devolution

Devolution

I very much welcome the debate and the cross party consensus on taking devolution forward

Whilst there is a small group of people who want to close down the Assembly

And an even smaller group of people who want Independence

There is a growing consensus in Wales shown in opinion polls

Which I see echoed when talking to my own constituents

A desire to have a working sphere of Government with the tools to do the job

I wish to concentrate on two areas firstly the reserved powers model and then tax devolution

As someone who has been a strong supporter of the reserved powers model I am pleased that this is becoming the consensus view.

Early last year I wrote a series of articles published by the IWA describing the devolution settlement in the rest of the UK and within Europe.

All based upon the reserved powers model.

In the individual members debate on the 26^th June last year supporting the reserved powers model

With support from members of all parties

It was passed by

43 votes for

6 against

2 abstentions

I hope today on this issue we can achieve unanimity

As I said then and now reiterate

The Reserved powers is not about more powers it is about clarity on what is and what is not devolved.

Turning to the financial proposals in this resolution

I do not believe taxation is primarily an economic driver

I believe its primary aim is to raise money for public services

If Northern Ireland and Scotland have the devolved to them corporation tax then Wales should as well;

 

But to Quote the Holthanm report

 

It is evident that varying corporation tax in different parts of the UK raises issues at both the UK national and the European level and these may be in conflict. The UK Governmentt would presumably wish to ensure that any variation was implemented in a way that was regionally equitable and not costly to HM Treasury. Yet devolution would also have to be consistent with European law, which precludes tax systems that could be interpreted as State aid to some businesses at the expense of others.”

 

Some people believe that low corporation tax in Ireland including the now closed double Irish helped the Irish economy

But the OECD said

 

Ireland’s appeal has been based on the quality, price and availability of its labour, the welcoming attitude to foreign investors, the use of the English language and exploitation of ‘first-mover advantages’: once one producer in a sector establishes production facilities in Ireland, it is generally easier to attract its competitors.

  But there is no question that the robust and prolonged expansion of the US economy – the source of most of the direct investment flows – and the attractive policy and institutional setting in Ireland have been the major driving forces.  A generally conducive and transparent regulatory framework, an open trade regime and competitive labour costs have generated this outcome.

 

 A long-standing favourable tax regime applied to tradeable goods sectors, financial incentives and substantial industrial support targeted at a small number of key dynamic sectors with spin-off potential, may also have been important in convincing major multinational incorporations to choose Ireland as a production location in order to serve at least the EU market”.

 

If Air Passenger Duty for direct long-haul flights is devolved to Scotland then it should be devolved to Wales

 

There should be a review the level of the borrowing powers afforded to Wales in the Wales Bill

 

I do not believe the Welsh Government should be treated less favourably than either Scotland or Welsh Local Authorities

 

Welsh Local Authorities can engage in borrowing to a locally set prudential limit

 

I do not see if it is good enough for Welsh Councils that the Welsh Government should not be treated the same

 

Welsh Government should be allowed to issue its own bonds

Just like Local Authorities and whilst borrowing from the PWLB has traditionally been cheaper Transport for London used bonds to part fund crossrail.

Again if Local authorities can do it so should the Welsh Government

 

we have come a long way since I first raised the reserved powers model at a Gorwel meeting

Hopefully with cross party agreement we can take Wales forward

Local Goverment -From August 2013IWA blog- now others have caught up

As we approach the start of another Welsh budget and a further reduction in the block grant by the Westminster Government, then cuts in public services are inevitable. Questions that arise are where they will be made and what will be the impact on each service area?
Giving the Welsh Government’s response to the lessons that the Welsh NHS needs to learn from the events of Mid Staffordshire, following the inquiry by Robert Francis QC, Welsh Health Minister Mark Drakeford made the following statement:

“Jointly with the Finance Minister I will be undertaking a review of the NHS budget over the summer to ensure that it reflects the lessons to be learnt from Francis, the additional burdens which face the health service and to ensure that there is a proper match between the quality of care, patient safety issues and the budgets to support them.”

