What’s the principle at stake that demands a direct endorsement by voters of powers over income tax? IWA Director Lee Waters asks.
Two years ago Manchester rejected the option of a directly elected Mayor but last week was told it would get one after all, as well as responsibility for health and education spending of more than £6 Billion – without the need for a referendum. Wales, meanwhile, must hold a referendum on whether a small proportion of income tax powers should be under the control of the National Assembly. “The irony of that is not lost on me” Kirsty Williams told the Liberal Democrat conference last weekend.
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Nick Clegg has called the parallel a ‘red herring’, whereas David Cameron flatly asserted that a promise had been given to hold another referendum in Wales, and that was that.
There is no consistent rule of when and why referenda are held in the UK. For example, there has been no referendum of the UK’s membership of the EU since 1975, despite significant extra powers being passed to Brussels; plans to significantly change the workings of the House of Lords were not put to a popular vote; and Police Commissioners – a radical departure in the way we govern – were established without a referendum. But four years on from the last Welsh referendum we face another, which would be the fourth on devolution in the last 35 years.
Since 2011 the Assembly has been a law-making Parliament and as a result of the St Davids Day Agreement will now have the ability to change its name to reflect the fact. But unlike every other Parliament – and indeed, unlike Community Councils or County Councils – it will primarily be a spending body, responsible for only raising only 10% of its income.
The Silk Commission regarded this as a problem, just as the UK Government did with Scotland. In 2012 the UK Government changed the law (without a referendum) to force Scotland to take responsibility for raising some of the money it spends through income tax in order to make it properly accountable. The UK Government now wants Wales to do the same – although only after another referendum. “If we believe that the devolution of tax powers is essential to ensure properly accountable and responsible government” Prof Richard Wyn Jones, Director of Cardiff University’s Welsh Governance Centre, argued before Welsh MPs, “then the question must be asked: should accountability and responsibility be optional?
Indeed, Professor Roger Scully has not be able to identify a single example of a referendum being required before tax powers are transferred to a pre-existing layer of ‘regional’ government anywhere in the world. “What if people vote No to accountability? Where does that leave us?” Richard Wyn Jones asked at a fringe meeting at the Welsh Liberal Democrat conference
But what’s the principle at stake that demands a direct endorsement by voters? It can’t be tax raising powers per say as the full devolution of business rates has been agreed from April 2015. Indeed, the Assembly will be responsible for 10% of all taxes collected in
Wales and no referendum has been deemed necessary.
The other argument advanced is that of precedent. There was a separate question on tax powers in Scotland in 1997, and Welsh voters have not been asked – in fact they were assured in the 2011 referendum that tax powers were not on the table. The Scottish powers to vary income tax have never been used and the Scottish Calman Commission argued that the principle of ‘financial accountability’ was the overriding principle. The question of pledges made in the last Welsh referendum is one I’m acutely aware of. I was Vice-Chair of the campaign and responsible for communications. The campaign’s message was a requirement to achieve cross-party consensus, but since the vote the UK Government’s decision to set-up a ‘Calman type Commission’ in Wales in the form of the Silk Commission, and the Treasury’s subsequent agreement for ‘minor taxes’ and Business rates to be passed down, have changed the terrain.
I’d suggest the principal reason is historical. Ever since the political establishment was shown to be staggeringly out of touch with public opinion of devolution in 1979, where an elite consensus was met with a 4:1 rejection in a referendum, the political class has been afraid of being out of step with the voters on Welsh devolution. The unease was reaffirmed by the water-thin majority in the 1997 referendum. The generation of political warriors that made up the party representatives on the Silk Commission was seeped in that mindset. It was at the first meeting of the Silk Commission in October 2011 it was agreed, without discussion, that another referendum would be needed on the tax question, and it has been very difficult for political leaders to move beyond that – indeed until the removal of David Jones there has been no political space to even discuss changing tack.
In her speech to her Welsh party conference Kirsty Williams flew a kite. “I think there is a debate to be had that if all parties did commit to [income tax powers] in their manifestos one could question [if] there was such a consensus whether a referendum was needed or not” she said.
I doubt very much that she’ll find much support for the idea. Conservative MP Glyn Davies is one of the few voices openly challenging the consensus. But in civil society the party line is increasingly coming to be questioned.
In the absence of an agreed and consistently applied set of rules of when referenda are necessary, the question of which tax raising powers are passed to the Welsh Parliament should be decided in the long established way – in party manifestos at a General Election.
