Wales and the Future of the United Kingdom

Thank you for inviting me to speak to you today.

This conference, and indeed the whole Wales in a Changing Union programme, is very timely.  I welcome the work of the Institute of Welsh Affairs, the Welsh Governance Centre and Cymry Yfory in this area.

We are on the brink of some major constitutional changes in the UK.  The impending independence referendum in Scotland, the review of devolution in Wales through the Silk Commission, and the possible reform of the House of Lords are only some of the constitutional challenges we face.

It is essential that we take every opportunity to discuss these challenges, their possible impact and to plan for how we – in Wales and elsewhere – will adapt to a new United Kingdom.

Some people may say that constitutional debates are only of academic value, but I disagree.  The outcomes of these debates will impact directly on how we as a Government deliver our services to the people of Wales, and that is just one of the many reasons why I believe that we have a responsibility to discuss the future of the UK and Wales’ place in that changing Union.

The Silk Commission – constitutional reform

The establishment of the Commission for Devolution in Wales, or the Silk Commission as it has become known, has been welcomed by the Welsh Government.

The Commission is currently working on the Welsh financial settlement.  This is essential to our future, and I will return to it in a moment.

The second aspect of the Commission’s work, on the constitutional settlement for Wales, will be of considerable interest.  The breadth of the Silk Commission’s Terms of Reference should allow for a wide-ranging consideration of the issues, and I hope there will be extensive public participation in that debate – including, no doubt, views from some of you in this room.  As a Government we are very keen to see a number of areas examined by the Commission.

Just this week the Counsel General launched a Green Paper to consult on a range of issues surrounding the legal status of Wales.  For centuries law in Wales was subsumed into English law to form a common legal jurisdiction.  Before devolution this was a perfectly rational position.  Thirteen years after devolution began the existing arrangement has become, in my view, steadily less tenable.  So far as I know, Wales and England is the only part of the world where there is a single legal jurisdiction but two separate legislatures.  As the body of law only applicable in Wales accrues over time, surely this position is anomalous.

I hope Silk will look at these and related issues.  Family justice is an area that could be devolved quickly and without much difficulty.  We as a Government already have responsibilities for many aspects of family justice and the devolution of family justice in its entirety would be a short step.

Criminal justice is a larger issue and its devolution would represent a fundamental step.  I would only contemplate this if the full budget for criminal justice administration came with it.

In the same way, there are issues about whether the Welsh Government should have responsibility for policing.  There’s an interesting debate about whether policing can effectively be devolved without criminal justice, and vice versa. I imagine that the Commission will receive evidence on these kinds of issues.

There have been a number of debates in the Chamber of the Assembly about railways and the fact that the budget for rail infrastructure in Wales is not held in Wales.  If it were, we would be much further ahead by now in refreshing vital infrastructure.  We would like to see this considered by the Silk Commission.

I also believe that the Welsh Government is best placed to align Wales’ energy aspirations with the needs of our communities and to manage the interface with our environment.

I hope that the Silk Commission will consider these and many other issues during the second part of its work.  The Welsh Government will submit evidence to the Commission, and I will be very interested to see the recommendations when the Commission reports in the Spring of 2014.

Financial Reform

Although constitutional reform is vital for the future of Wales and how we serve the people of Wales, it is fundamentally underpinned by the need for financial reform.  Without financial reform we will not be able to address the people of Wales’ needs as effectively as they would expect us to.

At present the Silk Commission is looking at the case for the devolution of further fiscal powers to Wales.  We have provided evidence on our position on financial reform to the Commission.

There is a strong case to be made for tax devolution in some areas.  In particular there is an argument for tax devolution in areas where we already have policy responsibility.  Namely, stamp duty land tax, aggregates levy, landfill tax and air passenger duty.

In principle I support the devolution of these taxes as part of a wider package of reform.

Further devolution of tax raising powers especially in relation to income tax and corporation tax are much more difficult issues.  In my view we could not seek devolution of income tax varying powers without a referendum.

As for corporation tax, the Holtham Commission set out the pros and cons of devolving corporation tax to Wales.  It could potentially provide a powerful tool to promote economic development, but equally it could be a substantial risk to the Welsh budget given the volatility of its receipts.  And if the consequence of devolving corporation tax to each of Scotland, Wales and Northern Ireland would be a competitive race to the bottom in the setting of tax rates, that would not be in the best interests of the UK.

More fundamentally, the Welsh Government will continue to press the UK Government for reform of the Barnett formula. We believe that Wales is underfunded, and that view is increasingly widely shared.  Quite simply this must be rectified if we are to continue developing as a country and providing our citizens with the services they deserve.

