WalesWatch — the IWA blog
Crunch year for Welsh media
Geraint Talfan Davies, IWA Chairman:2009: There has not been a more important year for the media in Wales for decades past, nor will there be for decades to come. This will be the year when we truly see the shape of things to come, with much of the action shoe-horned into the first three months. By now the communications regulator, Ofcom, will have decided how it would like to see the future of public service broadcasting. Its board will give the proposals some final tweaks at its meeting this month before revealing all in February. This is likely to be a crucial announcement for the future of television broadcasting in Wales – not only for ITV’s Welsh news service, but also for the future of general programming made for Wales. Hard on the heels of Ofcom, the Communications Minister, Lord Carter, will publish his report on Digital Britain that, apart from endorsing some or all of Ofcom’s proposals, could boost the prospects for superfast broadband. It is significant that in his new year interview with The Observer Gordon Brown, mentioned superfast broadband in the context of a possible job-creating public works programme that could also assist the cause of carbon efficiency.
The big issue is whether such a commitment will provide for a universal service that would reach both poorer and more sparsely populated parts of the country. Wales could be into it early with BT planning to pilot superfast broadband for the UK in Whitchurch, Cardiff. Without a wider switch the higher speeds would be confined to Virgin Media’s cable system, with its limited geographical reach, thus entrenching the digital divide.
Next month the switching-off of analogue television transmission will begin with the Blaenplwyf transmitter scheduled for 10 February, followed by Wenvoe on 3 March. Kilvey Hill, near Swansea, and Preseli and Carmel further west will follow in August, with Llanddona, in the north-west, and Moel-y-Parc in the north-east, in October.
The year will also see two less well-publicised events that could, nevertheless be very significant. First is the auction of broadcasting spectrum that could allow for a local television service for Cardiff and Newport. Regulations for this auction came into effect on 5 January. It has to be said that the commercial precedents for local television in the UK are not encouraging, so it will be interesting to see how many bidders for this spectrum emerge, and who they might be. It could be an indicator of new coalitions of forces in Welsh media.
Since any successful bidder will own this spectrum in perpetuity, and will be able to trade it the market place, some players may well think they can pick up an important but cheap playing card for the future.
A second development, later in the year, will be the launch of Real Radio’s service for north and West Wales, to add to its service across south Wales. Last year there were only two bidders for this radio licence, the other being a group wanting to provide a more local service in the north-east. The award of the licence gives Real Radio (part of the Guardian Media Group) an all Wales footprint – the first all-Wales commercial radio service. We shall have to see whether this leads to any significant development in radio journalism, which has not been strong in the radio sector.
But the big interest for Wales lies in decisions on public service broadcasting, and the extent to which Ofcom and the Government will take note of the real concerns. There has been a tendency in London to believe that the only broadcasting issue in Wales is broadcasting in the Welsh language. The current Ofcom review of the system is the first in which services in the English language have been the main concern.
Ofcom’s own advisory committee for Wales, advocated a Welsh Broadcasting Commission and an investment of £40m ‘to sustain and improve the range of output.’ The Assembly Government’s Broadcasting Advisory Group (of which, I should say, I was a member) called for something very similar, a Wales Media Commission, with at least £30m needed simply “to restore the value to Welsh broadcasting likely to be lost between 2006 and 2013,” but rising to £50m to fund a possible English language channel for Wales, along with online development. Its proposals were endorsed by the Welsh Assembly Government and its Heritage Minister, Alun Ffred Jones.
Almost every observer expects ITV’s news service for Wales to be rescued by some means or other: either by a renewed commitment from ITV, some additional public funding, some resource sharing with the BBC, or a combination of all these. The trap for Wales lies in accepting such a minimal deal.
At ITV Wales’s Politician of the Year event before Christmas, several politicians rightly underlined the importance of plurality in news, but the biggest threat now is to the English language general programming. By the end of this year, in English language television for Wales, sport will account for more hours than the combined total devoted to drama, music, arts, factual and light entertainment programmes. Wales needs a complete television service in English as well as in Welsh.
