The government’s determination to shrink the state may make it more difficult to save the union

On Friday 5 June, the Constitution Unit and the Welsh Governance Centre jointly sponsored a conference of politicians and academics on ‘Devolution and the Future of The Union’ at the British Academy. It followed up a series of separate reports by them and by the Bingham Centre for the Rule of Law and the Institute for Government, urging an end to the UK’s government’s piecemeal approach to devolution. But the Scotland Bill’s second reading in the House of Commons on Tuesday made it clear that the political parties are not rushing to heed the academic advice. Brian Walker reflects on the differences between the two agendas.

Credit: Martin Cooper, CC BY 2.0

The two rival victors in the general election have made opening moves over the future of the United Kingdom. After the second reading debate, government sources let it be known that the Scotland Bill based on the Smith Commission report was all Scotland was going to get this session, while the SNP played down full fiscal autonomy as one of its early aims. But this still leaves plenty to dispute. SNP demands for ’Smith plus’ – in the shape of further powers on job creation, taxation, welfare and wages – were left hanging. No clue was offered as to how the balance would be negotiated between pooling and sharing at UK level, and the extensive new fiscal powers being awarded to Holyrood. While the Barnett formula which disproportionally benefits Scotland remains in place, the government’s position contains the implicit challenge: if you want to take public service provision further, pay for it yourselves.

Fiscal devolution: Barnett and other issues

At the conference, it was the English local government expert Tony Travers who put his finger on the issue likely to feature more prominently than purely constitutional matters. ‘The Conservative aim of shrinking of the state to 36% of GDP raises big questions of how to sustain public services’. It is hardly shock news that there will be no increase in subvention levels from Westminster for further devolution under the Chancellor’s latest programme of fiscal consolidation. In his much-vaunted ‘Northern powerhouse’ plan, budgets will be concentrated for maximum effect, not increased. Fiscal tightening has already aggravated the stand-off between Westminster and Cardiff Bay over the ‘unfairness’ of Wales’ Barnett deal, and it has produced an anti-austerity rebellion at Stormont which could threatened the survival of the power sharing institutions. From the start of the parliament, political tensions over devolution seem set to rise, with unpredictable results for the future of the UK.

The First Minister of Wales Carwyn Jones will refuse further fiscal devolution until a new Barnett floor for Wales is created. In his sweeping criticism of the government’s improvised approach to future fiscal devolution, Gerry Holtham, who had chaired Wales’s Finance and Funding Commission declared:

‘there is no rationale for Barnett other than the wish to avoid an argument. To replace Barnett, a system of relative equalisation between regions is perfectly easy to implement’.

For future stages of devolution, he asked: ‘how much tax completion should we allow? We are gaily handing out taxes without protocols and with that absurd no detriment rule.’ That rule, a late addition to Smith, means that in future, no government should suffer financially from policy decisions made by the other. But this simple-sounding proposition becomes increasingly complex when for example, tax changes on welfare affect a devolved benefit linked to a reserved one, or Scottish unemployment policies might benefit the UK but not the Scottish budget.

What full fiscal autonomy means

Unionists are convinced that full fiscal autonomy (FFA) is the SNP’s Achilles heel but the SNP insist that FFA is not dead but sleeping. The deputy leader Stewart Hosie maintained their policy was still to move in stages to achieve it. Their leading strategist Stephen Noonan put up a spirited defence of FFA against two experts on fiscal devolution,Jim Gallagher, secretary to the Calman Commission and a prominent No campaigner in the referendum, and Gerry Holtham.

According to Noonan, Scotland’s fiscal position was better than the UK’s over the past five years. So if Scotland cannot afford FFA, neither can the UK.

‘Scotland’s full fiscal autonomy is not based on competition with England. The question is, can we balance our own books? It is perfectly reasonable to borrow to invest.’

To some audience laughter, he added, ‘fiscal autonomy can mean whatever we want it to mean.’