The other area that we must look at outside the remit of the Silk Commission is that of borrowing powers.  It is crucial that we have the ability to borrow for capital investment.  The recent agreement between the UK and Scottish Governments about the Scotland Bill will result in the Scottish Government gaining extensive new borrowing powers.

Wales cannot be left behind in this respect.  If we do not have parity on borrowing powers we run the risk of causing harm to our economic development and prosperity.  We could end up in a situation where major projects cannot be undertaken simply because they are in Wales. That would be an unacceptable position.

So I have to emphasise that we will continue to push for fair funding and borrowing powers as a priority.  Any new funding packages must include genuine progress in these two areas.  We cannot go forward with fiscal devolution without fair funding.

Scotland, and the Future of the UK

Let me now turn to consider issues from a wider UK perspective.  The future of the United Kingdom is crucially dependent on the outcome of the referendum on Scottish Independence.

The matter of Scottish independence is one for the people of Scotland.  But I believe in the United Kingdom and I strongly believe that we, as a Union, are stronger together than apart.

If the people of Scotland vote in favour of independence the shape and constitutional make-up of the UK will be dramatically changed.  We will not simply be able to wake up the day after and carry on as if nothing had happened when the top part of the state has been lopped off..!

Equally, if the vote is against independence there is still the prospect of substantive constitutional change in one part of the UK that potentially will impact on all other parts of the Union.  Wales needs to keep ahead of this debate, not get left behind by the tide of change.  We need to define our future in our own terms.

I have therefore called for a United Kingdom Constitutional Convention that would enable all four countries of the Union to discuss its future together, rather than piecemeal.  I have written to the Prime Minister on this issue, and await his response.

I am particularly concerned that constitutional reforms are being proposed without reference to other constitutional developments.  Take, for example, the forthcoming proposals for reform of the House of Lords.  There is potential for reform of the Lords to be an important part of the overall review of constitutional arrangements in the UK, but this linkage simply does not appear to have been made.

I believe that the four nations of the UK should have equal membership of the House of Lords on a territorial basis.  This would mirror arrangements for the Senate in the United States which ensures an equally weighted voice for each state of the Union regardless of population.  The House of Commons, like the House of Representatives, would continue as the Chamber which reflects population share – so there could be no question of England’s voice being diminished within the wider constitutional settlement.  I believe an arrangement along these lines could help bind together the four nations of the UK.

It is worth also mentioning Europe…we hear a lot about the West Lothian Question – about which the UK Government has also launched a Commission.  No explanation of the West Lothian Question is required to this audience, but there’s a related question about Europe which I’m calling the Bridgend Question.  Early in my ministerial career I spent many a long day and night, as Agriculture Minister, at the Council of Ministers.  Now, there are 4 Agriculture Ministers in the UK and yet, at the Council of Ministers, the English Agriculture Minister casts a vote on behalf of all of us – whether the other 3 of us agree or not.  Again, this seems increasingly unsatisfactory and unsustainable as time goes by…a revised way of dealing with EU business should also form part of our wider debate about the UK’s future.

In any event, we must ensure that, if Scotland leaves the Union, a strong voice is retained for Wales in a new partnership with Northern Ireland and England.  And if Scotland is to stay in the Union but on different terms, then that too needs to be the subject of discussion among all the interested parties.

I cannot emphasise enough how important it is that we start discussing the future of the United Kingdom before the people of Scotland go to the polls.  We cannot underestimate the substantive impact that constitutional change in Scotland will have on every part of the Union and we must start planning for the future.

On the brink of huge constitutional change in the UK

There is a strong case for reforming our central institutions to reflect the emerging reality of a looser UK.  We should be moving forward towards a Union that reflects the 21^st century, not the 19^th.

I am whole-heartedly in favour of a written constitution for the UK.  The incremental piecemeal approach to our constitution is destabilising and distracting.  Far better, I believe, to have a comprehensive look at what kind of state we want the UK to be and then move towards a written constitution which commits and binds.  Part of that constitution would define the relationship between the Devolved Administrations and UK Institutions.  “Assymetric quasi-federalism” is not the snappiest slogan for a political campaign, but the UK has changed beyond recognition over the past 15 years and it is time that our constitution recognised this.

To summarise, I am calling for a Convention on the Future of the UK.  I believe a reformed House of Lords could be, in effect, a territorial chamber.  I have defined the Bridgend Question and believe arrangements for dealing with aspects of EU policy should form part of future deliberations.  And I also believe we should move over time towards a settled written Constitution for the UK.

I am sure that today’s Conference, and the work you will be undertaking over the next three years, will make a significant contribution to that development.  I will look forward with interest to hearing about your discussion today, and wish you well as you take the debate forward in coming months.

Thank you.