Questions Without Notice from Party Spokespeople

1. Questions to the Cabinet Secretary for Finance – in the Senedd at 1:45 pm on 6 December 2017.

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Photo of Elin Jones Elin Jones Plaid Cymru 1:45, 6 December 2017

(Translated)

Questions now from the party spokespeople. Conservative spokesperson, Nick Ramsay.

Photo of Nick Ramsay Nick Ramsay Conservative

Diolch, Llywydd. Cabinet Secretary, yesterday was Welsh budget day. Can I ask you, with regard to that budget, and the effect of it on—[Interruption.] I thought you'd like that, Simon Thomas. The effect of the budget on businesses and small businesses in Wales: can you tell us how you feel that the budget has been good for small and medium-sized enterprises in Wales and, when you take into account the fact that the Federation of Small Businesses have estimated that, for every £1 spent by a participating local authority with local SMEs it generates an additional 63p to benefit its local economy, compared to just 40p generated by larger local firms, how are you ensuring that the Welsh Government's procurement processes are aligned to get the best bang for the Welsh buck and that we're going to make sure that we are procuring locally and procuring from smaller firms, not just larger firms?

Photo of Mark Drakeford Mark Drakeford Labour 1:46, 6 December 2017

I thank Nick Ramsay for that. Well, Llywydd, I believe that the budget we discussed yesterday is aligned with the needs of Welsh businesses in very many ways. It has in it the finance that will be necessary to instigate our new permanent small business rate relief scheme, which provides over £100 million every year directly to support businesses in Wales. Businesses in Wales benefit absolutely directly from all the investments that we make in infrastructure—that's how their customers travel to their businesses. They benefit from everything we do in terms of skills and education—that's how the people they employ get the skills that they need to make businesses successful. They benefit from everything we do in the national health service—that's how people who work in Welsh businesses are able to make sure that they are fit and well to carry out the duties for which they are employed. Our budget supports business in a whole range of ways.

Specifically in relation to the National Procurement Service, as I said in an earlier answer, back in September I announced that I wanted to have a review of the NPS and Value Wales to make sure that it is able to do the job that we want it to do, and key to that is the question that Nick Ramsay has raised. I am very committed to the programme that my predecessor began in this area of making sure that more of the spend that is made though the public purse in Wales ends up being spent with Welsh suppliers and that that money spent with Welsh suppliers then goes on to generate jobs and to safeguard jobs here in Wales. 

Photo of Nick Ramsay Nick Ramsay Conservative 1:47, 6 December 2017

Thank you, Cabinet Secretary. I'm glad you mentioned the National Procurement Service. I did raise this with you yesterday in the budget debate. I know that Andrew R.T. Davies mentioned it earlier. It is of key importance in terms of improving procurement procedures in Wales. The Wales Audit Office report into the NPS showed that there were weaknesses in the development of the business case for the NPS, which had not fully complied with the Welsh Government's usual procedures. That same report also highlighted that public bodies are not using the service frameworks as much as anticipated, resulting in concerns over its funding. In answer to Andrew Davies, you did say earlier that you are reviewing this. Can you give some timescales for when you think this review will be complete and you can bring its findings to this Chamber?

Photo of Mark Drakeford Mark Drakeford Labour 1:48, 6 December 2017

Thank you, Llywydd. Yes, I have asked for that review. I expect it to report in 2018. It will use the report of the Auditor General for Wales as one of the core documents that it will apply in the work that it will do.

Nick Ramsay is quite right to say that NPS has not delivered everything that we had hoped for it. Part of that is because it is a member organisation and some of its members have not used its services to the extent that was originally anticipated. So, what I am keen to learn from the review is: is it a service that those members really want? The auditor general's report says that they say that it is. If they really want the service, then what are the barriers that are preventing them from using the service in the way that they have told us that they would wish to do? Because, if we can't provide a service that customers want to use, then it's always going to struggle to deliver the benefits that we believe were there to be harvested in the first place.