I understand the nervousness of those who fear the UK tax base being fractured without full consideration of the consequences, which is why a full Constitutional Convention needs to think through how the moving parts of the UK fit together. But these are questions and judgements that need to be considered as a whole, and the conclusions applied consistently. Ad hoc decisions, as well as ad hoc mechanisms for executing them, do nothing to stabilise the Union.
“What if people vote No to accountability? Where does that leave us?” Richard Wyn Jones asked at a
fringe meeting at the Welsh Liberal Democrat
conference.”
The elite “us” in that statement is priceless. The people vs Us? Elect a new people. How else can our heroic Project advance? Get over yourselves people.
As for a referendum, didn’t your very own Gerry Holtham just (rightly) say that sub UK demands for extending devolution are anything but uniform, and warning of quick political fixs?
‘Another fine mess’ etc awaits.
The fact that people have not been consulted by referenda in regard to other major changes doesn’t argue convincingly that they never should be. Rather, the opposite. Let’s have more consultation and a vote which counts.
People will always grab more power and influence as greedily as they can and it is important to have constraints over this. Their justifications should be put to some test and public discussion. Devolution is the current political fashion in the uk (though not in the eu) and I have seen many cycles of moves to decentralise power in different spheres followed by moves back to centralise as the problems each bring are realised. The problem with devolution is that it is one way only. No way back when the difficulties and costs are recognised.
Lee, your argument on the merits of the case is sound enough. But Welsh politicians promised the electorate at the last referendum that the result did not imply tax-changing powers. They promised in effect that those would be subject to a separate plebiscite. Although such a plebiscite makes little sense in itself, if it is not held our politicians will be open to accusations of bad faith and the legitimacy of the last referendum result will be called in question. Richard Wyn Jones is right that accountability should not be optional but the promise has been made.
Has Professor Roger Scully ever been able to identify a referendum question on granting greater powers that included a specific reference on the ballot paper that a Yes vote would not mean that this would result in the granting of income tax powers?
Of course therin lies the answer poised in your article. In fact wasn’t it one Lee Waters and shrill shouty voiced Roger Lewis who constantly repeated with some indignation over and over again that the 2011 referendum wasn’t about granting income tax powers?
It has always been a comfort that, in spite of all the difficulties that the Assembly has faced, it can point to the fact that it was voted into existence by the people of Wales and acquired law-making powers on the same basis. It is only logical to extend the same principle to tax-raising powers, the next step in building a democratic polity.
The question would be, “Should the National Assembly for Wales have the power to raise taxes?”
However as Lee rightly points out, this principle has already been established by virtue of administrative arrangement. Clearly politicians do not think that the principle requires a referendum. So the suggestion is that the referendum should refer to income tax. This therefore is not a referendum of principle and it is not clear why this particular tax has been singled out for special treatment. And if understand it correctly, the power will be to vary income tax not raise it though I’m willing to be corrected on that.
In contrast, the Northern Ireland Assembly will soon receive powers to set the rates of corporation tax without reference to a referendum but rather as a result of a Westminster bill.
It seems to me therefore that the principle having already been established, the need for a referendum is defunct. Lee argues the historical case for such a position and there is a great deal of weight to it. And the current proposal seems more driven by a desire from elected politicians to show they are connecting with the Welsh public, for political reasons rather than constitutional ones.
Should Labour win the Westminster election in May, or become the largest party, then the constitutional convention that Lee refers to is on the cards. But I think that providing stability for the Union is pushing the argument too far. What may be available is stability of Anglo-Welsh relations. The strength of the SNP which, if the polls are to be believed, is still on the rise does not bode well for a stable Union. Imagine a constitutional convention with the SNP representing Scotland, what are they likely to want out of it? I would suggest that it would want every power going, short of full independence which would require a referendum. And as the government of Scotland and with every suggestion that they will be the biggest party north of the border in Westminster, who will be in a position to tell them no?
These thoughts are still taking shape in my mind but increasingly I feel what we are discussing is what change to Anglo-Welsh political relationships is achievable. In other words what will Wales look like when the devolution process finally settles down here? Scotland is going to go its own way, regardless of what is negotiated for Wales.
Lee is right. The American colonists campaigned on the slogan ‘no taxation without representation’. Proper accountability demands ‘no representation without taxation’.
All the arguments against having a referendum on this issue and to simply give wales powers to vary income taxes are legitimate, but would such a move win real legitimacy in the eyes of the welsh people? The same arguments – that it is just a ‘technical’ issue – were deployed against the need to have a referendum on the welsh assembly gaining primary law making powers Yet there’s no question the decision to hold the 2011 referendum – and the emphatic result – gave welsh devolution a popular legitimacy it had never previously enjoyed.
