Question Devolution

     In recent times, it has become in vogue in British politics to talk about the need for political and constitutional reform. This particularly means the devolution of political power from the UK Parliament at Westminster to other governing administrations within the UK – namely the devolved governments of Northern Ireland, Scotland, and Wales, as well as local council areas and regions within those areas and England, the largest part of the Union.

     With regard to Scotland in particular, politicians both nationalist and pro-union from all parties are of the opinion that more powers need to be exercised by the Scottish Parliament at Holyrood in isolation from the rest of the UK. For nationalists, they see devolution as another stage towards their ultimate goal of breaking up Britain, but both they and some pro-union politicians use similar language about how Scotland needs more powers to provide Scottish solutions to Scottish problems, and improve outcomes in critical areas such as health and education. Indeed, one of the sentiments expressed here is that policies in Scotland are better made by the people of Scotland.

     This is a fair sentiment to hold, but it ignores the reality that issues that affect Scots are issues that affect all Britons throughout the United Kingdom. As much as there may be issues better decided by the people of Scotland through their elected representatives in Edinburgh alone, there are also matters that may be better decided on a UK-wide basis by the British people as a whole (including Scots) through their elected representatives in London.

     Some politicians and commentators – particularly the nationalist sort – will go on to say that “left-wing” Scotland and “right-wing” England are so different (and drifting apart) politically and culturally that Scotland must be able to decisions for itself in isolation from the rest of the UK in order to reflect the values and aspirations of the Scottish people.

     Not only are such claims of vast Anglo-Scottish differences questionable to say the least, but it must be said that the MP’s elected to the UK Parliament are there to represent the interests of the UK as a whole in conjunction with the interests of their local constituents. Attempting to break British MP’s down to being English or Scottish (with regard to how they vote on issues or their political philosophies) and to say that the Scots and English are monolithically and irreconcilably different in their socio-economic outlook risks pitting the constituent parts of the UK against each other. This ought to be avoided – especially by those who want the UK to stay together – lest it lead to unhelpful perceptions and stereotypes that put the Union at risk.

     There is no problem in acknowledging and celebrating the differences amongst the peoples in the United Kingdom, for there is strength in diversity that can actually lead to bringing the British people together, just as has been done for over 230 years in the United States with 50 states and various nationalities and ethnicities. These differences however, need not be politicized and over-hyped to the extent of driving wedges and dividing people against each other, which gnaws away at the fabric of the Union.

     There are no differences amongst the peoples of the UK that cannot be overcome by the bonds – political, social, cultural, and economic – which bind them together as one. Indeed, there are such things as British values and British aspirations which are derived from the UK’s constituent parts and reflected by its people.

     This does not necessarily mean that there should not be devolution at all, but it certainly should not be done in a way that shreds the critical relationships and structures that allow for all parts of the UK to have an active part in the governing of the country and its political system, or indeed, the ability of the UK Government to govern the UK in its entirety.

     You see, so long as Scotland remains part of the UK, the UK Government must be able to have the tools at its disposal to make the Union work, which means that it must continue to have substantial responsibility over matters such as trade and commerce, fiscal and monetary policy, and lawmaking and law enforcement within the UK. Some of these responsibilities can be shared with the devolved administrations and even local councils, so that each level of government within the United Kingdom has its own ability to set taxes, make laws, and do other things within certain parameters that respect the authority and competence of each level.

     Piecemeal and ad hoc devolution based on what is thought to be “necessary” for one part of the country at a particular time may have been well-intended, but to some degree, it has proven detrimental to the strength of the Union and has not necessarily led to better or more efficient outcomes for those particular areas.

     For example, university tuition fees have been abolished in Scotland on the basis that it helps those with the fewest resources, who come from the lower strata of society. However, in terms of university entry rate amongst such people, Scotland lags behind England, Northern Ireland, and Wales. According to the Universities and Colleges Admissions Service (UCAS), England – with tuition fees – has an entry rate nearly two times greater than that of Scotland for those in the poorest quintile of the population. Perhaps that has something to do with the fact that according to the Scottish Funding Council, only 6.7% of poor Scots attain the average exam grades required to earn a university place.

