MP Owen Smith announced at the Welsh Labour conference last week that a government led by Ed Miliband would give Wales further financial powers.
The Shadow Secretary of State for Wales explained that Labour would empower the Welsh Assembly by giving AM’s the opportunity to vary income tax by 15p of the pound, subject to a referendum.
Speaking at the party’s conference in Llandudno, Smith said that devolved financial powers would allow the Welsh Assembly to increase its borrowing capacity and bring “real benefits to Wales,” “this will mean extending the amount of income tax potentially devolved to Wales to 15p in the pound, giving Wales control over a third of all of the taxes it spends – over 75% of basic rate tax”, Smith said.
Labour’s taxation policy comes after David Cameron’s controversial visit to Wales in late 2013. Cameron was criticised for proposing the use of a “lockstep” tax system which would allow tax bands to be increased or decreased but only if other tax bands move in tandem.
Chief Secretary to the Treasury Danny Alexander announced the lockstep system after the findings of the Silk Commission, which recommended further flexibility with taxation for Wales.
Cameron’s visit was criticised by many on the left for being reminiscent of a government which has poorly executed the use of devolution to empower Welsh citizens. Smith, 43, stated that the Conservative Party’s reluctance to devolve taxation powers has occurred because the party wishes to “play one part of Britain off against each other” and has led to an increase in inequality across Welsh society.
In response, Conservative MPs have accused Smith of changing his mind on the issue. Guto Bebb, MP for Aberconway, said that Smith has contradicted himself on the tax issue, stating that the Pontypridd MP has “flip-flopped”:
“This proposal affects more than 50% of income tax, and yet a few weeks prior he was saying it would be a Tory trap”, Bebb said.
The comments made by Smith illustrate the current split in the Labour Party. Whilst liberal MPs representing the party are likely to back Smith’s crusade for social justice, “economic fairness” and a desire to set a “progressive Welsh rate” by allowing the Assembly to vary tax bands, his comments have come under-fire for being reminiscent of Labour from the 1970s; which pushed for greater government control instead of promoting individual liberties, limited government and fiscal responsibility.
Despite the announcement, Welsh Labour have also increasingly come under fire from certain groups in Welsh politics. Daniel Roberts, the head of Cardiff University Plaid Cymru students for example said that: “Owen Smith’s comments haven’t been echoed by his colleagues. Carwyn Jones says income tax powers without Barnett reform is “pretty much useless”, but Scottish Labour and Gordon Brown have ruled out Barnett reform. This from the party that claims to be ‘One Nation Labour.’”