Category Archives: Devolution finance

The Bingham Centre devolution review: the UK at a constitutional crossroads

This post also appears as a guest post on the Centre on Constitutional Change blog here, the LSE’s British Politics and Policy blog here, and the Institute of Welsh Affairs blog ClickonWales here.

The impact of the Scottish independence referendum has been wide-ranging. It raises a number of questions about how the UK works as a whole and its territorial constitution, as well as ones about Scotland.  But for all the importance and urgency of these issues, they have not yet been subject to any wide-ranging or sustained scrutiny.  A new report from the Bingham Centre for the Rule of Law, available here, seeks to change that and look at what issues the UK as a whole will need to address in the coming months and years.  The review commission has been chaired by Sir Jeffrey Jowell QC, and its membership is here and remit is set out here.

The Commission’s starting point was to consider the implications of the piecemeal, ad hoc approach to devolution taken so far.  Its view is that this has reached the end of its road.  The knock-on effects of the Smith Commission proposals for Scotland mean that this now creates serious constitutional difficulties beyond Scotland.  A more systematic view, considering the UK as a whole, is badly needed.

The first big recommendation to address that is a Charter of the Union, to be passed as a Westminster statute with consent from the devolved legislatures, and setting out key principles for the working of a devolved union.  These draw on what already applies – they include such principles as respect for democracy, the rule of law, autonomy of each government and comity and respect for each other in their dealings with each other.  Subsidiarity and social solidarity are also key principles for the Charter of the Union.

The Charter would accompany the specific devolution statutes for Scotland, Wales and Northern Ireland, so they would need to be construed in accordance with it and its principles would govern further considerations of devolution – and indeed changes at UK level.  It would therefore set out a clearer constitutional framework for the UK as a whole, rather than the current ad hoc approach to three distinct arrangements plus an evolving pattern for England.  This might be a staging-post to a written constitution, but it would certainly put the UK’s territorial constitution at the forefront of its constitutional debates over the coming years.

The second major recommendation relates to funding arrangements.  The review is clear that the Barnett formula has had its day.  It does not deliver equity between the various parts of the UK.  It does result in a number of unintended policy spillovers between England and the devolved tier of government, and it gives the Treasury a huge degree of control and scope to make subjective judgements about how the UK’s finances as a whole work.  These are incompatible with the sort of devolved Union that the UK has become, and will only become worse.  The block grant will become increasingly subjective as adjustments are made to allow for devolved tax capacity, to pay for devolved welfare functions in Scotland, and by application of the ‘no detriment’ rule intended to help separate tax policy decisions by both devolved and UK governments (both the subject of forthright criticism by the Scottish Parliament’s Devolution (Further Powers) Committee).  This ‘multiple black box’ approach will become a source of nothing but disagreement and intergovernmental tension.

The Commission’s proposals entail reform of the UK’s devolution finance arrangements, of the easy parts as soon as practicable and of the more difficult ones over time.  The machinery needs an independent, impartial body to advise on financial matters and calculations.  There also needs to be an effective way of resolving disagreements and disputes when they arise, rather than ones that leave the initiative in the hands of the UK Government as at present.  And the block grant arrangements need to be put on a statutory basis rather than resting on a Treasury ‘Statement of Funding Policy’, and be subject to external scrutiny and audit

Linked to this is the need for a wider debate about welfare and the Union; how much the Union is responsible for delivering social solidarity and how, and the ways this relates to the arrangements for funding devolution.  This political choice has such wide-reaching effects it needs to be explicitly debated, not implied by other decisions.

The third major recommendation relates to ‘English votes for English laws’.  The report supports the principle that bills or provisions which satisfy the McKay Commission’s test of having a ‘separate and distinct effect’ for England should be subject to consideration by English MPs alone, within the House of Commons.  The problem will come with identifying what these bills are.  The government of the day may have a view about this, but ultimately deciding this will have to be a job for someone with authority and expertise or access to it, so probably the Commons Speaker.  It will need to take into account not only the policy implications of a decision about health, education or policing, but also the financial implications.  This will be tricky, and is an argument for both disentangling devolved and non-devolved finances and for separating the way finances and policy are considered within Parliament.

The fourth major set of recommendations relate to the UK Government, and particularly Whitehall. Whitehall needs to pay much more attention to devolution concerns; it needs to ensure that the machinery of intergovernmental co-ordination actually works; and it needs to reinforce ministerial capacity.  The last is a strong reason for a single Secretary of State for the Nations and Regions, or for the Union.  The absence of an effective overview at ministerial level has made the disjointed structure of the UK much worse.  Without much greater care about what devolution means, and the relationship between devolved and non-devolved functions, it will be impossible to distinguish between devolved and non-devolved financial matters or between legislation that has a ‘separate and distinct’ effect for England and that which does not.  Treating devolution as some sort of add-on or variation from an English ‘norm’ has also had its day.

