Economic Responsibility

Tweet The article by Gerry Holtham in the latest edition of the IWA’s ‘Agenda’ magazine, reported in yesterday's Western Mail, does not make for cheerful reading.  It is, however, possible to agree with his sums without necessarily agreeing with his conclusions.  In essence, his argument is that the economic situation in Wales is such that we do not currently have the tax base to sustain our current standard of living as an independent country.  It is difficult to argue with that view.

There are, however, two major flaws in his conclusion that Wales should not, therefore, be pushing to follow the Scottish path, but should instead concentrate exclusively on improving its economic position.  Those flaws are political rather than economic and do not detract from his economic analysis.

The first flaw is that, as far as I'm aware, no one is actually arguing that Wales should become independent tomorrow.  Those of us who seek independence for Wales seek it as an endpoint in a process, which process is going to take some years. 

And the second flaw is to assume that the two things (i.e. constitutional progress and economic progress) are incompatible or even contradictory.  Such an assumption takes it as read that economic improvement requires the continuation of the union whilst it happens, and that raises the question about to what extent we believe that the economic problems can or will be addressed within current structures.

I suspect that the inter-relationship between the two propositions is rather more complex than that.  The idea that independence in itself solves Wales’ economic problems is as misguided as the belief that current structures will solve those problems.  The one is based on blind faith that doing it ourselves will necessarily be better, whilst the second flies in the face of decades of experience to the contrary.

The one thing on which I hope most of us in Wales can agree is that we do not want to see Wales continuing to work on the basis that its economic survival depends now and forever on fiscal transfers from elsewhere.  And it seems to me that getting us out of that mindset is as much about taking responsibility as it is about economics.  In that sense constitutional progress and economic progress need to proceed in step; it’s not about one having to precede the other.

Weak Wales

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I may not like some of the comments made by Gerry Holtham in his evidence to the House of Lords, as reported yesterday, but it is hard to disagree with those relating to the economic situation of Wales, even if some of his comments about Welsh, Gaelic and the Highland Clearances seem to be somewhat outside his usual sphere of expertise.

The Welsh economy is indeed a great deal weaker than that of Scotland, and we do indeed have a problem with a deficit budget.  And we certainly don’t have any oil – well, none that has been proven yet anyway.  He may even be right that the departure of Scotland will not improve the prospects for a renegotiation of Barnett, although that is more political opinion than financial analysis.

He’s very blunt about Wales’ negotiating position; we have no cards to play, so can expect nothing.  And his line that we’ll get what we’ve always got, “which is nothing”, is similar to a point made by many in their critique of the current relationship of Wales with the UK.

With all of that I can, more or less, agree.  I’m not so convinced about the conclusions drawn on the basis of the analysis however – mostly because they offer no constructive way forward.  They seem to assume that this is the way things are, this is they way they’ve always been, and this is the way that they’ll always be.  It’s a depressing prospect.

It would be too easy simply to blame the current set-up for Wales’ position.  Of course the situation in which we find ourselves is a result of the policies followed over a lengthy period.  It isn’t, though, that those policies were designed to do Wales down; it’s more that policies which only look at the bottom line for the UK as a whole have allowed the variation in prosperity to remain and grow.  It’s a result of policy, not an intention of policy, although that’s little consolation to those on the wrong end of the policies concerned.

The question is how we bring about change, and simply carrying on as at present seems to be the least likely way of doing that.  Apparently, despite popular belief, it was not Einstein who said that “The definition of insanity is doing the same thing over and over but expecting different results”, but the misattribution takes nothing away from the relevance of the quote.  It doesn’t necessarily mean that doing something different will bring a different result, of course; but surely doing something different at least deserves some consideration from the sane.

Greater autonomy for Wales carries no guarantee of a solution for Wales’ economic problems, but not having that autonomy seems almost to guarantee that we will be forever seeking mitigation of effect rather than solution.  My conclusion has long been that taking responsibility for our own future has to be a better alternative than waiting for someone else to do something – at the very least, it gives us the focus on the problem which is currently lacking. 

One Wales: The Good...

