What happened to the pre-election Cardiff Bay magic money tree?

Jonathan Edwards

As the 2015 General Election approached, I organised a summit of the most impressive economic brains in Plaid Cymru at party HQ to crunch some numbers.

I was aware that we were heading for a second austerity-based election in which we would be scrutinised in great depth about our fiscal plans. Labour by that stage, under Ed Miliband, had adopted the tax and spending policies of Chancellor George Osborne, which opened an opportunity for us to outline a rather modest alternative programme based on ending austerity and increasing capital investment by 1%, which at the time was revolutionary.

I can’t recall the exact figures, but the basic ballpark was around £20bn extra spending per year for the UK which equated to around the £1bn mark for Wales if the investment was shared equitably across the State.

To be able to defend the platform we were aware we needed a clear plan of spending reductions and revenue generation as a part of the package, in addition to the Keynesian argument that capital investment if properly allocated in the end will pay for itself in increased economic output and subsequent tax receipts.

It is interesting to see Wes Streeting in his leadership bid for the Labour Party advance one of our key proposals of aligning Capital Gains and Income Tax. It will be interesting to see once the campaign proper starts to replace Keir Starmer if one of the candidates proposes our other key recommendation of equalising tax relief on pension contributions.

The reason I recall is that Elin Jones, the new Welsh Government Finance Minister, in her first big interview warned of “extremely difficult decisions” to fund the pre-election Plaid signature pledges. She also said that financial pressures were “more challenging than expected”.

I suspect her intervention was motivated by several aims. The First Minister has made a very wise choice as his Finance Minister. I wouldn’t trust most politicians with my kids’ Hyper Jar account.

He knows that Plaid Cymru is a highly ideological party with no experience of being responsible for a budget of nearly £28bn.

Elin Jones is a veteran Senedd politician, the only one with previous Ministerial experience, and comes from a farming background so understands the need to balance the books.

Of all the potential candidates for the role, she perhaps has the authority to keep a degree of realism amongst Cabinet colleagues and the wider Senedd group. The first audience therefore was very much internal.

I am sure the Welsh Treasury will be really enjoying the experience of a fresh Minister encouraging a root and branch overview of expenditure plans. A quarter of a century of one-party dominance tends to lead to no go areas. However, the Finance Minister will need to be wary: taking a red pen through budget lines is the easy bit.

The challenge will come when new plans are published and the inevitable backlash to spending cuts on various pet projects are announced.

As the Senedd proceeds, Elin Jones is going to be a key figure determining the unity of the Cabinet and the wider Plaid Senedd group. If either turn against her because she is seen as a block on lofty collective or personal ambitions, as Rachel Reeves has experienced as Chancellor, then matters will get very unpleasant very quickly.

The second key aim of her intervention was to try the old George Osborne strategy of claiming she had inherited a mess from the previous government. This worked a treat for the Tories post 2010 in Westminster, justifying their austerity programme for two Parliaments. It hasn’t worked for Rachel Reeves, who tried the same trick after the 2024 general election.

I fear that as a tactic it is going to be difficult for the new Welsh Government to make it stick.

Firstly, the Welsh Government is essentially a spending body. It lacks any meaningful fiscal firepower and therefore, despite the devolution of some minor taxes, the primary role of the Welsh Treasury is to allocate financial resources to sponsored bodies and devolved public services.

In other words, it’s not a Treasury in the conventional sense, balancing revenue generation, economic growth and spending.

Bean counters

This makes it more difficult to argue that there are variables at play that were hidden from all apart from Welsh Treasury bean counters. In addition, as the previous Finance Minister Mark Drakeford responded to his successor, Plaid Cymru helped shape the current Budget in a formal deal and therefore their fingerprints are all over it.

Furthermore, the independent Institute for Fiscal Studies in their analysis of the Plaid manifesto warned of “significant question marks over how to fund its giveaways” and that their key pledges would result in “deepening cuts to unprotected public services”.

During the election, such concerns were rebuffed by Plaid saying everything was costed and would be met by resource reallocation.

It is clearly understandable that a political party does not want to fight an election in a cost- of-living crisis year on a prospectus of bad news. However, Plaid in the last Senedd invested much effort in legislating to criminalise lying or misleading during elections.

It always seemed A bit of a gimmick to me; however perhaps collectively they will be breathing a sigh of relief that the new legislation won’t come into effect until 2030. Otherwise, I am confident that an opposition politician would be asking for the law to be tested.

Public distrust

Regardless, the big question the legislation sought to address was the wider question of public distrust in politicians. The intervention of the Finance Minister therefore exposes a potential problem for the new Welsh Government if the public feel there has been deceit at the heart of the manifesto that now forms the programme of government.

The battle for public perception that the Finance Minister has proactively launched will determine for how long the honeymoon of the new government lasts.

Jonathan Edwards was the MP for Carmarthen East & Dinefwr 2010-24

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