcoming Budget, but, as I have said, we do welcome the step forward that Lords amendments 9 and 44 provide and we will not vote against them.

May I say that it is a matter of some pleasure to see this Bill going through the House? It started off, as my hon. Friend the Member for Cardiff Central (Jo Stevens) said, as a dreadful and ugly Bill. This is not the slap of firm Government, but the timid, limp wrist cringe of a weak, uncertain Government, who do not know in what direction they are going. None the less, the result is generally beneficial, and a step forward—a stuttering step forward and not one of which we can feel greatly proud. We also know that we will have to come back to it because the world has changed after Brexit.

I accept that there has been some improvement in this Bill. I am talking about the £1 billion in the amendment, but it should have been £2 billion. The Welsh Assembly has a very good record of investing in infrastructure and other projects, but we do need more investments in the future. The purchase of Cardiff airport was a great success.

Much has been made of this £1 billion cap, but, as the hon. Gentleman knows, the M4 relief road, which is on his doorstep, has been talked about a lot. Access to borrowing has been available to the Welsh Government to crack on with scheme, but they have done nothing. The £1 billion is a sensible amount. Will he comment on the broader use of these powers?

The hon. Gentleman well knows why the delays have taken place on that scheme. Obstacles are in the way of the scheme going through the system of appeals and the public inquiry, but, certainly, there is unlimited enthusiasm. It is nice to see him sitting there among half an acre of empty green leather seats today. I noticed that, on a previous reading of this Bill, one party took great advantage, taking a video swipe that showed the Opposition Benches empty, apart from the three Members of Plaid Cymru. The visual image was that the Member who was speaking—a Plaid Cymru Member—was someone who habitually empties these Benches as people stampede to the Tea Rooms whenever he speaks. People should not lie by using these misleading pictures of the House.

What we have before us is an unprecedented challenge to Wales. We must understand what leaving the single market will do for Wales, for Welsh industry, for Welsh farming and for the health service. It will hit us much harder in Wales than in England, and we must make allowances for that. However, we are not doing anything of the kind.

The hon. Member for Cardiff North (Craig Williams) talked about roads, and we do have a great problem there. I am talking about the highway robbery of the Severn Bridge tolls. We have had 52 years of double taxation of local people, and that is set to continue. Perhaps the Welsh Assembly could look into that infrastructure project. It is an outrage that people are paying twice for the tolls: we pay our share of the national road scheme in Wales and the west of England, and we pay over again for the tolls.

It was accepted by this House, under the Severn Bridges Act 1992, that those charges should be in place for a certain period. That period will come to an end later this year or early next year, when the Severn bridges have the same status as every other piece of motorway in the rest of the United Kingdom, and should be treated as such. The cost of maintenance should be borne by national funding. That is an unquestionable argument in favour of the abolition of the tolls.

There is a similar argument for the abolition of the tolls on the Cleddau Bridge, though their genesis was rather different. We cannot allow this psychological barrier to Wales to continue to exist. We want to give the impression of complete accessibility as that will be beneficial to those living on both sides of the River Severn. I hope the Government will look at this again.

When we look at these Bills that come up year after year, we see a growing acceptance by the people of Wales of the idea of devolution. I am glad to see the absence of that band of Conservative MPs who tried to vote against a clause very similar to this one on Third Reading.

This Bill will give the Welsh Assembly greater dignity and status as a real Parliament. From that point of view, we welcome it, but what we have seen today in this Chamber is that grudged nature of devolution. Today’s Supreme Court decision is saying that this Parliament will rule on powers that have already been devolved to Wales, Northern Ireland and Scotland. It should have no right to do that. It is reversing devolution in today’s judgment. Unfortunately, this sad Bill will not take account of Brexit or today’s decision by the Supreme Court.

I had not planned to say much this afternoon, but I thought that I would take the opportunity to contribute. First, let me put on the record my thanks to the Secretary of State and congratulate him on the fantastic way he has steered this Bill through its Commons stages and on the way he has handled very sensitive discussions with the Welsh Government, peers and the Opposition parties to bring it to fruition.

I also wish to put on record my thanks to Lord Bourne and to Baroness Randerson, who has not been mentioned this afternoon. Baroness Randerson was a Minister in the Wales Office when I was Secretary of State, and she was a fantastic rock of wisdom and support on matters relating to devolution. The amendments before us really give effect to the fiscal framework agreement, and represent the culmination of all those original aims that we set out for this next stage of devolution.

I remember sitting down with the then Prime Minister David Cameron two and a half years ago in the lead-up to the Scottish referendum—we all felt that it was a moment of unique constitutional history—and saying, “Well, where does this leave Wales? Do we need to do something further on Welsh devolution?” We had already had the Silk reports. To be honest, they were on the shelf. My feeling was that it was not good enough to leave Welsh devolution in limbo. Yes, there was a bit of pressure coming from some of the opposition parties in the Welsh Government to give effect to Silk 2, but there was no overwhelming pressure. Conceivably, we could have resisted that pressure, but I thought that moving on to the next stage of Welsh devolution was the right thing to do.

I am immensely grateful to my right hon. Friend the Secretary of State and to Baroness Randerson who were with me at the time in the Wales Office. We really talked about the matter to see what we should do. Comments have already been made this afternoon about how the Bill has changed, but it has followed an entirely appropriate and correct process, including a draft Bill, a consultation, the taking of advice and guidance, and amendments. The tone throughout has been one of listening. However, the original objectives have not changed. We wanted to create a stronger, clearer devolution settlement for Wales to end the constant arguing that resulted in the UK Government and the Welsh Government trotting off to the Supreme Court to debate which Administration are responsible for which policies—it was absolutely ridiculous. We also want to create a fairer devolution settlement, which is where the financial aspect comes in.

I pay tribute to the right hon. Gentleman for what he has done. My colleague Jenny Randerson greatly enjoyed working with him. He has pushed this agenda forward. One test that he employed at the time was to see whether the settlement would stand the test of time and whether a chapter would be closed—would Wales get used to its new constitutional settlement and would we not have to return to devolution in future? Has that test been met?

To be absolutely honest, I do not think that this represents the end of the book on Welsh devolution, but we need a prolonged period in which the Welsh Government learn to deploy their powers and use their competencies in a way that benefits the people of Wales. We were talking about the M4 upgrade earlier; an early deal that I did when I was Secretary of State for Wales involved making new money available to the Welsh Government to crack on with it. The project had been talked about for years. I remember taking a question on it during Welsh questions and William Hague leant across to me and said that people were talking about it 20 years ago when he was Secretary of State for Wales. We are still waiting for any substantial action despite the money being available. That is the challenge that risks corroding public support for devolution in Wales—the sense that the Welsh Government, despite their additional powers, seem unable to crack on and take big, bold decisions to improve the lives of people in Wales.

