The Holtham Commission

There will be an independent Commission to review Assembly Funding and Finance, to include a study of the Barnett Formula, of tax-varying powers including borrowing powers and the feasibility of corporation tax rebates in the Convergence Fund region, including the implications of recent European Court of Justice Rulings in this area.

Gerald Holtham	David Miles	Paul Bernd Spahn

Plaid borrowing proposals to make up for past underfunding

WALES should in future get more than its fair share of money from the UK Government to make up for underfunding in the past, according to Plaid Cymru. Plaid is also proposing that the Assembly Government should be given tax-varying and borrowing powers.

The plans have been set out by the party’s economics adviser, Dr Eurfyl ap Gwilym, in a submission to the Independent Funding and Finance Commission. The commission, which is due to produce an interim report by the summer, is considering whether suggestions that Wales is losing up to £1bn a year under current arrangements stand up to scrutiny.

The Plaid submission states: “In economic terms Wales has long been a relatively poor country compared with other parts of the UK. The reasons for this are complex. Wales was slow to urbanise; was very dependent on an agricultural sector which suffered from a high proportion of poor quality, low productive land; and when industrialisation came it was concentrated initially on extractive industries with much of the added value being contributed elsewhere.

“Viewed from a UK perspective such specialisation may have made sense but it left Wales with an economy highly dependent on a few business sectors all of which suffered long-term decline over much of the 20th century – agriculture, coal, steel and slate quarrying. Although the Assembly Government is now making considerable efforts to strengthen and diversify the Welsh economy, most of the significant levers remain in the hands of Whitehall.

“Thus Wales has the challenge of dealing with this legacy, but during much of the last 100 years or more UK governments have regarded Wales as being on the periphery and have sought at best to ameliorate economic weakness rather than address the root causes.”

Last night Dr ap Gwilym said: “In Plaid we have long argued that the Barnett formula (the current population-based calculation for allocating money to the devolved nations) does not give weight to the special needs of Wales. But if there is to be a new formula, it won’t be good enough simply to divide the cake on the basis of need at that time. The formula should also take account of the need to remedy the existing disadvantage.”

So far as tax-varying powers are concerned Dr ap Gwilym said: “We would especially like the Assembly Government to be able to decrease the rate of corporation tax. That would be a good way of attracting industry to Wales and encourage new businesses to set up.

“Giving the Assembly Government borrowing powers would enable it to fund big infrastructure projects to help the economy in a way that is not currently possible.”

He added: “One of the disadvantages of the Barnett formula is that the amount of money allocated to Wales is determined to a large extent by decisions made in England about the funding of public services in England.”

Western Mail, 20 Jan 2009