Differences between theory and practice

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In recent days, the Welsh Government has been busily producing economic strategy documents.  Some of what they say is a welcome change, some rather less so.  The original idea of having specific target sectors for economic development was basically sound, but undermined by the peculiar Welsh insistence on leaving nobody out, which meant that all sectors were target sectors.  And, as the old saying goes, if you have more than two priorities, then effectively you have none.

The bigger problem than the content of the strategy however is whether any strategy is actually deliverable in practice.  The record is not good; fine-sounding words rarely get translated into effective action.  No doubt at least some of those in the Assembly would argue that it’s a question of powers – the Assembly / Welsh Government simply don’t have control over the main economic levers and their influence is therefore limited.  I agree with that, but if it’s true, then what exactly is the point of spending time and effort on producing strategies which you know you can’t implement?

The question of the extent of devolved powers isn’t the only issue though.  In theory, all those missing powers reside in Westminster, but the record of effectively setting an economic strategy isn’t much better.  The real powers over the economy don’t reside with government at all – in Cardiff or in London – they have been outsourced to the owners and managers of capital.  And unless governments are prepared to tackle that stranglehold of economic power, they will continue to have minimal influence on the real economy.

And there are those who even challenge whether the government should be making any attempt to spread prosperity more evenly.  This report suggests that if the goal is to improve productivity in the economy, then investment should be chanelled to those areas where the wealth already resides.  I don’t like the conclusions; such an approach leads to a concentration of investment and growth in some areas at the expense of others which simply provide the labour force and suffer the loss of young people stemming from that.  But if the objective is to improve the overall productivity of the country as a whole, and the overall average GDP per head, then I tend to agree that it’s the most effective strategy.

That is, though, a very big ‘if’.  For those of us who believe that the success of economic policy should be about more than overall averages, there is a trade-off here.  Increasing the average in this way might look like ‘success’, but it is success bought at the expense of increasing inequality and deliberate abandonment of more rural and far-flung areas.  The problem is that, for all the fine words from the Welsh government about strategies for spreading growth across Wales, their actions look more like implementing the approach laid out by the iea author – concentrating investment and growth in the south-east of Wales.  Actions speak louder than words.

Choosing the right scenario

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The headline in yesterday’s Western Mail was about a report from a think tank claiming that there is little to fear from a so-called ‘hard’ Brexit.  It reminded me of two thirds of the oath required before giving evidence in a court – it looks like the truth, and nothing but the truth, but not exactly the whole truth.

On the basis of an assessment of the likely impact of tariffs in the event of no deal on free trade, the report concludes that the Treasury will actually collect more than it will have to pay out – some £12.7 billion compared to £8.8 billion.  I haven’t gone through the detail of the calculation, but I see no obvious reason to dispute the figures.  The problem that I do see with them, though, is that they assume that we continue to buy and sell the same products and services to and from the EU27, and apply the likely tariffs to that trade.

In reality, exiting the single market is likely to change the nature of the trade between the UK and the EU27, and to do so significantly.  Whether it does so in ways which are damaging to the UK economy or in ways which benefit the UK economy is harder to judge.  I tend to suspect the former is more likely in the short to medium term, but I accept that the effects may be mitigated in the longer term by trade with other countries outside the EU if the more optimistic projections of the Brexiteers are to be believed.  (If they were honest, they could legitimately describe it as a gamble on short term pain for the possibility of long term gain; but instead they’ve been relentlessly and unrealistically optimistic and dishonest in trying to pretend that everyone will gain immediately, rather than accepting that there are going to be some losers, in the short term at least.)

There are a number of reasons why I tend to believe that the former scenario is more likely.  One of them, just as an example, is EU rules on tendering for work.  Under those rules, for contracts of a specified size, public sector purchasers are obliged to give fair and equal consideration to any tenders received from anywhere within the single market.  It’s part of what makes it a single market.  However, there is no such obligation for tenders received from a country outside the single market, with such tenders subject to additional tariffs as well.  That does not, of course, mean that UK companies cannot or would not tender for such contracts, but it does raise a question about the likelihood of success for such tenders.  And, in the same way, it might well mean that UK-based tenderers win more contracts in the UK if EU competitors’ bids are subject to tariffs.  On the basis of that, and other, factors, it is surely valid at least to question the assumption that the pattern of trade would remain unaltered.

