Making the ‘red water’ really clear

By John Osmond
Cohabitation between the Taff and the Thames conference, IWA and Wales Governance Centre, 9 July 2010

It can be claimed, I think rightly, that in the more than a decade of devolution in Wales, only one really distinctive political philosophy has really stuck in the public mind. This was Rhodri Morgan’s so-called ‘Clear Red Water’ speech, delivered at Swansea University on 11 December 2002.

It was a classic exposition of the claims of social democracy and one that still finds a good deal of agreement across the political spectrum in Wales. Indeed, the present coalition government between Labour and Plaid Cymru is very much built on this approach, what the One Wales coalition deal specifically calls a “progressive consensus”.

In terms of cohabitation between the Taff and the Thames, and at a time of pressure on the public finances, ‘clear red water’ has quite a bit of potential in creating tensions and divisions between Cardiff Bay and Westminster. The reason there hasn’t been much of this so far is not because there has been the same party in charge at both levels of government, but because of a lack of ambition.

‘Clear Red Water’ has been long on rhetoric, but short on policies that would really make a big difference to Welsh society and really differentiate Welsh policies from those being driven from Whitehall.

Our politicians, and even more so our civil servants, are shy of stepping too far out of line from what is going on across the border. By its nature Welsh devolution is incremental, and that has certainly been the case in policy development. We should be a bit bolder.

At the end of 2002 and shortly before the approaching May 2003 election, Rhodri Morgan was keen to set out a distinctive Welsh Labour stall, one that differentiated his party, not so much from its political opponents, but its political enemies in New Labour.

“We’re not new or old Labour,” he said at the time. “We’re Welsh Labour.” This is how he defined Welsh Labour in his ‘clear red water’ speech:

“There are always going to be those ideological fault-lines in the approaches to social welfare in post-war social policy in Britain – universalism against means-testing and the pursuit of equity against pursuit of consumer choice….

“The actions of the Welsh Assembly Government clearly owe more to the traditions of Titmus, Tawney, Beveridge and Bevan than those of Hayek and Friedman. The creation of a new set of citizenship rights has been a key theme in the first four years of the Assembly – and a set of rights, which are, as far as possible: free at the point of use; universal; and unconditional.”

He gave the following examples of how this was being put into practice:

  • Free school milk for youngest children.
  • Free nursery place for every three year old.
  • Free prescriptions for young people in the age range 16-25.
  • Free entry to museums and galleries for all our citizens.
  • Free local bus travel for pensioners and disabled people.

Since 2002, of course, free prescriptions have been made universal across all the age ranges. He argued that free services bind a society together and make everyone feel that they have a stake in it. As he said:

“… services which are reserved for the poor very quickly become poor services. That is why my administration has been determined to ensure a continuing stake in social welfare services for the widest possible range of our citizens. Universal services mean that we all have a reason for making such services as good as possible. Free access to social welfare services means that they become genuinely available to the full range of people in Wales, not simply those able to afford them”.

What was perhaps most remarkable about the speech was that it placed the goal of social democracy firmly within a national project of creating Welsh citizens. By virtue of receiving the universal provision he described, the people of Wales would become increasingly conscious of their Welsh citizenship. The objective was to cement an ever-closer relationship between the Welsh people and their fledgling new institution in Cardiff Bay.

This was partly driven by the social democratic impulse to treat people as citizens rather than consumers. As Rhodri Morgan stated

‘Our commitment to equality leads directly to a model of the relationship between the government and the individual which regards that individual as a citizen rather than as a consumer. Approaches which prioritise choice over equality of outcome rest, in the end, upon a market approach to public services, in which individual economic actors pursue their own best interests with little regard for wider considerations.’

This was a scarcely veiled assault on the priorities and values of Tony Blair’s government in London. A little bit of the Taff having a go at the Thames you might say.

Rhodri Morgan continued that he was very keen on the collective voice of the citizen, more so it seemed than the individual one. This was demonstrated by the government’s decision to retain and strengthen Community Health Councils, in contradistinction to England where they were being abolished. Generally, in the English model of public services, as developed by Margaret Thatcher and carried on by Tony Blair, people were treated more as consumers than as citizens. As Rhodri Morgan put it, in England people were encouraged to use public services as though they were:

“… some sort of serial shopper, forever out there in the market place looking for the piece of education policy or health care which best meets their individual needs.”