Geraint Talfan Davies is chairman of the Institute of Welsh Affairs.
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Planning needed to meet growth in demand for Welsh-medium schools
John Osmond considers the main recommendation of an IWA study:
The Assembly Government should enforce its requirement that Welsh local authorities should undertake parental surveys to assess demand for Welsh medium education, says a new IWA report, Creating a Bilingual Wales: The Role of Welsh in Education. The report says that despite an Assembly Government requirement, now more than five years old, so far only three authorities have carried out systematic surveys.The report surveys the 14 Welsh counties with fewer than 20 per cent Welsh speakers – those identified by the Assembly Government as requiring surveys – and finds that advances have been made where the surveys have been undertaken:
- Newport carried out a survey in 2002 and as a result the city’s second Welsh-medium primary school, Ysgol Ifor Hael, opened in September 2008.
- A survey in Wrexham, published in October 2007, revealed that 43 per cent of parents would choose Welsh medium education if there was a school reasonably close to their homes. As a result a plan for the expansion of Welsh-medium education is now under discussion.
- Swansea has also carried out a parental survey revealing that 28 per cent of parents who responded wanted a Welsh-medium education for their children regardless of its proximity to their homes. If it were available within reasonable reach the demand rose to 38 per cent.
Former South Wales AM Owen John Thomas, who carried out the survey of the 14 local authorities for the IWA report, said: “The greatest potential for gaining new Welsh speakers lies in the latent demand within these counties and this is substantiated by the growth of Welsh medium education across Wales.
“However, although several years have elapsed since they were first required to assess the demand for Welsh-medium school places, most of the local authorities have made little progress.”
In his contribution to the report Meirion Prys Jones, Chief Executive of the Welsh Language Board, notes that although the number of children in Welsh-medium schools has increased by 16 per cent over the past decade, to more than 53,000, there has not been a corresponding increase in Welsh-medium schools.
“Therefore, we must come to the conclusion that more children have gone to the same schools, “ he says. “This proves that an intentional policy of maximising the increase in the numbers of children and opening more Welsh schools was not implemented. This would have offered Welsh-medium education closer to the homes of an increasing number of children, and within their natural communities, and Welsh-medium education would have been far more accessible.”
He argues that the main difficulty facing the enhancement of Welsh-medium education is the lack of a national policy. This he puts down to a lack of political will, adding: “There has been no effort to ensure that the civil service, which is responsible for Welsh-medium education, has developed an understanding of this part of the education system. This is despite the fact that one in every four primary schools teaches pupils through the medium of Welsh.
“If you looked at the Welsh Assembly Government's education department today, you would see that the number of people there who are familiar with the Welsh-medium education and training sector is very limited. How, therefore, can this Department plan for the Welsh-medium sector with trust and confidence?
“It is time for the Welsh Assembly Government to adopt the role of a body responsible for planning the development of Welsh-medium education and training. The elected government of Wales needs to ensure that it has the capacity to plan the future of education in Wales in its entirety, not only the English-medium element. The sad truth of the matter is that that is all that has been done so far.”
Other contributors to the report explore problems facing teachers in classrooms where pupils have varying degrees of Welsh language ability and innovative Welsh teaching approaches in the Rhondda, Ceredigion and Gwynedd.
Under the terms of the 2007 One Wales coalition between Labour and Plaid Cymru agreement the Assembly Government is due to produce a consultation document on a strategy for developing Welsh-medium education early in 2009. The commitment in the One Wales agreement states:
“We will create a national Welsh-medium Education Strategy to develop effective provision from nursery through to further and higher education backed up by an implementation programme."
John Osmond is Director of the IWA. Creating a Bilingual Wales: The Role of Welsh in Education is available from the IWA at £15 (discount to IWA members).