Gallagher and Holtham were emphatic. From Holtham, ‘full fiscal autonomy is only tenable if you want to break up the British state.’ Jim Gallagher dismissed it as ‘magical realism without the realism’ which defied the arithmetic which leaves Scotland with an £8million deficit greater proportionally than the UK’s and a need to grow by 15% more than the UK to maintain current levels of public spending.

Hosie insisted that FFA could fit into a federal or home rule model:

‘The only union we want to end is union with Westminster. If it works fine, but if the people of Scotland believe they were sold a pup, they’ll demand another referendum.’

Might the SNP settle for a kind of federation with full fiscal autonomy and refute the charge of incompatibility with the continuing union? Or are they setting Westminster up to fail and provoking a second referendum, a view that appeals to some English Conservatives who believe that Scotland has gone already?

‘What should they know of England who only England know?’

John Denham, former MP and Communities Secretary, is a rare Labour figure (though no longer an MP) prepared to grapple with what emerging English identity politics means for Labour and the governance of Britain as a whole. He sees Labour in denial at the election over EVEL and the problems of forming a government without an English majority. A forthcoming paper from the Labour aligned pressure group Compass will admit there would have been a constitutional crisis if a major bill affecting England depended on a non–English majority. EVEL is the start of a process, not an event. It would work only if English MPs had the last word. City devolution would lead to the reorientation of English politics in five years. A clearer English identity could emerge in a federal structure:

‘We need an English Labour party which focuses on winning a Labour majority in England. Without it we will not focus on a Labour majority overall. There is a window of opportunity to find a democratic solution before the union goes.’

What does ‘federal’ mean?

A federal solution is the flavour of the moment. For First Minister of Wales Carwyn Jones, ‘the choice is between moves towards federalism or Scotland becoming an independent entity’. That would go hand in hand with a ‘clearer vision’ of what remaining part of the United Kingdom can offer them. Jeffrey Jowell, who chaired the Bingham Centre commission was in favour of a written constitution and in the meantime, a Charter of the Union to make devolution permanent and adjudicated on by the Supreme Court. For the unionist writer David Torrance, federalism would give the union parties a story to tell:

‘There is no other option despite English problems of legitimacy and public support. Federalism was the only offer that would create political problems for nationalists. Who would make the case? That’s a real problem. Not Cameron or Osborne, not Yvette Cooper. Charles Kennedy would have been the best person.’

It was the director of the Constitution Unit Robert Hazell who asked the bully question: The F word is never defined. What does federalism mean?

‘We have two tiers of government, both directly elected; we have machinery of Intergovernmental relations to facilitate cooperation between them; and a Supreme Court to resolve disputes over division of powers. We don’t have an overarching supreme constitution; but thanks to the Sewel convention, we do have a division of powers which cannot be changed unilaterally, because any change requires the consent of the devolved governments and their legislatures – which is the bit that matters. In Scotland, Wales and Northern Ireland we are already a federation. But not in England.’

England lags far behind in the debate about the future of the union. John Denham is a rare voice and no version of EVEL has yet won out.

End the ‘piecemeal’ approach

Academics are virtually unanimous that Westminster’s and Whitehall’s piecemeal approach to devolution has to end: As Hazell put it :

‘So long as Whitehall retains three territorial Secretaries of State, devolution policy remains doomed to be weak and fragmented. David Cameron has said that safeguarding the union is a key priority. I believe the only way he can achieve that is by making a senior Cabinet Minister responsible for devolution and the union. Until that happens, devolution policy will continue to be reactive, muddling through.’

So far, muddling through is what David Cameron has been doing as the head of a majority Conservative government. But there is also a political ideology at work here that is determined to thwart the growth of any ‘progressive alliance’ in the devolved nations and English regions. It means the government’s determination to shrink the state may make it more difficult to save the union.

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Note: this post originally appeared on the Constitution Unit blog and is reposted with permission. It represents the views of the author and not those of Democratic Audit or the LSE. Please refer to our comments policy before posting.

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Brian Walker is Hon Senior Research Fellow and press officer at the Constitution Unit.