Rhodri Morgan added that Welsh policy development was being directly informed by an engagement with members of the wider Welsh public, which again differentiated it from what was happening in England:

“We sometimes make a rather grand-sounding claim to have created a new pluralism in policy-making in Wales. The facts which lie behind that claim are certainly impressive, I think, in relation to the engagement between the Assembly Government and Welsh civic society. Research for the National Council for Voluntary Organisations and the Welsh Council for Voluntary Action both suggest that the voluntary sector in Wales feels itself to have a stronger sense of engagement with government than ever before.

“In the professions, too, the evidence is clear that devolution has created a new and closer engagement between policy-makers and front-line practitioners. When Jane Hutt published our ten-year plan for the health service in Wales, she opened the door wide to those working in the service to help construct the detail of change. More than 500 names were put forward from all parts of Wales, and all aspects of the health service.

“Participation on this scale would have been quite inconceivable in the days before devolution – it is a major part of the devolution dividend which the Welsh Assembly Government is determined to deliver.”

I find myself in agreement with much of this, as I would imagine many of you will be. Many, perhaps the large majority of us, are part of the ‘democratic consensus’. However, the experience so far has been a bit too cosy and self-limiting.

In the first place, extending free entitlements may not be the best use of public money. Like most people I jib at paying for parking in hospital car parks but I can well afford to do so. Removing them takes away an income stream that has to be replaced from somewhere else. More serious is the £30 million or so that it has costed a year to extend free prescriptions to everybody. They were already free for those on benefits, pensioners, long-term sick and so on.

Arguably, too, free entitlements have the effect of creating a dependency culture. This is how Ron Davies put it in his summing up of ten years of devolution in the Spring 2009 issue of IWA’s journal Agenda:

“Free prescriptions, free bus passes, and free school meals 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 highly problematic when the coming financial squeeze makes us revisit such policies, as is happening with student fees. If the government is forced to put them into reverse then a lot of people will see it as the Assembly removing an entitlement.”

But more fundamental, even than this, is a lack of ambition in policy. Let me provide two examples of what I mean – in social care, and public transport.

How we are going to pay the care home costs for older people in the future is a looming problem which governments across the UK are going to have to grapple with sooner or later. During the recent election campaign the issue was kicked into the long grass by both Labour and Conservatives. Its clear, however, that the Westminster Government is going down the road of getting people to take most responsibility for paying for themselves. For instance, ahead of the election the Conservatives suggested giving people the option of insuring themselves against the costs of residential care by paying £8,000 into a fund when they retire.

The current Welsh Government has actively been exploring this question over the past few years. It appointed an expert advisory group which last June reported as follows:

“Our strong preference for a new model of paying for care is one which is funded by payments from everyone in society, according to their ability to pay, primarily over the course of their working life. We recognise that the main options for achieving this would be increasing general taxation, or establishing a new social insurance fund or National Care Fund to which most people would be expected to pay.”

However, when the Welsh Government published its Green Paper on the issue last November it ducked this recommendation, saying:

“Whilst the Welsh Government is responsible for the social care system in Wales, the levers to change the system for paying for care are largely the responsibility of the Westminster Government, and the existing legal framework covers England as well as Wales.”

Is this right? Do the ‘levers for change’ really rest with Westminster? Social Care is a devolved area, with ‘Social Welfare’ one of the 20 devolved fields in which the National Assembly has competence. If it wants to, the Welsh Government can make laws in this area now, via a Legislative Competence Order. If there is a Yes vote in next year’s referendum it will be able to do so directly and in broad terms, without consulting Westminster.

But where, you will ask, will we find the money to fund a national care insurance scheme for older people? Certainly, the Welsh Government cannot tax directly. And if we were to rely on the Holtham Commission’s proposals published this week, for a power to vary the income tax as is the case in Scotland, we will be waiting a long time.

However, the Welsh Government could introduce legislation to reform Local Authority finance, and establish a ‘Social Care Precept’ on top of the normal council tax bill to fund social care. Such a precept would operate in the same way as the Police Precept and would be collected by local authorities. Households could be charged a uniform rate or the precept could incorporate council tax bands with people in larger houses paying more.

A 10-15 per cent precept on council tax would raise somewhere between £100-150 million. This would be make a considerable contribution to creating a National Care Fund, which would need to be operated by a new National Social Care Authority.

