Nick Clegg pledges Welsh assembly financial powers look

Nick Clegg has raised the possibility the Welsh Assembly may get tax-raising powers, following a referendum that backed direct law-making.

The deputy PM told BBC Radio Wales said there was now a gap between Wales's new powers and its lack of responsibility for raising its own budget.

He said the UK Government would set up a commission to look at the assembly's financial powers.

But he warned against reform of the assembly government budget formula.

Thursday's referendum saw a majority of Welsh voters backing a move to give the assembly direct law-making power in 20 devolved areas, such as health and education.

'Greater financial responsibility'

Mr Clegg said the UK government hoped to announce "fairly soon" there would be a process, similar to the Calman commission which reviewed devolution in Scotland, to look at financial powers in Wales.

"We don't just want the theory of law making authority in Wales, we want real power devolved to Wales. We'll be setting that up and that in turn will set another turn of the wheel as devolution deepens."

"The Calman commission did lead to more tax-varying powers for Scotland and that's clearly in the remit of a Calman-style commission."

In an earlier interview, Mr Clegg - who is in Cardiff for the Welsh Liberal Democrats spring conference - said the referendum was "a big sign that the Welsh people wanted more power and authority and we must play our part in the Westminster government to answer that call".

He said that could allow "greater financial responsibility to be built into the system".

Asked if that could mean tax-varying powers for Wales, Mr Clegg said: "Let's look and see what it means. Lots of people have different views. In the Scottish case it did lead precisely to that."

Mr Clegg also said it would be unwise to scrap the Barnett formula which decides the assembly government's budget while there is such a large economic deficit.

He told the BBC's Good Morning Wales on Saturday he was against rushing to open "that can of worms".

He said the funding formula was not cast in stone but the priority for the country was dealing with the "black hole" of the deficit.

"Clearly it will need change over time, but we're going to get on dealing with the deficit by the end of this parliament."

The Yes result after Thursday's poll was resounding one in favour of direct law-making powers for the assembly, which was established in 1999.

The final result saw 517,132 voting Yes, and 297,380 said No - a 63.5% to 36.5% winning margin.

Monmouthshire was the only county to vote No - but only by a a narrow margin of 320 votes, compared to a majority of 11,811 against devolution at the last referendum in 1997.