Wednesday 25 May 2011

An offer we can't refuse

Devolved power over taxation, in the form likely to be ‘given’ by the UK Government is something of a double-edged sword.  I can understand why the Labour manifesto for the Assembly elections tried to rule it out, although it wasn’t a very realistic stance to take.
I can understand as well why they’ve now shifted their position to that put forward in Plaid’s Assembly manifesto, which is that it needs to be discussed as part of a package which also includes fair funding for Wales.  I’m not sure that position is any more realistic though.
As Eurfyl ap Gwilym has pointed out, taxation powers are likely to be ‘given’ to Wales whether we want them or not; trying to refuse them or make acceptance conditional seems unlikely to deter the UK government.  It’s also dubious politics; whilst people will naturally be hesitant about the possibility that they might have to pay higher taxes, I suspect that most people will readily understand the anomaly of a government which can spend money but not raise it.
It doesn’t follow, of course, that the tax levels in Wales have to be any different after tax powers are devolved than they are now.  Provided that the associated variation in the block grant precisely matches the amount of money which would be raised by keeping taxes at the same level – which ought to be the case, initially at least – then the Assembly’s income is unaltered.  It might be argued that that makes the whole exercise a little pointless.  In practical terms, it probably does; but it establishes the principle that tax-varying powers can and should be devolved.
Unless Scotland is somehow to be excluded from any Barnett reform, I think we can take it as read that any move to ‘fair funding’ through the block grant is now off the table until at least after the referendum on Scottish Independence.  So, whilst associating the two issues during the discussions with London might look like a good idea to the Labour Party, it simply isn’t going to happen in practice.
What would be more constructive is to widen the debate to include borrowing powers, and a wider range of taxes which can be varied.  I’m sceptical about the over-concentration on income tax in the discussions to date.  It’s a tax which provides a major source of government revenue, as well as being the most visible tax from the point of view of the taxpayers, both of which are ‘good’ in terms of ensuring fiscal responsibility.
However my argument for devolved taxation revolves not simply around that issue of fiscal responsibility, but around the question of giving the Welsh Government more power over the economy of Wales.  And that requires control of a number of different taxes, and the ability to vary them in different ways at different times.
Rather than trying to constrain and limit what the UK Government is proposing by seeking conditions which are extremely unlikely to be conceded, it would be far better for the Welsh Government to grasp the opportunity with both hands and seek to widen the remit of which taxes are devolved.


Boncath said...

I am not sure I like the idea of we will tell you what you are getting --its an offer you cant refuse.
Sounds like the pitch of a well known double glazing firm who spent 4 hours telling me that 12 k
was an excellent deal. I turned it down only to be phoned an hour later to say would I agree to 3k No!

I believe that it is necessary for us to devolve the taxation financial stream in sync with the devolution of powers

It is also necesary for the Welsh Goverment to have its own Bank and the ability to raise finance for all its activities

Anonymous said...

Plaid would be better off having confidence and arguing for Wales to have the same compentences as the Basque lands within the Spanish state - that is collect all taxes.

Plaid could point to the Basque Country being among the wealthies areas of Spain, it's similarity in terms of geographic size, population, heavy industry heritage, language issues etc.

It would show a leap of faith and confidence which Plaid seem to lack, but it's honest it's a decent benchmark and it's transparent.


John Dixon said...


I'm not a fan of offers we can't refuse either, but sometimes we need to recognise their existence. The question really is how we react. Trying tor efuse or put conditions on such an offer really doesn't seem the right response for a nationalist, so teh question has to be how can we see it as an opportunity and set out to maximise it.


Couldn't agree more about the need to show confidence rather than timidity. Although I sometimes wonder if it isn't a case of timidity, but a case of people not agreeing with their own party's aims.

Spirit of BME said...

I am all for a wider debate on this subject –as you call for.
I just have this feeling in my water, knowing the “chaps” in the English Establishment, as I do that they never allow anything to happen unless it enforces the Law of English Supremacy.
Nothing will happen on this issue unless the City of London gives it the go ahead and they are satisfied that the majority of people ( England) will not be threatened by competition bought about by a more inventive regime in Scotland and Wales.
HMG in Westminster will need to design- in a mechanism where they have ultimate control, but with a payoff that when times are hard the “Regional” Governments (as the chaps call them) carry the can, thus enhancing the advantages of Union.

Anonymous said...

It made me laugh the other day when I was listening to Radio Wales phone in. The Scottish Labour guy on there said that the debt levels of the UK state would have to be shared out amongst any seceding countries such as Wales and Scotland. A large chunk of this debt....around 850 billion pounds can be traced to bailing out the banking system. So, lets get this right.....when the times are good, and even not so good, the bankers and indeed London benefits but when the wheels come off, Wales will be held as being responsible for coming up with money for the bail-outs if we want to go our own way. At least you could argue to a degree that the Scots to have a financial centre and benefited more than we did. But Wales?! You couldn't make it up!