Returning to my previous point, the Bill meets the core objectives that we set out. The reserved powers model and additional powers for the Assembly and for the Welsh Government create a stronger devolution framework. Amendment 9 will create a clearer and fairer settlement as a result of the fiscal framework and the funding floor for the Welsh Government’s new borrowing powers. I remember being told two and a half years ago that the four things that we wanted to achieve had no chance of success. I was told that the Treasury would not agree to them, that the Welsh Government would not agree to take tax-raising powers—income tax powers—and that my own Back Benchers would not agree. However, all the parties worked together to sketch things out while respecting each other’s’ differences. Plaid Cymru has long-standing aspirations and ambitions for Welsh devolution that, frankly, no Wales Bill has met, but the tone was constructive and that has laid a good foundation and has provided smooth passage for a reasonably good Bill. It is not the end of the story, but I hope that it is the end of an interesting chapter for Welsh devolution.

I am sure that the House will join me in wishing the best to my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards), who is expecting the imminent arrival of the latest member of his family. [Hon. Members: “Hear, hear.”] I sympathise with all MPs who have to balance family life and parliamentary duty.

I, of course, welcome to an extent the fact that a fiscal framework is on the verge of being in place, giving the Welsh Government a degree of financial accountability that is intrinsic for any functioning democratic Parliament. Judgment is still very much out, however, on whether it can really deliver the economic accountability and levers for growth that are required in this tumultuous time. I therefore want to start with a few brief comments about the framework’s ambition, or lack thereof. I then want to ask the Minister a specific question about how the framework will operate before finally discussing the capital expenditure limit outlined in amendment 9.

Despite finally having this fiscal framework in place, we still lag behind every other devolved Administration in terms of powers and responsibilities. Earlier today—like most days—we were embroiled in the Brexit conundrum and all its unravelling economic implications, but the Government’s insistence on a patchwork approach to devolution means that Wales will not have the real levers for growth that it needs at this most difficult of economic times. If the Conservative party wants to talk about the real opportunities that a single market and customs union exit brings for Wales, it should be looking at the fiscal levers for growth, including VAT, the most important tax for Wales, and how it could be devolved. I hope the Minister will indicate that he plans to review the framework in the light of recent developments to ensure that Wales has such fiscal levers.

I briefly want to touch on a technical point that my party colleague, Adam Price AM, has already raised with the Welsh Government’s Cabinet Finance Secretary. The much trumpeted relative need provision of the fiscal framework—the 115% rule, which is referred to as the Holtham floor—was based on a set of criteria that determined Wales’s relative need in 2009-10. There seem to be no plans to conduct a review of that relative need when the floor is set to be implemented approximately three years from now, meaning that those relative needs will be based on figures that are 10 years out of date. This was discussed briefly in earlier interventions, but the 115% rule surely cannot be set in stone for all time, so I ask the Minister to propose a review to investigate that.

I am happy to clarify that the fiscal framework agreement, which is supported by the Welsh Government, includes opportunities for periodic reviews.

I welcome those comments about periodic reviews as opposed to using 10-year-old statistics. I also have some concerns about the framework’s dispute resolution mechanism, but there may not be the time to discuss them here. We may be able to resolve that problem in future discussions.

I want to finish by emphasising the fact that both Governments lack ambition. In the Lords, Plaid Cymru called for a £2 billion capital expenditure limit, which was supported by Labour. However, under pressure from the devo-sceptic Tory party, we can see in amendment 9 that we are left with a capital expenditure limit of exactly half that. Although I am pleased that a fiscal framework is finally in place, I cannot avoid the observation that Wales is once again being short-changed through a lack of vision and ambition.

Thank you, Madam Deputy Speaker, for calling me to speak in a debate that is hugely important to me. As someone who served as a Member of the National Assembly for Wales for eight years before my six years here, almost all of my political life has been dogged—if I can use that word—by Wales Bills of one sort or another. I do not know whether I will still be a Member of this Parliament when the next round comes but, as my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) said, I am sure that there will be one.

It is a great honour to debate a particularly important Wales Bill, which makes devolution much more stable than it has been since it was first established in 1999. I could speak about a host of matters and on some of them there would be disagreement across the Floor of the House, but two principles are hugely important to me. The first relates to the fiscal issues, which I will come to, but I believe also that moving to a reserved powers model is of fundamental importance. There will be disagreements about what should be reserved to the Westminster Parliament, but, generally speaking, moving to a reserved powers mode will be a big step forward. People—including me—have been calling for it since 1999, and we should not forget that in the discussions about finance.

This debate is about financial issues, one of which relates to borrowing powers. I greatly support the measure, which gives the Welsh Government new and important borrowing powers. Other Members have suggested that the ceiling is not high enough, but I have heard Mark Drakeford, the responsible Minister in Cardiff, say that the Welsh Government will probably not borrow the £1 billion allowed in the first instance. I believe that the borrowing power will make a significant difference to the way the Welsh Government can operate.

There has also been some debate about the 115% rule. Throughout my time in politics in Wales, we have heard people—usually Opposition Members—calling for a level of spending in Wales that is the equivalent of spending in Britain, and that 115% is it. In fact, the UK Government are investing rather more than that, so the 115% is less than is being spent now. There has never been sufficient appreciation of the scale of the current Government’s funding for Wales. Complaining all the time gives the wrong impression. What has been called for since I became a Member of the Assembly in 1999 has been delivered, and I think we should recognise that.

The devolution of income tax is particularly important to me. I have long believed that it is crucial if devolution is to move forward. For any Welsh Government to be accountable to the people, they have to be fiscally and financially accountable. The form of that accountability has to be one that the voting public recognise, and income tax is that form. If income tax is devolved, there will be a debate at every election about the appropriate level of income tax. People will vote looking at both sides of the ledger—what the Government intend to spend and what they intend to raise. Until now, all we have had is a spending plan. When I was a spokesman for my party on financial issues in the Assembly, I would not refer to the annual budget as a budget, which caused a bit of controversy; I would refer to it only as a spending plan. We have to have both sides, and that is where we are moving to with the devolution of income tax.

I am hugely proud to support this very good Bill. Of course, it is not the end of the story—who knows what will be down the road in the next Parliament and thereafter? But it is a good Bill that takes us to a much more stable place and gives the Welsh Government much more accountability. The Bill not only delivers a clear position within a unified United Kingdom but gives the Welsh Government a degree of influence and power to deliver the sort of devolution that we, the people who live in Wales, want.

Lords amendment 9 agreed to, with Commons financial privilege waived.

