Alexander: 'Strong case' for assembly tax-varying power

The chief secretary to the Treasury says Wales has a "strong case" for some tax and borrowing powers if there is cross-party assembly consensus.

Danny Alexander, giving evidence to the assembly's finance committee, said it would strengthen devolution.

A commission chaired by economist Gerry Holtham has recommended these powers be given to the Welsh Assembly Government.

But Mr Alexander ruled out any changes to the Barnett formula which allocates expenditure to the devolved nations.

A Commission chaired by economist Gerry Holtham recommended earlier this year that tax varying and borrowing powers be given to the Assembly Government.

Mr Alexander, a Liberal Democrat, said: "If there's a consensus within the Welsh assembly across the parties, that those sort of greater financial freedoms in relation to taxation and borrowing [are wanted], along the lines that we're shortly to start the legislative process for in Scotland, then I would respond positively to that, in that I think there is a strong case for that in the context of a strengthening devolution settlement."

The Holtham Comission also recommended the Barnett formula be replaced by a formula based on need, rather than population.

But Mr Alexander ruled out any changes to the formula, saying that given the need to tackle the deficit, now was not the time for "technical, detailed and lengthy discussions" about the funding mechanism.

Some AMs reacted angrily to his statement, saying they felt it was going backwards from earlier commitments to examine the formula.

"Unacceptable"

Finance committee chair Angela Burns, a Conservative, told Mr Alexander that, in one sense, given the consensus in favour of reforming the Barnett formula in Wales, his statement was "unacceptable".

Mrs Burns said, "As a committee, and as an assembly, in the main, we believe that Barnett is unequal.

"We're not asking, as Wales, to be extra special compared with anybody else.

"We're one of the four nations that make up the United Kingdom and we're simply asking to have the same kind of treatment as other areas.

"We are seeking a needs-based formula - the Barnett formula has run its course."

Mr Alexander made the point that the previous Labour UK government had had 13 years to reform the Barnett formula if it so wished, but had not done so.

The assembly government argues that the Barnett formula is unfair to Wales as it does not take need into account.

The Holtham Commission found that the Barnett formula underfunded Wales by about £300m a year.

Spending review concerns

Some AMs also expressed concern about the impact of reductions to the assembly government's funding as a result of the Spending Review.

Newport West Labour AM Rosemary Butler said she felt that the cut in capital funding for the assembly government left it with few options in terms of backing projects in Wales.

She said: "It strikes me that the Welsh Assembly Government's choices are cut off before you go any further.

"You talked earlier on about fairness, but it does strike me, from this side of the Severn, that fairness seems to stop at the Severn Bridge".

Mr Alexander said he refuted that statement and that the settlement given to the devolved administrations was fair.

Gerald Holtham, the economist who chaired the Holtham Commission into the future of Welsh funding from the UK government, told BBC Radio Wales that reform of the Barnett formula would disadvantage Scotland.

Mr Holtham said: "It will hit Scotland very hard. It looks as if that is the reason the Government doesn't want to touch it.

"Its certainly not in Danny Alexander's interests but more broadly it looks as if the government have delegated this particular issue to the Liberal Democrat part of the coalition and they've got... seats in Scotland and they want to hold on to them."