Holtham Review calls for Welsh tax powers

14 Jul 10
Wales should be given greater borrowing and tax-rising powers, according to an authoritative review of the country’s funding
By Paul Dicken

15 July 2010

Wales should be given greater borrowing and tax-rising powers, according to an authoritative review of the country’s funding.

The Independent Commission on Funding and Finance, chaired by economist Gerald Holtham, published its final report last week. It concluded that the current system is contrary to established principles of public finance – that a democratic body should raise as much of its revenue as possible. It called for the block funding system for Wales – allocated according to the Barnett Formula – to be replaced with a needs-based system.

Holtham said: ‘At a time when public spending is under unprecedented pressure, it would be regrettable if the UK government persisted with an unfair, outdated and arbitrary system for allocating funding to the devolved nations.’
He added that the £50bn of public money distributed to the devolved nations this year would be spent ‘without even the most cursory attempt to see if what is provided is in line with what is needed’.

The report’s conclusions were welcomed by both Labour and Conservative politicians. Welsh Conservative leader Nick Bourne said: ‘Both the Conservative group in the Assembly and the Welsh Tory Party accept that there is a need to replace the Barnett Formula with a needs-based system, as Wales is suffering under the present arrangement.’

Labour Business and Budget Minister Jane Hutt said she welcomed the demonstration of how a needs-based system could be made to work in practice. But she gave a muted response to Holtham’s more radical proposals on tax-raising powers, saying they would need detailed consideration.
Chris Franks, Plaid Cymru’s finance spokesman, called on the coalition government in Westminster to take action on the issue.

‘To continue to refuse would be a breach of trust and a demonstration of a clear decision to ignore what’s best for Wales,’ he said.

The UK government has said that any change to the funding system must ‘await the stabilisation of the public finances’ and a process similar to the Calman Commission (which reviewed funding for Scotland) would be established for Wales.

A spokesman for the Wales Office said the report, published on July 6, was being considered and it was for the Welsh Government to take forward any recommendations.

Writing on the PF blog, devolution commentator Alan Trench said the report put pressure on UK ministers to rethink their commitment to a Calman Commission for Wales.

‘[The Holtham report] has done much of the heavy lifting to work out how limited fiscal autonomy and a needs-based block grant would each work, and interact with each other. This is work that the UK government appears never to have done at all,’ he wrote.

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