     Furthermore, the Scottish Government’s own survey on literacy amongst Scotland’s students (which was taken in May 2014 and released in April 2015) have revealed that literacy rates have fallen, and this is especially pronounced amongst pupils in the second year of secondary education (S2) from the most deprived backgrounds, where only 41% were performing well or very well in writing and 55% in reading.

     Given that education has been completely devolved to Holyrood since 1999 and that the SNP has been in government since 2007, it is an indictment against how education has been handled in Scotland in recent years. For some of the people I have come to know, the Scottish education system has not been served well under an SNP government that needs to do more (after eight years in office) to get more young people into higher education, but appears more interested in showing how different it is to the English system, even if the English system may produce better results, and therefore can provide at least some food for thought for what can be done in Scotland.

     In health – another critical area where Holyrood (not Westminster) has control, and where the SNP has been in charge of for eight years – real-term spending on the NHS rose by only one percent between 2009-2010 and 2015-2016, in contrast to the budget-cutting in Westminster that has seen a real-term rise in health spending in England to the tune of 6% in the same period, according to the Institute for Fiscal Studies (IFS).

     Given that the mechanisms of the Barnett formula (which mean that whenever spending changes in England (for any department), it changes by a proportionate amount for the devolved administrations in the rest of the UK), it would stand that health spending would also go up in Scotland as well. But Holyrood is under no obligation to following in tandem with the spending decisions south of the Tweed when it receives the block grant from the UK Treasury. It could have spent an additional 5% on the NHS, but appear to have chosen not do to so, and instead spent the money elsewhere, like the “free” university tuition, “free” prescriptions, and the council tax freeze – all of which arguably and disproportionately benefit those who have the means to pay for them, while doing little for those most in need.

     Several of my friends and acquaintance in Scotland have spoken about long waiting times at the NHS, run-arounds with various doctors, and delays with getting treatments and surgeries. Now to be fair, it would be a mistake to continuously blame the SNP for all of these things. For example, it may well be – as the BBC's Nick Robinson pointed out – that spending for the Scottish NHS may be historically higher than in England (including before devolution), and that England is merely catching up. Nevertheless, it does appear that any budget cutting is due to the actions of the Scottish Government, and it is therefore disingenuous to blame the UK Government for their own problems with the NHS in Scotland, particularly with regard to missing their own targets for improving A&E waiting times.

     Again, this is not to say that powers should not be devolved absolutely, but rather that it should not happen so hastily, carelessly, and without thinking if it is really necessary or otherwise good for Scotland, for if the constitutional debates are about what is best for Scotland, should there not be a vigorous debate on the merits on the devolution of power – especially with regard to how devolved power has already been used (or not)? If it is natural to question the very existence of the UK, or at least the its constitutional structures, then there should also be questions about the devolution of political power, for it may not always lead to better results. (It is probably for this reason that Scottish Green Party co-convener Patrick Harvie, a supporter of independence, has spoken out against the SNP's policy of achieving Full Fiscal Autonomy for Holyrood.)

     It is for this reason that devolution must be questioned at every stage, as opposed to being meekly accepted as an all-around good thing, and also why changing fundamental constitutional and political structures within the UK must be decided upon by all of the UK, for changing the machinery of the constitution in one part of the UK will have effects on the rest of the UK. This is why myself and others have been advocating for a constitutional convention to settle these matters of British governance, for the current model of piecemeal and ad hoc devolution results in a never-ending merry-go-round, in which one part of the UK receives a devolved power, and another part wonders why it doesn’t receive the same treatment. Such a constant rearranging of the constitutional jigsaw puzzle – almost living in a crisis by crisis scenario – does not bode well for good governance, and threatens to upset the stability of the Union.

     A convention would help to establish the powers and competencies of each level of government in the UK, as well as parameters that allow for the mutual respect of such competencies. Some responsibilities may be exclusive and reserved to a certain level of government, and others jointly shared. This points to federalism, which preserves a strong central government to handle matters and issues that require government action for the whole of the country – something which tends to get forgotten in the drive for devolution – while also featuring significant powers for the federated entities to do their own thing within a federal framework.

