The Clown Prince of Comedy Maths

It was reassuring to read in this story in today's Western Mail that Peter Hain has lost none of his blind tribalism. If the Tories support anything it must be wrong, whatever Labour supports must be right ... and if anyone has any better ideas they must be ignored.

The idea in question is that the Welsh Government should become responsible not only for how much it spends, but also for how that money is raised. Mr Hain is against this because public expenditure in Wales is greater than the money collected in Wales through taxation. That's not in question. But the figures he uses to justify his position are. He says:

The Holtham commission calculated that approximately £17.1bn of tax revenue is raised in Wales every year. Total public spending in Wales is around £33.5bn – almost twice the amount raised.

This latest demonstration of the Peter Principle starts by saying something that is true, but then twists it into a barefaced lie. £17.1bn is the total of revenues raised in Wales by UK-wide taxes for 2007-08. This is broken down in Table 4.1 of the Holtham Commission's Final Report, on page 40.

However this figure doesn't include money raised from local taxes, in particular council tax and non-domestic rates. It's not easy to calculate these figures exactly because NDR are put into a common pot for "Englandandwales" and supplemented by the Treasury before being redistributed, but Alan Trench calculated it at just over £1.9bn in this post on Devolution Matters.

The Holtham Report didn't put a precise figure on this, but does put it at approximately that level, for the very next paragraph says this:

In aggregate, total identifiable expenditure in Wales in 2007-08 was £25 billion, around £6 billion more than tax receipts. This is commonplace given Wales’s relatively high needs. Out of the devolved countries and the nine English regions, only London and the East and South East of England have fiscal surpluses.

So where does Peter Hain get his figure of "around £33.5bn" from? He doesn't say. But I can say that, at the very least, he is not comparing like with like. If he relies on Holtham for the first of his figures, he must surely also rely on Holtham for the second. But not satisfied with a six billion difference, he expects us to believe his figure of more than sixteen billion. Any clown that can get his sums wrong by several billion pounds fully deserves all the laughter he gets.

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I don't think Peter really intends us to take him seriously. He wants to get his name into the papers, and the more outrageous his claims the better. That's just his personal style, and it suits his personal agenda. He knows full well that a few die-hards will now quote this supposed £16.4bn fiscal deficit as if it were the gospel truth ... at least until someone comes up with an even more outrageous figure that they can latch onto.

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But there's a much more fundamental point at stake. After claiming that we only raise about half the total amount spent on us, Peter says that:

We shouldn't be ashamed or embarrassed by that. Wales' needs are greater than most other parts of UK.

No. We should be ashamed of it. We should rightly set out to address any fiscal deficit that we cannot support. The real question is how on earth we can be expected to do this without having our hands on the same enonomic levers that other governments have at their disposal.

Taxation is a tool by which we can take control of our own economy and steer it in the right direction. Every government adjusts the levels of a whole range of taxes to make their own economies more successful and to give them a competitive advantage over their neighbours. Each country has different strengths, different human and natural resources, and a different sense of what is important. Until we in Wales are able to use taxation as a tool to play to our own unique strengths, we will always be at a disadvantage.

Peter Hain and his Labour party clearly have no desire to see Wales fight for its own prosperity in this way. Put bluntly, their only solution is for us to resign ourselves to always being dependent on England; but to sugar it by saying that we shouldn't be "ashamed" or "embarrassed" enough to get off our backsides and do something about it. Nothing can or will change until we start taking responsibility for both the income and expenditure sides of the economic equation.

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10 comments:

Cibwr said...

Hain is an embarrassment - I wonder why Labour keep him on as shadow Secretary of State? Is it that they don't know what he says has no basis in fact, do they care?

Welshguy said...

"We shouldn't be ashamed or embarrassed by that. Wales' needs are greater than most other parts of UK.

No. We should be ashamed of it. We should rightly set out to address any fiscal deficit that we cannot support. The real question is how on earth we can be expected to do this without having our hands on the same enonomic levers that other governments have at their disposal."

Absolutely!

Anonymous said...

The £33bn is a figure I've heard and used in the past. It's basically taking Wales as 4-5% of the UK spend. It's also, bycoincidence, more or less the same as the Defence budget. It's worth keeping in mind when thinking of Wales as an independent country only to give some ball-pack figure.

