What a difference a day makes

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On Tuesday, the First Minister argued that allowing different parts of the UK to use Corporation Tax to compete against each other would lead to a ‘race to the bottom’.  Yesterday, he argued in favour of devolving Aviation Passenger Duty, to enable the Welsh Government to cut the level of tax so that Cardiff Airport could better compete against other airports, such as Bristol.

Why one of those two proposals will inevitably spark a ‘race to the bottom’, whilst the other will not, is not immediately obvious to me.  And of course, since the Welsh Government currently has no tax raising structures, any proposal to devolve any control over any taxation must surely fall foul of the second principle which he outlined on Tuesday, namely that any further devolution must ’be accommodated within existing Welsh Government structures’.

Yesterday, he also called for the devolution of control over stamp duty.  Again, it’s hard for me to see how that complies with the second of Tuesday’s three key principles.  And, having said on Tuesday that Wales should not call for devolution of powers simply because they were devolved to Scotland or Northern Ireland, yesterday he demanded borrowing powers for Wales, and argued that it did not make sense that “a large project could go ahead in Northern Ireland, Scotland and England, but not in Wales because the government here cannot borrow”.

I have some sympathy with his concerns about a ‘race to the bottom’.  It’s why Gerry Holtham, for instance, hasn’t called for devolution of control over tax rates, but rather for the rate to be varied on a ‘regional’ basis by the UK Government, based on an objective criterion set around the relative level of GVA.  And it’s part of the reason that we need to look at the devolution of a range of taxation and other economic levers as a complete package rather than taking CT as a stand-alone proposal. 

I even have some sympathy for the difficulty Carwyn faces in dealing with the internal contradictions and differences of opinion within his own party.  I’m not sure that I’d go as far as one commenter on yesterday’s post, who declared that Carwyn is, as a result, “making it up as he goes along”, but I can see why people might think that.

He’s walking a difficult tightrope, but he made a major mistake in trying to suggest that pragmatic responses to individual proposals are somehow based on a set of thought-out principles.  I doubt that he, or his party, will really be in any position to take a clear line on the devolution of taxation until the Silk Commission has reported and the UK Coalition Government has legislated on its recommendations, probably in the teeth of ferocious opposition from Labour’s MPs. 

After that, we’ll probably find that it was their idea all along…