The report also suggests other ways in which the UK could take action to mitigate the impact, once it is free of EU rules.  One of those is that: “Freed from the EU rules on state aid, the UK will be able to operate a more extensive regional aid programme.”  Again, that’s entirely true, and the argument was a regular feature of the Brexit campaign.  The problem, though, is that there is a not insignificant difference between “will be able to operate” and the much shorter “will operate”. 

Of course, it’s not down to the think tank to set UK policy in this area, they can only suggest.  But given the history of UK regional policy, I’m far from being alone in my scepticism as to whether any conceivable UK Government would actually implement such an approach.  And they do have, as ‘cover’ as it were, the fact that in rejecting the EU, the UK (and Welsh) electorate have implicitly rejected the concept that richer parts of the union should contribute to the development of the poorer parts.  Isn’t that a major part of that elusive £350 million per week that ‘we’ (i.e. the UK Treasury) were allegedly going to get back?

So, the report gives one view on the results of Brexit, but it is just that, one view.  As the Western Mail’s reporting demonstrated (by quoting a Welsh government spokesperson and Andrew RT Davies), its findings will be rejected by those who believe that full access to the market is the best outcome, and revered by those who are looking for some level of backing for their belief that the EU has more to lose than the UK does, who, despite Gove’s infamous comment, are quite happy to quote any ‘expert’ who will give them the answer that they want to hear.

Why would they give us the money?

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I can understand why the First Minister would come out demanding that Wales doesn’t lose a penny in regional aid following Brexit, and that the UK Government should commit to making up the difference.  It’s a natural response, given the sums involved and the number of important projects which depend on this funding.  But hold on a minute – didn’t we just, effectively, vote against the whole principle of regional aid, even if wasn’t put that way?

As one of the EU’s richest member states, the UK contribution was higher than the amounts received back in payments such as the budget rebate, farm subsidies and regional aid.  That ‘disparity’ was one of the core arguments of the Brexit brigade.  No-one on the Remain side took the trouble, as far as I can recall, to explain the reasons for that, let alone to defend it.  But there are a number of reasons for the disparity, and it’s worth stopping for a moment to consider what that ‘excess’ payment was spent on before assuming that it will automatically now be available to spend.

For instance, some of it went on those apparently hated ‘eurocrats’ – you know like the people that manage the CAP, negotiate trade deals and other agreements, and manage the single market.  We won’t need them any more, will we?  Well, not exactly...  Let’s take the case of trade negotiators.  For the next two years, we will still be paying our share of the EU costs of employing such people, so that they can negotiate with the UK as well as the rest of the world – and we will also need to recruit and pay more of our own civil servants to negotiate with them, whilst at the same time, negotiating our own deals with the rest of the world.  That latter cost won’t come to an end in two years’ time either – we’ll need those skills for the foreseeable future.  Indeed, the cost of doing this sort of thing for the UK alone is inevitably going to be higher than it would be if the cost was shared between 28 states.  Bang goes part of the ‘spare’ money.  And that’s just one example.

But more importantly, a lot of the EU budget is spent on attempting to redistribute wealth, from the richer areas to the poorer.  One can argue (and I certainly would so argue) that this hasn’t always been spent well or effectively, (although that’s generally more to do with those receiving the largesse than with those dispensing it) but Wales is far from being the only poor area of the EU, nor the only beneficiary of the EU’s attempts at redistribution. 

Further, anyone who was really serious about wanting to slow migration within the single market would be arguing for more redistribution, not less.  All the talk about people moving from areas of low economic activity to areas of high activity has focussed on the impact on the receiving countries, but if there is a part of the UK which should realise more than any other area how badly such migration impacts the areas from which people migrate, it is surely Wales.  Isn’t that loss of young working people exactly what we have been suffering from for decades?