Photo of Nick Ramsay Nick Ramsay Conservative 1:49, 6 December 2017

Thank you, Cabinet Secretary. You've had a fair few questions now, today, on procurement. If I can use my final question to ask you about land transaction tax, but not in terms of the residential LTT, which you mentioned yesterday and the changes there, but in terms of commercial LTT, am I right in thinking that, from April, businesses greater than £1 million will be faced with rates of 6 per cent compared with, I believe, 5 per cent across the border—certainly, lower rates in other parts of the United Kingdom? And what assessment have you made of the effect that that will have on commercial business transactions within Wales, and are you confident that it won't be creating an uneven playing field, where businesses here will find it harder to compete than those across the border?

Photo of Mark Drakeford Mark Drakeford Labour 1:50, 6 December 2017

Well, I thank Nick Ramsay for that. He is right to say that the proposals we have brought forward in non-domestic LTT mean that businesses with premises below £1 million will have less to pay in Wales than anywhere else in the United Kingdom, and that is paid for by businesses at the very top end of the market having to pay a little more. Ninety per cent of businesses in Wales will pay less in Wales than they have in the past or pay no more. I've always heard it said in this Chamber that small and medium-sized enterprises are the lifeblood of the Welsh economy. That's where jobs are created, that's where the businesses of the future are created, and a reduction in costs for those businesses matters more to them, in the period in which they are establishing themselves and seeking to expand, I believe, than the marginal increase that there will be for transactions of very high value indeed. Now, I'm not saying that there isn't an impact, because costs go up and that is an impact. Do I think that the marginal additional sum in LTT will be the determining factor in business deals of many, many millions of pounds, with many, many far bigger issues at stake? No, I don't. The analysis that we've carried out, and Bangor's independent scrutiny of that analysis, bears that out. We think there will be more transactions in Wales as a result of the changes that we have introduced, and that that will be good for the Welsh economy.

Photo of Elin Jones Elin Jones Plaid Cymru 1:52, 6 December 2017

(Translated)

Plaid Cymru spokesperson, Steffan Lewis.

Photo of Steffan Lewis Steffan Lewis Plaid Cymru

Diolch, Llywydd. A great part of the omni-uncertainty that we're facing as a consequence of our separation from the European Union is our future relationship with the European Investment Bank. I understand, a few weeks ago, the British Government had a position of wanting to maintain some sort of relationship with the bank post separation, but are a bit light on detail, shall we say. I wonder if the Cabinet Secretary could update us on what he understands to be the British Government's aim in terms of the future relationship with the European Investment Bank, especially considering the fact that Wales has benefited, I understand it, to the tune of some £2 billion from investment from that bank.

Photo of Mark Drakeford Mark Drakeford Labour 1:53, 6 December 2017

Llywydd, the Welsh Government's position is clear, that we believe we should remain a subscribing partner of the European Investment Bank. The UK was one of the founding members of the bank, and supplies a significant part of the bank's capital. Wales has been an enormous beneficiary of the European Investment Bank and we want to find a way of that continuing. When I raised this directly with the Chancellor of the Exchequer during a meeting of the Joint Ministerial Committee, he said that he too believed that it would be in the UK's interest to have an ongoing relationship with the EIB. He was open to exploring different ways in which that relationship could be brought about, and he said that, if it wasn't possible to continue to have a relationship with the EIB of the sort we have, it would be necessary to re-create an EIB in the domestic context. I've always struggled to understand why anybody would think that it would be more worth while to have to re-create a whole institution of our own when we have an institution that works, and works very well for Wales, and with which we should surely be looking to secure an ongoing relationship the other side of Brexit.

Photo of Steffan Lewis Steffan Lewis Plaid Cymru

Well, I'm sure that the British Government will change its mind by this time next week on that point and many others, Cabinet Secretary. You talk about exploring the options available post separation. I wonder whether one of those options that you've explored as a Government includes a relationship for Wales and the Welsh Government directly with the EIB. It is unprecedented, of course, but we are in unprecedented times, and also there's the other option, of course, of the Council of Europe Development Bank, of which the UK has never been a member, but has aims and objectives that fit very closely with the needs and aspirations of this country. Has there been an undertaking by Welsh Government to look at and to explore the options of having a bilateral relationship between Welsh Government and such institutions post separation, and whether or not they would require sponsorship from the UK Government, and so on?

