The stamp of approval?

Treasury Chief Secretary Danny Alexander has announced a consultation with business on whether the Welsh Government should get control of stamp duty

The recent victory of the British and Irish Lions in Australia was an amazing team effort. A team effort, but a victory in no small part down to the Welsh players. At various points in the past the UK Government has made space for people to have a proper debate about identity, governance and powers and has taken the time and resource to address huge questions. This is done with a view to changing our nations for the better, to ensure our relationships are sustainable and workable for all. To be successful these also have to be a team effort and in the case of the Silk Commission this too is in no small part down to the Welsh Players.

In 2010 I came to the National Assembly Finance Committee (the only UK Government Cabinet Minister to have ever done so) and I said clearly back then that I was relaxed about further fiscal autonomy for Wales if there were consensus amongst the parties. This remains the case today. In fact in my 17 days as Secretary of State for Scotland I’m immensely proud that I started the ball rolling on the biggest transfer of fiscal powers ever conducted by the UK government. A change for the good of Scotland¹s economy.

I am announcing today a quick and targeted consultation on the devolution of Stamp Duty Land Tax, to inform our formal response to the Silk Commission’s first report. I am also happy to announce that we will be looking at providing the Welsh Government with early access to borrowing powers to support a funding solution for the M4 improvement scheme. While our response has not met expectations on timing, the key to keeping our relationships sustainable and workable is getting the best outcome for all of the UK. Building on the Silk Commission’s earlier engagement when preparing its first report, I want to make a call today to all businesses to engage positively with this further consultation.

I want to focus a consultation on business ­ we are doing this because we need to understand better the potential implications for the construction industry and the housing market, given the number of towns and cities close to the border between Wales and England. We also want to gauge whether the business community supports the idea and believes that it will benefit the Welsh economy.

Welsh growth and economic recovery is at the heart of a decision to run this consultation. It’s the founding purpose of the coalition and is the ongoing thread of our work as a government in everything we do for all constituent parts of the UK. We are determined to return the UK to prosperity and I believe we all have a role to play in that recovery. We want to build a stronger Welsh economy and our response to Silk will be driven by these aims. To these ends we have already agreed in principle to capital borrowing powers for Wales, we have given the Welsh Government an additional £800million to spend on capital projects during this spending review period, ensured that nearly 200,000 SMEs and Mid-sized business in Wales benefit from the Business Bank and delivered a new employment allowance that will be worth £2000 to 35,000 businesses in Wales. And it won¹t stop there! I believe passionately that power must arise from the people; we are the best judge of our own needs. Furthermore I am delighted with the news of larger turnouts at the Silk 2 consultation meetings. It shows real movement towards change in this direction. In the same sprit I would urge all parts of Welsh business and society to take part in this quick consultation.

The British Irish Lions victory was fantastic to watch, and again worked when all parts came together. I¹m very proud that Richie Gray played his last minute part in the victory. For me, I’ve been leading from the outset. I will lead the consultation and we will respond in the Autumn remaining committed to the very best deal for Wales.

Danny Alexander is Chief Secretary to the Treasury

9 thoughts on “The stamp of approval?

  1. Suprised no one has commented yet. Kudos to Mr Alexander for writing this for ClickonWales -a welsh related blog.

    Early borrowing powers are to be welcomed. Not sure what to make of the consultation. It’s clearly Lib Dems vs Tories on Silk. Here’s to hoping Lib Dems win.

  2. David Jones opposes the devolution of Stamp duty – a really badly structured tax in crying need of reform. The Royal Insitute of Chartered Surveyors advocate reform, the Holtham Commission advocated devolution and reform, the Scots are reforming it and the Silk Commission advocated its devolution. Everyone agrees it needs fixing and Jane Hutt has half promised to do it. David Jones alone wants to block the devolution (and reform) of this tax but no-one seems to know why and he has never given a reason that I have seen. As a politician he must be the most obstructive waste of space in Westminster. It’s a competitive field but for sheer futility he takes the biscuit. For heavens sake Clwyd put him and us out of our misery at the next election.

  3. I don’t think that it was a job that he wanted but as a loyal Conservative he agreed to do his master’s bidding given that he represents a Welsh constituency. He’s clearly an intelligent and able man but his anti-devolution sympathies make him unsuited not just to the job but to the times, which is why he’s having such an uncomfortable time of it. His only compensation is that he sits around the Cabinet table.

