Peter Jones says the granting of tax powers to Wales could alter the course of the Scottish referendum

November 8th, 2013

Apart from when the countries meet on the rugby or football pitch, Wales is pretty much ignored in Scotland. But what has been just announced in Cardiff is important for Scottish politics, both for nationalists and unionists, though perhaps not in the way that either side, going by their public pronouncements, seem to think, for it marks a major philosophical U-turn by UK Conservative leaders.

Responding to Silk

 

This is the third of a series of articles  on the UK Government’s response last week to the Silk Commission’s recommendations on tax and borrowing powers for the National Assembly

On Monday: Owen Smith says to accept income tax powers without first re-examining the Barnett formula would lock in under-funding for Wales.

 

Last week, David Cameron and Nick Clegg said that the UK government will devolve tax-raising powers to the Welsh Assembly. Assembly members will get the power to set stamp duty, land tax and landfill tax and, if they decide to hold a referendum, Welsh people will be able to vote on whether the AMs should also set the rate for a portion of income tax.

With the promise that borrowing powers will also be devolved, Wales will be able to get close to the same fiscal powers that are now being devolved to the Scottish Parliament through the Scotland Act.

Carwyn Jones, the Labour First Minister, was thrilled. “We are now being treated like equals in the UK,” he said.

The comment is interesting. From my experience of Welsh politics, I know that politicians there across the spectrum strongly resent the way Wales is ignored in London, not just by ministers and Whitehall, but also by the media. But they also quietly resent the attention that Scotland gets which, given that Scots think they are disregarded by London, is a different and revealing perspective.

Scottish responses to the announcement were fairly predictable. Alistair Carmichael, the Liberal Democrat Scottish Secretary, was keen to point out that it gives the lie to the nationalist argument that if Scotland votes No next year, then we can forget about any further devolution of power and perhaps even expect those nasty Westminster types to exact some sort of revenge for giving them so much grief.

But, Mr Carmichael argued, Westminster has now performed two acts of devolution. The first was via the Scotland Act (though it might be noted this was done under the pressure created by the election of an SNP Holyrood administration) and now the second will be a forthcoming Wales Act.

Significantly, this second power shift is occurring when there is no particular nationalist pressure – Plaid Cymru does have 11 of the Assembly’s 60 AMs, but it is behind the Conservatives’ 14 AMs. The pressure, instead, came from a united front of all the parties and a wide slice of Welsh civic organisations.

The SNP response was to pick on one of Mr Jones’ other remarks – that he wanted to see an adjustment to the Barnett formula. It determines annual changes to the Treasury block grant which makes up the bulk of spending by both the Scottish and Welsh administrations.

Mr Jones thinks the formula is unfair to Wales. Studies by independent organisations commissioned by his government reckon that Wales is currently missing out on about £300 million.

Stuart McMillan, an SNP MSP, contended that “the comments from Carwyn Jones are the latest from the anti-independence parties attacking the Barnett formula [so] it is clear that only a Yes vote will protect Scotland’s finances”.

It is true that north of England Labour MPs and southern English Tories don’t much care for Barnett. Reform does look likely and it seems probable that Scotland won’t be a winner. But on political grounds, a punitive raid, docking hundreds of millions from the Scottish budget, looks implausible.

What we seem to be seeing now is a big political shift in direction by the Tories. Long associated with being the party of centralised (in London) government, they are now climbing on board the decentralisation bandwagon. Having been vehemently opposed to legislative and fiscal devolution, Mr Cameron is not now just endorsing it, but also giving it a push.

Mr Cameron, I am told by one of his advisors, “gets it” – that his party’s long eclipse in Scotland and Wales may well have a lot to do with its opposition to devolution, which is seen in many voters’ minds as being equated with hostility to both countries.

The Tories’ rather better recovery in Wales than in Scotland could well be attributable to their relatively swift conversion to supporting more Welsh devolution, a Damascene conversion to which Ruth Davidson and the Scottish Tories have been latecomers.

Of course, Scots will need a lot more hard evidence before they become convinced that the Tories are genuine devolutionists. But if they are – and Boris Johnson’s support for the London assembly to have more fiscal powers plus decentralisation of power to English cities and councils are further straws in the same wind – then that changes a lot.

It means that the Conservatives could become much more electable in Scotland. And if that is indeed one of the prizes that Mr Cameron seeks, why then would he risk jeopardising that gain by reforming Barnett in such a way that it singles out Scotland for spending cuts?

Sure, it is a challenge he will have to face, but first the SNP has to face its own test. By raising the Barnett question, nationalists have to demonstrate that Scotland’s public spending would indeed be better placed under independence. This isn’t a good place for nationalists to be. Recent analyses by the Institute of Fiscal Studies and the Centre for Public Policy and Regions have presented evidence which argued that oil revenues can only fill the gap, if Scotland was shorn of the Barnett transfer by independence, by a cut in defence spending from what Scotland notionally contributes now (£3.4 billion) to £2.5 billion.

