Muddling through to a very British version of federalism
It is a peculiar feature of devolution in the United Kingdom that each nation is treated differently, with its own settlement geared to local political demands.
Foreign observers look with puzzlement, seeing it as British pragmatism taken to extremes.
Yet, whether by chance or design, devolution does seem to occur at the same time. 1998 saw devolution laws for Scotland, Wales and Northern Ireland, while we have had the White Paper to implement the Smith Commission proposals for Scotland; the St. David’s Day proposals for Wales; the Stormont House Agreement in Northern Ireland; and Conservative promises for English Votes for English Laws at Westminster.
There may be some logic in all this. Wales tends to follow developments in Scotland, with the latest proposals making frequent references to Smith. The National Assembly for Wales gained legislative powers in 2012 and is now to get stamp duty, business rates and borrowing powers. It is promised the Scottish system whereby only the reserved powers (not the devolved powers) are specified, giving greater clarity and scope.
There are common issues across all three devolved territories. One is taxation, with a general move towards more tax powers. Scotland will gain control of all income tax rates, and be allocated half of VAT revenues. Wales may get income tax but only after a referendum, because of a curious convention that the Welsh but not the Scots or Northern Irish need a referendum on major moves to devolution.
The Northern Ireland parties are less keen on income tax, given their poor tax base, but have pushed for control of corporation tax in order to be able to manage the lower rates in the neighbouring Republic of Ireland. The SNP have long demanded this, although no longer promising to cut rates across the board. The UK parties are opposed on the grounds that a general devolution of corporation tax could stimulate tax competition, with a “race to the bottom” in which everyone would lose out.
Yet the UK Government itself has been engaged in tax competition internationally, cutting corporation taxes and resisting moves to harmonize it at the European level. While the UK parties had to be pressed to devolve taxes to Scotland and Wales, Westminster is quite keen to devolve more taxes to Northern Ireland to wean the province off support from London and make its politicians more responsible.
On the other hand, none of the UK parties has had the courage to address the Barnett Formula, which will continue to finance that part of devolved expenditure not covered by devolved taxes. The Conservatives would keep it, although many of their backbenchers see it as unduly generous to Scotland. The Liberal Democrats have dropped their policy of replacing it with a needs-based formula. Labour in Scotland cling to the fiction that Barnett actually is needs-based while their colleagues in Wales denounce it as unfair to them.
This latest round of devolution coincides with a radical overhaul of, and retrenchment in, welfare policy, which has become central to the debate. Labour essentially sticks to the view that, with minor exceptions, welfare must be UK-wide and the Conservatives and Liberal Democrats generally agree. Those pushing for more maximum devolution think that more of the welfare programme could be devolved and that the smaller nations might avoid the drastic welfare cuts proposed by the UK Conservatives – this would of course imply paying more in devolved taxes. Most of welfare is theoretically devolved to Northern Ireland but there has been an understanding since the 1940s that the province will match UK standards, with the UK Government meeting the bill. Now it means that Northern Ireland must match welfare cuts, including the ‘under occupancy deduction’ or ‘bedroom tax’. A row over this was one factor that almost brought down the power-sharing executive at the end of last year.
The debate in England, meanwhile, has proceeded on two tracks. One is the demand for English Votes for English Laws, which would in effect create an English parliament within Westminster. Many Conservative MPs insist that this is their condition for supporting further devolution for Scotland although the party leadership has been more ambivalent. Labour is totally opposed to the idea. The other track concerns the internal government of England. After experiments in moving to regional government in the 1970s and again in the 2000s, city-regions are now in fashion. Starting with Manchester, there are moves to strengthen and extend big cities, in what looks like a reinvention of the metropolitan counties abolished by Margaret Thatcher in 1986.
There is a lot of talk about devolution and empowerment but the city-regions will lack their own revenue-raising powers and be wrapped up in central regulations. The only directly elected member will be the mayor, an idea pursued by both big parties, but which has attracted little popular enthusiasm when it has been proposed.
Constitutional reformers, especially in England, have argued that this all needs to be drawn together in a written constitution for the UK, underpinned by a statement of British values and the purpose of the Union. This is, at least, premature. It would require agreement about what philosophers call the demos and the telos; that is, on who are the “people” and what their common future is. Nation-state constitutions typically have this. Plurinational states like the UK do not. There is no single people in the UK (we do not even have an adjective) or even a set of four clearly-defined peoples. Citizens, rather, have complex identities, which in Scotland run from feeling only Scottish to feeling only British and everything in between.
The Northern Ireland peace settlement explicitly avoids requiring people to adhere to a British identity in order to be part of the political community. Some people in Scotland see the ideal future as independence while others prefer union – there is no shared telos. What is needed for the UK is not a constitution that requires us all to sign up to the same vision of the future, but arrangements that allow us to live together and govern ourselves even where we disagree about the ideal future.
Some people have been arguing that the answer is federalism. If this means a symmetrical federation like the United States or Germany, it is a non-starter since there is almost no demand in England; city-regions are nothing to do with federalism.
If federalism is interpreted more broadly, to refer to accommodating diversity and dividing power, then we may be muddling through to a very British version. It will take a long time, though, and any idea that the latest round of devolution will provide an “enduring settlement” is illusory.
