Plaid’s path out of poverty
Wales needs its own financial plans if it is to escape the grinding poverty that has affected the country, sometimes for decades
THERE is one issue that overshadows all policy discussions and policy development at the moment, and it remains the biggest issue facing British politics: finance. As Plaid continues its spring conference in Cardiff this weekend, it is the one subject that returns to our minds time and again as we get ready for the general election campaign.
The public deficit forecast for the UK this year now stands at £178bn. Public finances are expected to be squeezed until 2014. The Treasury’s own figures show that government departments face a reduction of 3.2% a year – a total reduction of £72 billion. Most of us can only guess at the severe impact these cuts will have on the welfare state.
This is at a time when the gap between the rich and poor continues to widen to record levels, where the poorest 10% of the population pay a higher proportion of their income in taxes than the richest 10%. When two million elderly people are now officially classed as poor across the UK and the number of children living in poverty has increased to 2.8 million. This is the shameful reality of life in the UK.
The Conservatives have said that they plan to cut services immediately after the general election, only protecting the NHS and international development. In the 2009 budget, Labour also committed to big cuts in public expenditure in 2011. Since then, they have attempted to backtrack.
The Tories are threatening to further damage our already fragile economy with even greater ‘in year’ cuts. Virtually no leading economy in the world economy has taken this approach, including no member of the G7. They are instead waiting for a sustained recovery. The Tory approach could lead to a double dip recession which will threaten public services, so little wonder that the Conservatives are already reassessing their strategy and are inconsistent with public statements on the issue.
But what does this mean for Wales? Our economics adviser Dr Eurfyl ap Gwilym has estimated that the Assembly Government’s budget could suffer a cumulative reduction in spending in real terms of up to £2.8billion.
This cut in the Welsh budget must considered against the backdrop of severe underfunding over the years. The independent Holtham Commission identified that Wales is being underfunded to the tune of £300 million a year, and this is a conservative estimate. All parties in the Assembly have accepted these findings, that public services in Wales are being underfunded, But none of the UK-wide parties have pledged to reform the system. Any cut to the Assembly’s budget would therefore represent a double whammy for Wales, and our priority must be to protect front line services in Wales.
When times are tough, individuals and families need the Government’s help most. This is not the time to pull the rug from under the feet of Welsh families. Faced with the current deficit, Plaid have decided that our public spending priorities are to protect frontlines services by protecting the Assembly’s budget, and to take action to help the most vulnerable in society – our pensioners and families facing poverty. Even during this financial climate progressive policies can and still need to be implemented, both to begin the process of restoring public finances and to help those who need our support most.
We have announced a serious of tax and redistributive measures that should be introduced immediately. These include increasing the rate of capital gains tax to the marginal rate of paid income tax. This would raise £3.2bn a year, and eliminating the tax free allowance would bring in an additional £1.1bn.
We would limit income tax relief on pension contributions to the standard rate, at the moment a major proportion of this tax relief goes to those earning over £150,000 a year. The tax raised by this change would be approximately £2.1bn a year. And we would raise the rate of income tax to 50% on taxable earnings in excess of £100,000 a year. This measure would bring in an extra, annual £3bn.
From the £9.4billion raised, we would use £2.8billion to increase the basic state pension to the level of the pension credit guarantee, initially for the over 80s. This would have a significant impact on pensioner poverty. To help poorer families, Plaid would also raise the personal tax allowance by £1,000. That alone would take around one million people on low incomes out of the income tax net altogether and would cost £5.1bn. Together these measures are cost neutral but would help those on the lowest incomes – those who need government help most.
We believe that these policies clearly demonstrate our principles, priorities and vision, and they all deliverable within the budgetary constraints. They are our only spending commitments in the forthcoming election.
Perhaps somewhat predictably, the UK election narrative is being dominated by policies that will only affect England, as discussion around policy content, what budgets to cut and what to protect, is largely irrelevant to Wales, as we receive a percentage of spend across many departments while decisions on policy implementation are of course devolved to the Assembly Government.
