Put Senedd on a ‘more adult footing’ by devolving tax powers, top economist suggests

A top economist has called for tax powers to be devolved to the Senedd in order for it to be put on a “more adult footing”.

Paul Johnson, director of the Institute for Fiscal Studies suggested that without “substantive tax-raising powers” the devolved nations “will remain supplicants, asking for handouts” from Westminster.

He pointed out that although the Senedd has control over many areas of public spending, the budgets for areas such as health and education are determined largely by how much is spent in England.

He argued that like “a parent cutting the apron strings”, the UK Government “perhaps should be willing to allow the devolved nations more freedom to make their own decisions.

Control over some taxes have already been devolved to the Senedd. These include business rates, the Land Transaction Tax and some control over Income Tax.

The Welsh Finance Minister, Rebecca Evans has previously accused the UK Government of dragging its feet on devolving tax powers to the Senedd.

Johnson wrote in The Times: “The United Kingdom is not the fiscal monolith it once was. Until the devolution settlements of the New Labour era, tax and spending policy for all the constituent nations was set in Westminster.

“Today, the Northern Irish Assembly, the Welsh Senedd and the Scottish parliament have almost complete control over spending on public services. They can choose how to allocate their budgets between health, education, economic development and so on in ways that can, and increasingly do, differ from decisions made in Westminster and that affect only England.

“However, the budgets they have to spend are largely set from Westminster. They are still based on the venerable Barnett formula, a supposedly temporary fix put in place in the dying days of the Callaghan government. It allocates funding to the other nations via a complex mechanism that broadly means the grants they receive from the Treasury change in proportion to changes in funding in England.

‘Handful of smaller taxes’ 

He added: “The Scottish and Welsh governments have some control over income tax, as well as over a handful of smaller taxes, and so have some ability to increase revenues or alter taxes to promote growth.

“Yet for all devolved nations, the real prize for them and for Westminster is the possibility of a more mature relationship, with each other and their electorates. Without substantive tax-raising powers, they will remain supplicants, asking for handouts.

“More devolution of tax powers may be the best way to put the relationships on a more adult footing. Like a parent cutting the apron strings, the UK government perhaps should be willing to allow the devolved nations more freedom to make their own decisions. And their own mistakes.”

The YouGov poll, commissioned by TUC Cymru union, showed support for economic development, taxation, as well as welfare and social security being controlled from Cardiff rather than Westminster.

It also showed clear majorities in favour of Wales keeping control over health and education.

The Welsh Government should have control of economic development according to 53% those polled, while 30% think the UK Government should have control, and 17% don’t know.

Welfare and social security should be under the control of the Welsh Government according to 47% of respondents, while 37% think it should be under the control of the UK Government, and 15% don’t know.

Taxation should be under the control of the Welsh Government according to 43% of respondents, while 40% think it should be under the control of the UK Government, and 17% don’t know.