     But even if federalism is not the result of such a convention, the aim should be to at least provide a forum on what the British people as a whole want and expect in terms of their governing arraignments. It would be up to the people, with due and careful consideration and debate, to decide on the matter of which powers are better handled by, or otherwise require the action of, the central government. From here, there would be decisions on the powers of the devolved administrations and local government.

     Not everyone will agree – the members of the US Constitutional Convention certainly did not – but an effort ought to be made to forge some kind of settlement for the United Kingdom going forward that promotes stability, fairness, and the idea that the Union can be made more perfect.

     That would be a hell of a lot better than the seemingly constant and almost unquestioned flow of devolution, which as Tam Dalyell observed, runs the hazard of leading to the breakup of Britain. The people living there – from the most powerful politician to the postman – can and must do better, if for nothing else than the greater good and general welfare of all.

Saying “Thanks” and Following Up

     It has been a week since the post on Bastardized Federalism was published on this blog, and I must confess to being deeply amazed and humbled by the response to it so far.

     There have been just over 820 views as of Tuesday morning on June 23rd, which is quite astonishing considering that the second-most viewed post (on the need to save the RMS Queen Elizabeth 2) currently has 395 views, and has been available since June 7th.

     However, this is where another aspect of this post must be mentioned, and that is the role of social media, and I must thank everyone who shared, liked, tweeted and retweeted the post on Facebook and Twitter.

     It was on Twitter that Kevin Hague (@kevverage), the writer of chokka blog (which has been doing its bit to refute the economic claims of the SNP and pro-independence supporters) read the post, and with his following, got the ball rolling on getting it shared and read by great numbers of people. Many other individuals – some of whom I consider very good friends – also tweeted, retweeted, and shared the post around in the course of the last week, and along with this were mostly positive and supportive comments for which I am extremely grateful.

     Such comments came from people who are frustrated by the SNP and its supporters in the media who attempt to the peddle the notion that a fully fiscally autonomous Scotland could still benefit from fiscal transfers as part of the United Kingdom, in order to cover for the fiscal gaps that would in all likelihood be caused with the implementation of full fiscal autonomy (FFA).

     This is part of an problem for the SNP & Co., which has attempted to find ways to answer the difficult questions regarding FFA, as journalist and commentator David Torrance pointed out in the The Scotsman last week.

     First, they attempted to dismiss the fiscal gap of £7.6 billion and total deficit of £14 billion highlighted by the independent Institute for Fiscal Studies (IFS) by claiming that such figures represented merely a “snapshot” for one fiscal year. However, “there existed several such snapshots all the way up to 2020” which if anything, showed the figures getting worse.

     Then some members attempted to go another route where they did not deny the existence of the gap and deficit, or play them down. Instead, they spoke of how there would be a “fiscal framework” to accompany FFA – also known in more emollient terms as “Home Rule” – in which Scotland would still benefit from the pooling and sharing of resources within the UK, despite not having skin in the game (because after all, not a pound of Scottish tax revenue would go the the UK Treasury).

     In his column, Torrance points out that George Kerevan (a former executive and columnist with The Scotsman, and now the SNP MP for East Lothian) was “quite explicit” on this topic:

“For Scotland to accept fiscal autonomy without in-built UK-wide fiscal balancing”, he wrote, “would be tantamount to economic suicide.” All federal systems, added Kerevan, possessed “mechanisms for cross-subsidising regions in economic need by regions in surplus”, thus to “deny” something similar (ie the Barnett Formula) to a fiscally autonomous Scotland would in his view “derail any move to Scottish Home Rule in the UK”.

     Like Iain Macwhirter in the Sunday Herald last week, Kerevan states something that comes off as entirely reasonable and has truth in it, but leaves out the critical detail that in federal systems, the constituent parts are not fully fiscally autonomous, and indeed as Torrance adds, none have claimed this constitutional/economic status within their respective federations. To do so would be an act of stupidity and irresponsibility, not only because it is not true, but more critically, because making such claims fatally undermines the existence, purpose, and meaning of the federation.

