Peter Black argues that begging-bowl politics do not befit a mature nation

December 5th, 2012

The launch of the first report of the Silk Commission examining the future of devolution in Wales is a real win for liberalism. The report looks at the financial powers that the National Assembly should have, how accountable it is for its spending and how we ensure effective economic policy is rewarded. Welsh Liberals Democrats have been calling for these changes since the National Assembly was established.

The completion of this report is a major Welsh Liberal Democrat victory from the coalition. Kirsty Williams fought for this as part of the coalition deal and banged heads together when it looked like consensual terms of reference may not be developed. Labour and the Conservatives, who have a substantial number of devosceptics in their party ranks, did not drive this review forwards.

Empowerment and Responsibility

This is the third in a series of articles debating the recommendations of last week’s Silk Commission report on tax and borrowing powers for Wales. Tomorrow is the turn of Conservative AM David Melding. On Friday Paul Silk responds.

But we wouldn’t be considering this a liberal report if it had recommended deeply conservative policies. The fact is that this report endorses a number of long-held liberal principles and advances our vision of a federal state. Our submission to the review highlighted a number of new financial powers that we felt would benefit the public in Wales, and all of them have been taken on board.

Firstly, the report whole-heartedly recommends that a number of taxes that are low-yielding and exist mainly to advance policy agendas, rather than raise revenue, are devolved. Housing is already devolved, so it is right that stamp duty should be too. Environmental protection is devolved so it is only reasonable that the Welsh government can reform the Landfill Tax and Aggregates Duty. Economic development is devolved so powers over business rates and Air Passenger Duty help complement our powers to pursue economic growth.

As well as this, we have argued that the National Assembly should require borrowing powers so that we could invest in the infrastructure Wales needs to compete economically and ensure our public services work in modern buildings. It is absurd that every other tier of government in the UK can borrow to support capital investment, including the smallest town councils, but that the National Assembly can’t. This will give us parity with other governments and also help provide us with the resources necessary to invest in crucial new infrastructure.

These proposals, over so-called minor taxes and borrowing, give Wales the opportunity for real policy changes to deliver economic growth and fairness and as a result are relatively uncontroversial. As liberals, we have championed distributing power to the lowest possible level, and now we are proposing to give that level of government the tools that it needs to do the job.

The big changes proposed – over income tax – have been less widely expected.  I firmly believe that devolving income tax powers will improve both the accountability and economic performance of the Welsh government, regardless of whether or not they are used. By ensuring that half of income tax receipts that are raised in Wales are allocated to Wales, we will make sure that good economic progress is rewarded by an increase in revenues, and that poor economic progress will mean a government will see its income lowered.

For the very first time, a Welsh government will have a financial interest in making sure its job-creation strategies are actually effective. Liberalism means making sure that governments are accountable, not only at election times, but constantly. Accountability for performance is guaranteed if governments are financially rewarded for good government. The proposals to improve this accountability are drawn from the liberal tradition.

But devolution of income tax could well harm Wales if it is brought in without substantial reform of the Barnett formula, which allocates money between the UK nations and regions. A study by Gerry Holtham, a leading economist, showed that under the formula, Wales receives less money than it would if it were an equally deprived region of England. I am clear that income tax cannot be devolved unless action is taken on this measure. Otherwise, we will not have the money available to other regions with whom we will have to compete. Wales will be taking a much bigger risk, but from a much lower base, than elsewhere and that is simply unfair. We made this perfectly clear when we put forward the Welsh Liberal Democrat submission to the Commission and I stick by that now.

This conflict is the most important political point, as well as a crucial economic one. The Labour party are content with the current arrangement. They are given money and if they are not able to achieve what they want, then they ask for a little bit more. This is begging-bowl politics and it is does not befit a mature nation. But it explains why they have not driven forward this agenda.  Carwyn Jones, the First Minister, has made it clear that the government will not support the former without the latter and unless there is a referendum. So we need to make the political progress necessary to reform the unfairness of the Barnett formula.