In addition to this redistribution mechanism outlined above, we need a strong cross-party message from Wales that due to our historic underfunding our budget should be protected. Warm words from Labour and Conservative AMs in the chamber are not enough; we need to see action from their counterparts in Westminster. Only then can Wales begin to plan its way out of recession
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Its very welcome to see a pre election debate include policy and content rather than the usual “yah-boo-sucks” of personality politics that has distracted and discredited politics over the last ten years. Its good to learn of the strategic and tactical priorities for Plaid Cymru ahead of a General Election and I thought there were some interesting observations around the issues facing Wales. One thing that does continue to irritate though is the continuous false premise that the forthcoming election is only about England, implying the UK Government is somehow anti-Welsh.
Nerys Evans writes:
“Perhaps somewhat predictably, the UK election narrative is being dominated by policies that will only affect England, as discussion around policy content, what budgets to cut and what to protect, is largely irrelevant to Wales, as we receive a percentage of spend across many departments while decisions on policy implementation are of course devolved to the Assembly Government.”
I don’t accept this for one moment.
How is reducing unemployment “irrelevant to Wales”?
How is reducing the public sector borrowing deficit “irrelevant to Wales”?
How is the ongoing conflict in Afghanistan, where many Welshmen and women are proudly serving their communities, “irrelevant to Wales”?
Yes, Wales is different in many ways to other parts of the UK. And, yes we should reflect that in policy making and governance- surely that is what the recent debate around devolved powers has been about? However, like it or not, Wales is still part of the UK and this coming election, far from being either English in nature or “irrelevant” is actually the most important for Wales in a generation.
Poverty isn’t an issue that can be dealt with by politics and politicians alone, if that was true it would be something society would have sorted out decades ago in the West because truth be told we have got the resources needed.
Poverty also shouldn’t just be seen as a fiscal problem – it’s as much of a philosophical/sociological problem as it is a fiscal one. But at the root of it all it’s a spiritual problem. Poverty exists for some because of the greed of others.
Also poverty exists because people are told that they are in poverty. Is it right to tell a poor man that he is in poverty when he lives in faith know that he has deeper more important treasures? I visited Churches in Kyiv in October 2008 and I came face to face with poverty of huge proportions – but the material poverty was answered with spiritual and communal wealth as the Churches prospered serving their communities – Churches, voluntarily, provided what the welfare state provides here and more. I left Kyiv having witnessed poverty greater than that we have in Wales but also saw spiritual wealth that was much needed here in Wales.
You can’t spend yourself out of poverty because primarily poverty is a spiritual/moral issue. Plaid and other political parties have their role to play with politices as outlined by Nerys above but politics in itself will never succeed in making poverty issue. Even if you give every Welshman a £100k tomorrow – other forms of poverty, mainly spiritual, will keep knocking on our door. Gwynfor and his generation knew this and that is why Plaid was seen as one arm of a grater movement, another arm would have been the Churches, another family etc… etc… To think that politics and political parties can incorporate all of those is misguided.
I dont agree with all of your logic Rhys but you are absolutely spot on when you point out that poverty is not just a politicians issue.
I’ve now read this article three times. My original conclusion that it is an example of primary school politics at its worse I’m afraid still stands. Plaid’s strategy is now to hope for a hung Parliament. In this scenario Plaid’s 3 to 5 MPs with I assume their friends in the SNP would call the shots. The aim is to ‘protect the Assembly budget’. As England is hammered by expenditure cuts on a scale never seen before, Wales will be excempt in order for any minority Tory or Labour government to stay in power. If there are people who believe this nonsense then to paraphrase Nye Bevan’s famous quote regarding the ability or lack of it of Eden ‘They are too stupid to be politicians’.
