Tax powers could halt Welsh economy’s downward spiral

It’s almost a year to the day that the first report of the Silk Commission was published. It is deeply frustrating that, even now, we still do not have the UK Government’s full response to Paul Silk’s thirty-three recommendations.

Responsibility is a key concept for Silk. The argument goes that true accountability can only exist when a government has responsibility for raising a material amount of the money that it spends. The Welsh Government and the National Assembly for Wales have responsibility for spending money on behalf of the people of Wales, so it should also take on some of the responsibility for raising that money.

Responding to Silk   This is the seventh of a series of articles over the last few weeks on the UK Government’s response to the Silk Commission’s recommendations on tax and borrowing powers for the National Assembly.

There is consensus in support of Wales having borrowing powers and control over some of the minor taxes, such as stamp duty land tax and landfill tax. Air passenger duty for long-haul flights has been ruled out – even though this same UK government happily transferred those powers to Northern Ireland.

But it is the transfer of some powers over income tax is the key talking point. And as Eurfyl ap Gwilym, Plaid Cymru’s nominee on the Silk commission, has said, the smaller taxes don’t cut it, they are tinkering around the edges. Without sharing income tax powers between London and Wales, we can’t have a government that takes responsibility.

An annual vote on Welsh income tax levels would mean a real debate on public spending in Wales. For the first time, Wales would have the ingredients and the oven to bake the cake and not just the knife to cut it.

However, this debate is too easily simplified as being about the ‘use’ of the powers. For Plaid Cymru the important element is that income tax responsibilities would incentivise the Welsh Government – any Welsh Government – to increase the tax take.

Getting more people into work to pay income tax and then into higher paid employment would mean a greater tax take – more money in the tax pot. And that surely has to be the aim? It would then, of course, be an issue for the government of the day to decide whether that additional income should be used to cut taxes or invested into public services.

These powers give Wales a fantastic opportunity to do something that devolution has so far failed to get to grips with and that is the downward spiral of the Welsh economy. It makes no sense not to grab hold of an opportunity like that.

Is our lack of confidence so profound, that we do not have the belief in ourselves that we can improve the Welsh economy with the right tools to do the job? Of course, improving the Welsh economy requires much more than partial income tax raising powers.

It requires a plan to invest in infrastructure and  best resources – our people.

We need to ensure that our people are given the widest range of opportunities so that they can meet their full potential will be the key to unlocking Welsh economic success.

We have rightly placed great store on education, traditionally in Wales. The Griffith Jones schools were teaching our population to read and write and attracting the interest of the likes of Catherine the Great of Russia.

“Libraries gave us power”, the Manic Street Preachers tell us. Wales has been traditionally very good at making sure education is available as a route out of poverty. The phrase – “with an education, no one can walk all over you” is as relevant today as it ever was

And we in the Party of Wales are using the influence we have to pursue this. While the politics of austerity is closing libraries, and a failure to keep an eye on the ball has seen literacy rates fall in Wales, Plaid Cymru has been able to use our influence in the setting of the Welsh budget to give priority to education and skills.

Last year our budget deal provided funding for an additional 5,000 higher level apprenticeship places and a science park in the North West. And this year’s deal involves investing in the schools with the greatest levels of deprivation, which should help to address our poor literacy rates.

There are of course many aspects of Welsh politics and policies which are ‘different’. We have, of course, has a number of celebrated firsts – the Children’s’ Commissioner and the carrier bag levy to name some of the obvious ones.

At Plaid Cymru’s conference this year I put forward what would be another first for Wales. Under a Party Of Wales Government there will be a sugary drinks tax. Of course, the ability to introduce this tax is dependent upon the Silk process. We will be more than disappointed if our hands end up being tied on introducing new and innovative taxes – particularly relating to public health.

The principle of ‘nudge’ taxes is widely accepted. Few people would argue against using taxation to reduce consumption of tobacco or alcohol products. Plaid Cymru’s proposal for a sugary drinks tax should also be considered a public health issue.

We believe that this is a good policy because it addresses two problems at once. It will send a strong message that sugary drinks, high in calories, should be drunk only in moderation. Wales guzzles more than 300 million litres of sugary drinks per year. That’s 100 litres per person – about a can of pop for every person every day.

That undoubtedly contributes to our reputation as being high up in the league table of the world’s most obese nations. We have to do something about sugar consumption as well as other aspects of food politics – like access to fresh fruit and vegetables, more exercise and so on.

But this proposal addresses another problem we have, which is a shortage of doctors. Plaid Cymru has pledged that the money raised from this sugary drinks tax will be spent on training, recruiting an extra 1,000 doctors in Wales and incentivising them to stay. This would bring the doctors to population ratio in Wales up to the UK average – although even with an extra thousand doctors we will still be well below Scotland.

Drawing on the academic work carried out in the Republic of Ireland for a similar proposal, we can anticipate a reduction in obesity in around 10,000 people. A further 15,000 should no longer be overweight as a result of the change in behaviour that this will bring about.

And we know from France, where a limited tax was recently introduced, that there is an immediate impact on consumption. In their case a seven cent tax led to a 3.3 per cent fall in consumption. Our proposed 20p tax would be at least three times that. We are assuming a 10 per cent drop in sugary drink consumption.

If we achieve that, it would be yet another way in which Wales would be doing things differently. Because it makes sense for us, we will do it.

Wales already has many of the powers that we need to do things differently. In a number of fields – particularly health, education and rural affairs – we have choices.

We can choose to follow the same policies as before. Or we can choose or to innovate and develop our own solutions.

Sometimes we have pushed our own Welsh policies. We have seen the scrapping of prescription charges for all – a good example of universalism. Under the One Wales coalition government between the Party Of Wales and Labour,  we saw the removal of the internal market in the NHS, and legislation to suspend the right to buy in areas of high housing pressure.

In some areas, of course, we have no option but to innovate and be different. There is no comparison in England for our bilingual society. The importance of the Welsh language is something that can only be recognised and acted upon in Wales.

While there are a raft of areas where we can and are doing things differently, there is no doubt that what happens at Westminster remains important to us here. This is quite obvious in terms of the impact of macro-economic policy on Wales.

More recently it has been critically obvious with the effects of the cuts to Wales. Cuts to the Welsh block grant have been outside Wales’ control. There has been no ability on the part of the Welsh Government to resist those cuts. Austerity is actively undermining Welsh Government policies. Yet there is little it can do.

We are already seeing the fall out from the substantial Westminster cuts, particularly benefits cuts and the bedroom tax, directly undermining housing and child poverty policies of the Welsh Government.

Wales may have more freedom to make more choices now than ever before. Yet it is still far from being a free choice. We have the opportunity for it to be much more of a free choice. A Plaid Cymru government after 2016 will do all that we can to push to maximise our peoples’ choices here in Wales.

Not just through the powers that Wales will hopefully gain through not just the first but also the second part of the Silk Commission. But also through our attitude to government in Wales. A Plaid Cymru government would fundamentally change the relationship between Wales and Westminster.

There would have to be a ‘working together’ – as partners. The dynamic between England and Wales would change fundamentally. We will work to do everything we can to make sure that we have a more balanced relationship of equals. Because Wales deserves nothing less. And that in itself would be different.