Wales calls for more fiscal powers

23 Jun 11
Wales’ first minister has called for a radical extension of his government’s powers over finance.
By Mark Smulian | 23 June 2011


Wales’ first minister has called for a radical extension of his government’s powers over finance.

Carwyn Jones told the Welsh Assembly this week that the devolution funding settlement set in 1999 was ‘no longer fit for purpose’.

Wales’ share of UK finance is determined by the Barnett Formula, which allocates the relative spending of the four UK nations on a population basis. It dates from 1978 and was described by Jones as ‘an accident of history and now has few defenders anywhere’. It left Wales ‘significantly underfunded in relation to our needs’, he added.

Jones endorsed the call from last year’s Holtham Commission for a ‘floor’ to the Barnett Formula, with a move to a new needs-based regime in the longer term.

But he added: ‘Fair funding is the centrepiece, but not the limit, of our ambitions for reform. We need effective borrowing powers as a high priority. This is important to help fund investment in Welsh infrastructure and to support economic recovery.

‘Wales cannot remain the only part of the UK where the government cannot borrow to fund roads and hospitals.’

Jones called for the Welsh Government to be given control over more taxes, possibly including those on landfill, stamp duty, aggregates and air passengers, which together raise some £200m a year in Wales.

Devolved corporation tax could provide Wales with ‘a powerful tool to promote economic development’, he said.

But he warned that although devolved corporation tax might appear to be an ‘attractive prospect’, the budgetary risks would be considerable. 

‘The detailed terms of any change would be crucial in determining whether devolution was in the interests of Wales, but we intend to explore the options with the UK government.’

He ruled out seeking devolution of income tax, citing complex administrative, economic and legal obstacles and the probable need for a referendum on this step.

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