Lords amendment 44 agreed to.

Clause 21

Transferred Ministerial functions

The amendments deliver a comprehensive and lasting devolution settlement for Wales on water and sewerage. As right hon. and hon. Members know, water is of great symbolic importance as well as practical significance in Wales. Throughout the Bill’s passage, few issues have evoked more passion and debate. There is no question but that there cannot be a clear and lasting devolution settlement for Wales without resolving the issue of water devolution. The Government have therefore been determined to grasp the nettle and resolve the matter once and for all.

I was therefore delighted last autumn, when we were able to announce that we would replace the Secretary of State’s powers to intervene on water with a statutory agreement between the UK Government and the Welsh Government—in other words, a water protocol between the two Governments. Replacing the intervention powers with a formal protocol represents a clear break with the past, and is another landmark in the history of Welsh devolution.

The existing intervention powers were put in place in the Government of Wales Act 2006, when the Labour party was in government. Since then, they have taken on almost totemic status, despite having never been used. Their removal is another important change—alongside many others in the Bill—that marks the coming of age of devolved government in Wales. Amendments 30 to 32 give effect to this historic change.

Amendment 30 sets out the statutory requirements for the protocol that will be agreed between the two Governments, and we are absolutely clear that the protocol will have teeth. Both Governments will be subject to a duty to act in accordance with the new agreement, and once it is in place, both will need to agree any changes to it. The agreement will also need to include a process that both Governments sign up to for resolving any disagreements. The new arrangements will need to be negotiated, and that may take some time, but the Bill, as amended in the House of Lords, ensures that the Secretary of State’s water intervention powers can be repealed once an agreement is formally entered into.

Amendment 31 is also a crucial part of this package, as it imposes a duty on UK and Welsh Ministers to have regard to consumers on either side of the border when exercising functions relating to water resources, water supply or water quality.

The removal of these intervention powers ensured we were able to conclude our consideration of the wider devolution issues relating to water and sewerage, including the questions of whether powers over water and sewerage should be aligned with the England and Wales border and whether the sewerage intervention powers that were in clause 46 of the Bill when it left this House could be removed.

Amendment 30 removed the sewerage intervention powers from the Bill, and a great deal of work has gone into the question of whether the devolution boundary should be aligned with the geographical boundary of Wales.

I welcome the giving up of the intervention power, but does the Minister remain concerned, as I do, that there will be no direct line of accountability between Ofwat and Welsh Ministers?

I dispute the view that there will be no direct line of accountability between Welsh Ministers and Ofwat. There will be an opportunity to consult and work through the Secretary of State. The protocol that is being put in place will also address that issue in more detail in due course. However, hon. Members should welcome the fact that we are moving in that direction on the mature basis of a protocol between the two Governments.

Will the Minister clarify the position on the Competition and Markets Authority? Its regulatory role is very relevant to water. Will it be accountable to the Welsh Government and the Assembly?

It is important to highlight that the Bill is not devolving competition power; it is being reserved. Therefore, the Welsh Government—and this place, obviously—will have the ability to ensure that the views of electors in Wales on this important issue are taken into account.

Of course, the Silk report recognised that water and sewerage devolution is complex and that further work was needed to consider the practical implications of implementing the commission’s recommendations. Immediately after the St David’s day agreement, the Government set up the joint Governments’ programme board with the Welsh Government to look at these issues and to report on the likely effects implementing the recommendations would have on the efficient delivery of water and sewerage services, on consumers and on the water undertakers themselves.

After considering the conclusions of that work, the Government brought forward amendment 28, which provides for new schedule 7A to the 2006 Act, which is inserted by schedule 1 to this Bill, to be amended to devolve water and sewerage policy as it relates to Wales. While, on paper, this simplifies the devolution arrangements, it will involve the unpicking of a considerable number of provisions in primary and secondary legislation to align respective ministerial powers and duties with the England and Wales border.

Amendment 29 provides an order-making power limited to making changes to previously transferred functions and to functions directly conferred by primary legislation relating to water and sewerage, so that we will be able to make the various associated changes through secondary legislation once the Bill has been enacted.

The amendments in this group provide a significant package of water devolution to Wales. They deliver a stable, mature and effective devolution settlement by aligning powers over water and sewerage with the national border and replacing the Secretary of State’s intervention powers relating to water with an intergovernmental protocol. These new arrangements are in the best interests of water consumers on both sides of the border. I urge the House to accept these Lords amendments.

The devolution of water and sewerage matters to the Welsh Government is welcome—and, if we are honest, somewhat overdue. The tragedy of Tryweryn will never be forgotten, but the amendments in this group should, I hope, be another step forward in ensuring that something like it will never happen again. More broadly, while some cross-border aspects of water regulation will remain, we are pleased that the Secretary of State has given up his ability to intervene on this issue. Like my hon. Friend the Member for Cardiff Central (Jo Stevens), I find myself in the somewhat strange place of thanking the Government for their movement on this issue, albeit after some prodding both here and in the other place.

However, also like my hon. Friend, I still believe that these amendments do not go far enough. While they correct some problems, there remain discrepancies. As my hon. Friend the Member for Torfaen (Nick Thomas-Symonds) said, there is the issue of Ofwat’s accountability to the Welsh Government. When Ofwat is discharging its functions in Wales, surely it ought to be accountable in some way to the National Assembly for Wales and Welsh Ministers. As it stands, Welsh Ministers regulate water and sewerage operators in Wales, but with the Secretary of State being able to exercise his function of giving a general direction to Ofwat without any legally mandated consultation with Welsh Ministers. To be clear, we would argue that only Welsh Ministers should be able to provide directions in connection with matters relating to water and sewerage operators in Wales, or where licensed activities are carried out using the supply system of water or sewerage operators in Wales. Does that not seem a very reasonable and straightforward request? Surely it is not a step beyond imagining for the Minister that the regulator for a sector should be mandated to consult and speak to the politicians dealing with the implementation of that sector.

As my hon. Friend the Member for Wrexham (Ian C. Lucas) may well detail, it is not sufficient to believe that regulation from London will always work in the interests of communities in Wales. I will let him expand on that point and the ramifications of these amendments for the campaign he is fighting in his community. I pay tribute to him for his work in raising the issue, and assure the House that we support him on it.

Echoing my hon. Friend the Member for Cardiff Central, despite the gaps in these amendments and the problems we have with them, we will not vote against them. However, I would like the Minister to provide a substantive response to the points I have raised, to give us an assurance that the issue of Ofwat and the Welsh Government could be looked at, perhaps through some mechanism outside the Bill, and to keep the House informed of his progress on that.

