Tuesday 23 March 2010

Power clawback?

I'm not entirely sure what to make of the article by Darren Millar on WalesHome today. Is it a statement of opinion by one individual Tory AM - or is it clarifying and adding detail to the statement made by Cameron - which would make it a great deal more sinister?

The basic analysis – i.e. that a government which has responsibility for the spending side of the balance sheet but not for the income side has no real incentive to wealth creation – is one that I can understand, even if not entirely agree with.

It assumes that governments will only work for wealth creation if they are directly incentivised to do so, rather ignoring the possibility that some politicians might actually do so because they believe it to be right for Wales. I can forgive him that to an extent – most Tories seem to have an inbuilt belief that people will only do what they are incentivised to do. That's one of the fault lines between the political right and the political left.

What is a good deal less clear – and I'm not entirely sure that this isn't deliberate – is what solution is being proposed. The obvious solution would be to give the Assembly Government at least a degree of control over the income side as well. It seems increasingly likely that Holtham will recommend something along those lines, given the report of the Calnan Commission.

Yet Darren Millar ("This is not the same as advocating Assembly powers for raising taxes") seems to be specifically ruling out that option. So what actually is he suggesting? A funding formula which includes "elements which provide incentives for wealth creation" sounds to me like a conditional funding arrangement under which the Treasury only passes money across to Wales if the Assembly Government achieves a set of targets set by London. And that in turn sounds like a major clawback of power from Cardiff to London.

That brings me back to my opening question. If this is just a statement of opinion by one individual Tory about the nature of the relationship between Cardiff and London, then it's no real surprise. I'm sure that it's in line with what many Tories believe - Cardiff needs to be reined in. But if it's a clarification and amplification of what Cameron meant when he agreed that the funding formula needs to be looked at, then it takes on a much more sinister meaning.


plaidcasnewydd said...

It sounds like devolved public budgets will be cut under a tory government unless it is used in private sector 'wealth creation'. i.e. the welsh government will be duty bound to spend more on PFI projects and job creation and less on the NHS etc.

I really see wealth creation as a vague euphemism for 'handouts to the private sector'.

John Dixon said...

I wouldn't underestimate the importance of wealth creation. But it shouldn't be confused with making some people wealthy. It's not at all the same thing.

Plaid Whitegate said...

Isn't it a recognition that the Tories are unlikely to gain power at Assembly level and therefore are seeking to neuter the progressives within the Assembly through the back door?

Anonymous said...

This is more an attempt to try and set the agenda rather than claw power back and something that if the Tories aren't careful could backfire.

As for who Daran is speaking for, articles like these would have to be cleared or at least seen by the Tory Press Office in the Assembly, so we can take from that it has tacit support from the Welsh Conservative Party leadership.

Jeff Jones said...

John It's a variation on the Tory approach to local government in England where they are arguing that local authorities should be encouraged to be pro economic development by being able to keep some of the increased wealth generated by that development. There is an interesting conference and paper by the RSA on the same issue with the theme of authorities agreeing to accept the cuts in return for more powers. One of the ways in which centralised bodies can defuse some of the anger from a cuts agenda is to devolve power down as outlined in a recent paper by SOLACE and CIPFA. The problem with the devolved adminstrations is that they are a half way house in a highly centralised state. No one worked out issues such as revenue raising and accountabilty for a number of reasons. For Labour the reasons were quite simple. Very few members believed in any form of devolution. Their views had not changed since Nye Bevan went looking for power and ended up in Westminster. Devolution was a knee jerk reaction to nationalsist advances in the late 1960s and the early 1970s. For nationalists there was also no need to look at the boring technical issues of devolution because it was merely a stepping stone on the way to independence. Even the idea of some tax raisng powers a la Calman is not without its pitfalls if a paper written by two Scottish academics Drew Scott and Andrew Hallett is correct. They argue that whilst tax raising powers for Scotland would increase the financial acountability of the Scottish Parliament. It would also " be defective in economic terms, and if implemented are likely to create key instabilites in the budgetry arrangements of Scotland's government that have significant ramifications for the delivery of public goods and services and consequently for Scotland's economic prospects." Just when you thought that there was light at the end of the tunnel!

John Dixon said...


I don't think that there's anything you say here with which I would really want to disagree. It certainly does seem as though Millar's article indicated that they regard the Assembly as a form of local, rather than central, government. Something to be controlled and managed rather than empowered - and in that respect there are many in the Labour Party who see things in the same way.

I haven't read the paper by the two academics you quote, but will try and do so. I'm not surprised that people are identifying pitfalls - there are problems with any approach, it's just a question of achieving a balance. And we need to be clear which pitfalls are real and which are the result of particular pre-conceptions about the 'right' ways of doing things. 'Regional' taxation can certainly be made to work if the structures are right - otherwise states like Germany or even the USA would have fallen apart by now.

But your core message - that for one reason or another, it really wasn't thought through in advance - is spot-on, in my view. Sadly, for very similar reasons, I'm not sure that the possible answers are being thought through any better, though.

Spirit of BME said...

I do not think Little Daz Millar thought this one up by himself,and perhaps were reading too much into it . It is true that the current arrangement is not healthy for a spending agency ( thats what the HMG in Wales is ) to get a free blood bag of money each year and has no concern how to raise next years hand out.It simply does not make for good government, Wales needs to have full fiscal responsibility in order to cut taxes and negoiate its self out of the English Debit bomb.