News came out of Wales yesterday that the Cardiff government has been subsidising business to the tune of £244 million since 2011. Only 2 per cent has so far been returned, less than £7 million.
This figure is doubly painful because the government had the stated aim of moving “to more of an investment culture in our dealings with business”, with the then Department for the Economy and Transport indicating that all finance that DE&T provides directly to businesses will be repayable. In other words, the government doled out taxpayers’ cash with the expectation that it should all be repaid.
What makes this particularly galling is that the government recognised that “offering grants is perceived by many to distort competition, create dependency, and consume resources that could be deployed elsewhere for greater economic impact.” Indeed.
Protestations from the government that its scheme got 185,000 into work or saved those jobs don’t stack up. The Welsh government’s consideration of new taxes on vacant land, disposable plastic and tourism would depress revenue, discourage investment and lead to businesses holding back on hiring.
These plans are compounded by the introduction of a land transaction tax to replace stamp duty from next year. A similar scheme launched in Scotland in 2015 has seen home sales plummet and generated 10 per cent less in revenue than the government’s forecasts.
The Welsh government should not be showering cash on business, and it certainly shouldn’t be raising taxes or introducing new ones on the very people it wants to stay in the country. Wales has consistently grown at a slower rate than the rest of the UK, has a worrying dependency ratio and has the second worst rate of new business creation in Great Britain.
The government in Cardiff Bay needs to stop being so careless and stop picking winners.