Source: Adrian Platt (via. Geograph)
Public Services

Intelligent Spending Needs Intelligent Taxation

Since I first entered the Assembly in 2007, I have held the Finance brief under three Welsh Conservative group leaders and covered it for over half of my time in the Shadow Cabinet. In the most recent reshuffle, I was absolutely delighted that Paul Davies asked me to continue in the role. You may think it peculiar that I would want to carry on in a role I’d had for so long, but shadowing finance for the Conservatives, while also chairing the most important scrutiny committee in the Welsh Parliament, the Public Accounts Committee, is incredibly interesting. And it’s certainly a labour of love.  At its core, the role is a forensic appreciation of the way money can be used – some of it good, some of it bad – in order to deliver the entire purpose of a government. Arguably, with the current challenges of public funding in the face of the biggest crisis of our lives, the finance brief has never been more important writes Nick Ramsay MS. It links to everything. 

For this financial year the Welsh Government was already spending around twenty billion pounds, which equates to a growth level of around a third since 2010. In this financial year alone over one billion was added to the Welsh Government budget. On top of that, additional support of up to four billion pounds has been provided by the Treasury since the Covid-19 crisis began. Although there are of course very good reasons this has happened, we should not lose sight of the fact that, for different reasons, 2020-21 sees the biggest single increase in funding for the Welsh Government ever.

Let me kill one myth immediately: Conservatives do not believe taxing people is wrong. Without taxation, there is no revenue. Without revenue, we cannot fund public services. It is not why we tax but how we tax that matters. Taxation can also of course be used as a dissuasive measure and is levied consciously to persuade people not to do certain things, such as the current public debate around a sugar tax. As my colleague Darren Millar argued last weekend, the Welsh Labour Government is very keen on banning things and controlling behaviours. While I accept that taxing as a disincentive is often a valuable tool, both socially and fiscally, as we discuss the philosophy of taxation, we also need to be careful that we do not only think of tax in terms of being dissuasive. 

For us as Welsh Conservatives, we need to think creatively about how we use taxation to incentivise behaviour too. For example, we’ve long argued that there should be Business Rates cuts in Wales and our existing policy is focused on ending Business Rates for companies with a rateable value below £15,000. Yet we need to be focused on the reality of the economic situation we now face and which will undoubtedly get far worse between now and the next Welsh Parliament election. In this new context, as Conservatives we must make economic resilience and recovery absolutely central. Business Rates are basically a flat tax on business, shaped little by the wider economic circumstances or the investments businesses are making in their staff and their workplaces and their local economies. Over the coming months I will be talking to my colleagues; Russell George in the economy portfolio and Darren Millar as Policy Director, to see how we can examine the way we tax businesses. This is in order to reward investment in and retention of staff, for example, or to see how it might align to the geographic areas of our planned Covid Recovery Fund. Tax as not just revenue raising but as also as an incentive to economic stimulus, tied in to the wider social and political priorities of the first Welsh Conservative Government in Wales.  We want to create the most business friendly environment in the UK for the simple reasons that more businesses mean more jobs and the opportunity to invest more in the public services we all rely on.

Paul Davies has already ruled out new taxes in Wales under a Conservative Government, so the focus has to be on the taxes we already control. So I’ll be thinking about whether Landfill Tax can be reformed in any way to improve its impact and, more importantly, there needs to be thought about how Wales’ Land Transaction Tax can be restructured to meet wider policy goals than simply taxing house purchases. If we are serious about a greener Wales then it strikes me that Land Transaction Tax is ripe for some reform to reward properties with environmental and energy efficiency. Tax policy and political policy need to be joined up properly.

In all the time that I’ve been in this role the Labour-led Governments have never cut a single tax. It’s a core belief of all Conservatives; the best people to spend your money are you. As I explain below Governments need to raise money – but a Welsh Conservative Government will do what no Welsh Government has ever done before and cut your taxes. Our long term aim will be to reduce income tax when it is prudent to do so. But our ambition is way bigger than just a soundbite about cutting a penny or two off income tax, it encompasses our whole range of policy levers. A key element is the Fiscal Framework agreed between the Welsh Government and the UK Government at the heart of what we do. Under this agreement reached in 2016, the more economic growth and the more income tax yield we have in Wales, the more is returned from the Treasury. Surprise surprise, the Welsh Labour Government has never been interested in this element of tax policy. To them, tax is all about revenue and disincentives. As Welsh Conservatives we will strive to grow the economy not just to provide jobs and happiness, but to deliver more money for Wales too. 

With the challenges of Covid far from over, and the economic damage yet unknown, it is far too early to make detailed tax and spend commitments for a Welsh Conservative Government. Yet there is one definite policy that my party will commit to from today. In line with an emerging cross party consensus in the Welsh Parliament, we will introduce an annual Finance Bill in exactly the same way that the UK Government introduces a Finance Bill after every budget. This will allow greater scrutiny and greater input into our taxation plans, and will mark a new maturing in the fiscal competence of the institution. Where Labour has pontificated about doing this, just like so many times before it will be the Conservatives who deliver financial accountability to Wales.

In asking me to keep the Finance portfolio, Paul was also clear that we as a Conservative team had to work more closely together than ever before. If we are critical of the current Welsh Government for working in silos, then we as a Shadow Cabinet cannot work like that either. So as Shadow Finance Minister I will also be working particularly closely with my colleague Angela Burns in her new role as Shadow Minister for the Office of Government Resilience and Efficiency. Her wide ranging brief means that she will take an overview of the whole public sector. Making sure our ideas on both taxing and spending connect is absolutely essential if the new arrangement is going to work at maximum potential. 

Let me also put on record that I am grateful Paul placed his trust in me to continue in this key role in the Shadow Cabinet. I’m working on some interesting tax policies, looking overseas at different developments and cultivating new ideas that can help shape a new Wales. A Wales of hope.  Working with the rest of the Welsh Conservative team, I will help deliver a blue print for government that unlike Labour won’t just  be about taxing, it will explain why we tax, and how clever taxation is as important as clever spending.

Nick Ramsay is the Shadow Minister for Finance, the Member of the Senedd for Monmouth and has been readopted as the candidate for the Monmouth constituency in 2021.

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