Photo of Mark Drakeford Mark Drakeford Labour 1:55, 6 December 2017

Llywydd, I've had very recent correspondence with the EIB on behalf of some important Welsh interests that we are looking to continue to take forward. We've always had a very close relationship with the EIB. Adam Price and I both met with Jonathan Taylor, senior vice-president of the EIB, when he was in Wales in the last 12 months. I think it's just fair to say, Llywydd, that, from the EIB's perspective, they remain focused on their relationship with the member state rather than with Wales as a separate constitutional entity. That doesn't mean to say that we don't pursue Welsh interests with them. I have to admit that I was not myself much aware of the Council of Europe Development Bank, but I'm very happy to say that we will take a look at it as a Government to see whether there are new possibilities there for us in the Brexit context.

Photo of Steffan Lewis Steffan Lewis Plaid Cymru 1:56, 6 December 2017

I thank the Cabinet Secretary for that answer. I note the answer he gave to a previous question about not wanting to create new institutions when existing institutions work well for us, and I agree with that. However, perhaps some contingency planning needs to take place, because the loss of access to the European Investment Bank would be bad news for Wales and for the Welsh economy. In which case, given the recent UK budget, where fiscal transactions capital has become ever more fashionable—Wales has received £650 million in financial transactions capital, Scotland £1.1 billion, Northern Ireland £375 million—given the nature of those consequentials, could they form the basis for devolved Governments to come together to create a kind of Celtic development fund of our own, with the intention, perhaps, for the future of looking to develop into a Celtic development bank that could try to mitigate the loss of access to the EIB? We could look, of course, to examples in Scandinavia, where the Nordic Investment Bank is a mixture of devolved and sovereign Governments coming together, pooling resources for shared fiscal and economic goals. I wonder if that's something the Welsh Government might be interested to look at, so that we are as best prepared as possible for the impending separation with the European Union.

Photo of Mark Drakeford Mark Drakeford Labour 1:57, 6 December 2017

Well, Llywydd, it is very interesting that Steffan Lewis raises that possibility. Back in 2016, at a meeting with finance Ministers from the UK Treasury, Scotland and, at that time, the Northern Ireland Executive, the Northern Ireland finance Minister specifically put forward a proposal for what he called, I think, a Celtic investment fund. He did so because he explained some of the real challenges that Northern Ireland was facing in using financial transaction capital. 

Now, our ambition has always been to make the very best use of anything that comes to Wales, but there are challenges in using financial transaction capital, and the idea was to put it all together in a single fund that could then be used more flexibly and maybe for some larger investment purposes. To be fair, the UK Government said that they were willing to consider that further and to be part of a discussion about it, because I think that they too have an interest in making sure that best possible use is made of the funds that are available here.

Very soon after that meeting the Northern Ireland Executive ceased to exist, and it's been more difficult to pick up those discussions since because they were pretty much led by some work that had gone on in Northern Ireland. But, when there is an opportunity to pick that up, I'm sure there will be a shared interest, certainly from Wales and Scotland. But, as I say, I think there was a genuine enough appetite in the Treasury to have a discussion about most effective use of the funds that are available. 

Photo of Elin Jones Elin Jones Plaid Cymru 1:59, 6 December 2017

(Translated)

UKIP spokesperson, Neil Hamilton.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP

Diolch yn fawr iawn, Llywydd. I'm sure the Cabinet Secretary will agree with me that, for the foreseeable future, the resources available to the Welsh Government depend crucially upon the health of the UK economy and economic growth, and we need to increase the national UK growth rate. He said to me in a debate in this Chamber a few weeks ago that there's no evidence in general that lower taxes boost growth. But, since then, the US Senate has passed a tax Bill to reduce corporate taxes from 35 per cent to 20 per cent. President Macron in France has announced plans to cut the corporate tax rate from 33 per cent to 25 per cent. Italy is going to cut its corporate taxes from 27 per cent to 24 per cent, Spain from 30 per cent to 25 per cent. Hungary has introduced a corporate flat tax rate of 9 per cent, down from 19 per cent, and in Geneva, because it's cantonally based in Switzerland, they're bringing corporate taxes down to 10 per cent. 