But back to the point – to argue that we should not contribute more than we get back (which is what the leavers were doing) is in essence to argue against the very principle of redistributive policy.  It is to argue against the richer helping out the poorer.

One doesn’t need to take much of a look at some of the Brexiters to understand that arguing that the rich should keep what they have and not share it is probably instinctive and natural for them.  So, regardless of what they said during the campaign, why would anyone believe that people who are against the whole concept of redistributing wealth are suddenly going to be generously in favour of it within the UK?  Worse, why do they even need to, when the people of Wales themselves have voted to support that sort of economic selfishness?

Wishful thinking

Tweet The level at which the “discussion” between Cardiff and London over the European Union budget is occurring is disappointing to say the least.  To hear the politicians talk one would think that the only factor of any import is what structure gives Wales the largest sum of money.

It’s certainly true that Wales is a net beneficiary of EU funding.  I’d prefer that it were not so, because the fact that it is true is based on failure not success – the failure of successive UK governments to address what are, at a UK level, “regional” economic disparities.  But whilst the consequential availability of EU funds is better than not having them, no government –either in Cardiff or in London – has exactly covered itself in glory over the application of those funds.  It often looks as though we’re just pouring water into the sands.

More importantly, it isn’t structure that determines how much regional aid we get, its policy.  The claim by opponents of the EU that the UK government could direct more funds to the poorer regions of the UK if it didn’t send the money via Brussels first is an entirely fair one.  The problem, though, lies in the word “could”.  The UK government “could” do lots of things if it wanted; but it has shown little propensity – under Labour or Conservative governments – to turn a “could” into a “would”.  No surprise at the lack of trust therefore.

But the EU’s current stance on regional development isn’t guaranteed forever either.  Like UK government policy, it can always be changed.  I can understand why people think that the EU policy is more likely to stay the same than UK policy is to change; but is that really the basis on which we should make a decision about our role in the European Union?  There’s more to the idea of the European Union than that. 

Both Labour and Plaid Cymru politicians have recently speculated on what would happen in a referendum on the European Union if England wanted out and Wales and Scotland wanted in.  I suspect that there’s a certain amount of wishful fantasising involved there; whilst the views of Welsh politicians and those of English politicians might seem to diverge on the subject, I very much doubt that the views of the electors will show anything like as much divergence.

Notwithstanding the arguments about economic interest – or perhaps because that’s the limit of the support the Welsh politicians can manage to express – I rather suspect that any referendum would, in practice, be about other matters entirely.  And whilst I’d love to be proved wrong, I see no real evidence that Welsh opinion and English opinion on the Daily Mail type of attitude to the European Union are really very different.

Redistribution and subsidy

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Some interesting figures published today by the Centre for Economics and Business Research on the mismatch between taxation and spending across the ‘regions’ of the UK.  The Centre has looked at the revenue raised in each ‘region’ and the money spent there to come to a series of conclusions about the extent to which poorer regions receive a ‘subsidy’ from the richer ones.

The most obvious headline from a nationalist perspective is the conclusion that Scotland receives no net subsidy from the rest of the UK.  No doubt the SNP will be delighted with that conclusion; I certainly would be in their position.  It’s further evidence that there is no hard economic argument against Scottish Independence.

There are caveats, of course.  As I’ve noted before when discussing this sort of statistical analysis, the most important element is understanding what the underlying assumptions are; changing those could have a significant effect on the figures.  In this case, one key assumption, from a Scottish viewpoint, is about the proportion of oil revenues which would accrue to Scotland.  The authors have used the split suggested by Aberdeen University, which gives Scotland 83% of the total.  I think that’s an entirely reasonable basis for calculation – but it’s clear that many of those arguing that an independent Scotland would be near-bankrupt are using a very different basis.