I, too, welcome this Bill. As a firm believer in the adage that there are no coincidences in politics, I would go so far as to say that its existence is having an impact before it hits the statute book, because just as these amendments were being proposed in the Lords, the news came to my constituency and that of my hon. Friend—my very good friend—the Member for Clwyd South (Susan Elan Jones) that our local water company, Dee Valley Water, was the subject of a takeover bid from Severn Trent Water. I suspect that the takeover bid is not unconnected to the existence of the clauses that will give more powers and a greater role to Wales, the Assembly for Wales and the Welsh Government. I suspect that, with the transfer of regulation and accountability from the UK Government to the Welsh Government, it will be much more difficult to advance the present policy course as the Severn Trent bid is being made.

I cannot say too much about that bid, because it will be in court tomorrow; it is, of course, the most important court case that is taking place this week. What I will say is that I am a great believer in local accountability and local services. We have in Wrexham a great water company, Dee Valley Water, which employs more than 300 people. The workforce, to my knowledge, are united in their wish for the Severn Trent bid to be rejected. Because water is a monopoly, the role of regulators—there are and will continue to be two regulators involved in the process, namely Ofwat and the Competition and Markets Authority—is crucial. The regulators have let me down, as a Member of Parliament and a local customer, and they have let down the workforce and the community. The Government have also let the community down by standing aside while a very good, efficient local business is taken over by a much larger business in what I regard as a predatory way. The workforce are very worried about their future.

I do not want to be part of a customer base that pays into a pot to pay the chief executive of Severn Trent Water a salary of £2.4 million per annum. I think that is completely out of touch with the people I represent, and I do not think it is an appropriate course. I do not agree either with our having one water company fewer as a result of the proposed takeover. That means that we will have less competition and fewer benchmarks against which to measure water companies on price and quality. I am disappointed that the Competition and Markets Authority and Ofwat have not got involved and that they have not referred the matter to a stage 2 inquiry so that it can be looked into in more detail.

The Government have let down local people in Wrexham and Chester, where Dee Valley Water supplies water, and the regulators have let the people down. The proposals in the Bill are very welcome indeed, but I wish that they had been introduced a year ago. If they had been, the people of the community that I represent would have been listened to by a Government who had influence and authority and who would have exerted influence to prevent the predatory takeover of our local business, which is serving our community well and being let down badly by the proposal.

I rise to speak to the second group of amendments, led by amendment 10. My noble Friend Lord Wigley originally welcomed the Government’s announcement that they would devolve power over water, and in Committee he eloquently outlined how an historic wrong could be righted. He set out in great depth how the drowning of Welsh valleys has motivated his politics and the emotions of so many people in Wales, and how 50 years ago in Capel Celyn the compulsory eviction of families from their homes and land meant the destruction of whole communities. Llyn Celyn and Afon Tryweryn are in my constituency.

The high-handed way in which Westminster treated the people of Tryweryn still has repercussions in this place, as well as in communities across Wales. Amendment 30, in which the so-called water protocol is outlined, embodies the entrenched Tory resistance to addressing this injustice in any meaningful terms. What format the so-called protocol may take has never been fleshed out. In this Bill, we do not have a protocol or a draft protocol, and for that matter we do not have an outline of a draft protocol or a protocol by which to arrive at a protocol. However, despite that lack of clarity, the Government are willing to include clauses watering down this already thin provision.

Lords amendment 31 explicitly charges Welsh Ministers with the interest of English consumers when it comes to any changes to our water supply. It is important to note that the amendment specifically references English consumers. We are not concerned with communities or individuals even, but consumers matter and Wales’s natural resources are still not ours to dispose of to our best advantage. That is because the Government are prioritising the primacy of competition over the interests of Wales. The amendment refers us to the Water Industry Act 1991 to define consumers, but that Act was based on promoting competition. Does this mean that the protocol will be based on the Thatcherite dogma that the wellbeing of the consumer—in this case, the water consumer—is tied up with the tenets of free market competition?

The contents of the protocol and whether it includes a Thatcherite dogma are surely a matter for the Welsh Government to agree with Westminster, so there will be no Thatcherite dogma unless the Welsh Government agree to it.

The Minister explained earlier that competition is a reserved matter. In this case, that prompts the question, what does such a dogma have to do with the reserved powers model for Wales, in relation to this most emotive of all subjects? My party and many people in Wales feel cheated. When the Minister played the card of water devolution, we were led to believe that this would be a real game changer, but I am afraid it is no more than smoke and mirrors.

We considered pushing Lords amendment 30 to a vote, but we will spare the Chamber such an exercise, given that we might only manage to tweak the wording of something we have already opposed. I want the record to reflect, however, that my hon. Friends and I will not be taken in by empty words dressed up as substance from the Government. This remains a cynical political sleight of hand—endeavouring to gain capital from an historical event of deep emotional significance in Wales.

As much as two words can ever encapsulate a feeling or a sense, the two words “Cofiwch Dryweryn”—“Remember Tryweryn”—probably do so. I hope that we will not look back at this year and think of another four words, “Cofiwch Dwr Dyffryn Dyfrdwy” —“Remember Dee Valley Water”—as encapsulating the spirit of our age.

My hon. Friend the Member for Wrexham (Ian C. Lucas) spoke very powerfully about a difficulty in our part of north-east Wales that threatens the livelihoods of many people working for the local water company. In a sense, it is a David and Goliath battle, but there is real fear that David may not win on this occasion. David is in the courts tomorrow, so we cannot speak about many of the intricacies of the situation. We can say, however, that one of the UK’s smallest water companies—indeed, it may be the smallest, but I need to check that—which has the fourth lowest bills of any water company in the United Kingdom, is in court against its Goliath on issues involving the votes of shareholders.

In north-east Wales, we have seen what used to be called the unacceptable face of capitalism, with a nasty, large predator coming in and trying to take over a local company quite against the will of the local workforce and the local consumers. That, I fear, is a cause of great regret. I will not repeat what my hon. Friend said about the issues concerning us—the role of the Competition and Markets Authority, and its lack of linkage in terms of devolution to the Welsh Assembly, and that of Ofwat—but he made some very serious and important points about the future of water in our area. I know that great symbolism attaches to Tryweryn, and rightly so. The chair of the action committee of Tryweryn, T. W. Jones, was also a resident of my constituency. T. W., as he was known, fought valiantly for that campaign.

I urge this House and Ministers, as we approach the welcome devolution of water, to think carefully about what is happening with Dee Valley Water and to look carefully at aspects of company law. Surely this cannot be right, given the views of local people, shareholders and the employees of the company. If local ownership matters to us, surely a predatory takeover is in nobody’s interests, other than the large predator itself. I urge the Minister to give thought to the points that my hon. Friend and I have made. I welcome the proposals that devolve water to the Welsh Government. I agree that it is totemic and symbolic, but most of all, I want something that works, especially for people in north-east Wales.