The reality after the next election is that whoever is in power will have to very quickly set out a cuts budget. There might be an argument about the timing and its link to economic growth but no sensible economist disagrees that the public sector will have to be reduced in order to stabilise the UK’s finances. Any minority government which listens to either Plaid or the SNP would deserve to be defeated in Parliament. In the subsequent election the party concerned would be hammered as English voters quite rightly sought to ensure that no area of the UK would receive preferential treatment through the use of pork barrel politics. A hung Parliament will only benefit voters in Wales if it produces a united front amongst the parties regarding the tough decisions needed to bring the UK’s finances into line again. The ideas of Plaid if implemented would lead to economic disaster with increased interest rates and the inevitable intervention of the IMF.
Plaid had better get used to the fact that the party for the Assembly is well and truly over. People would have more respect for Plaid if instead of playing to the gallery with policy intiatives it knows will never be implemented, Plaid actually set out its priorities for the Assembly budget after 2011. In the run up to the Assembly elections of 2011 Plaid and all the other parties have to explain to the electorate how they would reduce the Assembly budget by £2.8 billion. Being in government involves taking difficult decisions I’m afraid. The referendum is a distraction from the real issue facing all Welsh politicians which is how do you live with a probable cut of nearly 20% in your budget in the next assembly term.
Thanks Mat, but there’s no logic to understand, just faith to be believed
Nerys,
Your article is entitled Plaid’s path out of poverty, and you correctly highlight the need to generate wealth in the Welsh economy. The main thrust of your article however is about how wealth should be redistributed within Wales and within the UK, but you don’t discuss Plaid’s strategy for ‘home-grown’ wealth creation. I’m not suggesting that Plaid do not have such policies, but it would be good to see them highlighted.
Rhys Llwyd,
I agree that material wealth is not the ‘be all and end all’ but I’m not convinced that an improved society can be achieved through religious devotion. I tend more towards the view that people living in poverty tend to be more religious as a form of ‘escapism’ or because they have little choice (many truly poor people are dependent on religious charities for their survival), and I’m also sympathetic towards the notion that in unequal societies, religion plays the role of keeping the opressed masses docile (although I realise that nothing is ever that clear cut). It is certainly true though that the most religious societies on earth are by and large the most oppressive.
I also disagree with your suggestion that politicians are trying to play ‘all roles’ in society, in fact I would say that in many ways today’s politicians have a far more limited role in in fluencing peoples personal lives than in the past.
Not a single word written by Nerys Evans above, about the creation of wealth.
The tragedy of “very” left wing politics.
Jeff Jones is absolutely spot-on. The fact is who ever wins, labour or tory, significant cuts will have to made in the first two years of that administration for two reasons. First is pure politics. Voters have been prepared for the pain of public sector cuts over the last 12-18mths, so to delay that to the back end of an administration would be political madness. The second reason is that as we have the same debt crisis as Greece, international financial institutions are not going to let us get away it!
Nerys Evans starts off her excellent article with …” the biggest issue facing British politics: finance” .
This is so true it is bordering on a truism but she doesn’t then really get to grips with any kind of policy that can deal with this. The article goes on to worry about pensioners and public sector services and the horrendous deficiencies of previous and current administrations, but surely this is missing the point. The ‘path out of poverty’ is through economic regeneration and giving people hope and opportunity though jobs and wealth creation (another truism!).
Rather than formulating policy around fiddling with the distribution of a rapidly diminishing public expenditure budget we need to generate more wealth and the essential first step in this means intelligent restructuring of the financial systems of Wales so that business can flourish. This means introducing ‘locality financing’ through credit unions, a solution for which the powers to implement already exist in the WAG. So I keep on asking, if the solution exists why is it not being implemented and why is it not at the forefront of policy?
Perhaps Nerys and her researcher should read yesterday’s FT’s article ‘Public Spending cuts on the way’. The NHS for example is already taking a £4 billion cut against its original expenditure plans. I wonder what the consequential effect on NHS spending in Wales will be?