Further if those of us who support greater devolution for wales are seen to be arguing against such a referendum it makes us look afraid…because we fear such a referendum would be lost! The pockets of ‘devo scepticism’ in wales – and make no mistake they are still around – would have a field day , and i fear popular support for welsh devolution would start to wane again.
But the least credible position on this issue is surely the stubborn and deeply damaging one adopted by our first minister. His party had 13 years in power in Westminister to address the issue of ‘fair funding’ for wales and the outdate barnett formula – but they did nothing about it. On this issue carwyn jones and welsh labour dont only look afraid – they look like total hypocrites!
Devolving tax raising powers to the Welsh Government has a precedence already that as you say occurred without the need for a referendum so the horse has bolted without any fuss. Why is this any different and given the cost of holding a referendum is not insignificant [ our last one in 2011 cost £6Million] having a referendum specifically about limited modification powers to income tax seems over egging it. A more widespread referendum might be useful but currently what would it include.
YES. Many people didn’t bother to vote in two previous referendums on devolution because they felt it wouldn’t affect them,however any one with a ‘few bob in the bank’ will be petrified at thought of any tax raising powers being given to WAG.Why can they not concentrate of ‘sorting out’ the public services as a whole at a ‘strategic’ level,rather than parish pump politics that seems to rule our political elite. We cannot afford the absurd numbers of paid politicians at a)County/WAG/Westminster/Europe levels,not withstanding the ‘quangos’ of the great and no so great acceptable to political master in Caerdydd. The wheels might be coming off ‘devolution’ as today a Plaid Cymru MP questioned OUR Prime Minister about a constituent who couldn’t get the treatment he needed in North Wales,so had to move ‘over the border’,i.e ENGLAND to obtain drugs etc etc. Before getting ‘tax raising’ powers over us ordinary people we need a new look at devolution and whether it is working for all our benefits,and not just the favoured few!!
The real reason why Lee and Plaid are so dead set against a referendum is here:-
http://www.icmunlimited.com/data/media/pdf/BBC-Welsh-Poll-2013-final-Website-version.pdf
Page 5; only 40% want the Assembly to have control of taxation levels. With the outcome so uncertain….and you can bet that Welsh Labour have already done some private polling on the subject, the risk is high. Once the people of Wales get the feel of stopping devolution then they may get a feeling for rolling it back. That is the reason why Plaid and Lee want more powers without asking the public.
I suppose the question is what is the purpose of these articles and blogs. I’m not going to defend Lee’s article firstly, because he does not need it and secondly because he may not want it. But he raises an important issue about the way our politicians operate. There doesn’t seem to have been any real debate on this. All parties appear to have drifted into this position by virtue of group inertia.
Gerald is right that the promise has been made and if any of the parties making it were to make a U-turn then their opponents would seize the opportunity. But isn’t it one of the purposes of the IWA to analyse our politics? David Melding recently lamented the lack of political writing in Wales and if we don’t think seriously about and question the way our politics is conducted, then that’s not likely to increase.
So it is quite legitimate, in my view, to ask why all the parties have signed up for this and there doesn’t appear to be anyone at Assembly level arguing the opposite case. I won’t restate the case against it because it has already been made but we could legitimately ask why it is being advocated when it makes no constitutional sense to do so? Is it, as Lee argues, based on a fear of being caught out of step with Welsh public opinion? Is it to have some sort of tax raising referendum which can be used at a later date to justify the transfer of tax powers without the need for a referendum? I don’t think we’ve heard the real reason for this somewhat pointless exercise.
I don’t think, Geraint, that anyone is arguing that we should not have financial accountability attached to the work of the Assembly. The question is why are the politicians arguing for a referendum for something as mundane as the ability to vary income tax rates, a power that is highly unlikely to be used? There are issues worth having a referendum on but this isn’t one of them.
If political analysis is to be of any use in Wales, we need to get beyond simply rationalising away decisions that make no sense. Surely it is part of our role to challenge cosy political consensuses and ask the awkward questions. If every debate is resolved into that’s the realpolitik ever time, then the intellectual debate surrounding our politics is going to be shallow if not useless.
Gerry / Kevin
I did take on this point in the piece. Yes, Carwyn Jones said in the campaign that income tax was not on the table but events have clearly moved on – at the instigation of the UK Government.