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Borrowing powers sidelined
John Osmond looks at the implications of a Scottish row for future funding of the National Assembly:On the face of it the terms of reference for the Assembly Government’s Commission on ‘Funding and Finance in Wales’, chaired by hedge fund manager and IWA trustee Gerry Holtham, are pretty innocuous. They are to review the operation of the Barnett formula which allocates the Welsh block grant and to:“… identify possible alternative funding mechanisms including the scope for the Welsh Assembly Government to have tax varying powers as well as greater powers to borrow.” It is the possibility of the Assembly Government gaining powers to borrow which suddenly have become controversial, following an extraordinary admission by one of the economists that have been advising an equivalent funding commission in Scotland. In Scotland the Calman Commission (see Fiscal Federalism post) has commissioned a group of 11 experts to examine the options for giving the Scottish Parliament greater financial powers. Now one of them, Hughes Hallett, Professor of Macroeconomics at Strathclyde University, said he had wanted the expert group to look at whether the Scottish Government should be given the power to borrow money but claims this was glossed over in the final report.
As he told Scotland on Sunday at the weekend: "Had it been a criminal issue, you would call it tampering with the evidence by not considering all the options."
In the final version of the report, compiled by the experts under the leadership of Professor Anton Muscatelli, Principal of Heriot-Watt university, Hughes Hallett said debt was hardly mentioned.
He said: "There is a very brief note that debt and borrowing may be necessary, but there is no discussion of any of the consequences or consideration of how much debt a Scottish Government can issue. The issue is how we can manage debt and how it can be issued. It would be helpful to know what that was."
Hughes Hallett added that he could understand why the Labour Government might not want such issues fully explored if ministers were not keen on handing over more powers to Holyrood.
He said: "You can see from the London end why they might not want to get into some of these issues. I can understand the political view from London that you don't want to go into it.
"I could imagine that if you're a sitting government, you probably have vested interest in keeping things more or less as they are. There may be all sorts of political reasons for keeping things as they are and they are legitimate. But they are not reasons to keep options out of the discussions."
Hughes Hallett explained that the ability to issue debt was essential if Scotland were to replace the current Barnett Formula funding mechanism with an assigned taxation system, which would see the Scottish Government's funds being calculated on the basis of the tax revenues paid by Scots to the UK Treasury.
He said the ability to issue debt was essential because tax revenue adjusts quickly to variations in income, but public expenditure for projects such as new schools and hospitals adjust at a slower pace.
Therefore the ability to raise money by going into debt is essential to keep projects going when tax revenue diminishes during economic downturns.
"You can't just close hospitals and schools every time the economy slows down," Hughes Hallett said. He also argued that the report had omitted to explore fully the merits of other economic models that could form the basis for a new constitutional settlement for Scotland.
"If you have to decide what you want and if people can't find that laid out, it (the report] doesn't have much legitimacy. What's missing here is any consideration of how these sorts of schemes might work."
Hughes Hallett said the report failed to examine the "trade-offs" between various systems. The economist claimed the report did not properly analyse the advantages and disadvantages of the Barnett Formula, assigned taxes and fiscal autonomy.
• John Osmond is Director of the IWA.
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Welsh Climate Change Challenge
Cathy McLean provides a reality check on the Assembly Government’s carbon emission targets:Nineteen solar panels per home in Swansea and 28 per cent fewer cars on the road in Bangor are just some of the methods Wales will need to achieve government carbon reduction targets, according to a report launched by the Royal Institution of Chartered Surveyors (RICS).The report, The Climate Challenge – Your City, Your Responsibility (available as a PDF in English and Welsh), uses scenario planning and statistical data sources to demonstrate the lengths three Welsh cities will need to go in transport, energy supply and energy demands of the built environment to meet the Assembly Government’s 20 per cent carbon reduction targets by 2010. Wales was the first government in the world to legally embed sustainability in all its actions and the Assembly Government has ambitions to achieve the UK’s 60 per cent target for reduction in carbon emissions by 2050 – even bettering this with latest target now being at an 80 per cent reduction. They have also recently pledged to achieve annual 3 per cent reductions in green house gas emissions from 2011 onwards. These targets demonstrate the Government’s commitment to lead by example. While these aspirations should be applauded, the RICS research highlights the significant challenges needed to meet them.