The other big caveats are that these are figures at a point in time – reflecting a single year – and that they assume that expenditure patterns for an independent Scotland would follow a similar pattern to those of the UK.  Again, that’s an assumption which is open to challenge.  Still, it’s good news overall for Scotland.

The figures for Wales make for much more gloomy reading, however.  They emphasise yet again how poorly our economy is performing.  Whilst the North East of England is not far behind Wales, only Northern Ireland is in a worse position.  We have a lot of ground to make up.

What the figures also show is the extent to which the UK’s economy is skewed towards London and the South East, with the north and west of England uniformly failing to cover expenditure from taxes raised.  I don’t like the word ‘subsidies’ in the way it’s used here to describe the way in which expenditure is redistributed to enable public services to be maintained outside the south and east of England, but it’s not an entirely unfair word.

The real question is how we stop redistributing the proceeds of uneven GDP and start redistributing the GDP more evenly.  It’s not handouts or subsidies that we need; it’s a sound economy of our own.

Regional Pay and GVA

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In this post on Monday, the Bevan Foundation drew attention to one of the key reasons for Wales’ comparatively low GVA – low wages.  It’s not a surprise; it’s a point that has been made a number of times in the past, but it’s a point of which we sometimes lose sight.

There are a number of reasons for Wales’ average pay being lower than the UK average.  Not the least of them is the fact that for organisations not headquartered here, the Head Office salaries – usually the highest – are elsewhere.  In a sense, that means that economic activity in Wales doesn’t contribute to GVA as much as it would if the higher salaried jobs were distributed in the same way as the lower paid jobs.  Such distribution is not exactly a practicable solution, but the effect of an uneven distribution is worth bearing in mind.

Given the way that GVA is calculated, low wages will inevitably depress GVA in any area, just as high wages would increase GVA.  So, the proposals by the UK Government to introduce ‘regional pay’ would have a direct impact on GVA.  For any area where regional pay was set at a lower value than average, GVA would apparently drop; for any area where it was set at a higher level, GVA would apparently increase.

This happens with no change whatsoever in the work people do, in the output they produce, or in their productivity; it’s solely an effect of redistributing the same amount of pay in a different way geographically.  I think we can be reasonably confident that the introduction of regional pay would see public sector pay levels reduce in Wales compared to the average, whilst they would increase in London and South East England relative to the average.

In principle, I’m in favour of redistributive policies, but in this case, the UK Government would be deliberately and consciously increasing the GVA gap between Wales and the UK average, by taking from the poorest areas and giving to the richest.

No doubt, some will cease on the resultant increase in disparity as clear proof that Wales can’t afford to control her own affairs.  But in fact, all it proves is that the measurement of GVA is a complex business, and doesn’t simply reflect poor economic performance in Wales.

I wish it were as easy as suggesting some sort of reverse regional pay, where the highest salaries were paid in the poorest areas, as a deliberate tool of policy to redistribute GVA more evenly.  But it does underline the way in which a policy of deliberately moving high paid public sector jobs from the centre to the periphery can have an impact on relative economic wealth. 

Winners and losers

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Yesterday’s report about Jack Straw’s little faux-pas echoes the report from last Friday about Wales’ contributions to, and receipts from, the EU.  Last week’s headline suggests that Wales pays more into EU structural funds than it gets back and is thus getting a bad deal; Straw’s case yesterday was that the UK is getting a bad deal.

Superficially, Jack Straw has a point.  If the UK did not contribute to the EU’s structural funds, the UK would have more money to spend on regional assistance within the UK.  I can’t argue with that; but it isn’t that simple.

The first complication is that the fact that the UK Government ‘could’ do something doesn’t mean that it ‘would’ do something.  ‘Regional’ assistance policy has been inconsistent at best within the UK over the decades, and I think we can be forgiven for suspecting that the UK Government might simply trouser the cash and use it to fund tax cuts, or wars, or whatever.  There’s absolutely no guarantee that we’d see any of it, which is the basis of much of the argument against what Straw said.