I will say a few words about clause 46 and Lords amendment 30 on the water protocol.

Every time I travel south in my constituency, I go past a famous piece of graffiti that says “Cofiwch Dryweryn” on the outskirts of the village of Llanrhystud. Intermittently, that acceptable bit of graffiti has been vandalised by others. No sooner has it been vandalised than it is restored to glory, as it should be. As the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) and the Government have acknowledged, such issues need to be dealt with sensitively and history does not always dim those sensitivities.

In that spirit, I reflect on the long gestation of the water protocol. It was recommended by Sir Paul Silk in February 2015. I remember being my party’s representative, alongside the predecessor of the hon. Member for Dwyfor Meirionnydd, Elfyn Llwyd, in the Wales Office when we went through the Silk recommendations and came across the devolution of water and sewerage responsibilities. It was altogether easier to dispense with sewerage than water. The officials were charged with looking at this issue because it was complex, not least because the responsibilities of water companies had to be assigned across national boundaries.

I am pleased that the Government—my party in association with the Conservative party—acknowledged in the St David’s day agreement that there should be a water protocol. On paper at least, the protocol makes eminent sense, although it would be a lot easier for us to pass judgment on it if we had a draft or, indeed, any assessment of the criteria under which it will work. Their lordships made the point that more detail would have been helpful, and so too would a timescale. We are dependent on the Bill being passed, and then the protocol will swing into action. I look to the Minister to give us some indication of the timescale.

Concerns were raised in the other place, right up to the end of proceedings. I will summarise them, and again I look to the Minister to assure me that these matters will be dealt with. Their lordships were looking for a clear statement that the National Assembly has total legislative control over the creation of reservoirs in Wales and for the Assembly to have legislative control over all matters relating to water in all of Wales, coterminous with Wales’s border. Is the Minister satisfied that those questions will be adequately addressed by the protocol once it is enacted?

On a pedantic point, the first line of new clause 46, as introduced by Lords amendment 30, states that Welsh Ministers and the Secretary of State “may” make a protocol. Should that not read “shall” make a protocol? If the protocol does not emerge, or if there are difficulties or delays in agreeing one, it would not serve the people of Wales well. I welcome the attempts made so far, but there remain unanswered questions, and I look forward to hearing from the Minister.

Lords amendment 10 agreed to.

Lords amendments 28 to 32, 46 and 137 agreed to.

Clause 1

Permanence of the National Assembly for Wales and Welsh Government

With this it will be convenient to discuss the following:

Lords amendments 2 to 8, 11 to 27 and 33 to 35.

Lords amendment 36 and amendments (a) and (b) thereto.

Lords amendments 37 to 43, 45, 47 to 136 and 138 to 177.

As I stated earlier, we have engaged constructively with peers, the Welsh Government, the Assembly commission, colleagues on both sides of the House and a range of other interested parties on the issues raised, and we have made changes to improve the Bill where there is a good case to do so. The Bill today is a better one as a result. The large number of amendments in the group is testimony to the fact that the Government have been open to improving the new devolution settlement where possible. I do not intend to discuss each amendment in detail, but I will draw some of them to the House’s attention.

We have amended the Bill to deal with concerns about how universities are treated in the new reserve powers model. During the Bill’s passage through the other place, concerns were raised by the higher education sector that defining universities as “Wales public authorities” might suggest that they should be classified more widely as “public authorities”. This was not our intention. Amendments 3, 4 and 115 resolve this issue by renaming “Wales public authorities” as “Devolved Welsh authorities”. This responds to calls from universities and Universities Wales. We have also ensured that the Open University will be defined as an authority that carries out a mix of devolved and reserved functions, reflecting its status as a UK-wide institution. This will allow the Assembly to legislate to confer functions on the Open University in devolved areas without requiring the consent of a UK Minister. We have also expanded the list of devolved Welsh authorities in response to concerns raised by the Welsh Government and others.

The Government have introduced several amendments relating to tribunals that resulted from extensive discussions with the Welsh Government, the Ministry of Justice and the senior judiciary and which are intended to improve the management of the workload of devolved tribunals and to maximise flexibility in the deployment of judicial resources in Welsh tribunals. The amendments tabled in the other place will create a statutory office of president of Welsh tribunals to oversee the work of the devolved Welsh tribunals. New schedule 5 provides for a two-stage process for the appointment of a person to this new statutory role. The new clauses will also allow for the deployment of judges between Welsh tribunals and reserve tribunals in England and Wales so that they might share expertise in a way that cannot happen under current legislation. These are important amendments that are the product of constructive work with the Welsh Government, the Ministry of Justice and others.

The Government’s key aim in introducing the new reserved powers model is to deliver clarity on the boundary between the Assembly’s competence and the competence of this Parliament, particularly in the light of the Supreme Court judgment on the Agricultural Wages Board settlement. Many amendments therefore either alter or remove altogether reservations contained in new schedule 7A to the Government of Wales Act 2006.

The Government have tabled a number of amendments to deal with the planning system and the law that governs the construction of buildings, responding to concerns raised by the Welsh Government. Amendment 71 devolves competence for planning in relation to railways, making it consistent with the position in Scotland. We have also brought forward amendments that replace the full reservation of compulsory purchase with one that covers only compensation. This was again in response to discussions between the UK Government and the Welsh Government.

As for amendments to schedule 1 more widely, we have demonstrated our willingness to devolve significant further powers to the Assembly where a clear rationale can be made for doing so. Amendment 80 removes the reservation relating to teachers’ pay and conditions. This was something that I was keen to devolve from the outset, but I recognised concerns that were expressed by colleagues on all sides of the House as well as by the teachers’ unions. Following constructive engagement with the First Minister and discussions between officials, we are pleased that we both came to the same conclusion—that education is a devolved matter and that it makes more sense for the Assembly and Welsh Ministers to decide the pay and conditions of teachers in Wales, particularly in the light of the greater divergence between the education models that exist in England and the education model that exists in Wales. It is sensible to devolve teachers’ terms and conditions.

Amendment 72 devolves the community infrastructure levy in Wales. That was a priority for the Welsh Government, and has been for a number of years. We have listened to the case that they made and we are again delivering on a demand made by them. We were happy to respond positively and constructively to these calls.

Finally, amendments 36 and 52 devolve legislative and Executive competence to the Assembly and Welsh Ministers to regulate the number of high-stake gaming machines, authorised by new betting premises licences in Wales. This is an issue in which the hon. Member for Swansea East (Carolyn Harris) showed particular interest and passion during the earlier stages of the Bill’s scrutiny. The Silk commission made no recommendation on the devolution of betting, gaming and lotteries, but we agreed as part of constructive dialogue with the St David’s day process to consider non-fiscal recommendations made by the Smith commission that it would be appropriate to take forward in Wales.