According to the National Assembly's Members Research Service, Wales is currently producing more carbon dioxide per person than the rest of the UK and is the 12th highest producer in the world. Given Wales’s history of mineral extraction and manufacturing, and our ongoing presence of heavy industry, these statistics reflect an infrastructure that has traditionally relied on high carbon use.
Transport is also a hot topic for businesses, cities and public services. Strategies outlined in the RICS report highlight the extent we will need to go to make an impact in this area. One example is persuading the people of Bangor to drive 28 per cent fewer miles or collectively owning 28 per cent fewer cars. Moreover, every car in Bangor would have to perform significantly better than the best model currently available – the Honda Insight – of which there are only 500 in the UK.
A further recommendation stems from the issue of energy demand from the built environment. This section of the report, based on Cardiff, looks at domestic, industrial and commercial buildings. Regulations driving change in buildings and energy efficiency will produce some change. However, every business site will need to significantly reduce carbon dioxide emissions per square metre. Yet as things stand it is considered ‘good practice’ for average non-industrial emissions to be brought down to a level currently achieved by office buildings.
Energy supply analysis was based in Swansea where research showed that on a household basis each home in Swansea would need 19 solar panels to help reach the 60 per cent target.
On a broader note, energy supply changes are likely to affect green belt policy, biodiversity and areas of outstanding natural beauty. Interestingly, industry developments in waste reprocessing technology, eco and resource parks may reflect the commercial opportunities.
With the Severn Barrage still in the frame, together with Defra’s comment that “Wales has tremendous natural potential for alternative energy”, the governments in both Westminster and Cardiff regard Wales as a major future resource for renewable energy.
Ultimately the Welsh Assembly Government has a role in developing Wales’s infrastructure in a sustainable and efficient way that can reach the ambitious targets for carbon emissions. The RICS research into these practicalities underlines that businesses, local authorities and the person in the street should be under no illusions about the scale of the challenge.
As David Fell, Managing Director of Brooke Lyndhurst, which produced the report on behalf RICS Wales, commented:
“It is relatively easy to set a future target for carbon reduction but the difficulty comes in addressing how to practically achieve this. 2010 is only two years away and so actions need implementing as soon as possible. As is demonstrated by the scenario planning in this report, small steps will not be enough to reduce our carbon dependency in Wales. A number of large measures need to be taken to achieve results. Whilst some of the measures may seem extreme or impractical this RICS report does not hide from that fact that it will take this level of commitment to reduce carbon by 60 per cent across Wales.”
Cathy McLean is Director of the Royal Institution of Chartered Surveyors Wales.
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Vulcan salute
Peter Finch reflects on the possible demise of the Vulcan pub in Cardiff:
The much-faded and painted advert for Guinness on the side of the Vulcan has been there since at least the 1960s. Back then this typically Cardiffian tavern was on the edge of a neck of tight working-class tenements, just the other side of the rail track from the recently slum-cleared district of Newtown. Cardiff was a dirty place, full of smog and dust. The sprawling steelworks of East Moors and the docks to their south provided a stream of men seeking sustenance and oblivion. In the Vulcan you sat on wooden benches in working boots and working clothes. There was sawdust on the floor. Today, fifty years on, Newtown is a memory – replaced by industrial units and a corporate hotel. The docks have been anodised, reduced to safety-conscious ghost of their former selves. East Moors is the Ocean Way Industrial Park, full of warehouses and articulated lorries. Even the terraces that once surrounded the Vulcan like ivy have been flattened and turned into a clean black-topped car park. When I first discovered this 1853 pub it still had the legendary sawdust and was still a home for working men. Railway workers, engineers from BT opposite, prison guards, locals from Duffryn Street, Taff Street and Pellet Street. I sat there with John Williams, the author whose anthology of short fiction Wales Half-Welsh (Bloomsbury) almost got titled Vulcanised. We were joined by a bunch of other writers who felt more at home here than in the aluminium and glass vertical drinkeries of Cardiff’s town centre. (If you’d like to follow this up then you can read more about the writers and the Vulcan in my Real Wales, published December 2008 by Seren).
The beer was good, there was a dart board, the juke wasn’t intrusive. Liz, the landlady, offered regulars bowls of chips and complimentary sausages.
