Wales and Taxes: One small country, one big report, one great democratic idea

Did you hear about the Silk Commission last week…?

No?

Let me explain: the Commission produced a report which threw its weight behind a key democratic idea which a country – any country – can adopt to deepen democracy.

As the Global Commission on Elections, Democracy & Security noted, developing democracies often have problems that no longer are an issue in mature democracies. But that doesn’t mean that democracy or the accountability process in European countries is perfect.

For example, what if you elect politicians who enjoy legislative and spending powers, but who do not have tax or borrowing powers? Wouldn’t that place limitations on democratic accountability, or to turn a phrase, be representation without taxation?

This has been the case in my own country, Wales, since the onset of political devolution in 1999. The Welsh Government in Cardiff is responsible for about half of public spending via the distribution of a ‘block grant’ from the central UK government in London. The other half of Wales-based spending comes from UK benefit expenditure in the country. But, while politicians in London have the powers to raise finance from tax and public borrowing, the Cardiff-based government doesn’t. And herein lays a significant democratic weakness.

Yet I doubt that you noticed the publication of a report by the Silk Commission. In fact, I’d imagine that, unless you took an active interest in British constitutional affairs, the report would have passed you by. That would have been a shame, because the Commission got to the heart of why taxation is an important component of a fully functioning democracy.

The Commission argues that Welsh government should have a share of the income tax raised in Wales, and be able to borrow on the basis of that tax revenue (albeit within fiscal limits). Though it doesn’t go as far as devolving tax-raising to Cardiff, it is an important step on the road. The report’s conclusions have been welcomed by Welsh and British politicians.

But if the existence of the report was news to you, here’s why it is important for democratic principles: when politicians have the power to tax and they use this power, it changes their relationship with their electorate – the people who are taxed. From that moment on, a direct democratic link between democracy and tax is formed.

Instead of acting like benefactors who can dole out largesse gained from another source—whether aid, resource extraction, or a block grant from a higher political power—politicians find that they have to take responsibility for their spending decisions. Suddenly, tax becomes less of a dusty technical issue, and more of a vital component of what makes democracy work.

With use of taxes, there is no longer the recourse to the excuse for poor performance along the lines of ‘it’s not fair, they’ve cut my allowance’. From passively accepting what others give, with tax, a nation becomes active in its fiscal management. In other words, representation with taxation is a major step on the road to responsible national adult-hood.

Participatory budgeting, as suggested by another blogger, is an intriguing concept. But making politicians accountable for the taxes they spend is not just about choice of public project or spending programme, it is also about the efficiency of how those taxes are spent.

So taxation makes politicians more accountable on successful outcomes for government spending not just on large inputs, particularly so when economic times are tough.

But we need to acknowledge two important structures which need to be in place to really make the link between taxation and democracy work.

Firstly, an effective infrastructure for the collection and enforcement of tax payments has to be in place. While a country like the UK generally has effective tax collection—give or take a major foreign corporation or two—significant non-tax payment of taxes can cause major issues, as we’ve seen recently in Greece.

Secondly, with the power to tax and the ability to collect, has to go hand in hand with transparency of how those taxes are spent, and with the ability of those taxed to demand accountability from the government, whether individually as citizens or elected politicians or through the dissemination of think tank research or actions of other civil society organisationsor through the law. But these structures will be enhanced by tax, as any eighteenth century American colonial subject will tell you!

Wales is a semi-autonomous region within a larger nation-state which is a member of the European Union, in this status, it is not alone. But the lessons of tax and democracy outlined by the Silk Commission have importance beyond EU borders. For any country, tax—allied with a strong collection framework and civic scrutiny—can deepen democracy in a way that a stand-alone winner-takes-all ballot cannot.

Seth Thomas is a MPP candidate at the Blavatnik School of Government, Oxford.

This post is part of our Deepening Democracy series, responding to a September 2012 report by the Global Commission on Elections, Democracy and Security, on improving the integrity of elections. The series is being curated by the Blavatnik School of Government and hosted on Politics in Spires. It features contributions from students on the Master of Public Policy course at the Blavatnik School, as well as guest posts from Oxford and Cambridge scholars in politics and international relations.


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