Monday 27 June 2011

Regional transfers

Returning to a post of a week or two ago, there is much more to the question of ‘inter-regional’ redistribution than tables of taxes and benefits broken down per capita.  The first question is whether we should even attempt to be redistributive.  Not everyone would take it as a given.
Some of the more extreme free-market thinkers would argue that the distribution of wealth can and should be determined entirely by the operation of the market, and if the result of competition is that jobs and wealth end up in one corner of the ‘country’ then so be it; people can either accept that they will live in relative poverty, improve their position by their own efforts, or else move to where the action is.  (There are some serious questions in there as to whether and to what extent the market which has created the imbalance is entirely free of intervention by policy-makers in the first place, but I’ll park that issue.) 
They don’t go as far as to put it in these terms, but it is close to saying that areas and individuals that are not doing well economically are in some way to blame for that themselves.
The alternative political perspective, to which I subscribe, is that it is implicit in the unwritten ‘contract’ which binds us all into a single nation (decide for yourself whether that’s Wales or the UK – it doesn’t really affect the argument) that there is a degree of ‘sharing’ of wealth, both vertically (from rich to poor) and geographically (from high GDP areas to low GDP areas). 
I think that most people subscribe to that view, although the word ‘degree’ hides a lot of scope for disagreement about the detail.  Certainly, it has been implicit in tax and benefits policy for many decades that there is an element of redistribution.  It was even implicit in the policies of the Thatcher years, although she and her colleagues never really shouted about that. 
It would be wrong to characterise the current UK Coalition as being against redistribution in principle, but entirely fair to point out that the implication of much of what they are doing is to lessen that element of redistribution and move closer to the free market position (and Labour’s policy on the deficit would have had much the same effect).
It’s an issue which leaves nationalists in a somewhat ambivalent position; sharing wealth more evenly across the whole is an essentially ‘unionist’ position to take, not least because there has to be a ‘whole’ across which to share.  Arguing for a bigger share whilst also arguing for no longer being part of the whole can – and often does – sound dissonant.  Whilst the circle can be logically squared by arguing that ‘as long as we are part of the whole we should have our fair share’, logic doesn’t always make for the clearest of political arguments.
But, and this is back to a point I made earlier, an independent Wales would face exactly the same issue, albeit on a smaller scale, with wealth concentrated in the south and east and other ‘regions’ comparatively worse off.  Unless and until we get down to a political unit which is small enough to encompass a single travel to work area, the question of geographical redistribution doesn’t go away (and vertical redistribution doesn’t go away even then).
Part of the problem with the UK’s approach has been that any attempts at redistribution are retrospective, i.e. they accept an imbalance in wealth creation, and attempt to redistribute only after the wealth has been created.  That in turn leads to a belief that the ‘rich’ are being robbed to help the ‘poor’ (‘England’s taxes subsidising Wales and Scotland’) but it ignores the question of how they became ‘rich’ or ‘poor’ in the fist place.  We need to ensure that the wealth is created more evenly across Wales (or the UK) in the first place.
The first anonymous comment on the previous post gave some details about German policies in this respect.  I haven’t looked into these in any more detail than is included in the comment, but it’s the sort of approach which seems to me to be worth exploring.  And it also places the emphasis on the ‘real’ economy rather than on simply moving money around.


Happy walker said...

my first visits on here.. =D

maen_tramgwydd said...

A dilemma very clearly and logically explained, John.

Imo it's a pity that your talent and experience aren't being put to better use for Wales, right now.

Your blog is an important contribution to the debate, nevertheless.

Boncath said...

One major probem for us is
that our raw materials have always been exploited by having their added values and tax takes generated and retained outside Wales
The Norman economy was driven by our wool exported to Europe
Fast forward to the Drovers, coal, iron, copper, milk, water electricity ,wind generation
This is more fundamental than regional transfers as we have remained poor in the face of unrelenting colonial exploitation by our neighbours

John Dixon said...


The point you make about Wales having been seen largely as a source of raw materials and basic products, from which the profits have flowed elsewhere is a good one. I would hesitate, though, to describe it as "unrelenting colonial exploitation by our neighbours". The same point could be made about, say, the north-east of England, but I'm not sure how many would describe that as 'colonial exploitation', even though it very closely mirrors Welsh experience in economic terms.