This has been taken by many commentators to mean that there will be an increase in health expenditure next year relative to the other services funded by the Welsh Government. This is despite my having attended meetings at the Assembly throughout the last year where a whole plethora of organisations have explained how for every pound spent on them several pounds will be saved by the national health service.
Out of the Welsh budget for 2013-14 of over £15.5 billion, health and social services were allocated over £6.3 billion and local government over £4.7 billion.  With more than 70 per cent of the total budget being spent in these two areas there is naturally a fear that if one increases its percentage in the next funding round, the other must go down. The easy option is to cut local government spending and use it to protect the health service. However, it is not as simple as that.
Local government provides a variety of services that contribute to the health and well being. For instance, if local authorities are unable to provide timely social care packages for those leaving hospital then bed blocking will occur. If Local Authorities do not intervene with home care provision soon enough then that will inevitably increase the risk of hospitalisation. As budgets become stretched then slowing down assessment and the production of a care package for hospital discharge could be the only way of staying within budget.
In order for some people to be discharged from hospital adaptations to their homes are often needed. The disability facilities grant is managed and funded by local authorities. Yet if there is insufficient funding available for the work to be done then the patient often cannot be released from hospital despite having no medical need to stay there.
Environmental health workers check food safety in premises where food is prepared. If there are less of them then obviously visits will take place less often and the chance of food poisoning such as salmonella will increase.
Of course, all these are statutory services. But if they are fully protected then the discretionary services would be hit disproportionately hard. Councils can reduce expenditure on road maintenance and street lighting but doing so increases the chance of accidents occurring and will add to the pressure on accident and emergency departments.
In a country where lack of exercise and unhealthy lifestyles are contributing to an obesity epidemic the last thing that the health of the nation needs is the closure of leisure facilities or a huge increase in their cost. Local authority run leisure centres and swimming pools provide an opportunity for people to engage in exercise at a reasonable cost. It will not improve health and fitness if they are either closed or prices are increased to such an extent that they exclude a large proportion of the public.
Welsh Government funding for free swimming in Wales for children and young people aged 16 and under during all school holidays and at the weekends, and for people aged 60 and over outside school holidays, has been very well received. It is an excellent means of increasing fitness. But what if we have to close our swimming pools in order to balance budgets? I remain unconvinced that if budgets are cut substantially then discretionary leisure expenditure will not face a major cut-back.
There are of course efficiency savings and invest to save opportunities such as more 3g and 4g pitches to allow greater use of sports facilities. Local authorities should be looking to use either the Welsh Government’s invest to save initiative, or their own reserves in order to reduce on going expenditure by investing to save. Local authorities can collaborate more to save money, especially with back office functions such as payroll. But the savings likely to be achieved will be around the edges.
If we continue to substantially reduce spending in fields other than the health service there will be big trade offs and health could be the loser. Health is not only about treating the ill and injured but also about ensuring preventative initiatives are in place. Local government is a major provider of preventative services. Large cuts in local government expenditure and a reduced provision of services could damage the overall health of the nation. We must remember that to keep Wales healthy local government has a major role to play.

Tags: Health, Mark Drakeford

Mike Hedges is Labour AM for Swansea East and a former leader of Swansea City Council.

Published on: Friday, August 2nd, 2013
Posted in: Economy, Featured Article, Health.
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devolution speech

I also welcome the decision made in Scotland by the Scottish people, by an overhelming majority of over 400,000 people. If ‘Yes’ had succeeded, Scotland would have needed to create a new currency, perhaps called the Scottish pound. New Scottish passports would have needed to be created. Scotland would have had to reapply to the European Union for membership with the near certainty of rejection. A ‘Yes’ vote in Scotland could have led to the Balkanisation of the whole of western Europe. Market reaction would have been the opposite of a rise in the pound and share prices. Last year, I led a backbench debate on the reserved powers model. I do not want to repeat the long list I gave of the countries in Europe that have embraced the reserved powers model, so, suffice it to say, it is the preferred model across Europe. Britain, when it set up devolution, embraced the asymmetric devolution model, based on what had been done in Spain. Catalonia had far greater powers than almost anywhere else in Spain, the Basque country had greater powers and some of the other regions had substantially fewer. Spain is now moving towards symmetry. In recent times, the difference between the powers devolved has become reduced as further responsibility has been devolved to all regions.

