Should there be another referendum?

What’s the principle at stake that demands a direct endorsement by voters of powers over income tax? IWA Director Lee Waters asks.

Two years ago Manchester rejected the option of a directly elected Mayor but last week was told it would get one after all, as well as responsibility for health and education spending of more than £6 Billion – without the need for a referendum. Wales, meanwhile, must hold a referendum on whether a small proportion of income tax powers should be under the control of the National Assembly. “The irony of that is not lost on me” Kirsty Williams told the Liberal Democrat conference last weekend.

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Nick Clegg has called the parallel a ‘red herring’, whereas David Cameron flatly asserted that a promise had been given to hold another referendum in Wales, and that was that.

There is no consistent rule of when and why referenda are held in the UK. For example, there has been no referendum of the UK’s membership of the EU since 1975, despite significant extra powers being passed to Brussels; plans to significantly change the workings of the House of Lords were not put to a popular vote; and Police Commissioners – a radical departure in the way we govern – were established without a referendum. But four years on from the last Welsh referendum we face another, which would be the fourth on devolution in the last 35 years.

Since 2011 the Assembly has been a law-making Parliament and as a result of the St Davids Day Agreement will now have the ability to change its name to reflect the fact. But unlike every other Parliament – and indeed, unlike Community Councils or County Councils – it will primarily be a spending body, responsible for only raising only 10% of its income.

The Silk Commission regarded this as a problem, just as the UK Government did with Scotland. In 2012 the UK Government changed the law (without a referendum) to force Scotland to take responsibility for raising some of the money it spends through income tax in order to make it properly accountable. The UK Government now wants Wales to do the same – although only after another referendum. “If we believe that the devolution of tax powers is essential to ensure properly accountable and responsible government” Prof Richard Wyn Jones, Director of Cardiff University’s Welsh Governance Centre, argued before Welsh MPs, “then the question must be asked: should accountability and responsibility be optional?

Indeed, Professor Roger Scully has not be able to identify a single example of a referendum being required before tax powers are transferred to a pre-existing layer of ‘regional’ government anywhere in the world. “What if people vote No to accountability? Where does that leave us?” Richard Wyn Jones asked at a fringe meeting at the Welsh Liberal Democrat conference

But what’s the principle at stake that demands a direct endorsement by voters? It can’t be tax raising powers per say as the full devolution of business rates has been agreed from April 2015. Indeed, the Assembly will be responsible for 10% of all taxes collected in
Wales and no referendum has been deemed necessary.

The other argument advanced is that of precedent. There was a separate question on tax powers in Scotland in 1997, and Welsh voters have not been asked – in fact they were assured in the 2011 referendum that tax powers were not on the table. The Scottish powers to vary income tax have never been used and the Scottish Calman Commission argued that the principle of ‘financial accountability’ was the overriding principle. The question of pledges made in the last Welsh referendum is one I’m acutely aware of. I was Vice-Chair of the campaign and responsible for communications. The campaign’s message was a requirement to achieve cross-party consensus, but since the vote the UK Government’s decision to set-up a ‘Calman type Commission’ in Wales in the form of the Silk Commission, and the Treasury’s subsequent agreement for ‘minor taxes’ and Business rates to be passed down, have changed the terrain.

I’d suggest the principal reason is historical. Ever since the political establishment was shown to be staggeringly out of touch with public opinion of devolution in 1979, where an elite consensus was met with a 4:1 rejection in a referendum, the political class has been afraid of being out of step with the voters on Welsh devolution. The unease was reaffirmed by the water-thin majority in the 1997 referendum. The generation of political warriors that made up the party representatives on the Silk Commission was seeped in that mindset. It was at the first meeting of the Silk Commission in October 2011 it was agreed, without discussion, that another referendum would be needed on the tax question, and it has been very difficult for political leaders to move beyond that – indeed until the removal of David Jones there has been no political space to even discuss changing tack.

In her speech to her Welsh party conference Kirsty Williams flew a kite. “I think there is a debate to be had that if all parties did commit to [income tax powers] in their manifestos one could question [if] there was such a consensus whether a referendum was needed or not” she said.

I doubt very much that she’ll find much support for the idea. Conservative MP Glyn Davies is one of the few voices openly challenging the consensus. But in civil society the party line is increasingly coming to be questioned.

In the absence of an agreed and consistently applied set of rules of when referenda are necessary, the question of which tax raising powers are passed to the Welsh Parliament should be decided in the long established way – in party manifestos at a General Election.

I understand the nervousness of those who fear the UK tax base being fractured without full consideration of the consequences, which is why a full Constitutional Convention needs to think through how the moving parts of the UK fit together. But these are questions and judgements that need to be considered as a whole, and the conclusions applied consistently. Ad hoc decisions, as well as ad hoc mechanisms for executing them, do nothing to stabilise the Union.

Lee Waters is Director of the IWA

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