Carwyn Jones’ limpet-like ambition

Madoc Batcup says the First Minister should be should be shaping his brief as well as just arguing it

The Institute of Welsh Politics annual lecture, delivered by First Minster Carwyn Jones at Aberystwyth University last Monday (available here) was deeply disappointing. In it he set himself three tests for further devolution for Wales:

  • Would it improve the lives of people in Wales?
  • Would the costs be excessively large?
  • Would the impact on the wider UK be limited?

This is a speech that, apart from the personal reminiscences, could have been given by the Conservative Secretary of State Cheryl Gillan, or even by a civil servant from the Welsh Office. Indeed it is scarcely credible to believe that the original devolution settlement for Wales would have passed these tests, since by its very existence the National Assembly has had a significant impact on the wider UK.

In any event, these were the wrong tests. The issue, surely, is which areas of policy should be decided by the elected representatives of the people of Wales, and which should be left at the UK level? Carwyn Jones’ broad vision of Wales’s place in the UK was left unexplained. For instance, he talked about the transfer of the energy consents function, and that it would have only a limited impact on the UK. But his responsibility as First Minister is to consider the impact on Wales of decisions made elsewhere. It is for the UK government to consider the impact on the UK.

The imposition of windfarms on Wales, the exploitation of Welsh natural resources, the construction of power stations that Wales does not need (but England does), are all matters the First Minister should be concerned with and fighting Wales’s corner on. They are key policy areas where a Labour government in Wales may well have a different view from a Tory-led government in Westminster. Yet he is happy for a mainly English Tory government to decide what its priorities are and then impose them on Wales.

Carwyn’s battle cry appears to be that it is better for a Tory-led government in London to decide on large generating stations in Wales (he is only seeking powers for stations of under 100Megawatts, compared with 50 Megawatts currently), than it is for a Labour government in Wales.

Carwyn’s lack of vision is highlighted when he focuses on constitutional change. He says that he knows that there may be constitutional change “because the UK government has set up a new Commission”. It is bordering on the bizarre that the First Minister of Wales is only contemplating the constitutional arrangements of Wales because the UK government has decided to set up a Commission. He appears to have no opinion of his own, even failing to deal with the question of a separate legal jurisdiction which he has talked about in the past.

There seems to be a fundamental lack of understanding between the distinction of having the power to decide and the policy decisions made with that power. Carwyn Jones said, “the chief responsibility is to deliver the public services so vital to the wellbeing of the people we serve.”

However, a government is there to govern, and its chief responsibility is to decide on policy. For example, the decision on free prescriptions is not a matter of delivery, nor is the decision in respect of student grants. Focus on delivery merely requires efficient administration. It is focus on policy that requires government. In addition this seems to ignore responsibility for the economy. It is not just a matter of delivering public services, but stimulating and enhancing the economy of Wales so that it can provide the work opportunities and the business environment to enhance the ability to succeed.

He was also being disingenuous when he said that he was cautious about asking for things just because the Scots have it, since in June of this year the Welsh Government issued a statement declaring that, “If the UK Government does propose to devolve corporation tax powers to one or more of the devolved administrations, it should make a similar offer to Wales.”

From his speech he fails to get to grips with corporation tax, merely voicing fears about a “race to the bottom” – that is to say, of corporation taxes going lower and lower to attract companies in different parts of the UK. However, the power to decide on corporation tax has many other dimensions. These include the comparative levels between large and small companies, and the potential for lowering corporation tax in west Wales and the Valleys without a reduction in the Barnett formula because of their entitlement to Convergence funding.

The Scottish Government has issued a well-considered discussion paper outlining why it should have control over corporation tax. It identifies corporation tax “as a crucial lever of growth, if used wisely alongside other levers such as investment in skills and training, infrastructure and planning”.  It is by no means clear why Carwyn Jones does not believe that the same arguments apply to Wales.

The Scottish Government paper goes on to point out that the previous Parliament’s cross-party Scotland Bill Committee, chaired by Labour’s Wendy Alexander, concluded that –

“The Committee’s view is that if a scheme to vary corporation tax were to be available in some of the devolved countries of the UK as a tool of the UK Government’s regional economic policy, it should be available as an option for a Scottish Government to use also. Any discussions about this should involve all the devolved nations.”