But then came the University of Glamorgan putting a tank on Cardiff University’s lawn, by converting the old BT building into its splendid new Atrium over the road. The School of Cultural Studies. Library, students, light. The Pellet Street tower block of student flats (Ty Pont Haearn) went up at incredible speed. After that came St David’s 2 and the need for car parking. The surrounding streets were systematically flattened yet the Vulcan survived. A pub in splendid isolation. A Victorian gem for fans or a planning difficulty for developers. How you viewed it depended on where you stood.
Currently rumours abound. The pub will be pulled down next spring. Brains have sold out. In its place will be a multi storey car park, social housing, another student tower block, bars, restaurants, even Atrium 2, symbol of Glamorgan’s unstoppable sweep to domination. There’s also a half-credible tale that St Fagans will purchase the bricks and rebuilt the pub, restoring it to its Victorian splendour in the heart of the museum. Iorwerth Peate would spin.
It is a function of developers to sweep all before them. Cardiff has seen generations come and go, each cleaning the slate of everything. The city today has almost nothing with a past. If you exclude the Castle and St John’s Church almost everything standing is recent. We should preserve the pub by building round it and incorporating it into the overall plan. It has happened before. Check the retained Victorian frontage of the Altolusso block a few hundred yards on up the road. We should retain the Vulcan’s charm, its tourist attractability (it’s in the top fifty best UK pubs, according to Camra, the Campaign for Real Ale) and its delight. Removing it even to the secure and beerless pastures of St Fagans would be a crime.
Possibly the only good thing to come out of the present economic breaking halt is that new construction is almost universally on hold. Which should mean a reprieve for the Vulcan. For a time. Let’s hope.
Peter Finch is Chief Executive of Academi, the Welsh national literature promotion agency and society of writers.
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Fiscal federalism
John Osmond says momentum is behind plans to change the Barnett formula used to fund Scotland, Wales and Northern Ireland:Hints from the Prime Minister on future funding options for the Scottish Parliament are rare and usually Delphic in their meaning. So close attention was paid to Gordon Brown’s relatively unambiguous remarks on the theme in a speech delivered to a CBI Scotland dinner in Glasgow in early September. Although observing that on the whole devolution had worked pretty well, he said he did see one problem: fiscal accountability. As he put it: “The Scottish Parliament is wholly accountable for the budget it spends but not for the size of its budget. And that budget is not linked to the success of the Scottish economy. “That is why we asked the Calman Commission to look carefully at the financial accountability of the Scottish Parliament. And this is a critical part of Calman’s remit.”
The commission, chaired by Glasgow University Chancellor Sir Kenneth Calman, a former Chief Medical Officer for Scotland, began work in April. Established by the Opposition parties in the Scottish Parliament, it was their response to the minority SNP government’s call, in July 2007, for a “national conversation” on Scottish independence. Given its provenance, it is unsurprising that the Calman Commission’s remit specifically rules out independence. However, it is reviewing whether more powers might be devolved and, in particular, matters that “would improve the financial accountability of the Scottish Parliament”. It is due to produce an initial report by the end of the year and a final report some time during 2009.
This week a commissioned report submitted to the Calman Commission by an expert group of economists, advocates extending the Scottish Parliament’s fiscal autonomy by giving it greater responsibility for raising taxation. However, it stops short of “full fiscal autonomy”. As one member of the group, Jeremy Peat, a former chief economist at the Royal Bank of Scotland and former economic adviser at HM Treasury, put it: “We are clearly drifting towards more fiscal devolution, if that can be fitted in with managing the macro-economy effectively.”
Gordon Brown’s remarks have led seasoned devolution watchers to conclude that the Westminster Government is now resigned to giving up decades of opposition to changing the Barnett Formula. Since 1979 this has determined changes in the level of the block grant funding given by Whitehall to the devolved administrations in Scotland, Wales and Northern Ireland. Now, it seems, Westminster is contemplating an element of fiscal federalism, in which the devolved administrations will become responsible for raising through taxation a significant proportion of their expenditure.