  4. Why has he got to begin and end with a reference to rugby? What on earth has that to do with devolution of powers?

    Moreover he speaks for a party which has only three of Wales’ forty MPs and a party which describes itself as a supporter of a federal UK. That’s one policy which seems to have bitten the dust, along with a few others, such as reform of the Lords and proportional representation. Failed people in a failed party making decisions about Wales. Unending decline under unionists.

  5. The reference to the Lions is a bit forced and patronising to be honest. I don’t really understand why this needs a further consultation. We’ve covered it in both Holtham and Silk. In terms of a porous border between Wales and England in the property market, if we want accountability in devolved finance we’re going to have to create some clear frontiers, including distinctive financial regimes for some taxes, which might mean accepting that in practice there should be a border of sorts in the property market. If this runs counter to received neoliberal wisdom, then so be it. Most actors within the market won’t have any problems making use of a distinctive Welsh stamp duty regime, especially if it ended up being more attractive than the present set-up. Ultimately the issue of what Welsh stamp duty should look like should be with the devolved Welsh Government, and this would include the option of keeping stamp duty the same as England, if voters in Wales wanted that.

  6. “Why has he got to begin and end with a reference to rugby? What on earth has that to do with devolution of powers?”

    It’s to show he’s in touch with the mood of the people of Wales (go figure) !

  7. Luke 9.27

    If having different tax regimes in a federal union runs counter to received neo-liberal wisdom, then the entire USA constitutional settlement is positively heretical…! Every state in America is a distinct tax jurisdiction and has autonomy to set practically all taxes (income, corporate, sales, duties, property) at the rates its state legislature deems appropriate. There is often massive divergence between one state and another reflecting political priorities and tradition, and, as I’ve argued on this site several times before, even between neighbouring states with not just porous borders but positively gushing borders like New Jersey and New York where they meet at the Hudson River in NYC.

    The ‘porous border’ argument in relation to Welsh devolution is a complete red herring. Proximity and movement of people may well affect POLICY (and contribute to convergence) at the margins but has absolutely nothing to do with whether or where a tax boundary lies in principle.

  8. Breaking my own rule about only having one bite of the cherry… In addition to theoretical norms as evidenced in international precedent, I just wanted to highlight that the same norms can be evidenced in miniature in our own system.

    Even in our current ‘unitary’ England and Wales tax jurisdiction we already have a patchwork of mini tax jurisdictions in the form of County Councils, who are able to determine the final Council Tax burden for their council area. This is not an insignificant tax either and can represent a significant proportion of a household’s annual expenditure (more for example than stamp duty, airport duty, insurance premium tax, duty on alcohol [?!], etc., etc., possibly even income tax for the very low paid…all set centrally), and of course it can vary significantly from council to council, reflecting political choices, tradition, circumstances, etc.. Does the fabric of our society collapse because Mr. Jones of Saltney in Flintshire pays £1500 p/a for his semi-detached whilst 100 metres away Mr. Smith of Roche in Cheshire pays £2000 p/a? Is it an impediment to economic growth? (the porous borders of the 32 London boroughs and their differing Council Tax rates does not seem to hold back one of the richest cities on the planet).

    I think we’d all agree that without this ability to vary taxation and expenditure at a local level by locally elected councils, there would be little point in local democracy. They would simply be servicing agents of a central state. No problem if you’re into that sort of thing, but it’s not my first choice.

    The principle of different tax jurisdictions controlling significant proportions of revenue in a decentralized state is well established across the developed world, and is even established in our own constitutional settlement. There is a fair argument to be had about the (mostly) short term distortive effects of policy divergence in some taxes (e.g. sales tax [VAT]) where the proximity or movement of people is greatest but these really are in the realm of theoretical economics and the bread and butter of any treasury function in London or Cardiff. Any distortions are simply measured for impact and managed accordingly. Turkeys don’t vote for Christmas. And ultimately the market will out.

    If we are to have devolved government in the UK, it simply follows that we have devolved tax systems as well (though how much and which taxes can be argued till we’re blue in the face, though Silk’s and Holtham’s conclusions before that were extremely persuasive if logically a little conservative and cautious). From a democratic perspective there isn’t really much point in devolution otherwise.

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