The UK Government’s Spending Review has much in it relating to devolution (and I’ll say something more about it shortly). There has of course been huge argument about whether devolved governments have been short-changed or not, particularly from Northern Ireland, despite the UK Government’s claim that ‘the Barnett formula will be applied in the usual way’. One issue that has been overlooked so far are the revised commitments made about devolution finance, though.
The Coalition’s Programme for Government made three significant commitments on devolution finance. For Scotland, there was implementation of the recommendations of the Calman Commission. For Northern Ireland, there was a commitment to produce a paper examining mechanisms for changing the corporation tax rate there. For Wales, there was the puzzling and widely-criticised commitment to ‘establish a process similar to the Calman Commission for the Welsh Assembly’, assuming a Yes vote in the referendum on primary legislative powers and stabilisation of the public finances.
In the Spending Review, George Osborne finessed two of these commitments. He said nothing about the Calman Commission, on which work is apparently proceeding (most recently discussed HERE). However, the commitment for Northern Ireland has changed to a commitment to produce ‘a consultation paper on rebalancing the Northern Ireland economy later this year’. (This appears not in Osborne’s speech, but in the press notice for Northern Ireland available here.) That suggests that the paper will look at a wider range of issues than merely the corporation tax rate, and also that the principle of a different corporation tax rate there has lost the appeal it had when the PfG was drafted in May.
The commitment for Wales is more intriguing. In his speech (available here), Osborne said:
In Wales, we will consider with the Assembly Government the proposals in the final Holtham report, consistent with the Calman work being taken forward in Scotland.
That indicates that the idea of yet another commission has been dropped, that change is no longer conditional on a particular outcome from March’s referendum, but that any changes for Wales will need to be consistent with the Calman proposals for Scotland. Thus, for example, allowing the National Assembly some control over the progressivity of tax rates in Wales will be contingent on that being done for Scotland, where it was deliberately left in Westminster’s hands. While it’s promising that the UK Government has moved away from its foolish earlier pledge, the idea that Wales might get a version of Calman as implemented, or nothing, is only half a step forward.