     Would the residents of New York, California, or Texas be content with their money going to programs and services in Mississippi, Kentucky, or West Virginia when those states claim full fiscal autonomy for themselves? No, and such a set-up would break the shared compact between the states that they agreed to when signing on to the Constitution of the United States, which provides Congress with broad powers of federal taxation that apply to the residents and businesses of all 50 states. Thus, the tax revenues that go to Washington come directly from the taxpayers throughout the Union, and is then spent throughout the Union.

     But of course, the principle aim for the SNP – their raison d’etere – remains breaking up the United Kingdom, and even though they may talk about doing what’s in the best interest of the whole UK whilst Scotland remains part of it, demanding FFA with continued mechanisms for fiscal transfers is a sure-fire way to stoke up the kind of resentment that will drive the rest of the UK to end the Union themselves – probably without a referendum.

     As I have said, this is probably what some Nationalists want since they could not achieve their ends through the referendum last year. They may complain about Unionists attempting to give Scotland rope to “hang itself” should FFA be delivered without “in-built UK-wide fiscal balancing” in the hope that it will force Scots to turn away from full independence. But arguing for these things seems an odd way extol the sentiments of solidarity – economic, political, and social – with the rest of UK, and indeed, if it leads to the break-up of the UK, then I suspect that some Nationalists will welcome it.

     However as Torrance said, making the case for fiscal transfers is a part of a series of intellectual contortions owing to the fact that the SNP cannot concede the disadvantages of FFA, for doing so “would also be accepting that independence (under which there would be no fiscal transfers) would leave Scotland worse off.”

     Even more confusingly, FFA is something that few on either side actually want, but it is something from which the SNP – some of whose fervent supporters (and even MP’s) believe was promised as part of “The Vow” (when it was not) – cannot afford to even appear to be climbing down. The party certainly cannot afford to admit that taxes would have to be raised substantially, lest it loses “Middle Scotland”, who according to David Torrance in The Herald, are the source of its “modern electoral support” with popular and easy policies such as the Council Tax freeze and “free” university tuition, which disproportionately benefit the middle classes, and which would almost inevitably come under pressure with the implementation of FFA.

     Thankfully, FFA was defeated in Parliament, but Scottish Finance Minister and Deputy First Minister John Swinney is once again attempting to “push” for this concept – with the SNP government in Holyrood even submitting to Downing Street the powers it believes ought to be devolved as a priority and with the aim of eventually attaining FFA. This is a variant of what the SNP MP’s were attempting to do last week with an amendment that would effectively allow Holyrood to choose what powers it wanted at a time when it is most convenient (i.e., when oil prices are higher), so as to not scare the horses, if you will.

     At the end of the day however, if the people of Scotland really want FFA, that’s totally within their prerogative, but not under a false prospectus which the SNP cannot deliver on – the premise that this is a form of federalism in which the rest of the United Kingdom will continue along with fiscal transfers to Scotland, even though Scotland’s residents would no longer directly contribute to the UK Treasury like everyone else throughout the United Kingdom.

     The SNP cannot have it both ways on FFA – its bastardized version of federalism – and actual federalism which retains features that bind a federation together, including a strong central government and federation-wide taxation. Either Scotland is fully fiscally autonomous or it’s not, and the SNP cannot have its cake and eat it too. They and their allies must be confronted on this point at every turn, and they cannot be allowed to get away with passing off FFA as federalism.

Bastardized Federalism

     On Sunday, I was reading Iain Macwhirter’s latest column in the Sunday Herald, which was focused on the issue of Full Fiscal Autonomy (FFA) for Scotland, and asserted that expressions of concern with regard to it amounted to scaremongering and “demeaning Scotland”, along with the notion that critics were being too negative about Scotland and its prospects. 

     Leaving to the side that there are genuine, valid, and serious concerns about FFA and that such critics are skeptical of the policy because its potential adverse effects on Scotland, what caught my attention was how Macwhirter described the proposed constitutional arrangement.

