David Roberts says tax powers present Wales with an unprecedented opportunity for Wales to find innovative ways to thrive
Supporters of the Silk Commission Report on devolving tax and borrowing powers to Wales will be delighted and more than a little relieved that the Coalition Government has finally got around to making its decision to push ahead with the report’s recommendations. Yesterday’s announcement may have come half a year late, but now Wales has got what it so passionately wanted, surely that’s the hard part over?
Not quite. In fact it’s fair to say that the tricky part is still to come. Now that the wheels are in motion to devolve borrowing rights, Stamp Duty Land Tax and Landfill tax to the Welsh Government, how can we be sure that these powers will be the key to a Welsh economic resurgence? Whilst the changes are being heralded as a means to found a new culture of accountability and fiscal responsibility in Cardiff, questions remain as to what the effect of the changes will be, both for business and personal finances.
Responding to Silk
This is the 9th in the series responding the UK Government’s announcements on the Silk Commission.
Read the full UK Government response to the Silk Commission’s recommendations.
Reporting on this topic has quite rightly focused heavily on what the new powers will mean for infrastructure development and the M4 relief road, which is so critical to the Welsh economy. Clearly, the ability to raise funds using the new borrowing powers will make a fundamental difference and should have a positive effect on private investment coming into the region. It also raises an obvious question. How does Wales, like any other Government, pay back what she borrows?
Transfer of borrowing powers would not have been feasible without a parallel transfer of income raising powers. The most complex aspect of this will be the proposed devolution of income tax. First Minister, Carwyn Jones, has long said that he would not support devolution of income tax without the Barnett Formula being reformed first. David Cameron, in direct opposition, has said that the Coalition Government has no current plans to revisit the Barnett Formula and does not believe that the two issues are ‘inextricably linked’. Either way, the right to hold a referendum for the Welsh people to decide is ready to be triggered.
With any devolution of tax, the thing to remember is that there will be a consequential reduction in the block grant for Wales from HM Treasury. We don’t get to have our cake and eat it. The tricky thing with devolution of income tax is how to ensure that there is no loss in income as a result of the devolution. Those opposed to devolution of income tax foresee higher taxes being necessary to plug the hole and cross border issues arising from the divergence of the English and Welsh tax regimes. Not a good prospect for a shaky economy.
The transfer of Stamp Duty Land Tax and Landfill Tax is certain to be welcomed by the property and construction industry, but political and economic commentators on all sides seem to be suggesting that the receipts will concurrently be available to pay for more affordable housing, borrowing costs and more infrastructure development. That is a tall order. Stamp Duty receipts are commensurate to receipts for Wine Duties in Wales and together with Landfill Tax only accounted for £200 million in in 2012-13. Compared to the £15.4 billion Welsh block grant this is a fairly modest amount and certainly not a bottomless pit. It must again be remembered that the block grant will be reduced to account for the loss of Stamp Duty and Landfill tax receipts by HM Treasury.
Tricky though it may be, the Silk reforms should still be seen in a positive light. They represent an unprecedented opportunity for Wales to find new and innovative ways to thrive. Good governance is dependent on fiscal autonomy and the changes will hopefully herald a new push towards efficiency, economic responsibility and value for money by the Welsh Government and National Assembly. Once the excitement about yesterday’s announcement dies down though, it will be critical to look at these new tools with a cool, dispassionate head to ensure that they are implemented for the long term benefit of Wales and its people.
13 thoughts on “Fiscal autonomy should mean better Welsh governance”
This union is well past its sell-by date.
It is not the Barnett that needs scrapping it is the British government that needs euthanising, painlessly or otherwise, it does not matter. We have bitter reason to bring those of Westminster, past and present, to justice.
The only discussion we ever hear relative to the union is finance and who can get the most out of it.
We see soon to be ex-partners in a dying company fighting over scavenging rights to the carcass. The only problem for the English is that we, the carcass, are not invited into the boardroom.
The other partners are currently slumped in a corner watching boardroom bully Scotland get first pick and prime loot.
As for England the time has come to kick the kids out of the door, they need to get a job and start fending for themselves. We have had enough; it is home rule for England and a complete purge of Westminster if real trouble is to be avoided.
The sooner this so-called “Union” ends, the better, as far as England is concerned. The British have systematically been robbing England for 50 years, and the robbery accelerated with devolution. The most recent example is Portsmouth being closed “for the sake of the Union”. Aircraft building has all, but been moved to Wales. Carwyn Jones laughably said that Wales would be “even more underfunded” if it separated from the UK. You couldn’t make it up.
Fred, we’ve been trying for over ten years to get the English out of Aghanistan. And you want to get them out of Wales? Dream on. The English imperialist tendency is incorrigible. They’ll never leave all those English OAPS on the costa geriatrica and in Ceredigion at the mercy of an independent Wales. They’re hanging on to a base in Cyprus and you think they’ll leave the Brecon Beacons and Mynydd Epynt? What are you smoking?