 

If we look at the United States of America, as we often do on many things, we see that state size varies from California with 38 million people and Texas with more than 26 million people to Vermont with just over 600,000 people and Wyoming with less than 600,000 people. The last two, as I always point out, are smaller than the Swansea city region. What do not vary are state powers. The number of senators they have also does not vary. I recently outlined my support for the Northern Ireland model, under which section 4 of the Northern Ireland Act 1998 allows the Secretary of State to devolve areas listed as reserved matters in the Act provided that a resolution has been passed by the Northern Ireland Assembly. This has stopped the big bang method of everything being devolved in one go. When two thirds of the Members of the Northern Ireland Assembly wish to have items devolved to them, a vote by that body moves those powers to being devolved. Has it worked? Yes. Additional legislative power relating to policing and justice matters were devolved to the Northern Ireland Assembly last year following a resolution of that body.

The English question will not go away and cannot be answered by creating first and second-class members of the Westminster Parliament. It will have to be addressed, which is one of the reasons why we need a constitutional convention to end asymmetric devolution and deal with the problems in England. It needs to be made up not just of the usual suspects. It needs to involve interested individuals as well as politicians and academics. We also need to decide what should be provided in each sphere of government. May I take you back to a word that, in 1990s and the early 2000s, was very popular: ‘subsidiarity’? The subsidiarity principle is based on the idea that decisions must be taken as closely as possible to citizens. The European Union brought it in. The principle says that the European Union should not undertake action, except on matters for which it alone is responsible, unless EU action is more effective than action taken at national, regional or local level. We need to decide what should be provided where. Devolution cannot stop at Cardiff bay. It cannot just be a case of moving powers from Westminster to Cardiff bay and then stopping. I am going to suggest a novel approach: we decide in which sphere of government a decision is best made and then allow that sphere of government to deal with it. It may be Westminster, it may be here and, dare I say it, it may actually be local government. We need a showing of mutual respect, not just by Westminster to the Assembly but also by the Assembly to principal councils and by principal councils to community councils. In 10 years’ time, we need to look back and be able to say that we have most, if not all, decisions made at the appropriate level. Would anyone say that we are there today?

they meant it

From the BBC website

Meanwhile RBS confirmed it would not be moving its registered head office now that independence had been rejected

"The announcement we made about moving our registered head office to England was part of a contingency plan to ensure certainty and stability for our customers, staff and shareholders should there be a 'Yes' vote," the bank said.

"That contingency plan is no longer required. Following the result it is business as usual for all our customers across the UK and RBS."

In a statement, Lloyds Banking Group said: "The group is proud of its strong Scottish heritage and remains committed to having a significant presence in Scotland. We remain fully focused on supporting households and businesses in Scotland as well as right across the rest of the UK."

if Scotland votes yes, what happens next

Well the first thing we can be certain of is that the Scottish Nationalist will have a big party over the whole weekend to celebrate the historic decision but when Monday morning comes what happens .

Firstly the time table for Scottish independence is far too long and will have a serious economic impact possibly pushing the whole country including Scotland back into recession. Surely the most sensible situation would be for Scottish independence to coincide with the start of the 2015 financial year.

Scotland would need to create a central bank and a currency which I assume will be called the Scottish pound and arrange for sufficient to be printed so that they can arrange to exchange British currency for Scottish currency at the banks. I would also expect the currency to start at equal value and then the currency markets to decide their relative values.

The Scottish passport office would need to start creating Scottish passports to replace the British passport that people travelling currently use. A decision on whether to share embassies with Scottish and British sections or to have separate buildings will have to be made.

The armed forces would need to ensure that all Scottish servicemen were in areas that were going to Scotland and that non Scottish servicemen moved the other way. In terms of the infantry equipment, air force and navy Scotland’s share will need to be calculated and sent to Scotland.

In terms of national assets and debts they will need to be shared out and the simplest way would be on a population basis but if such an agreement cannot be reached then arbitration will need to be used.

The easiest way to set the first year taxation and benefit levels would be to use the levels set at Westminster but in subsequent years as a sovereign country it would obviously set and collect its own revenue and have its own benefits system.

Those companies that wished to relocate either into Scotland or out of Scotland could then issue their 90 day redundancy notices and have time to either relocate or employ new staff at their new centres.