In September 2014, Scottish voters chose to stay in a reformed Union rather than leave it.  There is strong public support for greater self-government in Wales and England as well.  Northern Ireland, as part of the Union, needs and deserves a system that works effectively.  The Commission’s proposals are designed to lay the groundwork for a union that delivers on those demands.




Filed under Conservatives, Devolution finance, English questions, Northern Ireland, Publications and projects, Scotland, Wales, Westminster

How Labour messed up 1998-model devolution

It’s intriguing to see various senior figures from the New Labour era call for a return to something much more like new Labour to revive the Labour Party. Those figures seem to overlook how responsible New Labour’s politics and legacy are for the mess Labour now finds itself in. (On the nature of that mess, I agree with quite a lot of what Paul Mason says here; it is very clearly a structural problem caused by the collapse of an electoral coalition, not just a question of policy detail or leadership.)
New Labour helped create the mess, at least in its territorial dimension, in two particular ways. First, its political economy depended on getting London to generate large tax revenues to pay for redistributive benefits and much of public services in the rest of the UK, and satisfying those already owning property in London through a property boom. This has left a lasting and damaging legacy by creating or at least magnifying huge inequalities and resentments arising from different regional economies and levels of prosperity.  (In technical terms, it sought to use a huge vertical fiscal imbalance to redress horizontal inequalities.  What actually happened was that those horizontal inequalities increased.)
Second, new Labour treated devolution as an event not a process. What was done in 1998-9 for Scotland, Wales and Northern Ireland was itself always unstable, a reform half-completed.  For it to work as a durable constitutional settlement, it needed to form the first step in a wider programme, addressing regional issues for England, the West Lothian question, the working of the Barnett formula and the inequities in spending on public services that generated, and issues of tax devolution to complement that of service delivery.  But Labour largely stopped there.  Leaving these matters un-addressed generated or fuelled tensions between different parts of the UK. Moreover, to maintain its position in Scotland and Wales, it needed to understand the new political dynamics that arose once there were devolved electoral arenas that were also sub-state nations, but did so very poorly (although Welsh Labour appears to have learned that lesson rather better than Scottish Labour).
In office in Westminster, Labour not only failed to act on these issues. It positively sought to squelch any serious discussion of them (note the utter silence on the question of the Barnett formula after 1999 until 2008 and the establishment of the Holtham Commission in Wales, itself at Plaid Cymru’s insistence).   Labour could have addressed them during the decade after devolution, from 1999 to 2010, while it was in government in Westminster.  If it had done so, it would have been able to do so on comparatively favourable terms and with less serious consequences than now. It positively refused, despite repeated private urgings (to some of which I was party). It failed to change anything for fear it might lose something – and now it has suffered a grave electoral defeat and lost any meaningful influence over events, particularly in its former powerbase in Scotland. These are bitter lessons for Labour, but it has only itself to blame for learning them now and not addressing them sooner.

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Filed under Devolution finance, Elections, English questions, Labour, Scotland, Wales

Bingham Centre review of devolution in the UK

For the last few months, I’ve been working with the Bingham Centre for the Rule of Law on a major inquiry into devolution and how it should develop, from the point of the UK as a whole. The starting point has been constitutional: what sort of constitutional system has emerged given the fragmented nature of the process of devolution in Scotland, Wales, Northern Ireland and across England. Our committee has been chaired by Professor Sir Jeffrey Jowell QC, Director of the Bingham Centre, and includes such figures as Professor Linda Colley, Gerald Holtham, Sir Maurice Kay, John Kay and Philip Stephens of the FT. (Full details of the committee are here.) Adam Tomkins and I have acted as advisers to the committee.
We’ll be publishing the report on 20 May, with a launch at Middle Temple Hall, and have a number of important recommendations for how the UK should work which we hope will shape the actions of the incoming UK Government, whatever political complexion it may have. Key to these is the need now to think about devolution as affecting the UK as a whole, and what the nature of that Union is – not unitary, but not federal either. No new government can afford to ignore these issues, or fail to try to tackle them.

UPDATE: Anyone wanting to come to the launch should email Sandra Homewood on s.homewood[at] to confirm their attendance. 

UPDATE, 21 May:  The report, A Constitutional Crossroads: Ways forward for the United Kingdom, can now be downloaded here as a PDF file.

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Filed under Devolution finance, English questions, General, Northern Ireland, Publications and projects, Scotland, Wales

An ‘English rate of income tax’: six questions in search of an answer

In a speech on Friday launching the Conservative Party’s ‘English manifesto’, David Cameron apparently proposed an ‘English rate of income tax’, on which voting in Parliament would be limited to English (or non-Scottish) MPs.  (There’s also Telegraph coverage here and BBC News coverage here.)  There’s not much detail about this – Cameron’s speech isn’t available on the Conservative Party website, nor is the ‘English’ manifesto.   But from what we can tell of it, this proposal raises a lot of questions.