Politically, we cannot proceed with this project without the Labour party. A referendum on income tax powers would need the support of an Assembly and the Labour party would hold an effective veto while they still hold 30 seats. But securing consensus on this is desirable, not just essential – I would like to see the new legislation proposed pass unanimously because this is a major constitutional reform and it deserves better than a party-whipped vote.

I am clear that the Silk report is a real victory for liberalism in Wales. We demanded the report’s production as part of the coalition agreement and it has produced a liberal agenda. But the real test will be when we begin to implement that agenda. When a new Wales Bill receives royal assent and these powers are devolved – that is when we will have achieved a real liberal gain.

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Peter Black is Liberal Democrat AM for South Wales West.

6 Responses to:Silk debate: Tax powers will reward successful Welsh government”

  1. R.Tredwyn says:

    Let’s understand this: we should be mature and get away from begging bowl politics – but we mustn’t take responsibility for any income tax until nursey gives us more money. Come again? Peter Black achieves almost Owen-Smith-like levels of self-contradiction. What is the matter with Welsh politicians? No wonder the electorate despise you when you mince around trying to please everyone. For heavens sake have the courage of your convictions, take a coherent line and be damned. Let the electorate judge a principled position instead of having to decode weasely statements with all bets hedged. I don’t know who cuts the more pathetic figure. Lets hope Melding can do better.

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  2. Gethin says:

    What a nonsensical statement from R. Tredewyn. Peter makes it clear that he wants a fair starting point from whcih we can be accountable. How on earth is that contradictory?

    You know what I really dislike though, whatever any politician says, R . Tredweyn will oppose it, regardless of what they say. Any position is “pathetic” or “weasely” or “mincing around” (nice bit of mild homophobia there) nevermind who they are or what they say. I quite like politicians, at least when they whine about tother people’s view they have the decency to do it on the public record and stand for election afterwards.

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  3. R.Tredwyn says:

    Well, I don’t know. How can you want to be accountable only if someone gives you more money? Sounds paradoxical to me. For the record, it never occurred to me that a verb describing the way someone was comporting themselves would be taken as a reference to anyone’s sexual orientation. Perhaps I am too innocent. Anyway no such implication was intended and I take exception to unwarranted accusations of homophobia. And a look back at this blog will show I have supported and praised politicians when I thought it appropriate. No harangue by Gethin hides the fact that Peter Black has tried to take the high ground while actually adopting the same position as Owen Smith – make us virtuous but not yet.

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  4. Martin Jones says:

    I don’t get how Peter Black is wrong. I don’t particularly support him or anything. But isn’t it appropriate for Wales to be funded on a needs basis and then to have tax responsibility? This is also Plaid’s view. Unless R Tredwyn simply doesn’t believe in the findings of the Holtham Commission.

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  5. R.Tredwyn says:

    The Holtham Commission, as I recall found Wales underfunded by £3-400 million, just 2-3 per cent of our annual budget of £15 billion. That is not 20 per cent and indeed must be within the error margin for calculations of that sort. Yet we have been moaning and hiding behind that figure for two years now. Since when does a 2-3 per cent shortfall make such a critical difference as to absolve you from taking responsibility for your own affairs or being accountable to your electorate? As a country, have we no dignity and no shame?

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  6. Howell Morgan says:

    R. Tredwyn, Plainly the answer to your question is NO, I will give PC one thing, in that it clearly wishes to seperate us from the UK, makes its case, and then it is up to the electorate to decide on the issue. The Labour Party in Wales is run by ‘carpetbaggers’, as they want ‘power’ in Wales, but not so much as it will frighten the anglo-Welsh, as other ‘carpetbaggers’ also in the Labour Party wish to earn their crusts at Westminster. And do want a diminuition of seats etc. I believe a greater teacher once said “You cannot serve two masters at the same time”. The Welsh Labour Party are making a good fist of it, and plenty of well paid jobs to boot, whilst the real world for people is going south at a rate of knots.

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