Ministers, elephants, and carrots

Danny Alexander, Jane Hutt and David Jones

As historic announcements go, it certainly looked the part, anyway. Two UK Cabinet Ministers flanking the Welsh Finance Minister in the Welsh Government's Cathays Park HQ. Danny Alexander and David Jones were there to announce...well, what exactly?

Reform of the Barnett formula? Well, no. The much vaunted "Barnett floor" to prevent Welsh spending creeping downwards compared with England with every spending review? Well, sort of. Borrowing powers for the Welsh Government for the first time? Well, in principle but...

It was one of those press conferences where everything sort of looks the part, but there's, how can I put this, something of an elephant in the room.

Now Paul Silk, former Clerk of the Assembly, probably won't take kindly to being compared to an elephant, but that's exactly what his Commission was today - the Commission that's due to report in the middle of next month with their recommendations on which tax powers should be devolved to Wales.

By the way, given the number of times the assembled politicians told us they couldn't pre-empt the Silk Commission's findings, I hope Mr Silk feels thoroughly un-pre-empted this evening.

But therein lay the problem with today's announcement - it was a deal today about a deal tomorrow. Until we know what the cross-party Commission is going to come up with (date for your diary, November 19th) we don't know whether the borrowing powers that were offered today in principle will actually happen.

So why do it? Clever politics from the Westminster end seems to be the best explanation. How do you avoid the risk of the Welsh Government simply placing the Silk Report onto the dusty shelf already groaning with un-implemented Commissions and Inquiries?

Simples, as the meerkat might say.

You place in front of them a billion pound carrot of borrowing powers - a golden carrot, if you like, but on condition that Silk or a broad swathe of it is implemented - and you make that explicit deal very public in advance.

Will the deal happen? A billion or so is a heck of a lot of money - so I suspect the carrot will work. We'll have to wait for November the 19th to find out exactly what's on the table here, but the guess would be full devolution of some minor taxes - the Aggregates Levy, Air Passenger Duty, Landfill Tax, possibly Stamp Duty?

But we could also see a move to a halfway house of fiscal accountability on income tax too - perhaps nominally assigning a chunk of Welsh income tax receipts to the Welsh Government without the much thornier move towards tax varying powers - something the First Minister has long stressed would be a matter for another referendum.

That would give the Welsh Government that all-important revenue stream to borrow against independent of the block grant. How much they will be able to borrow is again something for another day. Jane Hutt talked of "parity" with Scotland, which is getting around £2.7bn of borrowing powers this year. Danny Alexander talked of borrowing limits "commensurate" with the income from whichever taxes are devolved.

It was a historic day which was short on detail, and if the three Ministers looked (relatively) happy and relaxed in each other's company then that was probably a good thing - as they'll be spending a lot more time together over the coming months I suspect working on those details.