John McDonnell has recently been talking about taking £36 billion out of companies' balance sheets by blocking certain unannounced tax breaks, and he even floated the idea of adding 2.5 per cent to the current corporation tax rate to pay for scrapping tuition fees. Does he not accept that the Labour Party is going in the opposite direction to the rest of the world and, if we are to compete with economies abroad, we have to have a competitive business tax regime?

Photo of Mark Drakeford Mark Drakeford Labour 2:01, 6 December 2017

Llywydd, what I hear the Member describe is a competitive race to the bottom in which everybody thinks that the only way to get a competitive advantage over somebody else is to take even less tax away from business in order to pay for public services. I'm grateful to him for setting out that dismal league table, because it demonstrates exactly why I don't think that that is a sensible way for us to go.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP

I'm sorry that the Cabinet Secretary doesn't seem to think that the reality of what's going on in the rest of the world is something that should be at the forefront of his mind when he's designing a tax system for the United Kingdom or for Wales, because the way to end up at the bottom is certainly to carry on thinking along those lines.

To revert to the experimental tax case that Suzy Davies mentioned earlier on in relation to a tourist tax, has he not seen that Ian Edwards, the chief executive of the Celtic Manor, has recently said,

'Along with everybody else in our industry, I was stunned by news of a proposed new tourism tax for Wales being considered' by the Welsh Government? He said that

'A tourism tax would seriously jeopardise our ability to continue our rapid recent growth as a resort and carry on making this valuable contribution to the Welsh economy.'

In the same sentence that the Cabinet Secretary uttered to me, in that debate that I referred to a moment ago, that there was no evidence that lower tax boosts growth, he also said that badly designed taxes can hamper growth. The Cabinet Secretary has certainly announced a number of ideas for hampering growth in the Welsh economy. I hope he will reject these ideas.

Photo of Mark Drakeford Mark Drakeford Labour 2:02, 6 December 2017

Llywydd, there's little for me to add to what I said earlier on this whole matter. We're having a debate about different possibilities that exist for Wales. The views of anybody who has a view are welcome, whatever they may be, and we will take them into account when we come to make our decision. We will take the views of Celtic Manor into account. The Welsh Government is a very significant investor in Celtic Manor. It has received many millions of pounds in direct aid from the Welsh taxpayer. We will take its views into account, alongside anybody else's. That's the point of having a debate.

Photo of Mr Neil Hamilton Mr Neil Hamilton UKIP 2:03, 6 December 2017

I appreciate that the Cabinet Secretary has an open mind and he's not in a position today to announce any final decisions, because that's the whole point of the consultation process, and I appreciate that having put £22.5 million into Celtic Manor he should want to get a good return on that investment. Therefore, I hope that that's going to inform his decision taking in this respect as well, because Ian Edwards said further in the article that I'm quoting that

'Adding extra cost to staying in Wales would have just as damaging an effect on attracting business events as it would on attracting leisure visitors. Securing large conferences and association meetings is a very competitive sector and an additional tax on the thousands of delegates who attend these events would be a significant deterrent to those considering Wales as a venue.'

So, clearly, this is a vitally important issue for the whole of the hospitality sector in Wales, and the sooner we announce that we're not going to go ahead with a tourist tax, the easier it will be for them to relax and sleep easy in their beds.

Photo of Mark Drakeford Mark Drakeford Labour 2:04, 6 December 2017

Llywydd, I hear the case that the Member has made. He will be aware that others make a very different set of propositions. Other people would say that taking a very small amount of money from people who are clearly not short of money—they're coming to stay in the Celtic Manor—that a very small addition to their nightly stay would create a pool of money that could be further invested in enterprises like the Celtic Manor and other tourism possibilities that would attract more people into Wales in the future, and that investment of that sort, delivered by people who, after all, are enjoying the benefits of all the investment that the public purse has made in that sector—that that is not an unfair thing to ask of them, and actually creates a benign cycle in which small amounts of individual contributions are aggregated and allow significant new investments, that benefit the industry, to be made.

Now, I am not saying that the Welsh Government has come down on either side of this argument. All I'm saying is that in this area, as in all others, there are many competing analyses of what would work best, and the point of having a debate is to allow all those arguments to come out into the open, and then to be properly weighed up.