The Welsh Government’s strategy for devolution finance

While I was speaking in Cardiff last Thursday, Jane Hutt was giving a speech to the Bevan Foundation about the Welsh Government’s approach to the finance debates.  The Bevan Foundation’s report of the speech is here, and there’s a news release from the Welsh Government here.  There’s also some discussion here by Victoria Winckler, the Foundation’s director.

What Hutt outlined is a two-track strategy, with intergovernmental discussions about ‘fair funding’ and reform of the block grant, and other issues including tax powers to be left to the (still-unannounced) ‘Ap Calman’ commission.

This clearly further diminishes the role of ‘Ap Calman’ in the Welsh Government’s eyes.  It’s long been clear that the government’s real priorities were block grant reform and borrowing powers (see, for example, my discussion HERE), and that it had very limited interest in fiscal powers or more structural change.  This latest speech suggests the government is now happy for a relatively low-key commission to consider such issues further, knowing that it won’t make any recommendations for some time and that whether these will be implemented, and when, mean there is no urgency about them.  Meanwhile, the ‘grown-ups’ will press on with addressing the government’s more pressing priorities.  This position isn’t entirely new, but does suggest a bit of zigging and zagging by the Welsh Government, given what this story from the Western Mail in August had to say.

One effect of this approach is to downgrade the impact Ap Calman might have.  It’s easy to understand the Welsh Government’s unease about the commission – it’s an idea from the UK Coalition, never clearly understood or communicated, which the Welsh Government doesn’t support.  However, as I argued in my talk in Cardiff last week, we’re now at the point where there’s a serious mismatch between devolved functions in Wales and the institutional framework for Welsh devolution.  That merits serious inquiry, as does the question of financing powers.  The UK Coalition is seeking to reshape the state in ways that will alter significantly how much is spent on education, health and other public services in England.   The idea that problems will go away if Wales gets ‘fair funding’ dependent on a consequential share of spending on ‘comparable functions’ in England is optimistic at best; Wales will need to raise substantial amounts of its own revenue if it wants to build the sort of social democratic system to which most parties in Wales aspire.

Moreover, there is a serious flaw in the Welsh Government’s tactics.  What clout will it carry in bilateral intergovernmental talks with the UK Government about borrowing and fair funding?  As I’ve argued before (see HERE), the Welsh Government has the problem that it carries relatively little weight, and needs to find support from somewhere.  That’s unlikely in general to come from the Scottish or Northern Ireland governments, especially on financial matters where its interests are so much at odds with theirs.  It’s not making any noticeable efforts to recruit support from other quarters either.  The politics of this may be attractive within Wales, but their impact further afield is much more questionable.  The Welsh Government’s tactics mean it starts with a weak hand in a game where it has few cards to play.  It’s hard to regard that as a formula likely to help it win.

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7 Comments

Filed under Devolution finance, Intergovernmental relations, Labour, Wales

7 responses to “The Welsh Government’s strategy for devolution finance

  1. Jeff Jones

    Alan again on your two latest posts which I’ve just caught up with you raise the issues which should be discussed and debated in Wales. Instead to quote Nye Bevan we have the unity of the graveyard. Unfortunately it is far easier to play politics and blame everything on the nasty UK coalition. Labour is sadly paying the price for the lack of real debate over where devolution would and should actually take Wales. At the moment we seem to be heading for a classic example of the law of unintended consequences. As for Plaid they seem to be drifting off into a fantasy world of independence alongside Catalonia and Flanders. The real issue of course facing areas such as Wales with a left of centre tradition in the 20th century is how does social democracy operate in the new environment created by the aftermath of the credit crunch and the rise of the BRIC economies. On second thoughts it is far easier to blame everything on the Eton Taliban and wait for the electoral tide to turn in your direction.

  2. Jeff accuses Plaid of drifting – whereas the reality is that they are not in government in Wales, and just as Labour in England are re-evaluating and restructuring, Plaid don’t actually have to show their hand yet. (Labour in Scotland are, of course, busily imploding.)

    But Labour in Wales are actually IN government, and so far have shown so little vision and timid self confidence in what they want to achieve that it is embarrassing – Jane Hutt’s efforts show that clearly.

    Carwyn Jones at the Labour conference was petted like a favourite puppy – and lapped up the attention, but it was still clear that he is the plaything of his London masters. Also, Jeff appears to have missed the point that secessionists have long ago given up on blaming the London government of the day for the ills of Wales. It is the unionist parties that like to do that. The problem lies within the system, and Labour obviously have no answer to it as they have not yet recognised the problem.

    And thank you for an informative and thought provoking piece, once again, Alan.

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