That raises another issue, though.  Is the fact that we might trust one government – the EU – more than another – the UK – really the best way to decide where regional policy should be made?  I don’t think it can be or should be.  It isn’t radically different from the argument put forward by some anti-devolutionists – they trust the UK government more than the Welsh one and therefore want power to remain there.  If we’re consistent, we should surely separate the issue of where policy is made from the substance of that policy.  We need a better reason than distrust of London to want the decisions to be made in Brussels.

Nor is it good enough to decide whether participation in the EU structural funds is worthwhile on the basis of a simple comparison of how much we put in and how much we get back.  On that basis, only the poorest countries would want to contribute – but there’d be nothing left for them to withdraw.  And that’s ultimately the whole point of the EU structural funds – the most well-off put in more and the least well-off get more back.

It’s fundamentally a question of whether we support redistribution or not – looking at it in terms of what we get is a much narrower viewpoint.  We tend to forget sometimes that the UK is one of the wealthiest countries in the UK; it is inevitable that the UK will therefore be a big net contributor. 

The problem for Wales is that we’re a poor region within a wealthy state.  We only get Convergence Funding (like Objective One funding before it) because of some creative work drawing a line across Wales in order to invent a region which didn’t exist before, and which exists for no other purpose than to qualify for the funding.

That shows the complexity of the issue of redistributive policies – drawing the right lines in the right places (and not necessarily following accepted regional or national boundaries) can make a huge difference to the perception of wealth and poverty without making any difference whatsoever to the actual wealth or poverty of the people affected.

There was one other point raised by the Open Europe report which has received little attention.  That is the extent to which the whole process is managed efficiently and effectively, and whether the same amount of funding could deliver more effect on the periphery with less bureaucracy at the centre.  I think that they have a point there; I just don’t agree that dismantling the whole policy is the best way of resolving it.

Regional transfers

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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.

Regional winners and losers

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I’m grateful to Jeff Jones, who, in a comment on an earlier post, drew my attention to this report.  Jeff pointed me specifically at the table on page 28, which talks about ‘regional’ (in a UK context) winners and losers in terms of taxes and benefits. 

The table sets out to show whether, and to what extent, taxation and benefits policy in the UK over the past 30 years has been ‘redistributive’ in geographic terms.  Now, there are always going to be some estimates and assumptions behind work of this nature, but on the basis of the report’s authors’ best endeavours, they do indeed identify that there was a degree of redistribution implicit in the Thatcherite/Blairite approach.

Wales is a net gainer, as one might expect, although the biggest gainer by far is the North East of England.  London and the South East are losers – again, as one might expect – but it was interesting to note that Scotland is also a significant loser.  I’d be surprised if the SNP didn’t attempt to turn that finding to political advantage!

The point which the authors make, however, is that the cuts being implemented by the current coalition are directly undermining that inter-regional redistributive effect, and are doing so largely at the behest of those who run the financial services which did so much damage to the economy in the first place.  (And, lest anyone conclude that this supports Labour’s views on the cuts, the scale of cuts proposed by Labour would have had a mighty similar effect – and were being driven by the same people for the same reasons).

But there was much more of interest in the report than the table on page 28.

The underlying point of the authors is this:

“This paper argues that the City of London has power like that of a City State in a country like the UK where financial elites dominate and competition of elites has failed. This is now a serious problem because expenditure cuts after the crisis are undermining the redistributive settlement of benefits and publicly funded jobs which were the life support of the ex-industrial areas under Thatcher and Blair. The only credible response is radical new economic policies which can usefully be launched through local and regional initiative.”

That sounds initially a little like the long-standing nationalist argument that the UK Government works in the interests of London and the South East, whilst ignoring the needs of Wales, but the analysis offers far more than that simplistic conclusion. 

It makes it very clear (as most of us knew already, even though not all are willing to admit it) that this isn’t about England v Wales; most of England’s regions suffer in the same way as Wales looked at in this context.  ‘London’ really isn’t synonymous with ‘England’.

