I suspect lots of Conservatives (and a fair few Labourites) will fiercely disagree with my opinions as outlined in this post. But here goes. I am in favour of devolving income tax to the Welsh Gov't - sharing the role with the UK Gov't 50-50. And I would go even further in that I would like to see this as a Conservative commitment in our 2015 manifesto - negating the need for a referendum if we form the next Gov't. I suppose readers (most of whom will disagree with me) are not going to become too exercised by this opinion though. Like me, they do not see much chance of it actually happening!
The reason I begin my post with such a provocative and controversial statement is that Danny Alexander, Chief Secretary to the Treasury has been in Wales today, talking about it. In his view there is a consensus in favour of transferring responsibility for 50% of income tax raising to Wales (Oh Yeah) - and he will not allow a Treasury response to the Silk Commission Part One Report which does not include these powers. Now this is very big talk indeed. I should remind those who do not share my interest (that's almost everyone else) in Welsh constitutional issues what 'Silk' is. The UK Gov't established a commission, chaired by Paul Silk to recommend how devolution funding arrangements should be changed to make the Welsh Gov't more fiscally accountable. Silk 'Part One' was delivered last year, and we are expecting to learn of the Treasury/Wales Office response 'soon'. The Report made several recommendations, but the only one that would make a real difference would be to devolve income tax raising powers.
While I was not in favour of creating a National Assembly for Wales in the 1997 referendum, I accepted the Yes vote immediately, and ever since have believed it should have tax raising/varying powers. Made no sense otherwise. We had those powers when I chaired Berriew Community Council in the 1970s. At present all the Welsh Gov't does in allocate spending. Its not actually a Gov't at all in any real sense. Its a spending agency. Everything popular they say "We are great" and everything unpopular they say "the UK Gov't won't give us the money". No accountability. Needs to change. Welsh politics could really grow up then.
Where I am almost alone is believing there's no need for a referendum. I don't like referendums in principle. The proper way to govern is to inform voters of plans in a manifesto, and if elected act on them. If there's a coalition, both parties involved would have to have committed to devolving income tax raising powers. Problem is that if there is a referendum, voters will automatically assume that a Welsh Gov't will put up income tax, and they will vote no. Well, a future Welsh Gov't might vote to cut income tax. Huge amount of time and money wasted - and no financial accountability either. Anyway, it seems that Danny Alexander has decided it will go ahead! He will not allow anything less. Hmmm. Don't think he's been talking to the same people as me. Don't even think he'll have the Welsh Gov't onside, though could be wrong about this. Looking forward to seeing this response to 'Silk'. Its going to lead to some interesting debate at Westminster.
11 comments:
I will be disappointed if recommendations made by Silk are not introduced. As it will just be yet another commission not implemented in Wales. So I feel the Gov just have to implement it.
Personally I'd like to see a system where there is a UK rate of income tax and then there is a Welsh/Scot/Eng rate in addition to this... like how community councils are funded. Rather than the 50/50 you suggest. This will mean that if the Welsh Gov has efficient tax planning- it will reap the rewards. I also disagree that you say any WelshGov would increase tax rates. I read somewhere that the Welsh 40% band raises some pathetic amount... so why not lower it and get a few execs to live here and the Welsh Gov benefit??
But personally Glyn, as a proud Welshman and putting Wales first. I'd prefer to see corporation tax and air passenger duty devolved. Once devolved I'd like to see them slashed. As a Brit I'd find this unfair as Bristol would lose out and many companies would locate here from London. But as a Welshman I'd love it!!.
Lastly, I feel welfare (benefits) is a problem in Wales. And unlike anybody else in the country, I would like to see it devolved. Yes, this would cost a fortune. But I just feel there is no incentive at the moment in Wales to sort the problem. If it came from Welsh funds - people would "bite the bullet" and actually do something about it. In fact Glyn, I would devolve the system further and I'd quite like to see Councils having a role in it. This, I'm sure would stop certain sea side resorts up in the North from turning into giro-city for people from the N.West of Eng!!!!!