I, too, place on record my congratulations to my hon. Friend the Member for Swansea East (Carolyn Harris) on the success of her campaign on this issue. Does the Secretary of State agree that when statistics show that an average of £3,000 a day is being staked on these machines, it is very important to devolve these powers and for the regulations to be implemented?

I will come on to that specific point, because a review is being conducted by the Department for Culture, Media and Sport which will address the specific issues that the hon. Gentleman raises. For the moment, I shall stick to explaining the rationale behind the amendments on fixed odds betting terminals.

One proposal was for the powers to be devolved to stop the proliferation of these so-called fixed odds betting terminals. We concluded that these powers should be devolved in Wales, as they are in Scotland, coming out of the Smith commission. Amendments 36 and 52 therefore ensure that the Bill mirrors the provisions in the Scotland Act 2016 in respect of high-stakes gaming machines. The amendments apply to sub-category B2 gaming machines, and would provide the Welsh Government with a means to address public concerns in Wales regarding the proliferation of these machines. These machines were regulated by the Gambling Act 2005, which was introduced when the Labour party was in power.

The Opposition amendments would go much further than what is already devolved in the Scotland Act by extending this provision to all existing gaming machines with a stake of more than £2, and by devolving powers over existing licences. We did not believe that that was appropriate. As I mentioned a moment ago, the Government have already announced a review into the issue because we recognised the flaws in the 2005 Act. As a result, we are carrying out a thorough process to examine all aspects of gaming machine regulation, including the categorisation, maximum stakes and prizes, location and number of machines, and the impact that they have on players and the communities in relation to, for instance, problem gambling and crime. All those factors are potentially relevant and interrelated. The powers that we have agreed to devolve are intended to enable the Welsh Government and the Assembly to take action to prevent the proliferation of fixed odds betting terminals.

The review that we have announced is the appropriate mechanism for consideration of all those issues in a far more holistic way. I urge Opposition Members not to press their amendments to a vote, but if they pursue them, I shall do my best to respond to some of the issues that concern them. I urge Members to support the Lords amendments.

I support Labour’s amendment (a) to Lords amendment 36, which would reduce the relevant stake for fixed odds betting terminals to £2. I welcome the review that is being carried out by the Department for Culture, Media and Sport, and I also welcome the move to devolve this power to the Welsh Assembly. My reason for doing so is very much in line with all the work that has been done by my hon. Friend the Member for Swansea East (Carolyn Harris), but I fear that we could find ourselves in a ridiculous position. All of us—apart from certain advocates for the betting industry—know that what is happening with fixed odds betting terminals is deeply concerning. Figures as high as about £1.7 billion have been quoted as the profits made on these horrible machines, which cause so much devastation in our communities. We all agree that something must be done fairly urgently, but I fear that the House of Commons could collectively vote to put in place a stake of below £10 but then, if we pass the Lords amendment as it stands, the stake could be reduced only to a minimum of £10 in Wales. That does not seem right to me.

Let me put it another way. Collectively, the House could vote for a maximum stake of £2 in England and Wales, but once the matter is devolved to Wales, the Welsh Government would be limited to £10 and then the House of Commons could not go for a lower stake here, simply because the Government would tell us that that this was a case of English votes for English laws and we would be banned from lowering the stake.

All we are asking for is something very pragmatic—something that would give us the right to decide the level of the stake and benefit communities. Let us make no bones about it: these machines, and what is happening in the gambling industry, are hitting our poorest communities the hardest. We see the impacts of it in our industrial villages and in our towns. Let us say once and for all to the harder elements of the gaming industry, some of whom I am sure will be e-mailing us all later, that the nonsense of what is happening with FOBTs must come to an end. Let us say, “Do not think you can intimidate us, or those in the communities who are fed up with the hold that you have on them.”

It is time for us to act firmly. It is time for us to give the Welsh Government full devolution in this regard. It is time for us to lower the stake even further, if possible. It is time for the Welsh Government to have the power to do that, and, hopefully, this place will as well.

As the Secretary of State has pointed out, there are a lot of amendments in the group, many of which are welcome and deal with important issues. Given the limited time that is available, however, I shall focus on Lords amendment 36 and our amendments to it.

We welcome the Government’s Lords amendment, as we did when it was moved in the other place, but, as has already been said, we want it to go further. Today gives us the opportunity to achieve that. Our main point of contention with the amendment is that it limits the powers that are being devolved to the Welsh Assembly to regulate fixed odds betting terminals. That ability to regulate will apply only to machines licensed after the Bill becomes law that have a stake of £10 and above.

The Campaign for Fairer Gambling has been campaigning on this issue for some time. It has been an invaluable source of help in our work on the amendments, so I want to put on record my thanks to it. I also thank the all-party group on fixed odds betting terminals, which is so ably chaired by my hon. Friend the Member for Swansea East (Carolyn Harris). It has just completed its inquiry into the machines and is due to publish its report very shortly.

Both groups are clear, as we are, that the £10 threshold set by Lords amendment 36 is still too high. FOBTs are the only machines on the high street with stakes of £2 and above; all other machines in pubs, arcades and bingo halls are capped at £2 and under. Amendment (a) to the Lords amendment would allow devolved regulation of machines with stakes of £2 or above, rather than £10. Only fixed odds betting terminals would be covered by the amendment, so any fears that the Welsh Assembly would be overstepping agreed devolution limits on gambling would be unfounded.

In a similar spirit, amendment (b) to the Lords amendment would ensure that the Assembly had the power to regulate all current and future licensed FOBTs from the point that the Bill becomes law. That is important because there are an estimated 1,500 terminals in Wales, and according to the latest figures, which cover 2015, £50 million was staked and lost on them during that period.

The financial and social problems and harm that these machines cause in communities across Wales is well known. Having the ability to regulate those terminals already in place would ensure that the Welsh Assembly did not have its hands tied when seeking to deal with this issue.

The Secretary of State mentioned how the Government are devolving teachers’ pay to the Welsh Government because education is devolved. FOBTs are now being devolved, but not full regulation, which simply means that we will be coming back with another Wales Bill to introduce the necessary regulations. Does my hon. Friend agree that if the Government concede this point, it would simply mean we would have the measures in place now and would not need to return to this point in future Wales Bills?

My hon. Friend is absolutely right. The Government have the opportunity to accept that we could lead the way in Wales. The Secretary of State has already pointed out that he is aware of the social and economic problems that these machines cause, and despite the Department for Culture, Media and Sport’s review, the Bill represents an opportunity. We know what the problem is, and we know we could deal with it right now.

