A Federal Britain?

by Diego Zuluaga

Britons are all too aware of the problems of political and economic centralisation. Indeed, the trend for more and more legislative and regulatory power to move from London to Brussels is one of the main objections voiced to Britain’s continued membership of the European Union.

However, this debate often overlooks the extent to which the UK itself is a highly centralised country. With only five per cent of its tax revenue raised at sub-national level, the UK is by far the most centralised member of the G7. This is much less than federal states like Canada (50 per cent) and Germany (29 per cent), but also below France (13 per cent), supposedly the master of dirigiste centralism. With regard to the share of expenditure made at sub-national level, the UK is less of an outlier compared to its G7 peers, but it remains at the bottom of the pack together with France and Italy – hardly examples of efficient public administration.

Matters are made worse by our asymmetric devolution settlement. The countries that enjoy devolution – Scotland, Wales and Northern Ireland – tend to favour bigger government than England, where powers have not been devolved. This means that there is an unjustified big-government bias in Westminster. On one hand, MPs from the devolved nations can vote for big government for the UK as a whole and get it. However, even if Parliament votes for smaller government, their constituencies will retain big government because many tax and spending powers are devolved. This is not only unfair to English voters, but it also results in a tax and spending mix which does not reflect what UK voters as a whole want.

Some have proposed EVEL (English Votes for English Laws) as a potential solution to this constitutional imbalance. However, while it looks neat and simple on the surface, EVEL would further complicate the legislative process by making some MPs responsible for two sets of issues (English and UK) and others for only one set (UK). Furthermore, we could end up with, say, a Labour government with an overall majority of MPs, but faced with a majority of Tory English MPs. In that situation, the government would be able to legislate on UK-wide issues like foreign affairs, but it would be barred from deciding on English matters like healthcare and education. EVEL could make day-to-day governing very difficult.

A new IEA publication offers an alternative solution, based on a federal settlement for the whole of Britain coupled with substantial decentralisation within each of the nations. The aim is to overcome the problems and instability of the current settlement, and to take the opportunity to bring government radically closer to the people.

There would be a UK government in charge of a limited set of functions – defence, foreign affairs, and the management of the national debt. All other powers, including healthcare and education, would be handed over to the nations. These powers would then be decentralised to the local level, allowing communities to determine most taxes and spending, as well as local healthcare services, schools, policing, planning laws, and lifestyle regulation.

Fiscal decentralisation of this sort would almost certainly have a positive economic impact. Studies suggest that raising the local share of taxation from five to 20 per cent could increase per capita GDP by six per cent. Not only that, but communities would for the first time in a long time be able to determine policy according to the preferences of local people and the particular conditions in each place. There would be vastly greater scope for experimentation and constant reform.

Constituents could provide steady feedback to local councils, not just through regular elections but also by moving away from places that enacted bad policy and into places that offered a good environment to live, work and raise a family. ‘Foot voting’ of this sort, because it involves the movement of capital and labour (and related tax revenues) can be more compelling to public authorities than traditional ballot-box voting. We could thus expect councils to reverse course on bad policy more quickly than is currently the case.

Many of the problems the UK faces today – from an acute shortage of housing to an inefficient health service and underperforming schools – are made worse by centralisation. Just imagine how much easier it would be to arrive at optimal policy if local communities had the ability to reform and experiment with new ways of delivering services based on local needs. We might see school vouchers in Lincolnshire, greater competition between hospitals in Devon, planning liberalisation in Norwich and an end to the smoking ban in Newport. Crucially, decentralisation would enable us to try new ways of doing things without having to implement them in the UK as a whole. This would dramatically reduce the costs of potential failure, and also allow for different reforms in different places. After all, not all of us share the same vision of the good life – why would we all want the same sort of government policies?

The current debate over devolution in Scotland and the status of England offers an opportunity for extensive reform of the UK’s constitutional settlement. Moving towards a federal, decentralised Britain will make us all richer and allow local communities to flourish. We should not miss this chance to bring government closer to the people.

