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Funding of the Welsh Assembly

September 21, 2011 9:57 AM
By Peter Black
Originally published by Peter Black and South Wales West Liberal Democrats

Peter Black: I move amendments 2, 5 and 6 in my name.

Amendment 2 notes that we need to take into account that, following a recession, any UK Government would need to have implemented the sort of austerity measures that the current UK Government is bringing into effect, in order to restore confidence to the UK market. This was amplified by nearly a decade of deficit financing by the previous Government. Complaining about this without proposing imaginative solutions is the worst kind of headline politics.

Amendment 5 deletes the proposal to lobby the UK Government- [Interruption.] If you want to intervene, you are welcome to make an intervention.

Simon Thomas: He mentions 10 years of deficit budgets by the Westminster Government. Could he tell us on which occasions Liberal Democrat MPs called for less spending during those 10 years?

Peter Black: You will know, Simon, that Vince Cable said on a number of occasions, 2006 most prominently, that the level of debt that the UK Government was getting into-

Simon Thomas: That was personal debt, Peter, and not public debt.

The Deputy Presiding Officer: Order. This is not a private conversation.

Peter Black: The Liberal Democrats have been raising this issue in the UK Government and it is fairly evident that, since 2002, the UK Government under Labour was running a deficit budget well before the banking crisis. Of course, that put it in a worse position when that crisis finally came.

Amendment 5 deletes the proposal to lobby the UK Government for a temporary cut in VAT. The UK Parliament has twice rejected the call for a VAT reduction. So, if the Government were to implement it, it would represent a slight difficulty between us and them. More importantly, the rise in the VAT rate raised an additional £13.5 billion-not much less than the entire budget of the National Assembly-and I can see nothing in this motion as to how Plaid Cymru proposes to fill that gap. We also have to consider the evidence available from when Alastair Darling cut VAT as a temporary measure. There is very little evidence that it stimulated the economy in the way that is being proposed here. It seems to me that that is a myth being proposed by a number of people.

Finally, amendment 6 acknowledges that much of the work in developing additional financial powers for the National Assembly will take place through the Calman-style commission, and encourages each political party represented here to engage with the commission to ensure a consensual approach to greater powers. It goes without saying that we would ask minor parties and other interested bodies to contribute too. The Welsh Liberal Democrats have been key in ensuring that borrowing powers are devolved to the National Assembly. We believe that the power to borrow would help finance large capital projects, particularly infrastructure projects, which would have two effects. The first is that it would develop the infrastructure needed for future economic growth, and the second, as pointed out by Ieuan Wyn Jones in moving the motion, is that it would stimulate immediate economic growth.

I would like to see the borrowing powers of the National Assembly made equal to those of the Scottish Parliament as soon as is feasible. The details of the proposals for Scotland are already known. Scotland will be able to borrow up to 10 per cent of the capital budget each year, with cumulative capital of around £2.2 billion, with money available from the national loans fund and plans for repayment. There is detail regarding what these Scottish-style borrowing powers mean, so we can evaluate it on that basis. That would be a first step, but an important step nonetheless.

That is in strong contrast to the Conservative amendment relating to a 'made in Wales' public-private partnership. I have no problem with using private money to invest in infrastructure as long as we avoid the pitfalls of PFI. However, the Conservatives have provided no details on how they would do this, how it would differ from other models or anything about it at all, other than it would be made in Wales. I require a bit more detail before I can offer my total support to that amendment, and I hope that any Conservatives contributing to this debate can flesh out the details of that amendment.

The other point that I would like to make is that there are other ways in which the Welsh Government can stimulate capital investment. The first is tax increment financing, which has been proposed in England by the UK Government. It would allow local authorities to stimulate capital development by borrowing against the increase in business rates raised as a result. I also referred earlier, during questions to the Minister for Finance, to the proposals for a Welsh housing investment trust, which would stimulate capital investment in social housing by using the borrowing power of local authorities and many other mechanisms attached to that. I would like to see that being pursued further. The Minister hinted in her response that that had been abandoned by the Government, so I would like more clarity from the Minister on that.

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