The Secretary of State says that the Government’s intention is simply to match the powers given to Scotland, but the devolution arrangements for Wales, England and Scotland are already different—they are not in alignment—so there is no reason why the Government could not accept our amendments today and agree to the lowering of the stake and that all current and future machines should be covered. Anything less than that would be a bureaucratic nightmare for the Assembly and only half a solution to an already accepted problem. It is unacceptable for the Government to refuse to give the Welsh Assembly the full powers that it needs to deal with this problem simply because Scotland does not yet have them.

There has been a 50% increase in betting shops in Welsh town centres since 2004, but that overall statistic masks the true story. The Campaign for Fairer Gambling shared with me some research from Geofutures showing what many Labour MPs already know: there are four times as many betting shops in areas of high unemployment than in areas of low unemployment. The machines are deliberately placed so that people who are least able to cope with the drain on their finances that problem gambling can cause are subjected to the highest exposure to those machines most likely to cause it.

These terminals allow players to stake up to £100 every 20 seconds, which is why, although only 3% to 4% of the UK population use FOBTs, those players account for 66% of all UK gaming machine losses. Already massively profitable bookmaking companies benefit even more from the losses on those terminals, to the tune of £1.7 billion just in the last year across the UK.

It is not only Opposition Members who think that this is a problem. Polling carried out by 2CV for the campaign showed that 82% of betting shop customers perceived the use of fixed odds betting terminals as an addictive activity, with 32% of those borrowing cash to feed their habit. It also showed that 72% had witnessed violent behaviour emanating from players using the machines. Other research has backed this up, consistently showing that fixed odds betting terminals are one of the most addictive and problematic forms of gambling. One study published in a journal from the Cambridge Health Alliance, a Harvard Medical School teaching hospital, found that the terminals had a fourfold correlation with problem gambling, which is higher than any other gambling product available in the UK.

The machines are already causing real and lasting damage to some gamblers and they exacerbate problem gambling more than any other form of betting. If the UK Government will not tackle this issue now, they need to give the Welsh Assembly the power to do that in Wales. The power to regulate existing machines is crucial to tackle the harm that they are causing in many communities across Wales, and our amendments would help to ensure that all such machines were regulated. I urge the Minister to follow his own logic, to be innovative and to accept our amendments. If he does not do so, I am ready to test the will of the House, certainly on amendment (a).

I welcome the consideration that colleagues in the other place have given to this matter. I declare an interest as chair of the all-party group on fixed odds betting terminals, which are affectionately known as FOBTs. As many colleagues know, I have campaigned on this issue for more than a year. Sometimes I feel that it has taken over my life. There are 35,000 FOBTs located in high street bookmakers up and down the UK. These high-stakes, casino-style games are in low-supervision environments and are easily accessible to those who are most vulnerable to gambling-related harm. In Wales, there is a growing problem with FOBTs in local communities. According to the latest statistics, more than £50 million was lost on FOBTs in Wales in 2015.

The Lords amendment is welcome, but it does not go far enough. Powers should be devolved to the Welsh Assembly to allow local authorities to deal with existing clusters of betting shops in deprived areas. The most effective way to do that would be to reduce the maximum stake playable on a FOBT to £2, but the power to achieve that is not included in the Bill. There are growing calls for a reduction in the maximum stake, with more than 93 local councils across the UK, led by Newham Council, having now petitioned the Government to reduce the stake to £2.

The all-party group has concluded its inquiry into the machines. We found beyond reasonable doubt that the maximum stake on a FOBT should be reduced to £2 on a precautionary basis, in line with the objectives of the Gambling Commission. The full findings of the report are due to be published shortly, and we have been encouraged by the willingness of Ministers at the Department for Culture, Media and Sport to work with us on this issue. I very much hope that they will respond positively by reducing the stake and properly regulating FOBTs. I eagerly await the result of the current stakes and prizes review.

These machines are directly linked to problem gambling, with four out of five FOBT gamblers exhibiting problem gambling behaviour at stakes in excess of £13 a spin, compared with one in five when stakes of £2 and under are involved. FOBTs cause significant economic and social problems. In particular, they lead to increased incidence of money laundering in bookmakers, as the gambling activity is largely unsupervised and it is therefore relatively easy for fraudsters to use it as a way to clean their money. They are also leading to more problems as players take out payday loans to sustain their FOBT usage. Increasing crime levels have also been reported, with betting shops now accounting for 97% of all police call-outs to gambling venues. Up to September 2014, there was also a 20% increase in police call-outs to betting shops. There has been a clustering of betting shops on Britain’s high streets, with a 43% increase in the number located in towns and city centres. This is destroying the health and vibrancy of our high streets.

The most effective way to limit the harm of such machines is to reduce the stakes, which are currently set at up to £100. A substantially lower stake would bring FOBTs into line with machines in other low-supervision environments such as adult gaming centres and bingo halls. The Gambling Commission itself says that if stakes were being set now, it would strongly advise against £100 stakes on a precautionary basis. A lower stake of £2 is the level that the previous Government said would bring adequate public protection. I encourage the Government to support amendment (a) to the Lords amendments, to devolve powers to Wales and to allow local communities to tackle the problems caused by FOBTs. Such a proactive move not only would recognise the danger of these addictive machines and establish good practice to protect our communities from it, but would be a positive step towards ensuring that we, as a society, take our moral responsibility seriously.

The third group of Lords amendments is wide-ranging and covers a variety of subjects. Some of those subjects are more welcome than others, and I regret to say that some resulted in my party voting down the Bill in the National Assembly. I will not address each amendment, as time is limited, but I will focus on key amendments that are salient to my colleagues’ decision making in the Assembly.

Under scrutiny, the Government have conceded on certain issues, for which I commend them. Those include areas where Plaid Cymru has pressed the Government in both places, resulting in Government amendments—that work should be noted. Lords amendment 73, for instance, devolves compulsory purchase, which was mentioned earlier. A previously silent subject, the National Assembly will now, without question, have the power to legislate to enable important infrastructure projects to go ahead. However, those are only small concessions that skirt around more substantive policy areas that could really make a difference.

Lords amendment 38, for instance, adds a new clause creating a statutory office for the president of Welsh tribunals; Welsh tribunals are already devolved. Although that is a welcome move on a practical level, it does little to satisfy those of us, including the Welsh Government, who have been calling for a separate legal jurisdiction to ensure a truly lasting devolution settlement. Without a strong and definitive legal jurisdiction of our own, surmounting the challenges that we all face in unpicking European law in the great repeal Bill will be even more difficult.