     What the SNP (claims it) wants – and what Macwhirter appears to be championing – is a system in which Scotland remains as part of the United Kingdom, but with every single pound in Scotland being subject only to taxation levied by the Scottish Parliament at Holyrood, which means that the people of Scotland will no longer be directly contributing to the UK Treasury. Holyrood would send some form of payment to cover for shared services reserved to decisions at the UK level (defense and foreign affairs) and Scotland’s share of the UK national debt, but this is not the same as Scottish residents and business joining with their fellow British citizens in directly contributing to the maintenance of UK via taxation that applies to all British citizens, regardless of where they live.

     This means that Scotland will cut itself off from its financial links with the rest of the UK, and it will make Scotland independent in all but name (which some unionists describe as independence through the back door) but Macwhirter does not believe this to be the case because, as he claims, this is a “form of federalism, so even with fiscal autonomy there would be transfer payments to be negotiated as there are in all federal systems.”

     The esteemed columnist and journalist makes this sound reasonable because after all, Scotland would still be part of the United Kingdom and “sending a subvention south” for the aforementioned common services and debt payments. So Scotland should not be seen as contriving to have its cake and eat it too, and therefore, Macwhirter believes that Scotland should be entitled to “equalization payments.”

     However, in the eyes of people in England, Northern Ireland, and Wales, as well as many Scots, this does give the appearance of wanting to have the benefits of independence, but still wanting the financial backing of the rest of the UK. Worse, it adds fuel to the ugly perception that Scotland “sponges off” of taxpayers south of the Tweed. Under the current circumstances, Scotland and Scottish taxpayers – by being part of the same tax system as everyone else in the UK as a whole – contribute to the UK Treasury, as they have been doing for centuries, and as such, are entitled to UK spending – including the block grant via the Barnett Formula.

     But by essentially going it alone financially, the criticisms of Barnett and any other form of fiscal transfers to Scotland will become sharper and louder than ever before – just as would Scottish representation in the House of Commons would come under closer scrutiny.

     But what about that “subvention” as Macwhirter describes it? Wouldn’t it represent Scotland’s contribution to the UK’s coffers? Well, it appears that such a payment would only cover the aforementioned services still shared by Scotland and the rest of the UK, and therefore, money from the UK Treasury would only be spent in Scotland in relation to those services. If the “Scottish subvention” was strictly applied in such a way, it may mean that there would be little prospect of fiscal transfers directly to Holyrood, much less a fixed formula for an annual block grant.

     Macwhirter attempts to defend this and makes the argument for continued fiscal transfers on the basis that this is a “form of federalism.” After all, the UK appears to be on the road to federalism, and in federal systems, there are mechanisms for distributing wealth in order to provide assistance to states and to equalize the balance between wealthier regions and poorer ones.

     However, this does not make sense because under the SNP’s own proposals, Full Fiscal Autonomy means that every single pound of taxed money in Scotland goes directly to Holyrood, and none of it goes directly to the UK Treasury. Now, I admit that I’m not an expert on federalism or government systems in general, for those are topics that I study as a hobby – not a profession – and I also realize that federalism may mean many things to different people. But coming from a federation and having a basic understanding of major federal systems in other countries, I can say that Iain Macwhirter’s (and the SNP’s) vision of federalism goes out of sync with federalism as I understand it.

     In the United States, Germany, Australia, and Canada, taxation is a joint responsibility between the federal government and the federated (state/regional/provincial) governments, and the respective federal governments of those countries have the ability to levy and collect taxes throughout the entire federation. The federated governments within those countries have their own powers of taxation, which sometimes parallel those of the federal government, so that there may be federal and state taxes on income, corporate profits, consumption, and other sources of revenue. In some circumstances, there are taxes that can only be levied by the federal government, and taxes that can only be levied by the state governments.

