Tuesday, December 18, 2012

Discussing Devolution of Power to Welsh Assembly

Mr Paul Silk and Professor Noel Lloyd came along for a friendly chat with the Welsh Affairs Select Committee this morning. All very genteel, but some interesting 'nuggets' emerged. Most discussion was about recommendations already made under Part 1 of his review on how to underpin the National Assembly with fiscal accountability. Very little discussion about Part 2, which will be about what powers should be devolved - in reality what extra powers should be devolved. That's for next meeting with the Silk team.

Best 'nugget' of the lot was Paul Silk's statement that his his Commission intends to look at whether parts of the 'benefits' system should be devolved to the Welsh Gov't. Secretary of State, David Jones told our last meeting that National Assembly powers should be no more than 'tweaked' under Part 2. Well, there is no way, devolution of benefits can be described as 'tweaking'. Clearly, Paul Silk, in his 'quiet but firm' way was putting down a marker. Sounded to me like a direct challenge to Sec of State - very interesting ! Though BBC's David Cornock tells me it was more 'could' than 'would'.

Quite a bit of discussion about devolution of income tax (part thereof). First Minister has tried to reassure all that income tax would not rise. Not sure about this myself, especially since its recommended there be freedom within tax bands. Doesn't look impossible to me that a future Labour Welsh Gov't might fancy putting top rate up to 50p, higher rate up by 1p and cutting lower rate by 1p. Any administration which wants to buy up airports might easily fancy a policy it could sell as "squeezing the rich". Could also see a future Welsh Conservative manifesto arguing that cutting income tax would stimulate the Welsh economy. Unlikely - but very possible. The rest of the Silk Report tax devolution proposals are small beer.

One issue of interest to me was the degree to which borrowing powers are dependent on power to access money for repayment. It will be no use a future Welsh Gov't going to the bond markets without the capacity to raise funds to repay. Only income tax devolution will provide that. Another recommendation of interest is that the block grant problems normally referred to as Barnett Formula issues must be sorted before income tax can be devolved. We' ve been talking about this for 30 yrs already! I see long grass before me.

Paul Silk was clear that a referendum is needed before income tax can be devolved - though I sensed there had been a bit of tension in the Commission over this. Major influence on the Commission had been desire of two main parties in Assembly for a referendum. Must admit I'm not at all convinced by this trend for politicians to set difficult issues aside by 'parking' them with promises of a referendum. We should tell people what we intend to do in manifestos. General Elections should be about policy decisions, not a beauty parade - which is why I'm totally opposed to TV Leader's Debates as well. It was a good interesting session. Perked up my interest in the Welsh Affairs Select Committee no end.


Anonymous said...

"Doesn't look impossible to me that a future Labour Welsh Gov't might fancy putting top rate up to 50p, higher rate up by 1p and cutting lower rate by 1p."

Isn't this the whole point? Labour could put that in their manifesto. Tories could put cutting taxes in theirs. And the option would be there to effectively keep them the same, which is what would probably usually happen.

This would give the electorate a wider choice.

Anonymous said...

The devolution of income tax as Silk proposes in the 1st part of his report leaves Labour in Wales in an awkward position. If the Assembly had the powers proposed the most sensible thing to do (in order as a "shot to nothing") to kick start the economy would to actually cut the top band of Income Tax by a couple of pence iin Wales. The present income from the bracket is pitifull so even if it didn't work in attracting more higher earners to Wales (with the possibility that these are the type of people who may start their businesses here) didn't work it would cost almost nothing in reduced takings.
However this of course, politically, would be almost impossible for a Labour Govt to enact (or even propose)- the idea of cutting tax for the higher earners (no matter if it made practical sense or not) would be a pariah to most in Welsh Labour.

Anonymous said...

I don't think cutting the higher tax would "work", but neither would it cost much. It's a low risk option.

Labour could quite easily not bother cutting the top rate and the public would probably support that. However, I would really like to see it debated at election time so that voters had a real choice. At the moment, Assembly elections don't have THAT much riding on them, compared to other elections. If you throw in a debate about tax, it gets serious and the electorate then has real power.