Let’s talk about Wales

We don’t talk nearly enough about what is happening in Wales, and most Scots are probably unaware that it’s been promised another referendum, their fourth since 1979. The Welsh First Minister Carwyn Jones argued in a speech on Thursday night in Edinburgh (here) that Wales has initiated a process that will change Britain out of all recognition no matter how Scotland votes next year. He also served notice that, if Scots do vote Yes, Wales will, under his watch, vehemently oppose Scotland keeping the Pound.

Certainly, Wales has undergone remarkable changes since it was dragged reluctantly into the devolution age by Scotland nearly 20 years ago. In 1979, when Scotland voted narrowly in favour of a Scottish assembly (but didn’t get it because of the 40% rule), Wales voted massively against, by a margin of four-to-one. Even in 1997, they only just managed to endorse a devolved assembly. But in 2011 they voted two-to-one to give it primary law-making powers, and now they’re expected to vote in favour of tax-raising powers. Though the date has yet to be set.

Assuming Wales votes Yes, this represents an even more dramatic constitutional evolution than Scotland’s, if only because it started from such a much lower base. Welsh politics used to be almost entirely about the Welsh language. Many English-speaking voters feared devolution might mean they had to learn Welsh, while many nationalists feared the Welsh Assembly might be dominated by the English. But that’s all changed. Preoccupation with culture has been replaced by economics, and concern that, with the relentless concentration of wealth and power in the south-east of England, constitutional reform is increasingly a matter of economic survival.

We ignore Wales partly because of our own constitutional navel-gazing – which led this week to neurotic speculation about Scottish population statistics in 50 years following the report from the Institute for Fiscal Studies. (How anyone, unionist or nationalist, could have the faintest idea about Scottish demography in half a century defeats me). Meanwhile, Wales has been using the threat of Scottish independence to leverage its position in the here and now. Labour First Minister Jones had refused to come to Scotland to argue the case for the UK if Wales didn’t get a promise from David Cameron of a referendum on tax powers, as proposed by the Silk Commission. He got it.

And last night Mr Jones duly came north to call on Scotland to vote No, so that Wales can vote Yes. Not to independence, but to a deeper form of devolution – a Welsh version of Devolution Max, or perhaps that should be Devolution Bach. Wales has been offered similar tax-raising powers to those being introduced in Scotland following the Calman Commission. Wales is also in line to get a Welsh treasury, an increase in the number of elected members to the Welsh parliament and a shiny new Menai Bridge, like our second Forth Road Bridge, financed by new borrowing powers.

Less fraternally, Carwyn has also demanded the scrapping of the Barnett Formula, which he believes benefits Scotland over Wales. The Scottish Government doesn’t agree, which is another reason the Welsh First Minister is not getting the Bute House treatment. It is confirmation, if still needed, that Scotland is likely to lose the Barnett Formula whatever the result of our 2014 referendum.

Economic determinists might argue that what is happening in Wales and in Scotland is an inevitable response to globalisation, the triumph of neoliberal economics and the decline of the state. The days when the men in Whitehall genuinely cared about what happened in the “regions” are long gone. In its place is emerging a kind of constitutional free market in which countries like Scotland and Wales have to fight their corner or risk going out of business, like the nationalised industries of old.

And whisper it, but devolution and independence are increasingly about tax-cutting rather than tax-raising. The SNP may appear be the party of “socialist giveaways” but its actions speak a different language: freezing council tax, cutting business taxes and seeking to reduce corporation tax. And the same is true in Wales. In the forthcoming Welsh referendum, the Conservatives are calling for a Yes to tax powers because they expect them to be cut. In 1990s Scotland, the Tories opposed devolution because they thought the “Tartan Tax”, as the former Tory Scottish Secretary Michael Forsyth used to call it, could only ever go up.

This is counter-intuitive. The language of devolution – and independence – appears to be about state paternalism, social democracy and public spending, but it is really about responding to the collapse of these things. Again, the answer to this week’s question about public spending in Scotland – will it be higher or lower under independence – is that it will almost certainly be lower whatever happens. But for their own reasons, neither side can admit this.

The dismantling of the old UK state is leading to a fragmentary and piecemeal federalism, which optimists believe could lead to an entirely new United Kingdom by stealth. If there is Yes in Wales, and something like the proposals for Devolution Plus are accepted in Scotland – devolving all income tax and energy taxes to Holyrood – we could start to see genuine fiscal autonomy that allows devolved parliaments to claw back some of the economic power lost to London. However it’s a big ‘if’.

There is no historic necessity about the new federalism. Westminster has shown no interest in promoting it. Everything is reversible, and it is quite possible that a No in Scotland could bring the process to a dramatic halt in Wales as well as in Scotland. Lord Home’s shadow hangs heavy over 2014. A UK government may conclude that there is no longer any need to placate the Scots or the Welsh once nationalism has been put back in its box.

Optimists, like Ben Thomson of the Reform Scotland think tank, believe that sufficient movement has been generated across the UK to keep the devolution project on the rails whatever happens in the Scottish independence referendum. He believes that Devolution Plus is pretty much a done deal and that the opposition parties in Scotland will eventually buy into it. That even after a No vote, Westminster will give Scotland radical new tax powers. Perhaps he is right.

But I wouldn’t underestimate Westminster’s capacity for taking powers back. A No vote will be interpreted as a reassertion of sovereignty by Westminster. And after the “bayoneting of the wounded” there may not be much enthusiasm for handing more powers to Holyrood. Unlike in Wales, Scots will not have had the option of voting for devolution max, so there will be no reason for Westminster to go to the trouble of legislating for it.

The Barnett Formula will be scrapped, certainly, but I wouldn’t bet on Scotland getting petroleum revenue tax in exchange, as the nations and regions squabble over a declining pot of public cash. And Wales overtakes Scotland as the leading edge of devolutionary change.