Of course, this is a radical suggestion. It would be a huge divergence in Welsh policy from England. It would probably be opposed by the London Government as setting an example that some in England might want to follow. No doubt, there would be cross-border problems in implementation. Civil servants would oppose it, as they invariably do, as being ‘too difficult’. But the Welsh Government has the power to do it now, if it has the will.

My second example is in the field of public transport. A few months ago Arriva Trains, which run the Welsh rail network was taken over by the German State railway Deutsche Bahn. This could not mean very much, since the service is locked into a 15-year franchise contract with the government that Arriva signed back in 2003. This means that the Welsh Government, which took responsibility for railways in Wales following the 2005 Transport Act, could argue that its hands are tied until 2018. But need that be the case?

It was fortunate for Welsh railway passengers that the Welsh Government became responsible for the rail service. The 2003 contract was negotiated by the Department of Transport in London which gave us a lousy deal. It agreed a £112 million annual subsidy for running Wales’s railways which, if Whitehall had still been in charge, would have fallen to £105 million today and declined still further as we approached 2018. If this had been sustained then there would have been very little investment in the Welsh rail service for the whole of the 15 year franchise period.

For example, the Welsh Government is spending an extra £36 million on top of the £105m this year just to keep the railways going, and it has allocated additional sums in capital spending spread over several years.

The main result has been a dramatic improvement in north-south rail links, with a two-hourly faster service between Bangor and Cardiff. There are plans to make this an hourly service within two to three years.

A new passenger service opened between Ebbw Vale and Cardiff in 2008 and is exceeding passenger projections. Other Valley lines have been  improved, and much of the rolling stock upgraded.

None of this would have happened if the dead hand of the Department of Transport had continued to lie heavily on the Welsh railways. It is a striking example of a devolution dividend, brought about by having our own Government giving priority to Welsh interests.

But it could be doing more. The Government will be investing more than £2 billion between now and 2018. So Deutsche Bahn, the new owners, have an interest in regaining the operation licence when it comes up for renewal in 2018.

The Welsh Government should be talking with the company to see what the options are for developing a light rail network in south-east Wales comparable to Deutsche Bahn’s magnificent light rail operation in the Stuttgart region of southern Germany. This could be the biggest investment project overseen by the Welsh Government in its history, linked to ridding central Cardiff of cars.

It could be funded by a bond-issue, at least partly underwritten by expanded ticket sales, on the model that funded Glas Cymru’s takeover of Welsh Water.

If Deutsche Bahn is not interested, the Welsh Government should propose buying it out from the Wales and Border rail franchise and creating a management contract with a subsidiary on Glas Cymru lines. It has the procurement powers under the Transport (Wales) Act to do this.

Its interesting that the Glas Cymru not-for-profit model was viewed with great suspicion by the Treasury when it was first proposed. In fact, it was only the Welsh Government’s enthusiastic support that gave the bid a chance when the Welsh water industry came up for privatisation at the end of the 1990s.

It is noteworthy, too, that Glas Cymru was praised by Rhodri Morgan in his ‘clear red water’ speech in 2002. He said devolution was providing a ‘living laboratory’ in which different approaches to problems could be worked out. As he put it, Glas Cymru represented a Welsh version of the post War consensus on the welfare state:

“The water supply industry has always been close to public consciousness in Wales. A not-for profit company, run in the public interest, rather than in the interest of private shareholders, although with operations and customer services outsourced, has provided a solution which is both practical and which chimes in with the community’s sense of how such a basic necessity of daily life ought to be organised and provided.”

Could we imagine applying such a solution to our railways? Just as with a National Social Care Fund it would be radically different to the way things are run in England. And for that reason alone would doubtless be opposed in Whitehall – and probably in Cathays Park as well. But, surely, isn’t this what devolution should be about? We need more and clearer red water between the Taff and the Thames.

John Osmond is Director if the IWA

One thought on “Making the ‘red water’ really clear

  1. Lack of ambition has been the footprint left behind by the Assembly’s first decade of existence. ‘Radical’ ideas such as the two suggested are just what Wales needs in order to build confidence in our Government and our development as a Country.

    Your article is very impressive as was your presentation at the Taff/Thames conference. I hope it gets a little publicity.

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