This could certainly be done, but it creates two problems. One, it would allow the unionists to contend that the SNP is admitting spending cuts would be necessary with independence and, two, it focuses yet more attention on the importance of oil revenues which, everyone knows, are volatile and in long-term decline.

So unionists have every reason to be happy with last week’s events in Cardiff. But they, especially the Conservatives, have no reason to be smug. They have yet to produce the plans for further devolution which opinion polls suggest is what Scotland really wants. Those plans would have to be passed by Westminster and, it now seems clear, will have to include some reform to Barnett. And doing that in such a way that it satisfies English and Welsh politicians without inflaming Scottish opinion is still a pretty formidable challenge.

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Peter Jones is a contributor to the Scotsman where this article first appeared.

10 Responses to:“Wales in spotlight puts Scotland on edge”

  1. Peter A Bell says:

    I was rather amused by the notion that paying lip service to devolution might make the Tories more electable in Scotland. Why? If we want jam tomorrow promises we can get them from the marginally less toxic British Labour in Scotland. What possible reason might there be to turn to the Tories?

    There is another underlying fallacy in this analysis. The fallacy that devolution can ever be a satisfactory substitute for independence. Unionists have grown fond of portraying devolution as an ongoing process. But this begs the question of where this process ends. Given their vehement opposition to independence it is clear that unionists understand devolution as having limits. It can only be a continuing process up to a point. The difference between devolution and independence is that in the former case that limit is defined by the British state while in the latter it is something to be decided by the people of Scotland.

    The idea of devolution as a continuing process but with limits is only meaningful if those limits are explicitly stated. Otherwise, the end point could be anywhere. It might even fall short of the existing devolved powers. We have no way of knowing.

    The anti-independence campaign is trying to make a big thing of the suggested changes to powers for Wales. But looking at it realistically there is really no significance at all for the debate about Scotland’s constitutional status. It changes nothing. There is no more reason now than there was previously to believe that any of the British parties will deliver the powers that the people of Scotland want for their parliament rather than the limited powers that the British establishment is prepared to concede.

    Power devolved is power retained. The imperative for UK governments at all times and in all things is the preservation of the structures of power and privilege that define the British state. To whatever extent devolution is a continuing process it is a process with this purpose and has nothing whatever to do with finding a settlement which addresses the needs and wishes of the people of these islands.

    If you doubt that then try looking past the hype about these latest devolution proposals for Wales. As Peter Jones notes, there was no significant political pressure for the changes. It doesn’t take any more than a perfectly healthy cynicism to conclude that the UK government had its eye on the situation in Scotland rather than Wales when it came up with these proposals. It is all to easy to believe that these additional powers are being offered to Wales out of the blue simply to polish the Tories’ credentials as a party of devolution and lend some illusory substance to the jam tomorrow promises they and their British Labour allies are dangling in front of Scottish voters.

    The people of Wales might do well to consider the possibility that they have been no more than pawns in the machinations of the British state.

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  2. Danny Ross says:

    What a strange headline for this article. To be honest most of us in Scotland wouldn’t have a clue what the writer is talking about.So far from “being on edge” its a shrug of the shoulders and so what.
    Wales will decide its own way,that is up to Wales. I hope the Welsh can one day move toward independence but that is up to them. We in Scotland will go our way and for every unionist figure forecasting doom and gloom there are plenty of YES campaigners putting out a positive message.

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  3. RTG says:

    Why are some commentators obsessed with the idea that devolving landfill duty and very limited powers over income tax to Wales (maybe, at some point, perhaps in the distant future- something which evidently terrifies Carwyn Jones) going to somehow bowl over the Scots? These powers are already devolved to Scotland, and are far behind the scale of devolution which the Scots actually want (regardless of support for independence per se).
    Control over oil revenues, energy, broadcasting and welfare is where the Scottish debate is at, and devolution of these key areas is not on the British state’s agenda. The Unionists have had literally years to cobble together something resembling a positive counter-offer to independence. They have not done this, not out of some kind of omission or failure on their part, but because they know that devolution has reached its limit and anything significantly beyond the status quo would require a fundamental overhaul of the whole UK state architecture, something not on the radar of the Westminster elite at all. They would prefer a No vote in Scotland, but at least a vote for independence would leave the elite’s state and privileges basically in tact- hence no ‘devo-max’ question on the ballot (at Westminster’s insistence) and no model of ‘devo-max’ offer to the Scottish public.
    It is also dangerously naive to imagine that devolution is simply a one-way process of gradual extension. The PP government in Spain is currently systematically the existing devolution (and linguistic) settlement. A Scottish No vote will not simply result in the status quo. The British state elite will be determined to prevent the natives getting uppity again.

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  4. Doug Melville says:

    “This could certainly be done, but it creates two problems. One, it would allow the unionists to contend that the SNP is admitting spending cuts would be necessary with independence and, two, it focuses yet more attention on the importance of oil revenues which, everyone knows, are volatile and in long-term decline.”