Power and wealth flowing to 'the centre' is, and has long been, a real problem, and one that no-one else is ever going to solve for us. We do need to be careful, though, that we don't simply replicate the problem on a smaller scale in Wales, which sometimes seems to me to be the direction of Welsh Government policy. It isn't just a question of fairness between England and Wales; it's also a question of internal fairness for both those countries.

Boncath said...

Agree with you about
internal fairness but we are not only losing out to our neighbours re materiels --our talented youth have also exited globally rather than remain here in dare I say it a kind of gentile poverty

Totally agree with maen-tramgwydd that talent and experience are being wasted on a grand scale

Spirit of BME said...

I would not call myself an “extreme free market thinker” more of a very extreme free market thinker.
Ever since the Athens of old and through the Roman Empire governments have viewed markets as a source of revenue and as a result of that “free” is a much misused word. Natural markets do exist but are usually killed off by government action and greed, however, you are right where power rests is the secret of redistribution and the more central that power the harder it is to truly get sustainable redistribution.
One of Plaid Cymru`s Aims is a decentralist government and that in Wales (as in Switzerland) always makes sense, for to make industry competitive North and South West Wales will have to complete against Ireland ,North East Wales against North of England, Mid Wales against the English Midlands and South Wales against the English M4 corridor. An Independent (and Federal) Wales will have to allow each Talaith to set the business tax architecture and environment, so they can best react to their natural markets.

Anonymous said...

It is totally irrelevant if disparities between rich and poor sub regions (and populaces) exist in Wales post independence. These vicious and virtuous circles (Myrdal) are a structural component of economic life under capitalism (combined and uneven development) – and surely no-one except the Marxist fringe is now proposing any form of socialism!

The poor will soon learn that their position is a result of their own inadequacies and will be consoled and humbled by a deep pride in our overarching Independence Project, and the role of "we" as the political class and the natural ruling elite of an organic Wales. If not, why are we in Welsh politics ?

Anonymous said...

"One of Plaid Cymru`s Aims is a decentralist government"

I don't think this is true. Maybe John can illuminate, but Plaid's Aims commit them to decentralist socialism as the ideology of government. The Aims don't say the government itself should be decentralist, just that the style of socialism should be decentralist (originally the call was for "community socialism").

Plaid's Aims also support European Union membership for Wales, and there are legal obstacles to setting differential tax rates within an EU member-state. Things in the EU can change obviously, but it would be wrong to say Plaid supports or desires a Swiss-style compartmentalisation of Wales, although such a state of affairs may well have merit.

John Dixon said...

Anon 11:26,

Nice parody, and with a ring of sad truth to it.

Anon 14:12,

I don't think that "decentralised socialism" has ever been sufficiently well-defined to enable me to answer that question, although different individuals will give you different answers based on their own perception. Leanne has done a certain amount of work on trying to put more definition in place, based on the early work of DJ Davies et al, but there is a real question mark in my mind as to the extent that what she is saying would be supported by the leadership.

Certainly, one of the concerns that I raised in September last year at my final annual conference was that the party was claiming to be decentralist yet proposing a very centralist and directive approach to local government ("do as we say or else"). And I'll leave others to judge to what extent 'socialist' is a term which can be generally applied.

Certainly, EU rules have been quoted as an obstacle to certain types of tax reform, but I'm unsure whether that is a reason or an excuse in some cases; it can often suit the UK Government to hide behind EU rules. Local governments can and do have more freedom to set local taxes elsewhere in the EU than is the case in the UK, and I suspect that a government that really wanted to devolve power over taxation would be able to find a ways of doing so, even if it involved taxing apparently different things.

Anonymous said...

I agree John, and I know about the grey area of decentralist socialism, but the point I wanted to make is that Plaid's Aims do not include Swiss-style "decentralism" as the spirit of BME claims. They include "decentralist socialism", however ill-defined that concept may be. Whatever it means, it isn't the same as plain "decentralism".