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Members of the House of Lords have expressed support for giving Wales powers over taxation but disagreed over the practicalities of the issue.

Lib Dem Baroness Randerson opened a debate by saying tax powers would give the Welsh government credibility.

Labour peer Lord Howarth of Newport said the "unjust" Barnett formula for determining grants should be addressed.

Former Tory minister Lord Roberts of Conwy said he feared higher business rates which "would drive people away".

Many peers expressed the view that the Silk Commission's conclusions over the case for devolving tax powers to Wales would be pointless if they did not also address the Barnett formula, not part of its remit.

Lord Howarth of Newport said of the formula: "It is bizarre, unjust and it makes a mockery of the devolution settlement."

Lord Rowe-Beddoe stated that unless the formula was addressed then "all we're doing is rearranging the deckchairs".

He called for the setting up of a national UK convention to discuss the governance of all parts of the UK.

Despite support from peers for the principle of devolving tax powers to Wales, there were differences of opinion as to the best practical solution for Wales' financial future.

Lord Roberts of Conwy said he was "perturbed" by the possibility that the Labour Welsh government may impose new rates of tax on businesses.

"Their record in developing the Welsh economy is not one to be proud of," he said.

"They have seen Wales fall to being the lowest, bar one, of the UK regions in attracting investment, that I dare say is due to abolishment of WDA (Welsh Development Agency).

"Extra taxes would drive people away."

Former Labour MP Lord Anderson of Swansea said he agreed that new taxes would be a "huge disincentive".

"I am not against borrowing powers for the assembly in principle but the problem with borrowing is that it must be repaid.

"There has to be a clear limit set by the Treasury... where is the continuing stream of income to pay for borrowing?"

Plaid Cymru's Lord Wigley argued that there was an overwhelming case to transfer both borrowing and tax varying powers to the Assembly.

"The Welsh people want it," he said. "Let's get on with it."

The UK government's spokesman for Wales, Lord Wallace of Tankerness, agreed to a call from Labour's Baroness Gale for a further debate following publication of part one of the Silk Commission's report, due in the autumn.

But he said the question of holding a referendum on devolving tax to Wales was "premature".