    Spending cuts would be necessary, but is anyone arguing that the spending cuts imposed by Westminster would be better targeted or appropriate than cuts necessary for an independent Scotland? It should also be noted that the structural deficit in Scotland is much lower than for the UK as a whole. So now we need to consider whether as independent nations, the cuts would be more or less appropriate than those imposed with a view to what is politically acceptable to south east england? As for oil, well, it may be volatile, but would we rather not have it?

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  5. Fred says:

    “Carwyn Jones, the Labour First Minister, was thrilled. “We are now being treated like equals in the UK,””——————Some are more equal than others, Wales id not used as a ‘Milch Cow’

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  6. Richard McHarg says:

    The IFS report is seriously flawed and presumes that spending currently attributed to Scotland, including the disproportionate debt and interest payments, will continue.

    For example, the Treasury will bill Scotland, and Wales, for a population share of the HS2 rail project, while the project will go nowhere near Scotland. Likewise for defence spending, government infrastructure spending in London and FCO spending abroad. The list seems endless!

    Scotland’s economy is on a par with the UK as a whole without the oil and gas.

    Its spending will not be the same as the UK’s, so it is not a like-for-like comparison. Consequently, the IFS have no idea how much Scotland will need to balance the books, if in fact Scotland has a fiscal deficit at all.

    The IFS would be better looking at the finances of England/Wales/NI post-Scottish self-determination, since the UK’s fiscal deficit is considerably greater than Scotland’s, while Scotland only has a deficit because of it’s continuing role as part of the UK.

    http://www.businessforscotland.co.uk/revealed-the-accounting-trick-that-hides-scotlands-wealth/

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  7. John R Walker says:

    “What we seem to be seeing now is a big political shift in direction by the Tories. Long associated with being the party of centralised (in London) government, they are now climbing on board the decentralisation bandwagon.”

    More total tosh – the Tories initiated the Regionalisation of the UK when Heath handed over the UK’s WW2 emergency government regions during the Treaty of Rome negotiations to further the aims of the European project, with the clear intention that each Region would have an elected Assembly ultimately answerable to Brussels. That was over 40 years ago in case you obviously missed it! From there the EU’s NUTS1 Regions were formed. Wales is UKL and Scotland is UKM.

    Everybody ignores Wales – why shouldn’t they when Wales has cut itself off from the mainstream in a growing number of ways which are slowly unravelling to the detriment of the people in Wales?

    But this is yet another straw-man article assuming the Scots may vote yes to independence and global isolation. They won’t – so get over it… A more likely scenario is that Salmond’s long-standing failure to be upfront about the difficulties an independent Scotland would face are likely to be increasingly exposed as the campaign goes on and his comprehensive defeat is likely to put back the march of the UK’s regional separation movements for years to come. Bring it on!

    Sadly, it is unlikely to do much good for those Regions which have started to isolate themselves from the UK mainstream because the decision makers in the real world will continue to ask themselves why they should put themselves out to pander to irrational minority Regional administrations when they can have 90+% of the UK’s ‘cheese’ and ‘single market’ access by operating only in England? Tinkering with taxation is just re-arranging the deckchairs on the Titanic.

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  8. kp says:

    Agreed, devolution can never be a substitute for independence.

    But it seems the populations of Wales and Scotland want the very best of both worlds. They have no real appetite for full independence (otherwise they’d have a simple vote and just get on with it) and yet we are constantly being told they want to see much further devolution of powers.

    My suspicion is that most people don’t very much care. They just want lower taxes (if they pay tax), more welfare (if they receive welfare), and a whole loss less government (in all its forms).

    I think I rather agree.

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  9. R.Tredwyn says:

    The response of the UK government to Silk – it’s own Commission after all – is contemptuous. Far from treating Wales “as an equal” as Carwyn Jones averred, Wales is treated as an inconsequential beggar who can be thrown scraps when it suits the UK govt to appear magnanimous but whose own opinions can always be ignored. In every single case where the Silk Commission argued that Welsh and Scottish conditions were different and Wales needed a somewhat different settlement the arguments have been ignored and the proposals rejected. Wales has been told it can have its own version of the Scotland Act and nothing else. The form of income tax powers being offered was rejected by Silk and the Holtham commission too. Powers in that form are unusable and no sane Welsh politician will fight a referendum for powers she can’t use. Does Westminster not know that? The point is they don’t care enough to know. They just don’t care enough about Wales at all to take time to think about it – an insignificant place that gets a big subsidy already, in their mind. How are Welsh politicians supposed to respond to such ignorant contempt? I don’t know but Carwyn’s puppy-dog gratitude for being slapped in the face demeans us all.

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  10. R.Tredwyn says:

    Your other correspondents have rebutted Peter Jones’ absurd argument that the Scottish referendum will be influenced by the response to Silk. 99.9 per cent of Scots will never know about it and those who do couldn’t care less. In what self-important Welsh dreamland are we living? Nobody gives a flying hoot what we think, as HMG has just abundantly demonstrated. We have to get off our backsides and build our economy and society in Wales with the tools we have. We can do it and then we can command the attention and respect we do not currently enjoy.

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