Hitherto, despite pressure from Wales and some northern English regions, which have believed they have been short-changed, successive Westminster administrations have refused to open up a debate on changing the Barnett formula, largely because of pressure from Scotland which is generally acknowledged to have been a beneficiary.
However, tensions have risen since the SNP took power in Edinburgh last year, with the Nationalists introducing a series of ‘giveaways’, including the phasing out of prescription charges and freezing council tax. This has prompted accusations that the Barnett formula means English taxpayers are ‘subsidising’ Scotland for services that are not available south of the border.
So it is significant that even some leading Scottish figures are now calling for change. These extend to some in the Scottish Conservative party who are calling for the Scottish Parliament to be made fiscally responsible in raising the money it spends. Sir Kenneth Calman himself has given the broadest of steers that his Commission is considering altering or even scrapping the Barnett formula. Asked if the formula was fair to British taxpayers, he said, “It’s pretty good for Scotland – it depends if you think that’s fair or not. But I don’t think it reflects the needs.
“It depends where you live in England. Its quite important you don’t think about England as a single place – you can break down the regions quite nicely. If you look at London, for example, you would see London does pretty well.”
That doesn’t apply in Wales, which is why the Welsh Assembly Government, a coalition between Labour and Plaid Cymru, has established its own Commission to investigate the Barnett formula and come up with recommendations for change. It is a small expert group, chaired by Welshman Gerald Holtham, a hedge fund manager and former Director of the Institute for Public Policy Research think tank. It also includes Professor David Miles, a managing director and chief UK economist at Morgan Stanley, and Paul Bernd Spahn, an Emeritus Professor at the Goethe University, Frankfurt am Main, who has advised the Treasury of Bosnia and Herzegovina.
Announcing the Commission in October Welsh First Minister Rhodri Morgan said:
“You would be astonished at the way the debate has already been framed strictly in terms of the relationship between the UK and Scotland. You can imagine what a dangerous scenario that is for Wales. We do not believe we are over-funded. We believe we are probably – in some sort of gut feeling – under-funded, but we need an evidence base to demonstrate that.”
Although Northern Ireland is generally reckoned to have done well out of the Barnett formula (see Table 1), even here there have been calls for a review. Last year the Northern Ireland Assembly’s Committee for Finance and Personnel called on the Executive to examine the implications of the Barnett formula and scenarios for reform.
 The Barnett formula, named after Joel Barnett who was Chief Secretary to the Treasury the year it was established in 1978, determines the increase (or decrease) to a baseline block grant for each of the devolved administrations at each comprehensive spending review. The change is calculated by considering three elements:
- The changes in spending for England by UK departments.
- The ‘comparability percentage’, which essentially refers to the extent to which a programme or service is devolved.
- Size of population compared with England.
The result is known as the Barnett consequential, with the calculation being made for each UK government department. Put another way, the formula means that for every pound of extra spending in England each year on a service which is devolved, Scotland, Wales and Northern Ireland will get an increase in their block grant proportionate to their populations. Originally the proportions were set arbitrarily at 85:10:5 for England, Scotland and Wales. So, for every 85p of extra spending in England, Scotland would get 10p added to its block grant, and Wales 5p. These population proportions were too generous to Scotland (and too mean to Wales) until altered by Michael Portillo, as Chief Secretary to the Treasury, in 1992, to the correct population proportions.
In practice, the changes have been complex. So, for example, pre-1992 for Scotland, for programmes other than law and order the proportion was calculated at 10/85ths which corresponded to a 11.76 per cent increase. Following 1992 this was reduced to 10.66 per cent. For Wales, pre 1992 5/85ths amounted to a 5.88 per cent increase in expenditure. Following Portillo's review this was upped to 6.02 per cent to reflect Wales's relative increase in population. These small changes in percentages have significant consequences in terms of reductions and additions to the block grant, though it is fair to say that the Scottish Parliament's share has been persistently high in relation to the other devolved institutions.
Now they are rebased for the following two or three years after every spending review. Table 1 provides the break-down for spending per head for 2007-08 across the UK, together with the percentage deviation from the UK average.