Why is it ok for Business Rates to devolved but not a portion of income tax. In fact the ‘minor taxes’ that have been devolved much more likely to be used than income tax powers
“the intellectual debate surrounding our politics” (sic)
Well that at least brightened my day! More humour please.
Let’s have the vote. But let’s make it a more worthwhile vote.
i) do you want the Welsh Assembly to have tax lowering powers
ii) do you want the Welsh Assembly to have tax raising powers
iii) irrespective of your answers to i) and ii), do you still want to continue having a Welsh Assembly
iv) irrespective of your answers to i), ii) and iii) do you still want to remain part of the European Union
We might start to learn something.
If it is even logically possible and historically accurate to say that a ‘promise’ will be broken by not holding a referendum on Income Tax variation (and I’m not sure that it is*), then that ‘promise’ has already been broken by the Conservative and Liberal Parties at Westminster.
By virtue of the Wales Act, the National Assembly is already a tax varying legislature (Stamp Duty, Aggregates Levy, Land Fill Tax, Business Rates). Those people expecting an outcry, or a rush to the barricades, if such a referendum were not held, might reasonably expect that that rebellion would be happening now, wouldn’t they? The constitution of Wales has already been changed. The fiscal sovereignty of Westminster in Wales has already been corrupted. The principle of UK-wide fiscal uniformity in both distribution and degree has already been diluted. If there is any deceit or foul play against the good will of the Welsh people, it has already taken place.
Since there is no legal (and certainly no technical) impediment to the National Assembly varying the taxes already under its jurisdiction to a level that materially alters the overall tax burden of the people of Wales, whether measured directly or indirectly by via price transfer, then it is frankly irrelevant (from a constitutional perspective) whether this tax or that tax is within that jurisdiction or not. The Welsh Govt. can (in theory) already increase/decrease the compass and rate of any of these taxes and significantly increase/decrease the overall tax burden of the country, and it is constitutionally irrelevant whether that would be politically expedient or economically distortive. The constitutional principle that the overall tax burden of the people of Wales can be changed by the National Assembly has already been conceded and enacted.
It is not a matter of constitutional importance that a Welsh Govt. chooses to increase its revenues by 0.5% by tripling Stamp Duty or by raising the higher rate of Income Tax by 1% at the margin. It is constitutionally important that it can vary the overall tax burden in Wales vis-à-vis other parts of the UK at all.
Insisting on a referendum on Income Tax variation, whilst acquiescing to (and even supporting) the passage of the Wales Act, can only be interpreted as either shallow political grandstanding or constitutional and fiscal ignorance.
(*I will happily be corrected, but I do not recall senior ‘Yes’ campaigners ‘vowing’ (to use the current jargon) that a referendum would definitely be held on tax devolution, only that the referendum at hand (to confer primary legislative powers on the Assembly) was not in itself causally related to any future proposal to confer tax varying powers; that the referendum was not and could not be construed as popular consent for tax devolution. And of course they were correct. It was not, neither legally nor morally. Any future devolution of tax powers would have to be, and has been, subject to a separate process of consultation, parliamentary process and popular consent. I am not aware that anybody with any political authority committed that ‘popular consent’ would be sought specifically through a referendum rather than (say) a manifesto mandate at a General Election. Does such a ‘vow’ exist? If it does, who made it?)
This whole debate – and the so-called St David’s Day ‘Agreement’ – has been overtaken by events in Scotland. The only referendum that we should contemplate is one in which the people of Wales have a vote on whether they wish the same powers as Scotland. Nothing else makes political sense – because anything less would settle nothing.
Cards on the table: I am a a home-ruler. I think Wales should ultimately have full powers over its own affairs while remaining in both the UK and the EU as long as its people wish. But the Welsh government and administration does not have the capacity at present to take over every policy area with success. Moreover our political culture is immature with people voting tribally or out of habit so we always get the same crew in office however well or badly they govern. So it makes perfect sense to take a progressive approach and devolve powers gradually as experience grows. The St David’s Day agreement is fine for now but no-one should think it’s the end of the process. As for tax powers, the sadness is we got things the wrong way round. Local authorities the world over have tax raising powers without being able to pass primary legislation. That;s normal. Nowhere outside the UK is there a primary legislature that does not have substantial responsibilities for raising tax. For good reqason, it’s a nonsensical arrangement that works against good thrifty government. If we have to have a referendum let’s get on with it. Even a people as bored and uninterested as the Welsh will see that the people spending their money should have to come to them and make a case for raising some of it.