Holtham: The Right Answer to the Wrong Question? Dr Calvin Jones Welsh Economy Research Unit Cardiff Business School Financing Devolved Government Pierhead Building, Cardiff, January 21 st 2011

Rule 1 Get your apologies in first

Contention The Holtham Report and the form of governance it represents are deeply flawed in their conceptual approach, and in ways which ensure devolution can never fully play its part in maximising the welfare of the citizens of Wales.

The Cheek! Why? The Commissions terms of reference were to: i) look at the pros and cons of the present formula- based approach to the distribution of public expenditure resources to the Welsh Assembly Government; and ii) identify possible alternative funding mechanisms including the scope for the Welsh Assembly Government to have tax varying powers as well as greater powers to borrow.

The Cheek! Why? The Commissions terms of reference were to: i) look at the pros and cons of the present formula- based approach to the distribution of public expenditure resources to the Welsh Assembly Government; and ii) identify possible alternative funding mechanisms including the scope for the Welsh Assembly Government to have tax varying powers as well as greater powers to borrow.

The Conceptual Approach Implication that Barnett matters greatly to Wales (cf. level of resources & political capital employed) Lack of focus on likely welfare impacts of (slightly) greater fiscal devolution Wheres the hypothesis and research question? Incrementalism v preferred future

The (understandable) Limitations of Holtham Do we now know… What is the best form of government for Wales? Is Holtham (phase 1&2) implementation the end of the process or an important way-station? Is a bit more accountability better than none (evidence on fiscal decentralisation & full fiscal devolution)? How does Holtham link to settlements in other parts of the UK? Was the commissioning of Holtham tactically astute?

The More Worrying Limitations of Incrementalism Q: What is Wales preferred future?

Funding & Welfare Probably none of the foregoing can be delivered under the current tax & spend regime, or any small variant of it, The Holtham brief did not extend to considering how current settlement impacts on policy delivery A priori, there is a disconnect between stated goals and available levers that Holtham does nothing to consider or solve…

Ah, you say, thats Someone Elses Problem* Funding Settlement Two year, high profile Commission involving internationally renowned economists inc. member of MPC, and with substantial support from WAG to deliver thoroughgoing, detailed & defensible report on status and options. Energy Policy © Douglas Adams

Ah, you say, thats Someone Elses Problem* Funding Settlement Two year, high profile Commission involving internationally renowned economists inc. member of MPC, and with substantial support from WAG to deliver thoroughgoing, detailed & defensible report on status and options. Energy Policy Devolution We asked. They said no. We asked again. They said no again. © Douglas Adams

So what if we get Holtham? £300m + per annum ~2% of the devolved budget £100 per man, woman and child 50% more than ERDF Objective 1/Convergence Funding

So what if we get Holtham? £300m + per annum ~2% of the devolved budget £100 per man, woman and child 50% more than ERDF Objective 1/Convergence Funding Insignificant? No. Transformative? No.

OK, Enough of the Negativity: What is to be Done? Welfare-increasing Policy Objective Cut child deaths & SI from road traffic accidents by 90% Evidence based required action20mph blanket urban limit, 50mph rural Implications, cost/benefit & barriers? Electoral, time costs competitiveness, NHS savings, ethical etc. Do we have the guts? Revise policy Fully devolved? Save lives Constantly, visibly hassle Westminster & Whitehall

OK, Enough of the Negativity: What is to be Done? Welfare-increasing Policy Objective Decarbonise Energy & economic production Evidence based required actionCarbon tax Implications, cost/benefit & barriers? Loss short term competitiveness /employment. Medium/long term competitive climate, & fuel poverty /security advantages Do we have the guts? Revise policy Fully devolved? Go green Constantly, visibly hassle Westminster & Whitehall

Conclusion Holtham has had so much traction & attention because it matters to politicians, the Welsh intelligentsia & civil society. i.e. us. Elevation of devolution/funding issues (& here subsuming of important economic issues into political context) risks further disconnect & less focus on how settlement impacts on regional welfare.

Conclusion Simultaneously, austerity has reinforced a focus on frontline service provision at the expense of the economic and environmental/energy interventions and infrastructure development that might serve to protect welfare into the medium term Excessive focus on funding of devolution (& now lawmaking powers) distracts from impact and potential for devolution – which may be large

We know what happens to people who stay in the middle of the road. They get run down. Aneurin Bevan Thanks for listening