The Barnett formula is not based on any assessment of relative need, or of costs of services, which is pointed to by its critics as one of its main drawbacks. Table 1 gives a snapshot of the relative inequities. Wales, for example, is especially aggrieved that Scotland and Northern Ireland received 21 pr cent above the UK mean in 2007-08 compared with its own 8 per cent. It argues that the distribution would be markedly different if a greater emphasis were given to fairness in terms of need, taking into account levels of economic performance (GVA per head) and levels of poverty (households below 60 per cent median income levels).
Both Scotland and Wales also complain that the process by which the Treasury determines whether spending is subject to the Barnett formula or not is at best unclear, and at worst arbitrary. They are certainly not underpinned by any published criteria. So, for example, there are currently disputes between the devolved administrations and the UK treasury regarding the Olympics being classified as being of the benefit to the UK as a whole and therefore not subject to a Barnett consequential. Plaid Cymru’s economics spokesman, Carmarthen East MP Adam Price, claimed that as a result Wales was being robbed of £437 million, saying it is “a disgrace that the poorest part of the UK is effectively funding a massive regeneration project in London, officially the richest city in Europe.”
For its part the SNP Scottish Government claims it is being financially penalised by the failure to attach a Barnett consequence to the £1.2 billion increase in spending on prisons in England and Wales, in response to the Carter Review and pressure on prison places.
A further drawback to the Barnett formula is that it institutionalises what the political scientist Anthony King has dubbed an “infinite blame potential”. The devolved administrations have virtually no control over the size of the block grant that is available to them. When things go wrong, or there is a cutback in spending, they simply blame Westminster and Whitehall. It is not a recipe for accountability and responsibility in spending.
However, it is one thing to criticise the formula, quite another to come up with an alternative designed to achieve acceptance across the competing nations and regions of the UK. There are broadly three options for change:
1. Implementing a needs-based system for calculating the block grants of the devolved administrations. To ensure credibility this task should be carried out by an independent body, such as the Australian Commonwealth Grants Commission, established in 1933 to assess claims made by the Australian states for financial support from central government.
2. Devolving fiscal autonomy to the devolved administrations to raise their own revenue to meet their own expenditure, and at the same time making a contribution to the central Whitehall government for functions such as defence, the welfare state and international aid. This is broadly the case in the Basque Region’s relationship with the Spanish government in Madrid, probably the most extreme example of fiscal federalism.
3. A hybrid approach combining greater fiscal autonomy with the equity of a needs-based grant.
The likelihood is that the Calman Commission, together with the Holtham Commission in Wales, will opt for the third, hybrid solution. Certainly, this was the recommendation of the report Fair Shares? Barnett and the politics of public expenditure produced by the Institute of Public Policy Research in July 2007. However, this still leaves the hard question of what category of tax to allow the devolved institutions to deploy. The choice is assigning taxes, where the proceeds of certain taxes are attributed to the area where they are raised, or allowing the devolved administrations to vary certain taxes, whether income tax, corporation tax or VAT.
Possibilities explored by the expert group of economists that this week reported to the Calman Commission include letting Scottish Ministers set income tax. Currently they are only able to vary the standard rate of income tax by up to three pence in the pound, an option that has never been utilised in a decade of devolution. Other possibilities include devolving VAT, introducing an US-style sales tax, and devolving National Insurance contributions.
None of these options is straightforward. Yet the balance now seems to have tipped in favour of moving away from the Barnett formula in favour of a reform that would combine an element of devolved taxation with a needs-based equalising block grant. Despite the political problems in opening this ‘can of worms’, the arguments for change are gathering momentum. It is noteworthy, for instance, that even the author of the formula himself, Lord Barnett, now a Labour peer, has pronounced that he is amazed it has lasted as long as it has. He says it should be scrapped and replaced with one that reflects needs rather than population.
John Osmond is Director of the Institute of Welsh Affairs. This article appears in the current issue of the journal Public Finance.