The first question is whether this is a move beyond the Conservatives’ manifesto commitment for a veto for English MPs (or English, Welsh and Northern Ireland) MPs on non-Scottish income tax decisions, after the Smith Commission proposals are enacted.  This proposal caused quite a stir  when it was first announced, back in December 2014, and raises the hackles of Labour and other parties (and see also here), but it’s not actually new.  This may just be a rhetorical shift, using heightened language to get news coverage for an old story, but if so it has been publicised in remarkably insensitive terms: what the Conservatives are proposing is not an ‘English rate of income tax’, but relates to Wales and Northern Ireland as well. This may be an attempt to curry favour with English voters, but England is not the only part of the UK it affects.

The second question is what this proposal relates to: the Scottish rate of income tax which is due to come into effect in April 2016, and on which a decision will need to be taken this autumn, or the Smith Commission proposals? The latter probably won’t come into effect until April 2018 at the earliest, so this will not be something that could be put in place for England very quickly, or would need to be.  If the former, it implies very quick action indeed – and it’s hard to see a rationale for excluding Scottish MPs from voting when only the Scotland Act 2012 powers are in effect.

The third question is how to resolve the difficulties an ‘English rate of income tax’ shares with any move toward ‘English votes for English laws’ at Westminster to address the West Lothian question. These can be summarised as

• Serious practical difficulties in identifying ‘English laws’
• Operational problems in limiting those and ensuring only qualified MPs voted on them in divisions
• The potential governability issue, if a UK Government with the support of a majority in Parliament as a whole did not have majority support from English MPs, and could not get its business relating to England through Parliament.

On top of these, it would probably intensify (and not redress or remove) the problem of the connection between decisions about funding for services in England, and the block grants for devolved governments calculated using the Barnett formula. It would risk intensifying those problems because the ‘no detriment’ principle which is adopted for tax devolution is meant to protect each government from the effects of tax decisions taken by the other tier of government. An ‘English-only’ tax decision would risk creating all sorts of spill-overs which would trigger that principle.  So this is a recipe for greater complexity, not simplicity or ‘fairness’.

The operational problems of identifying what measures Scottish MPs could vote on and which they could not would be considerable. Collection and enforcement of income tax, even after Smith is implemented, will be for HM Revenue & Customs – so Scottish MPs should be able to vote on all matters relating to that. So would the definition of income, and exceptions, exemptions and reliefs. Also allowances – the personal allowance, married couples’ allowance, and so forth. And as income tax on savings and dividend income is not devolved, decisions about that would also need to include Scottish MPs. No wonder the Smith Commission noted that ‘Income Tax will remain a shared tax and both the UK and Scottish Parliaments will share control of Income Tax. MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax’ (paragraph 75). There may be a logic in stopping Scottish MPs voting on the devolved matters, but those are rates, bands and the thresholds between bands – a very significant measure of fiscal devolution, but not the sort of complete devolution that an ‘English rate of income tax’ would imply. Making that actually work, vote by vote, will involve a veritable Parliamentary hokey-cokey.  The Smith recommendation not to limit MPs’ voting rights on tax matters will be very much easier to make work.

The fifth question is whether, if this really is about an ‘English’ (or English/Welsh/Northern Ireland) rate of tax, it can actually work at all.  It almost certainly can’t.  Tax devolution for Scotland (both under the Scotland Act 2012 and the Smith Commission proposals), Wales and Northern Ireland works by making a reduction from the block grant to allow for devolved tax capacity. There are many issues about how that will function in practice, but the principle is a viable one – because there is a distinct and identifiable grant to fund each devolved government.  That is not the case for England. Funding for English services is simply funding for UK Government functions that happen to be located in England. To have a separate English rate of income tax means identifying what those services are and having a separate and identifiable pot of funding for them, to which the English rate of income tax flows. That would be a huge upheaval for the administrative machinery of government, which certainly goes beyond the commitment in the Conservatives’ UK manifesto for a veto for English MPs on income tax decisions.  It would amount to putting in place a federal fiscal structure for the UK.  That certainly hasn’t been discussed by any political party to date.

The sixth question is whether this is meant to apply just to the Scottish proposals for income tax, or more widely.  With devolution of stamp duty land tax and landfill tax to Scotland and (in due course) Wales, shouldn’t it logically apply to those too?  What about issues regarding the new Northern Ireland rate of corporation tax?  What about air passenger duty or the aggregates levy when those are devolved?  The fact these are small taxes doesn’t alter the principle that appears to underlie Cameron’s proposal.

