"The proposals to cut public spending to such an extent run the risk of stalling any recovery.
Private sector demand remains fragile and access to finance continues to be constrained.
The current plans for fiscal consolidation could therefore have a significant and lasting negative impact on the economy, including people's jobs, which would undermine the very efforts to address the UK's fiscal position.
We believe that promoting economic growth is the best way to restore the health of our public finances and this must be our overriding priority."
Alex Salmond, Scotland's first minister, has been spearheading today's announcement and has taken every opportunity to lampoon the coalition's spending plans on TV and radio news programmes. I would remind him of two things:
- Firstly, according to the Holtham Report, whereas Wales is underfunded by the Treasury to the tune of £300m a year compared to an equivalent English Region, Scotland by the same calculations is currently overfunded by a whopping £4.2bn per year. This means that as we move into the belt tightening phase, Scotland starts from a better supported position than any other region in the UK.
- Secondly, if Alex Salmond thinks that the coalition's programme to reduce spending is too severe he has recourse to a very simple means of offsetting the effects of those the cuts in Scotland: he can use the tax-varying powers granted to the Scottish Parliament to increase income tax in Scotland by up to 3p in the pound in order to fund a reduced pace of cuts. Unfortunately Mr Salmond doesn't have the balls to unilaterally adjust income tax in Scotland as he knows the Scottish electorate wouldn't tolerate it -- therefore he's content to demand that the elected Westminster government (which is already overfunding Scotland by £4.2bn) should abandon their much telegraphed plans and instead raise taxes throughout the UK so as to protect the Scottish public services which Mr Salmond himself is too politically cowardly to take action to protect.
Of course unlike Scotland, the Welsh Assembly has no such tax varying powers and therefore Welsh first minster, Carwyn Jones, is able to make the same argument as Mr Salmond safe in the knowledge that he is not in anyway accountable to the people of Wales for the amount of tax they pay. However he is responsible for how efficiently that public money is spent -- and if WAG was a paragon of efficiency and cost-effectiveness I would have great sympathy with Carwyn's position. However we know that public money in Wales has not been well spent and the recent problems highlighted by the leaked McKinsey report into the running of the Welsh NHS are a case in point, as was the decision to maintain for ten years the £50K+ salaries of hundreds of NHS executives who were found to be surplus to requirements following the last Welsh NHS reorganisation. Therefore, although I fully support any calls for the Barnett Formula to be amended as per the Holtham recommendations, I would argue that the first task of the Welsh Assembly Government is to prove that it can manage public money more efficiently before taking the easy option of simply blaming the coalition government's spending plans.
On a related note, I have argued previously (here and here) that the Welsh Assembly should have tax varying powers in order to, amongst other reasons, make our Welsh politicians more accountable to the Welsh electorate. However as per the example set by the Scotland Parliament, which has had such tax varying powers since it was formed but has chosen never to utilise them, I suspect that a Labour/Plaid Cymru-controlled WAG also would probably just take the politically cowardly route of not using them either. The fact is if you continue to do the same old things, you will continue to get the same old results -- its time for some new and radical thinking in Wales if we are to radically improve our economic situation.