No serious left of centre politician can argue against the need for cuts. The debate should be where the cuts should be and ensuring that fairness is a key element in any decisions. Attacking the bankers might make you feel good but it doesn’t solve the mess we are in. It’ might already be too late to cancel the aircraft carriers but we need a serious debate about Trident as part of a much needed defence review. As for the other cuts Assembly politicians should be looking at all the assembly’s expenditure with nothing ruled in or out.
Economic spend in Wales , for example , was the highest in the UK yet we remain bottom of the league on most indicators. There should be a major debate on whether the decision to abolish the WDA was the correct one. Can we really tolerate any longer a situation where in 1997 there were 12 hospital beds per manager and now there are just 4? There are now nearly 40,000 individuals earning over £50k in local government where once there was under 4000 and all of this in an age of low inflation. Cuts can be made but as Mark Drakeford points out in an interesting speech they have to be driven by the politicians not the civil servants. Why , for example, is the Assembly intending to slash the capital budget in the next few years? Particularly when research by the IMF shows that increasing capital spending by 1% leads to a permanent boost to economic growth of around a third of 1%. Instead of wasting money for political reasons on the route to North Wales the Assembly should be spending money to boost the potential of the Cardiff City region. Cardiff should be the economic power house driving recovery for much of the area where the majority of the population lives. They could start by reinstating the much needed improvements to the M4 in the Newport area, constructing a road to the airport and dusting off the old Mid Glamorgan/South Glamorgan scheme for a tram system to connect the valleys to the capital.
“Can we really tolerate any longer a situation where in 1997 there were 12 hospital beds per manager and now there are just 4?”
We might, if the previous situation left the NHS badly under-managed. Of all the public debate that depress me, the ones that feature attacks on so-called NHS bureaucrats are perhaps the worst. Anyone who has spend any time in a hospital, either at A&E or on a ward, will know that it is characterised by often chaotic administration; patients moved wards in the middle of the night, confusion about the administering of drugs, having to tell 10 different clinicians all your details. What the NHS needs is tight and efficient management to make its budget go further. More managers (by which is often meant all staff who are not clinicians, including cleaners, caterers etc) would probably pay for themselves several times over.
(besides, the bed to ratio manager is also a measure of the changing way people are treated: far fewer need an overnight stay nowadays)
There’s a problem in that the title of the article doesn’t match what its actually about.
It looks to me like Nerys is writing about her party’s political priorities ahead of the election, rather than a ‘path out of poverty’. There’s been some discussion of the Welsh poverty question by the likes of Adam, and I think to weigh in with a proper contribution to that debate Plaid would have to produce an economic plan, like they used to through the likes of the late Phil Williams, Wigley etc. In terms of wealth creation I’d like to think the best is yet to come with IWJ looking to turn the Welsh budget around. Perhaps Nerys could have acknowledged that. Other than that you need skills (the education budget to be protected) and infrastructure. Although it only benefits the south of Wales, Plaid should make electrification of the railway all the way to Swansea a red line issue for any Hung Parliament negotiations.
However, is Plaid really wrong to call for the protection of the Assembly budget? No they are not. Sir Jon Shortridge has also pointed this out. Protecting Welsh finances (and Wales patently did not unleash the forces that created this recession) is entirely justifiable once you accept that Wales has specific needs and has been relatively impoverished by the Union, compared to other parts of the UK. This argument wouldn’t be good for that Union but Plaid is right to make it.
Jeff Jones’ point that money is somehow being wasted on north-south links should be rejected. Anything that tries to bridge internal divisions should be promoted and could well be important for building an actually Welsh economy in the future.
Finally, it is ridiculous to even accept cuts without looking at why the cuts have to be made. Even if you accept the reality of cuts (which Plaid does) you don’t have to argue that they’re normal, you don’t have to think they are moral, and you’re under no obligation to think they’re right. It isn’t right to propose cuts (except perhaps for inside the Assemblys fixed budget where you’ve got no fiscal powers) without addressing the cause of the recession. The recession was caused by quite specific circumstances engineered by the world of high finance. If you still have to bring the debt down (or the deficit, which is a separate issue) then fair enough but only do it if you’re asking the public-owned banks to maybe curb their excessive bonuses, and perhaps pay back some kind of levy. It neednt be a crippling levy or tax, but a solid return for the taxpayer would be nice.