Stephen Gash, Pure paranoia my friend. 20 per cent of all British refined oil products and 50 per cent of all liquid natural gas come through Milford Haven. Birminghma and Liverpool get all their water from Wales. England is going to move out and let Wales bang a rent on those pipelines? Y’know, I doubt it somehow. We were the first English colony and we’ll be the last. Hell, the Spaniards can’t get you out of Gibralter. I admire and revere the English but no-one could accuse them of having self-knowledge.
R.Tredwyn if you could see through your traditional cloud of English hate you would appreciate that it is the British you are talking about. Or are you confirming my statement that you are only British when the English purse comes in sight? It is the British government that denies England the referenda that it pushes so energetically on Wales,Ireland and Scotland. Wake up the British are the enemies of all of us and encourage bilious people to make posts like yours to feed it. We really need to stick together to get freedom for all of us. 30% of the British government were not born in England, of the remainder a good proportion are not of English parentage. We have had to accept into prominent positions the likes of the Kinnocks, Prescott, Blair, Brown, Dewar, Reid, Steel, Kennedy, Thorpe, and a myriad of other English hating politicians. How many English people in your Assembly?? Please try to turn your vitriol to good use by helping us all to purge Westminster totally and replace it with four governments with sufficient national pride to live in peace and self-reliance.
The ConDem coalition have announced that as little as possible of Part I of the Silk Commission recommendations will be implemented. The income tax proposals have been reduced to the minimum and to the extent that, as in Scotland, they would never be used, assuming that they will ever be put to a referendum. As in 1997, Wales is being sold a pup, when real fiscal powers are required to deal with the nation’s massive problems. All the parties have failed Wales, especially Labour, which has no vision beyond the status quo.
I concur wholeheartedly with your remarks about the Union being well past its sell-by-date, and the failings of the Westminster system.
However, it wasn’t the British who conquered, subjugated, or attempted to assimilate Wales. The exploitation (slate, coal, water, machine gun fodder for the British army & wind) and colonialism (which is on-going) followed the creation of the Union.
The Wales of 2013 is the poorest country in the EU, and is getting poorer. We should have done something about it a long time ago. It took the Irish a century. It won’t be long, if it isn’t in 2014, before the Scots leave too. Sooner or later, we in Wales will have to bite the bullet and take the pain, so that we can begin to create a country with a positive future.
So Fred, was it Wales that created the Union and subjugated its self?
In fact Ben, people of Wales were actively involved with the assimilation of Wales into England, naturally it wasn’t the little people, but just as today, we had a minority driving the politics of Wales; the question is the same today as it was then, for whose benefit?
R.Tredwyn The first country to be colonised by the British Empire was England. The Welsh flooded England just as did the Scots. Every European invader had its eyes set on England. Milford Haven? Ha, where would the oil and gas come through without the Union? My guess is an English port, just as all the shipbuilding would have remained in England without the Union.
The British run these islands, not the English. 70%+ of people in England say they are English not British. Given the chance, most English folk would gladly be shot of this risibly named Union, which is exactly why we English are never asked.
England was robbed of Monmouthshire in the ’70s and we’ll have it back come England’s separation from the UK.
“England was robbed of Monmouthshire in the ’70s and we’ll have it back come England’s separation from the UK.”
The ignorance of history is astounding. The English Democrats stood on that platform in Gwent and polled 1.5%. Good luck with that project.
Stephen – The English are a German people not British. They only started calling themselves “British” during WW1. Until then they called the Welsh and their language “British”.
The English sought to conquer Wales, Scotland and Ireland to Colonise and expand England. Which is how they got England in the first place. So the real name of the “British” Empire is the English Empire.
The English have never invaded anywhere other than to make themselves rich (mainly the monarchy) at the expense of the poor dabs they attacked. Lands that cost them money they got rid of with considerable hast.
The UK Government has always been the English Government that rules Britain, not a “British” Government (i.e. belonging to the British).
There’s a British fiction not a British nation (in Unionist terms).
@John Tyler- That minority did so within a colonial structure and post-colonial mindset, created by the English state. The quip about a minority leading the politics of Wales, well not at all considering the Labour party have a majority and two referendums have given a Yes vote. Wake up
Blimey, when I read these comments it’s hard to know whether some of the English or some of the Welsh have the weaker grip on reality. Two facts: 1. the English run nearly everything, whether they call themselves ‘British’ or not so it is an exercise in imaginative paranoia to feel hard done by by some mythical tribe called the British ;2. whatever the historical exploitation may have been, currently Wales is subsidised by the British/English state. Can we talk about something real?
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