The Dangers Behind Lack of Scrutiny in the Spending Review

Below is my piece for the Wales Business Blog. Also found at:

http://www.walesbusiness.org/2010/10/the-dangers-behind-lack-of-scrutiny-in-the-spending-review/

As Plaid Cymru’s Treasury spokesperson, I am calling on the ConDem UK Government to give proper debate time to the upcoming Comprehensive Spending Review (CSR), rather than hiding it away from MPs.

The CSR is currently expected to be delivered to Parliament as an ordinary statement on 20th October, with a limited amount of time for MPs to question the Chancellor of the Exchequer on the decisions announced in the report.

Plaid will be campaigning for fiscal stimuli including measures such as the devolution of corporation tax, the creation of economic enterprise zones, the electrification of the railway from London to Swansea; and increased political powers for the Welsh Government over economic policy.

Normally the House of Commons discusses the Budget report for five days after it is announced by the Chancellor.

However, this Comprehensive Spending Review, which will have a tremendous impact upon people’s everyday lives for the next three years, will have almost no scrutiny in the House of Commons whatsoever.

We should have the same five days as MPs to quiz the government on exactly what the effects will be of the different cuts which they are announcing in October.

As we saw in the emergency Budget, the ConDem Government made a whole series of claims about the effects of their Budget, not least that it wouldn’t hit the poorest hardest, which were subsequently disproved.

They can’t be allowed to get off the hook this easily, without a full debate.

The UK Government, which will be imposing these cuts on the devolved administrations, should also make transparently clear the effect of their decisions upon the national governments of Wales, Scotland and Northern Ireland.

They should publish a report alongside the CSR which shows the effect of the Barnett Formula on each and every decision.

At the moment, the Treasury acts as judge, jury and executioner over funding for Wales. There needs to be proper scrutiny and publication of the figures so that we can see for ourselves the decisions made behind closed Whitehall doors.

The problem is that successive UK Governments have been guilty of basing their economic policy on the financial sector in London. Consequently under Tory and Labour administrations there have been increasing regional and individual wealth polarisation. Inner London, despite the recession, continues to be the richest part of the European Union, whilst West Wales and the Valleys less than a few hours down the M4 is amongst the poorest.

The folly of this one eyed approach was exposed by the collapse in the banking system and the subsequent recession. As a result of the recession and the banking bailout, the UK Treasury has accumulated an unsustainable deficit.

The new UK Government has set as its main political objective clearing the deficit before 2015. We in Plaid Cymru believe this level of retrenchment is far too quick and that the deficit should be viewed over the medium term.

Too rapid a consolidation threatens future economic growth and will inevitably have a disproportionate effect on those areas of the UK that are more reliant upon public spending.

Even if the UK Government is successful the gain will mostly be felt in the south east of England whilst the pain will be concentrated in traditional manufacturing areas such as Wales.

We will continue to make the case against the scale of cuts proposed by the UK Government in the lead up to the Comprehensive Spending Review in October. However, if the UK Government is to embark on its stated aims it is essential that countervailing measures are introduced to allow the private sector in the poorest parts of the UK a competitive advantage.

These should include fiscal measures such as the devolution of corporation tax or its setting on a regional basis; the creation of economic enterprise zones; the electrification of the railway from London to Swansea; and increased political powers for the Welsh Government over economic policy.

If the UK does not introduce such measures then the so called North-South Divide will inevitably increase, at UK level the economy will become even more two stepped, and the economic and social ramifications in areas such as Wales will be severe.

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