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Now that it has come to an end, I’d like to think that the successes and failures of the One Wales period can be dissected a little more objectively than has tended to happen to date.  Supporters of the agreement tend to see only the good, whilst opponents see only the bad; and whether people want to rush into another similar agreement or not seems to depend on which side of that argument they find themselves.  In real life, there were some things that were good, some things that were bad, and some things which were downright ugly.

I’ll start with some of the good points, although this is not intended to be a comprehensive list.  And I make no apologies for looking at the issue from the standpoint of my own political outlook.

One of the things most frequently bandied about was that the hospital rationalisation programme of the previous Labour government was halted.  Technically, this actually happened before One Wales was agreed, so it isn’t a direct result of One Wales.  But One Wales would have been impossible without it, and Labour could read that writing on the wall.

I felt that one of the most positive things about One Wales wasn’t an outcome as such, it was the detail in which the programme was defined.  There is often a world of difference between what a party says in a manifesto and what it does once elected; the discipline of having a detailed written programme, which was essential to any decision by Plaid to enter coalition, gave a road-map to the government for a four year term.  It’s something that perhaps even single party governments might learn from.

The reports of the Holtham Commission were hugely significant.  Although Plaid had been banging on about the unfairness of Barnett for years, the reports of the Commission finally convinced the other parties.  Labour’s argument that it wasn’t necessary to do anything about it earlier because the squeeze didn’t apply when the settlement was generous might be technically correct, but it sounded a bit like saying that we didn’t need to fix the hole in the roof because it wasn’t raining.  Holtham changed the basis of the debate – in Wales, at least.

The calling and winning of a referendum on Part 4 of GOWA was undoubtedly a huge plus for the agreement.  I’ve noted before that the Lib Dems could legitimately claim a certain amount of credit for that, albeit by accident, but it was One Wales which delivered, and delivered handsomely.  The result has created a quite different sort of Assembly in Cardiff, and gives Wales a new basis for moving forward.

There can be little doubt that the Welsh Language Measure steered through by Alun Ffred was a major piece of legislation.  Sure, it doesn’t do everything that some of us would like, and there’s more to be done, but surely no-one can really believe that we would have had anything like this Measure without One Wales.

Some of the strategies produced by One Wales, such as on energy and the environment are extremely far-reaching.  The government took huge strides forward in recognising the importance of lowering Wales’ ecological footprint; and related to this was the switch in emphasis within the transport programme from road-building to public transport.  All of this creates a sound foundation for the future.

But not everything was perfect…

Power clawback?

Tweet 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.

Differing opinions

Tweet Plaid had a really good two days at our Spring Conference in Cardiff yesterday and Friday. Last year was the first time that we extended the event to two days and ran a whole series of debates outside the main hall. It worked well last year, and even better this year.

The biggest problem for many of us was deciding which debates to attend - with two or even three running in parallel, as well as training events for candidates and activists, it was impossible for anyone to be everywhere.

The biggest clash, for me, was between a session on creating wealth in Wales with Ieuan Wyn and Eurfyl and a parallel session on fair funding where Gerry Holtham gave some pretty forthright views on taxation policy. Sadly, the result was that I missed the comments by Gerry Holtham which Tom Bodden reported on his blog.

Glyn Davies seems to think that we will all be regretting inviting Gerry and / or Tom as a result. On the contrary - the only thing I regret is missing the session. I think it's a good thing to have some alternative voices at this type of debate (perhaps we'll even invite Glyn one day!). It's a good thing to have our views and policies robustly challenged; I've never been afraid of a debate, and nor should Plaid be.

We've seen in recent weeks that different economists, or groups of economists, have very different views as to how far and how fast the budget deficit needs to be cut. Similarly, there are a range of different views, even amongst the experts, on taxation policy. Clearly, Gerry Holtham doesn't agree with Plaid's position on that issue! It doesn't mean that his views are 'right', any more than those of any other experts in the field. But they deserve a hearing - and they got one.

It's actually a sign of Plaid's growing confdence and maturity that we are willing to invite outsiders into our conference to present alternative views, and that we're prepared to listen to them and debate with them. It's certainly better than having the whole thing so carefully choreographed that it becomes boring.