If Wales were to be given the power to alter corporation tax, it would not be obliged to use it. It would be a matter for the Welsh government of the day. The issue is whether Wales should have the right to choose. Wales is one of the poorest parts of the UK, and a fiscal stimulus would be an important potential policy lever to change this.  It is clear that both the Northern Ireland and Scottish governments believe that this would enable them to improve their economies. Both governments are less exercised than Carwyn Jones about the wider impact.

Increased economic activity in Wales would also potentially have beneficial consequences for the UK as a whole, for example in reductions of benefit payments. This is where Carwyn Jones should have his focus, the creation of jobs in Wales. Indeed, lower rates of corporation tax can also lead to equivalent or higher revenues. It is noteworthy that corporation tax revenues represent about the same level of GDP in Ireland as they do in the UK, even though the Irish rate is about half that of the UK.

There are, of course, other factors to consider as well, such as the need for borrowing powers given the potential volatility in revenues, which companies pay the most corporation tax, and the importance of other taxation powers to provide a balance of policy levers. However, none of this was evident in Carwyn Jones’ speech.

The First Minister is clearly worried by the size of cuts in capital expenditure, but it would be helpful to know where he gets his figure of 50 per cent capital expenditure cuts from, since the 2010 Treasury Comprehensive Spending Review put the figure at a cumulative 41 per cent. Perhaps he is assuming that the cuts will continue beyond 2014-15, but it is important to understand why he appears to be looking at an almost 25 per cent increase in the Treasury figure.

What is striking about this speech is the lack of ambition or a vision of what needs to be done in Wales to enable it to be a successful country. As a barrister he may well be used to arguing his brief. As First Minister, he should be seeking to shape and define it.

Rather than just concentrating on delivery, which is largely a matter of administration, the Welsh Government should be focusing on policy. Its priority should be the ability of Wales to decide for itself how it can create the successful economy it needs in these difficult times, something that Westminster has failed to do over many generations.

The theme of Carwyn Jones’ speech is that he would prefer the key levers of the Welsh economy to be left with a Tory-led government in Westminster, rather than exercised by a Labour government led by him in Cardiff.  The current Labour administration has the ambitions of a limpet. They want to stick to what they know and refuse to budge, hoping that the tide of events will wash over them. If Carwyn wants the Tories in London to make the key decisions on Wales perhaps he should refer to a previous Tory Chancellor, Nigel Lawson, who once said ‘To govern is to choose.  To appear to be unable to choose is to appear to be unable to govern.”

Madoc Batcup is a financial consultant

5 thoughts on “Carwyn Jones’ limpet-like ambition

  1. Labour are intellectually bankrupt. The party’s collapse in Wales could be as swift and dramatic as in Scotland, provided Plaid get’s its act together!

  2. The Labour Government of Wales have no vision or ambition for our country. They are a total disgrace. Carwyn Jones is there to preserve the jobs of Labour MPs not to further the ambitions or interests of the Welsh people. He is imprisoned by Hain and the rest of the Welsh Labourites at Westminster. The only way forward for Wales is get rid of Labour altogether at the next Welsh Government elections and have an agressive pro-independence Plaid Cymru Government.

  3. Re: corporation tax, the Holtham Commission said that “it is not clear how the taxes or underlying profits of enterprises [operating across the UK] should be geographically assigned at a sub-UK level.” It also said that “devolution [of corporation tax] would have to be consistent with European law, which precludes tax systems that could be interpreted as State aid to some businesses at the expense of others.”

    I believe that the Scottish Government’s recent paper on the devolution of corporation tax was criticised by the CBI. They said that the paper had an apparent bias in favour of devolving the tax and featured “little analysis” of the impact of the costs, complexities and risks inherent in doing so.

    What’s more, a recent research paper for the NI Assembly concluded that opinion is divided on the merits of lower corporation tax – it may or may not deliver improved economic performance. And how would the revenue forgone be made up? Presumably through higher taxes on individuals or lower public spending. There’s no such thing as a free lunch.

  4. Rhys, selective quoting from the Holtham Commission, which actually proposed a UK-wide scheme of devolution of corporation tax with the ability to cut depending on a devolved territory’s relative GVA. It did say, though, that cutting corporation tax was a gamble and quite expensive so it was a matter for elected politicians whether to use such power.

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