I’ve already mentioned (HERE) the Edinburgh seminar last week on exchanging information about ‘place inequality’ with academic colleagues from Brazil. My presentation to the seminar wasn’t just about data (which readers will know is a concern I’ve had had for some time), but also related data needs to ideas about how the UK might develop what I call a ‘more or less federal’ approach to devolution finance. The goal here is to devise a system which would reconcile a measure of UK-wide redistribution, and equity in public services, with substantial fiscal autonomy. I’m still working on this and my ideas on how exactly it might work remain somewhat tentative, but they underpin my presentation, which considered what such a system might entail, what data we would need to operate it, what we already have, and what changes would be needed.
My thinking at present is that we would need to have two grants, or two elements of a grant. One would be to address spending needs, meaning both the costs of providing public services (such as sparsity of population) and cost factors arising from varying demands for them (many of which are demographic –younger and older people use public services like education and health more). The other would be a fiscal equalisation grant, to deal with different tax bases across the UK. The chief reason to draw a clear distinction between the two is because one wouldn’t expect all three devolved administrations to want to opt into a system involving a measure of fiscal responsibility from the outset – Scotland probably would, Wales might (but might not), and I’ve no clear idea what Northern Ireland might do. A system that addressed both aspects of need would, however, be much more attractive to devolved governments and legislatures, as well as be more workable from the UK point of view.
As far as data needs are concerned, the bottom line is that we would need much better data about tax revenues, across the UK. The main concern would be with personal taxes rather than corporation tax, VAT and other taxes levied on business (where there are serious problems in working out what revenue is attributable to which place). HM Revenue & Customs appear reluctant at present to contemplate disclosing such data, though I can’t see any good reason for it. Data at the level of the nations and English standard regions can’t possibly reveal information about individual tax payers.
As far as the spending grant is concerned, it seems to me that the ‘top-down’ grant of the sort considered by the Lords Barnett Formula Committee and the Holtham Commission serves as a valuable starting point. One virtue of that approach is that it makes use of the range of high-quality social statistics the UK already has – and that the indicators used can be adjusted to fit available data, rather than needing the vast data-gathering exercise that was necessary for the sort of detailed assessment carried out by HM Treasury in 1979.
The slides from my talk, outlining my thinking so far, are HERE. As I say, this is work in progress not a polished proposal, but I think it may stimulate debate. The key point is a very simple one: this is not a debate where the only options are the status quo, the Calman/Holtham recommendations, and ‘full fiscal autonomy’. There are other broad options, and many points of detail that will profoundly affect how any system would actually work.