The second part of the Holtam Commission’s report on the financing of Welsh devolution has proved to be a bit of a slow burner, having a bigger impact in Scotland than it did here in Wales.
One of the reasons for that is the aspirational nature of the report. With the exception of Rhodri Morgan’s outspoken and strong opposition to tax-raising powers most Welsh politicians have filed it away for later. After all we have a referendum on law-making powers to fight first and then the battle for a reformed Barnett formula. The struggle for fiscal responsibility is something we can look at once those issues are behind us.
And then there is the more common reaction of most moderate supporters of devolution that actually this report is a bit of a ticking timebomb beneath the ‘Yes’ campaign. I share their view that this report will be seized upon by the opponents of properly empowering the Assembly to claim that the modest question facing voters in the referendum is just one step onto a slippery slope that will see us fall helter-skelter into higher taxes and an independent Wales.
As it happens nothing of the sort is on the table and nor is it likely to be. Whatever the logic of the Holtham report I believe that the Welsh referendum will settle the devolution question for several generations. There will clearly be the need for changes to the way we are funded but I cannot see any demand for fiscal reform to go further than that.
There are though two aspects to this report and its predecessor that stand out. The first of these is the tax-varying powers already held by Scotland. Holtham himself makes the point that this power has never been used for fear that it will expose the significant advantage that the Scots have from the existing Barnett formula.
Scotland is in fact sitting on huge amounts of End Year Flexibility (accumulated underspends to you and me) because the settlement is so generously weighted in their favour. Any attempt to use some of this cash to reduce taxes in Scotland would be bound to attract the attention of the Treasury and lead to reform. Equally, there is no point giving Scotland greater fiscal responsibility under Calman without switching the funding formula to a needs-base for exactly the same reason. All the impetus is for reform. All that it needs is for the Treasury to wake up to that fact.
Secondly, the least publicised part of the Commission’s recommendations is that the Welsh Government should have the power to borrow money to advance its spending agenda. Such a cause should command cross-party support and offer additional options to Wales in delivering basic improvements to the NHS and the Education sector.
I understand that Gerry Holtham and his team are due to meet the Chief Secretary to the Treasury to discuss their recommendations. Of the recommendations in the two reports that to gradually reform the funding formula to one based on needs is still the most compelling. Surely, it is only a matter of time.
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I really think central government would like the Assembly to have tax raising powers …if the Assembly had this it may weaken the case for a reform of the Barnet formula, with the charge that the Assembly could raise for public finances with taxation more specific to welsh earnings.
another thought is that this one is really a subject for the ‘Politterati’ !!!!
Have i coined a new word on the blogosphere on Freedom central