Anon - I do not say that a Welsh Gov't would always increase income tax. I agree that reducing the higher rate band would make much sense. What I said that it would be impossible to prevent it becoming the narrative during a referendum campaign.
Couldn't agree more Glyn. To reverse the famous 18th century slogan there should be 'no representation without taxation'. It shouldn't just be income tax either with the Assembly being given the power to levy other taxes as is the case in regional parliaments throughout the world. Whether it will happen, of course, is another matter because it could be the game changer as far as Welsh politics is concerned. Danny Alexander is right to link borrowing powers with taxation. Otherwise any borrowing has to be paid for out of revenue expenditure set by the UK government or by the users of the capital infrastructure built as a result of the borrowing. As for the issue of a referendum I cannot see given the previous two referenda any changes can be introduced without confirmation by the electorate in a further referendum. This ,of course , might add a further complication particularly if those opposed to tax raising powers see the referendum as a chance for the voters to deliver a verdict on the performance of the Assembly
Under Silk's proposals you'd still only have about a quarter of Welsh revenues coming directly under Welsh responsibility. Alright, it would give a very important link between Welsh spending decisions and revenue raised, but the Commission talks in a bad year about differences of about £10m per annum compared to an entirely block grant funding scenario. If the Tories think this is going to seriously decrease public spending in Wales, they're getting the wrong end of the stick. It doesn't put any of the major devolved socialist policies at risk (and nor should it, to be fair).
Where it would create progress is in quite symbolic ways. People recognising Wales does create some wealth (though nowhere near enough), having more financial expertise based in Wales, and having (very minor) fluctations in the budget based on Welsh economic performance. Glyn and other Tories have to bear in mind though, income tax is one area where Wales hasn't actually done that badly under devolution. You'd be better off devolving corporation tax if you wanted a stick with which to beat Labour.
Also one of the best improvements it would deliver, would be choice at election times between a wider range of spending plans.
I don't often agree with you Glyn, but I think you are absolutely right to say that there is no need at all to hold another referendum for such an obvious development as income tax powers for Wales. As you say, such a proposal can be put to the public by means of party manifestos in 2016 and it can be fully discussed as part of a normal election campaign. As a nationalist, I obviously hope, and expect, that Plaid Cymru will present this argument to the electorate.Let's hope the Conservative Group in the Senedd also sign up to this idea because it just makes so much sense fo them to make a positive case for this. And it will also serve to isolate Labour, who are so beholden to their Westminster faction.
Whilst absolutely pro the principle of the Welsh Govt shouldering some responsibility for raising some of the billions it spends, splitting a key headline tax 50/50 between two wholly separate govts is a recipe for confusion and a diminution in democratic accountability given the continued reliance on the UK govt for revenue support.
Suppose i'm on PAYE and largely work in England despite living in Wales. How does this affect me?
Would it not be far better to devolve another fairly big tax - say VAT - entirely to Wales; which a corresponding drop in direct funding and introducing the flexibility to borrow into devolved DELs?
"Suppose i'm on PAYE and largely work in England despite living in Wales. How does this affect me?" Good question, but think Silk Commission has worked it out based on the Calman Commission's definition of a Scottish taxpayer. I THINK it's on residency, not workplace. Silk looked at this an income tax was the only big tax that could really be devolved, and in other countries it's the most frequent big devolved tax. They couldn't recommend devolving VAT because EU law prohibits it. Rest assured that the xperts have checked all of this.
I agree with all of this including that the change should come about through manifesto commitments rather than a referendum. I don't like referenda either.
Peter - It must be spending all this time in coalition that is having an effect on us!!
Anon Fri Apr 26, 01:47:00 pm
Yes, you are correct in saying Calman and Silk zeroed in on income tax (wrongly IMHO); but income tax is currently collected largely by PAYE via the employer - it's not mainly self assessed. Tax credit rules mean emloyers have gotten used to handling tax codes of increasing complexity ... but i'm not keen on devolving part of a tax on principle. I also suspect that some VAT devolution, based on an argument around Scotland and seccession would not meet with total refusal in the Commission at the present time ...
Peter/Glyn: Surely such concord will be reflected in the gracious speech ???
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