In any case the £33bn would include spend on things like Defence, embassies, social securiy etc. Things which I beleive aren't to be discussed by the Silk Report.

S

Owen said...

If you include a proportional Welsh share of non-identifyable expenditure in the latest Treasury figures (not 2007-08 when Holtham was published) then it does add up to around £33.5bn. But that also means that in the tax raised in Wales will have gone up by a similar proportion over the period (i.e VAT hike). It was quoted in the WM (I think) that Council Tax and NDR in Wales now raises £2.2bn for example.

..........in short Hain is still wrong.

Naturiaethwr said...

"We shouldn't be ashamed or embarrased by that". Which party does Hain think has one of the longest one-party domination of any democratic country's politics in history? Perhaps what he's saying is "We [my party] aren't ashamed or embarrassed by that".

Anonymous said...

He should be ashamed and embarrassed at his and his party's record in Wales. One of the poorest regions in the EU and in the UK. Child poverty rising. Decades of lack of investment etc.

Hain's solution: 'Carry on as we are, keep holding out the begging bowl, stay in the workhouse'

MH said...

S and Owen, you both mention the £33.5bn figure includes an apportionment of non regionally identifiable expenditure. Comparing like with like for the same year (table 9.1), this was £73.3bn which would give us a population share of about £3.6bn. Added to the £25.3bn, this gives £28.9bn.

The figures for 2009-10 (only available as a spreadsheet, and with slightly different figures for previous years) are £29.1bn identifiable and £81.2bn non-identifiable (= £4.0bn) amounting to £33.1bn in total. But as has been said, the tax take will also have risen, and this isn't readily identifiable for Wales without doing another Holtham calculation.

I could add other factors, in particular the extent to which profits generated in Wales are accounted (and therefore taxed) as having come from elsewhere in the UK. This information simply isn't available, and any calculation has to be made on assumptions (which may of course be completely reasonable). But there was a one-off change to the UK government's accounting methods for exports which gives us a concrete figure of the extent to which this happens. The details are in this post, but in essence Welsh exports dropped by 13.4% against a UK rise of 2.2% when exports changed from being accounted from the point of production to the head office of the company concerned. If this pattern is generally true for what is produced in Wales but distributed within the UK, it would indicate that about 15% of the wealth we produce is accounted as having come from elsewhere in the UK. The only way we will know for sure is if we require companies in the UK to produce regional accounts.

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To Naturiaethwr, I would say that although Labour have been in power locally in much of Wales for decades, they were not in power at Westminster for an unusually long period. The levers of the economy are held at Westminster, and the Tories have also done their fair share of damage to Wales when they held them.

The point is that both Labour and Tory governments pursued policies which were designed to benefit the UK economy as a whole. But the trend of the last few decades has been towards services, and particularly financial services; and the profits made (and therefore the tax on those profits) have made a major contribution to the UK economy over the years. Both Labour and Tory governments used their tax levers to play to the strengths of the financial services sector in order to maximize their profitability and therefore the tax take from those profits. They made the perfectly reasonable calculation that the overall tax take for the UK would be greater by playing to those sectors of the economy than to other sectors of the economy.

The point I am making is that Wales (which does not have an especially strong financial services sector) would, if we held those same powers of taxation, use them to develop the profitability of the sectors in which we are stronger, or have the potential to be stronger.

John Dixon said...

The final paragraph of your most recent comment makes a key point. We should indeed use taxation powers to encourage the sort of economy we want to see in Wales. It's almost the complete reverse of the policy pursued by successive Welsh Gvernments, which seems to have been based on trying to attract those industries (e.g. financial services) who benefit from the current tax regime. Whether we 'would' do so (as opposed to 'should' do so) depends on using a bit more imagination than we've seen to date...

Anonymous said...

Much of the blame lies with the media. When can we expect them to challenge political figures on the comments they make, instead of printing everything uncritically like glorified stenographers?

Colwyn.

Siônnyn said...

Peter hain an numbers, eh? He can't even account properly for his own election expenses, who who would expect him to understand the intricacies of a country's finances?

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