The Comprehensive Spending Review on 20 October will bring UK public spending into sharp focus. That it falls between two major elections across the UK and Wales – with all four major parties now involved in government – adds extra bite.
Polling evidence suggests that most people generally accept that deficit and debt reduction should take place. This should be welcomed, given the precarious state of the public finances. Labour’s Budget last year showed that more than £1 in every £4 spent by the UK Government was borrowed. The interest alone on the UK debt is this year more than three times the Welsh Budget. Even Cuba is cutting public spending, with the support of the Cuban Labour Federation.
Welsh Conservatives believe it is tremendously unfair to spend considerably more than is raised in tax while presumptuously passing the burden of debt onto the next generation. And there is nothing at all fair about taking tax from lower paid workers to fund ineffective or unproven interventions.
I suspect that most sensible Labour politicians knew this. As the outgoing Labour Chief Secretary to the Treasury admitted in a note to his successor this year: “There’s no money left.” We know that Alistair Darling had been expecting to reduce the deficit by £57 billion in this spending cycle alone. Labour’s Party coffers are empty. It needs to reach out to the unions, so one can understand why opposition has wrought such an opportunistic change in the party’s position. But one cannot also take opposition to all cuts seriously. And it will be interesting to see which path Ed Miliband chooses, given the realities of the debt and deficit compared with his own debt to the unions for their decisive support in the Labour leadership election.
Wales will face challenges both directly for the Welsh Government budget and also in UK Government spending here. I was disappointed by Carwyn Jones’ response to the UK Government’s offer to delay in-year cuts in 2010. At first he said “I don’t believe that will happen with the Conservatives” (Western Mail, March 2010). Later he was unable to decide whether the offer was “very useful” (Press Association, May 2010) or “not quite as attractive as it sounds” (Western Mail, May 2010).
President Clinton faced a considerable budget deficit on taking office. His State of the Union Address in January 1996 reveals his thinking at the time:
“We know big government does not have all the answers. We know there’s not a program for every problem. We know, and we have worked to give the American people a smaller, less bureaucratic government in Washington. And we have to give the American people one that lives within its means. The era of big government is over. But we cannot go back to the time when our citizens were left to fend for themselves. Instead, we must go forward as one America, one nation working together to meet the challenges we face together. Self-reliance and teamwork are not opposing virtues; we must have both.”
America’s system is of course not directly analogous to the UK’s. But President Reagan said:
“Perhaps the greatest test of federalism is how we meet the urgent need for welfare reform – how successful we are in fashioning local and community solutions to problems that would destroy families, or worse, keep families from forming in the first place.” (Speech to National Government Association, February 1988)
Ultimately, Reagan failed to implement his reforms. However, Clinton took up the challenge and in 1996 the Personal Responsibility and Work Opportunity Reconciliation Act was passed.
Similarly I think welfare will be a key test of how UK and Wales governments interact. Areas of Wales currently have great welfare needs. But as the Centre for Social Justice, under Iain Duncan Smith’s leadership, has proved, the benefits system keeps people trapped in poverty. The system makes it difficult to take lower paid work.
Under the new UK Government’s plans, the income tax allowance for lower paid workers will be raised. And providers of welfare services will be rewarded for real results, not for cycling people through the system repeatedly. Though a largely non-devolved area, we should take an interest in welfare. And the Assembly Government just this year signed an operational agreement with the Department for Work and Pensions.
In the run up to the last Assembly election the then Labour Assembly Government accepted the case for welfare reform in a joint document with the Department for Work and Pensions, Wales – Towards Full Employment. Reaching an employment rate of 80 per cent is now a One Wales target. The document said:
“Wales can achieve an employment rate in excess of 80 per cent, putting it on a par with the rest of the United Kingdom; it will mean bringing into employment a larger share of older workers, lone parents and Incapacity Benefits claimants. It would be the equivalent of supporting 155,000 people from these groups into employment in Wales.”
If we are to bring an end to the immoral waste of human potential and if we are to raise Wales’ economic standing, reforms of this kind must be implemented. The Welsh Government must also play its part. It should never have taken an indiscriminate approach to ‘freebies’ and the harsh economic environment has exposed the Welsh Government’s flawed thinking. Welsh Conservatives have consistently argued, and received criticism, for campaigning against universal free prescriptions. The issue is simple. Those who can pay a contribution should do so.
And as Ron Davies said in the IWA’s journal Agenda in May 2009, these measures are a “form of welfarism specifically targeted at propping up the Labour core vote. It is not a progressive agenda in the true sense of the word and will prove problematic when the coming financial squeeze makes us revisit such policies.”
Devolution has given Wales considerable freedom in important areas, such as health and education. By implementing these reasoned but tough decisions we would bring about real change, as well as helping Wales develop as a political nation. We would be taking responsibility for problems as well as opportunities, and for failures as well as successes.
So, I would like to see next year’s Assembly election fought on real issues that affect people. In so many every day but important matters – such as business rates, survival rates for cancer and the school pupils funding gap with England – the Welsh Government has not delivered. I anticipate next year’s referendum on Assembly powers will again affirm the public’s view that the premise of devolution is secure. But the promise of devolution is yet to be fully realised. Next May’s election will be the first step towards that goal.