So, if this is something new, it may well be unworkable. But it’s probably the case that this is just eye-catching rhetoric to reheat an old promise, which is causing much more heat than light.  But who would report an announcement about ‘English, Welsh and Northern Ireland votes on English, Welsh and Northern Ireland income tax rates and thresholds between rates on non-savings non-dividend income’?

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Filed under Conservatives, Devolution finance, N Ireland corporation tax devolution, Northern Ireland, Scotland, Wales

Devo Max and Devo More

There are two myths going around about what happens following a No vote in the Scottish referendum.

First, it’s said that plans for ‘more devolution’ are unclear. They are not. The three pro-UK parties have different schemes for them, it’s true, but there is a substantial degree of common ground between them. All involve devolution of most or all of personal income tax to the Scottish Parliament. Labour and Conservatives both support forms of welfare devolution, which – among other things – would have enabled Scotland to opt out of the Housing Benefit change that led to the ‘bedroom tax’. The differences do need to be resolved, but there is also a clear route for that, endorsed by the UK Prime Minister in his Aberdeen speech as well as other party leaders: an early process of cross-party negotiations, leading to a white paper by November 2014, publication of draft legislation in early 2015, followed by incorporation into manifestoes for the May 2015 general election, which will give the mandate for delivery of them.  That level of political commitment is not easily ducked – and ironically it is perhaps the Conservatives who have the greatest short-term political interest in securing their delivery.

It’s also untrue that these are last-minute proposals All these schemes have drawn on the work I have done with IPPR, and particularly Guy Lodge, through the Devo More project since late 2012. They reflect many months of work and careful analysis of the implications of further devolution, not just for Scotland but for other parts of the UK as well – they haven’t been suddenly ‘pulled out of a hat’.

Details of the key publications from Devo More can be found here, here and here (and there are posts about the financing paper here, the welfare one here and how the programme fits various political traditions here).

Second, it’s suggested that these proposals amount to ‘Devo max’. They don’t. This is usually a rather lazy shorthand from journalists or politicians who haven’t understood what is actually on the table. The extra-devolution schemes, or scheme, will substantially enhance the autonomy of a devolved Scotland within the UK. But the Scottish Parliament is already responsible for about 70 per cent of all public spending in Scotland. The Devo More proposals will take Scotland as close to home rule as is possible in a single state.  They will deliver what Scots had clearly shown they’ve wanted for a decade or more – greater self-government in the Union – in a way that works with the interests of people in other parts of the UK, rather than against them.


Filed under Devolution finance, Publications and projects, Referendums, Scotland, Scottish independence, Westminster

‘Devo More’ seminar in Cardiff, 11 June 2013

I’m giving a seminar on Devo More and what it would mean for Wales in Cardiff on the morning of Wednesday 11 June. The full title is ‘Devo More: How fiscal and welfare devolution can benefit Wales and strengthen the Union’, and it is part of the UK Changing Union programme based by the Wales Governance Centre at Cardiff University, under the aegis of the National Assembly’s Cross Party Group on the Changing Union. (Those who haven’t seen them can find the Devo More and Welfare paper here, and Funding Devo More here.)
The seminar will take place at 8.30 am in conference room 24 in Tŷ Hywel, with tea, coffee and pastries provided. To book a place, please email

UPDATE, 12 June: The slides from Tuesday’s talk are now available HERE.

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Filed under Devolution finance, Events, Publications and projects, Wales

Unlocking the lockstep?

There are interesting changes to the ‘Calman’ model of income tax in the Wales bill (which had its Commons second reading on Monday) and the Finance bill (which had its Commons second reading on Tuesday).

The ‘Calman’ model applies a ‘lockstep’ to the devolved income tax rate, which has to be the same for all three tax bands (basic, higher and additional or 45 per cent). That rate can be 0 per cent, 10 per cent (as it is at present) or some other figure but it must be the same for all three bands – so if the devolved rate were nine per cent, you would have tax rates of 19, 39 and 44 per cent. While this question did not attract particular attention when the Scotland Act 2012 was going through the UK and Scottish Parliaments, it has been controversial in Wales. It was not recommended by either the Holtham or Silk Commissions, and has attracted criticism from the Commons Welsh Affairs Committee, the First Minister (who called the power with the lockstep ‘pretty useless’) and the Plaid Cymru and Welsh Conservative leaders.

The provisions in the Wales bill mark a change from the draft bill published before Christmas. Instead of providing for a single ‘Welsh rate of income tax’ across all three bands, the key operational clause now provides for Welsh basic, higher and additional rates and defines each of them separately (see clause 9 of the bill). Clause 289 and Schedule 34 of the Finance (No 2) bill make similar changes to the finance provisions of the Scotland Act 2012. (Both bills also provide for beefed-up arrangements for reports on devolved tax powers by the Comptroller and Auditor General, something that was conspicuously missing from the Scotland bill.)

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Filed under Calman Commission/Scotland bill, Devolution finance, Legislation, Scotland, Wales