I would go so far as to say that the whole Wales Bill has been overtaken by Brexit. Leading constitutional lawyers and academics, and even the leader of the Welsh Tories, agree that the constitutional future of the British state is in flux. There are many possibilities and opportunities for both those, such as ourselves, who champion devolution and those who are sceptical about devolution. Famously, devolution is a process not an event, and we should be clear about the dangers of substantial rollbacks.

That brings me to the main focus of my speech, a series of Government amendments—all variations on Lords amendment 3—that will give Wales public authorities a different name, that of “devolved Welsh authorities.” The wording clarifies what constitutes a devolved public authority. Although, in isolation, the amendment is not a concern, it alludes to a more worrying aspect of the Bill, in which there are substantial rollbacks.

Throughout the scrutiny of the Bill, we have tabled amendments following concerns expressed to us by the Welsh Language Commissioner regarding the Bill’s potential effect on the National Assembly’s power to legislate on matters pertaining to the Welsh language. The effect of schedule 2 is that when the National Assembly wishes to legislate for the Welsh language, it will require the consent of the relevant UK Minister. Under the current settlement, ministerial consent is required only when legislating to impose Welsh language functions on Ministers of the Crown.

Ministers in both Houses have confirmed that if a future Welsh language measure were to be proposed, it would no longer be applicable to many more reserved authorities, such as Her Majesty’s Revenue and Customs and the Crown Prosecution Service. Consent would be required to add to the list of devolved public authorities, which are contained in the Lords amendments before the House today. The Minister’s words offered no reassurance, or indeed any justification, as to why the Bill should include such a regressive step.

The National Assembly for Wales research service has produced a briefing paper confirming our fears, outlining the fact that under the Bill there will be a loss of legislative power relating to the Welsh Language (Wales) Measure 2011. In the other place, Lord Bourne agreed that that would in fact be true. He justified the Government’s position by stating that amendments we had tabled to rectify that rollback would,

“cut across one of the underlying core principles of the Bill: the Assembly should not be able to impose burdens on non-devolved bodies without agreement…To add a specific exception to the consent process for the Welsh language would undermine that principle.”—[Official Report, House of Lords, 10 January 2017; Vol. 777, c. 1935.]

So there we have it—an admission by the Government that the Bill does indeed take powers away from the National Assembly; any exemption for the Welsh language would undermine UK sovereignty.

Earlier I mentioned the dangers of a reverse devolution agenda post-Brexit, but it seems as though that is the reality we are already facing today. Unfortunately, that is not the only example of significant rollbacks in the Bill; the ancillary measures in it have been the subject of damning criticism during scrutiny. As to any Assembly Acts deemed ancillary to any of the reservations, of which there are in excess of 200, the UK Government would be entitled to overrule the Assembly.

The Plaid Cymru group in the Assembly last week voted —rightly, I think—against the legislative consent motion for the simple reason that powers are being clawed back. The existing legislative powers of the Assembly were endorsed by a measure of 2:1 in the 2011 referendum, and the powers implicit in that vote are now being retracted. Some of the legislation enacted by the Assembly since that referendum was made under powers that will no longer be available to it when the Bill becomes law. We tabled amendments at several stages of the Bill’s consideration to delete the word “normally”, so that there would be no doubt as to whether the Government would grant an Assembly LCM following today’s historic Supreme Court ruling. We will continue to take that stance, and my colleagues in the Assembly are drafting an LCM as we speak.

To finish, I quote no less a personage than the leader of the Welsh Tories. In a radio interview on 17 January, Mr Andrew R.T. Davies said:

“This won’t be the last Wales Bill. Brexit will require devolution changes to realign those responsibilities.”

I can assure the House that my party will do everything in its power to reverse the rollbacks to ensure that Welsh interests are taken seriously during Brexit and to build a truly lasting devolution settlement for Wales.

With the leave of the House, Madam Deputy Speaker, I would like to respond to the points that have been made. I thank all those Members who have made contributions today, and throughout the Bill’s passage through the House and the other place.

I am disappointed that the Opposition want to divide the House on the proposals we introduced in the other place on fixed odds betting terminals. Those proposals responded positively to calls that were made by colleagues on both sides of the House and by the Welsh Government. The Silk commission made no recommendations in that area, but having considered the Smith commission recommendations for Scotland we believe it is right to put the Assembly on the same footing as the Scottish Parliament and allow it to legislate on the proliferation of fixed odds betting terminals in Wales.

The Secretary of State asserts that only Members on this side of the House oppose the proposals, but Conservative Members of the Welsh Assembly oppose what the Government are proposing and have supported my hon. Friend the Member for Swansea East (Carolyn Harris), including Darren Millar from north Wales. Has the Secretary of State consulted his Assembly Members on this point?

The hon. Gentleman makes a relevant point. We take the issue of problem gambling seriously. As I mentioned, we are committed to looking at all aspects of gaming machine regulations as part of a wide-ranging review of gambling. The regulation of fixed odds betting terminals is covered by the Gambling Act 2005, and we recognise that flaws exist in the current regulatory arrangements. They were introduced by the Labour party and it is time that they were reviewed. That is what my right hon. Friend the Secretary of State for Culture, Media and Sport is doing. We will act when that work has been completed, so I hope hon. Members will vote against the Opposition amendments and in support of the Lords amendments tabled by the Government.

The hon. Member for Newport West (Paul Flynn) suggested that the Bill showed a half-hearted approach to devolution. In the positive spirit in which the Bill has progressed through both Houses, I remind him that legislative competence orders were in place when we came into power in 2010 and started this process. A conferred model was in place then; the Bill introduces a reserved model. We have in place a needs-based funding settlement—something that has been called for for decades—and we are devolving significant tax powers. We have removed the water intervention powers and extended the Welsh Government’s powers in a significant range of areas, such as energy, fracking, elections and running their own affairs. A host of positive steps have been taken.

We all know that Members in the other place rightly pay close scrutiny to matters of constitutional importance in Bills such as this. Despite being in a minority in the other place, the Government were not defeated on the Bill, so I hope that Members from both sides of the House, and all Opposition Members, will recognise the significance of the Bill and, once and for all, welcome it because of the positive steps it takes in bringing about a devolution settlement that will last for a long time to come.

Lords amendment 1 agreed to.

Lords amendments 2 to 8, 11 to 27 and 33 to 35 agreed to.

After Clause 48

Gaming machines on licensed betting premises

Amendment (a) proposed to Lords amendment 36.— (Jo Stevens.)

Question put, That the amendment be made.

Lords amendment 36 agreed to.

Lords amendments 37 to 43, 45, 47 to 136, and 138 to 177 agreed to.