Where's the ideological response to Tory nonsense?

Tweet

Accusing the ‘Welsh’ Tories of possessing principles of any sort would be a foul calumny, but lacking any basic principles isn’t the same as lacking certain fundamental ideological beliefs. One of those is that tax cuts are axiomatically a good thing, and they are at it again today in the Senedd, calling for a cut in income tax and the abolition of business rates for small businesses. These changes, they claim, will put more money in peoples’ pockets and boost economic growth.

The Welsh government (and the Welsh budget) are fundamentally different creatures from the UK versions, and don’t have the same freedoms. It’s a consequence of the difference between devolution and independence: an independent government in control of its own currency and with debt mostly denominated in that currency can spend as much as it wants to as long as the physical resources are available, and that spending isn’t constrained by the availability of money through taxation. The Welsh government has no such freedom: it’s budget, and its ability to borrow or transfer money between financial years are limited by external dictat, and over a period, it must balance the books. It means, in essence, that whilst it’s not true that a UK tax cut must be balanced by spending cuts, it is very definitely the case that a Welsh tax cut must be balanced by spending cuts. And the Tories know it, even if they didn’t spell it out.

What that translates to in practice is that, whilst the tax cuts proposed by the Tories may make individuals and small businesses feel better off initially, they will either have fewer (or worse) services delivered by the Welsh government (and by the local authorities who receive large transfers from the government in Cardiff), or find that they have to pay more for the same services out of the ‘extra’ money they gained from the tax cuts. More people will end up paying for private health care, or private tuition, for example. There will be those who argue that that is a ‘good’ thing, and that those services can be provided better or more cheaply by private providers. Whether that is true or not (and I’m not at all convinced by the arguments) is irrelevant to the economics here – a subject for another day. The point is that those who gain most from the tax cuts will be better able to afford such things than those who gain least – and that is especially so for those who earn so little that they pay little or no income tax already.

Whenever a tax cut is proposed which leads to cuts in what the government can do, it necessarily promotes a further disparity between those who can afford to bridge some or all of the gap and those who cannot. Some won’t be able to do so at all and will suffer as a result; others will see all the gains from their tax cuts swallowed up by extra costs; and the luckiest few will end up banking the difference. It goes to the heart of the argument for funding some basic services in society collectively, through taxation and public bodies, as opposed to leaving individuals to find the money to pay themselves or go without. Concentrating primarily on the financial effect on the Welsh government and its budget – which seems to be Labour’s response – is to miss the underlying ideological point. For too long, the argument about collective provision rather than individual provision has gone largely unmade, an omission from the debate which helps only the Tories.