Didn’t realise Jeff Jones also called for money to be diverted away from “the route to North Wales” specifically to pay for a tram system, an M4 relief road, and an airport link road.
Haven’t got a clue about the tram system but the M4 relief road was quite clearly not environmentally acceptable to any Government that takes climate change even a little seriously.
The airport link road is not needed and Cardiff Airport have now denied that they want a new road. Its more of a vanity project to get the taxpayer to even further underwrite the St. Athan Academy.
And that’s without saying there isn’t enough money in north-south links to even pay for the M4 relief road let alone Jeff’s trams, unless you wanted to cancel the trains I suppose.
It might be worth commending the fact that St. Athan has not been mentioned once during this discussion on the Welsh economy. Because its complete rubbish that 1,000 cleaning jobs constitutes anything significant to the Welsh recovery. But that’s the reason they (a handful of Labour politicians) want an airport link road, it certainly isn’t because the Airport wants or needs one.
Welsh Connection,
I wasn’t advocating theocracy, don’t worry! Oppression happens when people, mainly Muslims, try to legislate morality. Christians in Wales believe that you can’t legislate what goes on in a man’s heart; therefore thats why, thankfully, we have a long tradition of the separation of Church and State in Wales. But that doesn’t change the fact that a changed heart leads to a change in society – history shows this, it happened in Wales before. E.g. During the 1904-05 revival the Police in Bethesda had nothing to do because crime levels dropped so they went on to establish a choir to keep themselves busy!
What I was saying was that different spheres of society need to be addressed by different institutions. Some by the political parities/government, some by the Church and some by the family and together they all tackle different aspects of poverty.
It will be a bitter-sweet Wales if we end up being a materialist wealthy country some day but still full or moral and spiritual poverty.
Could someone explain to me the economic benfits improved transport links between North and South Wales will bring to the Welsh economy? I would thought that any business based in Nothn Wales would want a customer base bigger than South Wales. If that is the case then the obvious transport link to the wider market is not through Mid Wales but the A 55 and then on to the UK motorway network. perhaps Someone could explain how any government that takes climate change seriously can subsidise Air Ieuan? Answers on the back of a postage stamp ,please.
Thank you Nerys Evans on your report. I have to agree that my own heart goes out to my family and neighbors who are more vulnerable in this economic recession, and I plead for everyone to do what they may to alleviate their suffering. It is in times like these that communities can pull together. I do take to heart Llwyd’s observations, and it is worth remembering that many of us do find solace in Faith, and that many rediscover their sense of spirituality and hope in times like these.
Ultimately, however, I do believe that those who may not feel the economic downturn quite as severely as others should do the right thing and offer what they can in making sure that their neighbors have a roof over their heads, food on their tables, health care and education for their families. The strategy outlined by Evans I believe responsibly affects this value.
Re: Matt Davies:
“One thing that does continue to irritate though is the continuous false premise that the forthcoming election is only about England, implying the UK Government is somehow anti-Welsh.”
I do not think what Evans was saying implied that the UK Government is somehow “anti-Welsh”. It is simply that England enjoys the largest electorate with a preponderance of MPs, and a professional media based in the largest population centers. It is a truism that politics on the UK national level simply speaks to the concerns of the largest population.
“I agree that material wealth is not the ‘be all and end all’ but I’m not convinced that an improved society can be achieved through religious devotion. I tend more towards the view that people living in poverty tend to be more religious as a form of ‘escapism’ or because they have little choice (many truly poor people are dependent on religious charities for their survival), and I’m also sympathetic towards the notion that in unequal societies, religion plays the role of keeping the opressed masses docile (although I realise that nothing is ever that clear cut). It is certainly true though that the most religious societies on earth are by and large the most oppressive. ”
What a load of cobblers! so the United States is one of the poorest countries on Earth.