     At the end of the day however, the federal systems I have mentioned still feature some form of taxation levied by the central (federal) government on all parts of the federation. The federated governments have fiscal autonomy, but not full fiscal autonomy, which is to say that those governments have the power to impose their own taxes on the residents and businesses within their jurisdiction for the needs and purposes of those areas. However, not every unit of taxable money goes to those governments because (as part of a wider federation), its residents and businesses are subject to some form of federal taxation, and so some of that taxable money goes to the federal government for needs and purposes across the entire federation (and this was already planned to be implemented under the Scotland Act 2012, and is to be greatly enhanced by the passage of another Scotland Act this year, which will give Holyrood full control over income tax rates in Scotland).

     Among those needs and purposes include the mechanism that the federal government uses to distribute money to specific parts of the country – i.e., fiscal transfers from the federal government to the state governments. Of the four federal countries mentioned here, Canada, Australia, and Germany have programs that are explicitly designed to equalize the fiscal capacities of the states/provinces within them, which invariably means making payments to less wealthy areas or areas that need assistance in covering the cost of providing public services.

     The United States does not have a fixed mechanism for achieving these ends, but some equalizing does occur when the federal government provides funds for specific programs within the states, such as education, food and nutrition, and health programs (like Medicaid). In addition, the federal government spends money to assist states in the financing of large capital projects, such as roads, bridges, and other forms of infrastructure. On average, the 50 states receive nearly half of their revenue from the taxes they levy on their residents (which ranges from North Dakota at 65.7% to New Mexico at 36.4%), and just under a third comes from the federal government (ranging from Mississippi at 42.9% to Alaska at 22.4%) through various programs and initiatives. The remainder comes from a mix of interest earnings, service charges, royalties, and local government transfers.

     So while the states are able to tap into their own tax base, they do not have exclusive access to it because they share their individual tax bases with that of whole United States, and this allows for money to be used to assist other states and the people that reside within them. While this does not amount to the same thing as the Barnett formula or the equalization payments found in other federations, it still amounts to a system into which everyone pays and from which everyone benefits.

     Regardless of how it’s done however, there is not a federal system I am aware of in which one part of the federation is not subject to some form of federal taxation (like everyone else) – where that part of the country effectively keeps all of the tax revenue raised within its borders, but then expects that the rest of the country will continue on happily with “equalization payments.” How is that possible when the taxpayers residing in that area are no longer directly contributing to the central government?

     It isn’t. What the nationalists and their supporters want with regard to FFA is not federalism – at least not the way I have come to understand it – and by going down this path, they are either living in a pipe dream where they do have their cake and eat too, or (as many suspect) they are trying to create conditions where the rest of the UK finally gives up on Scotland and the Union altogether. At the very least, it is an admission that while Scotland can get on as fiscally autonomous within the UK, it cannot continue with current levels of spending without something plugging the gap – whether that means cutting spending, increasing taxes, or benefiting from the financial assistance of the rest of UK.

     With regard to the Union itself, it is the nationalists and their supporters who are quite negative about it. Throughout the referendum campaign and up to the present, it has been common to read from a pro-independence columnist and/or tweeter who talks about the UK as being a country in terminal decline, living in its past, and having absolutely no hope for the future. Further, they characterize the UK as being this horrendously dark and scary place that watches poor people suffer with a smile on its face and hates immigrants, which does nothing but paint a broad brush against the Union and makes unfair characterizations about the people inhabiting it.

     If only these people could join with their fellow British citizens in moving forward and striving to understand one another, while pushing on to build a better Britain – which naturally and quite critically involves building a better Scotland. That should be the ideal as opposed to breaking apart.

     Federalism – in the way the US, Germany, Australia, or Canada exercise it – in my view can help to achieve this and strengthen the Union. FFA – the SNP’s (and Macwhirter's) butchered and bastardized federalism – will not, and thank God it has been defeated in the Commons.

     Going forward, I hope to write further on federalism and how it is practiced in Germany, Canada, Australia, the United States, and perhaps others. In particular, I would like to shed light on how their tax systems work, as well as their mechanisms for fiscal transfers, and the amount of fiscal autonomy exercised by the federated governments, which helps to achieve a healthy balance between them and the federal government, and binds the country into one.

     If Britain can achieve something like this and the British people strive to make it work, Britain – in my ever humble opinion – shall endure.