Here’s one thing you can say for Wales: we are not short of suggestions for how improvements could be made. Bangor’s Professor Colyn Gardner in our cover story says Cardiff needs more bankers. And wind farm builder David Williams would like the planning system speeded up.
Another idea came through this summer from
economist Gerry Holtham. His commission
suggested giving the Assembly Government
powers to increase and reduce income tax and
property tax, and explore corporation tax powers.
I would guess that many, perhaps most, entrepreneurs would worry at the prospect of the Assembly Government having tax powers. Taxes might go up, they would say, to pay for services thatWales can’t really afford.
But consider where we are now. The Assembly Government gets a grant set by Westminster. If the business base in Wales shrinks and the country gets poorer, that strengthens its hand in lobbying for more. There’s no incentive beyond the ballot box to grow the private sector. And now Wales has the UK’s lowest GVA (gross value added) per person.
Here’s an alternative scenario: The Assembly Government keeps any increase in income or corporation tax receipts, but gets less income if those receipts go down. It would have a powerful incentive to maximise salaries and company profits in Wales. That might mean tax cuts rather than rises. And the idea of an Assembly with real economic clout could attract more able people to stand for election.
There are risks, of course. The tax system is already pretty complex, and this could make it even more confusing. The UK government would react aggressively if it looked like Wales was setting lower tax rates to pinch companies and people from across the border.
But it’s the kind of fresh thinking that Wales needs as we enter another period of economic uncertainty. As Redrow’s Steve Morgan says, it’s easier to plan new homes in Wales than in England now thanks to the coalition government’s planning policy. Solutions that are right for London will not always be right for Wales.
Douglas Friedli, editor
Also in: September 2010
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Steve Morgan
Douglas Friedli meets the chairman of Redrow and Wolves, who wants to create a triangle of enterprise in Wales and England.
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Return of the banks
More competition and a feeling that the banks are more willing to lend is injecting some much-needed optimism, find Douglas Friedli and John Sanders.