Harry Saville is a recently graduated masters student, having studied International Politics at Aberystwyth University. He is a Deputy Chairman of Aberconwy Conservative Association and interns with a Member of Parliament.
The Welsh Government isn’t working. Neither is Welsh Labour who have led each Executive Committee and Welsh Government administration to date. The two problems are mutually reinforcing; the Welsh Government has full control over spending whilst funded entirely by the UK Government, which has given Labour the opportunity to do what they do best – spend other peoples’ money!
Council tax has soared in Wales, jumping up by 4.2 per cent this year alone. The Welsh NHS, education and local services are all to be found wanting. Meanwhile the Welsh Government has found £52 million to fund a nationalisation of Cardiff Airport. Even if passenger figures have increased under Welsh Government ownership, was it really a worthwhile way to spend taxpayers’ money with Bristol Airport only an hour down the road?
Key to encouraging the Welsh Government to act responsibly is giving it real responsibility over its finances. Making the Welsh Government more accountable to those it serves is the first step. The possibility of acquiring full income tax powers (without the lockstep) under the Wales Bill is key to this, coupled with a significant reduction of funding for Wales from the UK Government.
Writing for the Institute of Economic Affairs, Matthew Sinclair argues individuals are “more likely to feel entitled to scrutinise the quality of local services”* when they are funded by locally raised taxes. Likewise, enhancing the link between taxation and services in Wales, and cutting out the UK Government, will encourage the three million people the Welsh Government serves to subject it to greater scrutiny.
The proportion of tax levied by the Welsh Government and the proportion levied by the UK Government should be communicated to Welsh taxpayers. This could be done via payslips noting PAYE tax deductions or by formal tax statements similar to those being proposed by George Osborne.
As well enhancing accountability these changes would encourage more Welsh Government efficiency. A common argument in favour of tax decentralisation is that local authorities are better placed to ensue that local services cater to local needs. A cursory glance at the Welsh NHS and education services shows that Welsh Labour have consistently failed in this respect. Troubling numbers of people are already moving from Wales to make use of the English NHS. Poor health and education standards are likely to discourage companies and younger professionals with families from investing in and moving to Wales.
If these people were directly contributing to Welsh Government finances through taxation there would be more incentive to provide better quality public services, lest they move to England and take their taxable income with them. There is also a clear incentive to offer attractive tax rates to encourage people to remain in and move to Wales. These two factors together dispel the myth of the ‘race to the bottom’. Whilst people want low taxes, they also want good public services.
The Welsh Government will be encouraged to find the right compromise, with competitive tax rates funding high quality public services. The English experience, where taxes are lower and public services are of a higher standard then in Wales, demonstrate that this is possible.
The current Labour Welsh Government is keen to ensure that Wales does not hold the referendum on income tax powers offered by the UK Government – they are quite content spending without the consequences.However, the ultimate consequence of these income tax powers will be a more economically sustainable Wales within the UK.
There are some that argue the Welsh Government shouldn’t be granted such powers, believing a Labour Welsh Government would take the opportunity to raise taxes further, encouraging people to leave and damaging the economy overall. A Labour Welsh Government might choose to follow this path. However, Welsh Labour are already suffering from their atrocious mismanagement of the Welsh NHS. Under Welsh Labour things might get worse, but if they do not get better they will suffer at the ballot box.
Such a new settlement for Wales, where individuals have a greater stake in the Welsh Government’s financial responsibility, would increase the electoral strength of the Welsh Conservatives as the party financial responsibility and low taxes. Despite commanding huge support in Wales, thanks to the Additional Member voting system Welsh Labour have never won a majority within the Welsh Assembly.
Whilst a Welsh Conservative majority may sound like a distant dream, under the right circumstances a coalition including the Welsh Conservatives is not.
*Norquist, G., Sanandaji, N., Sinclair, M., Smith, D.B., A U-Turn on the Road to Serfdom, Institute of Economic Affairs, London. (2014)