(And ‘London’ isn’t even synonymous with ‘Londoners’.  The very recent relative economic success of London has at least partly been a case of “growth com[ing] from a sweated, casualised workforce providing cheap services for a small group of working rich and their employers and… immigrants claim[ing] most of the jobs at top and bottom.”  The point here isn’t about immigration per se, merely an attempt to analyse why the apparent success of London doesn’t necessarily benefit Londoners any more than it benefits the rest of us.  And we should never forget either that boundaries are artificial; within London, there are pockets of both poverty and wealth.  It isn’t really ‘London’ which is doing well, but some individuals and groups within London.)

I’ll admit that it surprised me to learn (although it probably shouldn’t have) that elections to the City of London Corporation still allow ‘business’ votes, rather then simply residential voters – and that the number of ‘business’ votes outnumbers the residential votes.  It’s a not insignificant example of the way in which the financial sector influences political decision-making at the heart of the UK.

That London’s economy has become dysfunctional, and that those responsible for the financial industries of London have disproportionate influence are surely undeniable conclusions.  But it is the effects of that dysfunctionality and disproportionate influence on the rest of the UK which is really the issue which should most concern us here in Wales.

Solutions?  Well, there are a few suggestions in the paper, some of which I’ll return to in future posts, and some of which they admit need more work.  But they won’t come from a continuation of the Labour-Tory economic policies of the past/present.  Indeed, the report actually says at one point, “we are for the foreseeable future most probably caught in a world of elite closure where the (Labour) opposition front bench is part of the problem not of the solution”.

It goes on to say that “we need a new politics as much as new policies because radical alternatives will get nowhere until they break the metropolitan monopoly of power and knowledge”.  Not a message which will be unfamiliar to many of us, but there is also a very clear warning that those who seek to simply build a replica of Westminster in Cardiff, with policy – and particularly economic policy – confined to the straitjacket of convention – are barking up the wrong tree. 

And it seems to me that we especially need to break free of the misguided notion that because the Conservative-Lib Dem coalition is wrong, then the Labour opposition is right.  Looked at from this perspective, there really isn’t that much difference between them.  Another familiar message which some seem to have forgotten.

Update:  I hadn't seen this report when I posted the above.  The CRESC report is an interesting piece of work in its totality, as I noted above.  There are dangers though - which I hope I avoided - in picking out particular tables and giving them attention out of context, which is what it seems to me has happened in the Western Mail's report today.  The purpose of the table in question was not to show which households 'paid more (or less) in taxes than they received in benefits', but to show the extent to which government policy on taxes and benefits is having a redistributive effect in geographical terms, and it seems to me that the narrower meaning being given to the figures is therefore potentially misleading.

I don't always agree with spokespersons for the Welsh Government, but in this case, I think they're right to draw a distinction between the issue of fair funding on matters within the devolved areas and a taxation and benefits regime which partly addresses the question of economic imbalances.  There is a relationship between the two things, but it isn't the straight line relationship as which it is being portrayed, and I don't really think that the effect identified by CRESC can reasonably or logically be used to argue against a needs-based formula for the block grant.

But, as I noted in the original post, neither do I agree with the simplistic response from Jonathan Edwards that 'London' has had an unfair share of the increase in jobs; that's a statement which obscures more than it tells us.  Where I do agree with what Jonathan says is that benefits cuts (and I'd extend that to public sector cuts in general) will impact Wales harder than some other parts of the UK, and will, in the process, undermine the geographical redistribution which leads to the figure of £800, therefore undoing the effect which Jeff highlights.  In that sense, these figures actually strengthen the argument for Barnett reform at a time of cutbacks.

Jeff is right to draw attention to an interesting set of figures; and the implicit suggestion that financing devolved administrations needs to be looked at in totality rather than one piece at a time is something I'd support, but I disagree with his suggestion that these figures undermine the need for Barnett reform.  

There is, in all this, a danger that people simply pick on the figures which support a particular point of view rather than look at the position as a whole - and that's a point-scoring approach rather than a debate about the future financing of Wales.  We really need to look properly at the whole question.