7 thoughts on “A Federal Britain?

  1. A federal constitutional settlement is something I am open to, but there are so many more questions left unresolved by this article. I don’t have time to read the IEA’s paper, but I would hope that they address the question of whether Parliament is to be retained, what to do with Blair’s Supreme Court, whether to have a Bill of Rights or stick with the HRA, how ‘democratic’ these new regional legislatures would be etc…

    Our constitution is imperfect, but the last time we had huge constitutional upheaval, that just made it a mess.

  2. I’m not a fan of devolution in a small country. We heard recently local councils will get control of the uniform business rate, which will no longer be uniform! My prognosis is that rates will go sky-high, and local council wages will soar as a result.

    The only real devolution that counts is to the individual level — a restoration of the Common Law. Most of us live in areas where the majority vote in a certain way, leaving us individually unable to influence the overall result.

    I don’t want my neighbours to be deciding what level tax I pay. To a large extent, central government restrains the tendency to excess of local government panjandrums.

    In recent years, council tax has been capped. Who thinks that council tax would have stayed the same otherwise? My ideas for local government tend rather towards abolishing council tax entirely. We could even abolish local elections entirely and just have appointed trusts – what visible difference would there be?

    • This is why, at the same time as radical decentralisation, we have to restrict the suffrage to property owners over, say, 40.

      One of the chief problems with the Thatcher government was that instead of rolling back the state, it instead rolled back local government and centralised power under QUANGOs, all the while the central government continued to grow in size and scope.

  3. The paper assumes that all the UK institutions are like dough in the hands of the Westminster majority. I don’t for a moment believe, though, that the Holyrood-SNP police state would consent to being dismantled. The elected politicians would make a UDI, and the officials would go along with it. The result would be a choice between some kind of civil war and a descent into institutional chaos.

    Losing Scotland would have certain benefits, but not if it left England too wrapped up in deciding the competences of Kent County Council and Dover District Council to look at the scale and nature of English government as a whole.

    Better answers include the following alternatives:

    1. Expel Scotland from the United Kingdom;
    2. Create a devolved English Parliament;
    3. Exclude all but twelve Scottish MPs from the House of Commons.
    4. Make a list of English-only issues, and exclude all but English MPs from voting on them.

    My preference is for 1. It makes everything clear and allows the remaining British State to be captured by English interests.

    The European Union, by the way, is largely irrelevant to this debate. The fact that Hungary can do what it pleases indicates that the supposedly all-powerful European institutions are nothing against a determined national ruling class.

  4. In this globalised world, what exactly does it mean to be ruled more by a local than a central government? Does it even matter which country you’re ruled from? Most people wouldn’t see much difference, not in any profound way. Laws and institutions have been homogenised across Europe and the Western world, and modern communications technology has eroded the significance of being geographically close to the seat of government..

    Most people’s preferences about where they’re governed from is more a matter of sentiment than logic. I do appreciate the precious heritage of English Common Law, but reinstating and preserving it (and restoring the country’s independence from foreign influence) will not depend much on the balance of central and local government.

  5. Pingback: RRND - 11/09/15 - Thomas L. Knapp - Liberty.me

  6. I am completely against devolution as it has been proven that assemblies and devolved parliaments require more of the taxpayers money plus they are power mad (as proven with the SNP and the Welsh Labour Party).

    Since the start of the Welsh Assembly, we have always had a Labour administration (by hook or by crook) and it is so frustrating that people know that they keep on messing up but they still carry on voting for Labour as they still see the faux-conservatives as out of touch snobs and UKIP as racists (if though they are definitely not).

    What needs to happen is that devolution and other political institutions have to go. By that I mean:

    – Assemblies and devolved Parliaments
    – County Councils
    – House of Lords
    – Over Half of the House of Commons (650 seats down to 300)

    Community Councils should step up to the mark as they are there to serve the community hence the name.

    The House of Commons should only be there for National Interest only and not interrupt in other countries unless they genuinely posed a threat.

    Any questions or queries?

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