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Rhodri reveals his ankle
John Osmond reports on the debate that launched the IWA’s Politics in 21st Century Wales :The debate in the Senedd on Monday evening that launched the IWA’s latest book on the future of Welsh politics proved a fascinating curtain raiser on the coalition negotiations between the parties that we can anticipate in the wake of the 2011 Assembly elections.All the participants were key players in the two months of negotiations that took place following the May 2007 elections and three of them may well be in pole position in a little over three years time. So, it was instructive to watch them circling around one another warily and watching their words. Of course, First Minister Rhodri Morgan won’t be among them after 2011, since he has announced his impending retirement from politics – “he has indicated a wish to stand down as First Minister well before the elections” (according to his biographical note in Politics in 21st Century Wales). However, he prompted the speculation by suggesting in his contribution to the book that Labour should countenance proportional representation in local elections in order to allow a coalition deal to be negotiated with the Liberal Democrats.
It was Plaid Cymru’s Adam Price who suggested somewhat mischievously that this was tantamount to Rhodri revealing ‘a bit of ankle’ to the Lib Dems. Read the small print, he inferred. Rhodri was not showing the whole of his leg. In fact the First Minister was suggesting what is called permissive PR. That is to say, on the presentation of a petition by a set number of electors, local authorities should be obliged to hold a referendum on whether to introduce proportion representation, following the similar system that obliges them to hold referendums on establishing a mayor. On Monday evening the First Minister stated that he had borrowed the notion from New Zealand where it had worked extremely well and, as he said, completely taken the heat out of the argument over proportional representation.
However, Adam Price wanted to know whether this would be enough to entice his fellow contributor to the book, the Liberal Democrats’ Kirsty Williams, into a coalition with Labour. She carefully skirted round giving a straight answer to the question, though she did concede that, although she vetoed a coalition with Labour last year she would be prepared to consider one after 2011.
In her chapter she criticises the June 2007 Rainbow deal the Liberal Democrats negotiated with Plaid and the Conservatives in the following terms, ones she reiterated on Monday evening:
“The All Wales Accord had a tick box and a sprinkling of pork barrel for every interest group, but where and what was the vision? The most attractive part of it was to get rid of Labour. The vision was to change the government – not to change the nation. Is that enough? It wasn’t for me at the time, and I remained unconvinced today.”
Adam Price retorted that this was a bit rich since in the negotiations it was the Liberal Democrats who kept on inserting detail after detail of commitments. He said he well remembered delivering a final version of the accord to the Liberal Democrat Chief Executive just before the fateful meting of the Liberal democrat Executive in Llandrindod, which rejected the deal. “It still had the ink of Liberal Democrat bullet points drying on it as I handed it over,” he said.
The Conservative leader Nick Bourne opined that it was a perfectly honourable ambition to have as a priority the replacement of the governing party if it had been so long in charge as Labour in Wales. He believed that the results of the 2011 election would more than likely mean that Plaid, Liberal Democrats and the Conservatives would be facing that option once more.
Adam Price said that Red/Green stripes ran right through him and that it should be acknowledged that while the Plaid-Labour coalition Government might not be popular with party activists on either side, it struck a deep well of approbation amongst the electorate. “It chimes with what Wales wants,” he said. At the same time he said, and as puts it in the book, “The question for Plaid is not whether to challenge Labour for dominance, but when”.
He acknowledged there were dangers for any junior partner in a coalition in being sidelined by the electorate. But optimistically he referred to West Germany’s SPD, a party that Willy Brandt led into a Grand Coalition with the Christian Democrats in 1968. This gave them their first taste of power since before the Nazis had taken over in the 1930s and legitimised them as a governing party. Two years later they went on to gain a majority.
Rhodri Morgan said he had been in politics a long time and lived through many periods when Labour had been written off, only to bounce back in often unforeseen circumstances, as was currently happening with Gordon Brown’s renaissance amid the credit crunch. But he warned that his party needed to embrace PR for local government if it wanted to have any choice of coalition partners in future.
John Osmond is Director of the IWA.
Politics in 21st Century Wales is available from the IWA. Price £10, or for IWA members £7.50, plus £1.50p P&P.
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