Scotland could apply immediately to become a member of the European Union and seek any opt outs that Britain has got that it wishes to continue with.

Divorce is never easy but a quick clean break would be the best way.

a Welsh treasury

As taxation and borrowing powers are devolved to the Welsh Government then we will obviously need a Welsh Treasury to deal with these changes, but what will it actually do.

There are two distinct types of public sector treasury that we have in Britain, the treasury at Westminster and the treasuries at Local authorities.

The treasury at Westminster carries out 5 main functions, central co-ordinating and accounting department, a ministry of finance, economics department, foreign economic policy agent and a policy driver.

Local authority treasuries act as tax collectors, control borrowing including debt management, manage expenditure and invest reserves. Effectively they fulfil the first two functions listed above of the Westminster Treasury.

Currently the Finance Department in the National Assembly acts as a central co-ordinating and accounting department where it distributes the money received from the Treasury at the beginning of the financial year and via a series of supplementary budgets allocates additional funding during the year. What it effectively does is receive income from the treasury and distribute it between the different assembly directorates for them to spend.

What a Welsh Treasury will not become is a foreign economic policy agent because that will be still be carried out by the Westminster Treasury or an economics department because the main macro economic policy will also still be set at Westminster. What we do not want it to be is a policy driver, with Treasury policies over riding departmental policies as appears to happen at Westminster.

It will have more similarities with the treasury function of a Council than it will with the Treasury functions at Westminster. It will continue to manage expenditure but will have added to that raising part of the income and managing debt. Also it is inevitable that investing and managing any reserves will become part of the duties of a Welsh Treasury.

Whilst initially the amount of money raised via taxation by the Welsh Government, outside of the block grant, will be relatively small if income tax is either wholly or partly devolved that will lead to a far larger proportion of the Welsh Government income being raised in Wales.

I believe there is a definite requirement for a Welsh Treasury to control debt including debt management, manage investments and income as well as distribute money. What we need to avoid is a Treasury that also wants to be a policy driver setting its own policies and driving Government policy.

 

 

 

questions on scotish indepenence

Scotland would not be unique if it broke away from the rest of the UK or if it didn’t. We have seen in recent years in Europe the splitting up of the old Soviet Union, Yugoslavia and Czechoslovakia. More recently Sudan split into Sudan and Southern Sudan. Quebec has twice rejected separation from the rest of Canada in a referendum.

That Scotland is large enough to be separate country is self evident as it is larger than a number of other countries in the world. Strathclyde on its own is bigger than Slovenia and almost five times the size of Luxembourg.

We have the three big questions, currency, European Union and share of the debt.

We have a fairly recent example of an amicable divorce by two countries when Czechoslovakia divided into the two new countries of Slovakia and the Czech Republic. Initially the old Czechoslovak currency, the Czechoslovak Koruna, was used in both countries following the dissolution of Czechoslovakia on the 31 December 1992. However, by the 8 February 1993, the Czech Republic and Slovakia had adopted their own national currencies in the form of the Czech Koruna and the Slovak Koruna. At the beginning, the currencies had an equal exchange rate, but later on the value of the Slovak Koruna was as much as 30 per cent lower than the Czech Koruna. The Czech and Slovak joint currency lasted less than 40 days.What I have been unable to identify is countries splitting up and then continuing with a joint currency for more than a few years.

On debt we again have the example of the split in Czechoslovakia when most federal assets and debt were divided in a ratio of 2 to 1 (the approximate ratio between the Czech and Slovak population within Czechoslovakia).  The same would be expected to occur and if it could not be agreed then we would need arbitration.   If after a split the debt is left behind then it would be in the interests of every region in Europe to split away and leave the debt behind causing another European banking crisis.

Would Scotland have to reapply to the EU and would it be accepted? We need to look at this from a European perspective where many European Countries have regions which have expressed a desire for independence such as Catalonia and the Venice region of Italy. If a split can occur and regions or nations can remain within the EU, then again the fragmentation of Europe looks likely.

I am sure that there are those who see Britain as the centre of the universe who will say things like “There is a considerable difference between the global significance of Sterling compared to the Czech/Slovak Koruna” or “how important sterling is as a  currency”, or “EU needs Scotland”.

On September 19^th we may start finding out who is right regarding currency, debt and the EU.