A REFORMED STATE OR A FAILED STATE

The video below shows Jim Sillars, a Scottish nationalist, explaining why he considered Scottish independence as part of an inevitable process of Britain’s decline (‘the question [is] whether Scotland remains part of a state which is in its final stages of imperial decline’). Britain’s ruling class is now in the process of presiding over the decline and fall of the United Kingdom in the same way that they presided over the decline and fall of the British Empire. Jim Sillars is not alone in his recognition of the decadence of Britain’s ruling class (eg see here).

With his own perspective, in an article in The Guardian in October 2020, the former prime minister Gordon Brown once again argued for constitutional change in the UK. On this occasion he used unemployment as his reason. He argued that ‘the crisis of 2020 is creating a Covid generation as lost and as neglected as the Youth Training Scheme (YTS) generation of the 1980s’, and that:

‘Now, as then, youth unemployment in cities in the north, Midlands, Wales, Scotland, Northern Ireland and in the inner cities will exceed 20%. Young people need local and national government working together to help them through. But the very areas with the greatest needs are the ones that are protesting that the centre listens to them least. For Covid is revealing that our nation suffers another illness: a fatal flaw in the way we’re governed, for which we must now also find a cure.’

Brown proceeded to set out examples as to how a variety of mayors and the First Ministers of Wales and Scotland were feeling neglected by the UK Government. According to Brown: ‘Never has the United Kingdom looked more divided and more polarised.’ Revealingly, he further said:

‘For after 20 years of devolution and decentralisation, there is no real capacity for joint working between London and the regions and nations. All the mechanisms put in place for coordination, like joint ministerial committees, are broken; ministers have yet to wake up to the significance of what they are creating – strong, powerful mayors with their own mandates who now complement parliaments in Scotland, Northern Ireland and Wales. They cannot accept that the UK body politic is no longer made up of just MPs and local councillors, but also elected legislatures in the nations and elected mayors in the regions.’

Alleging that Boris Johnson would be unable to ‘hold together our multinational UK of distinctive nations and regions within the straitjacket of a centralised state’, Brown advocated ‘that the minute the immediate crisis is over, the UK needs to be rethought and rebooted – starting with a convention engaging all nations and regions and built out of local citizens’ assemblies to discuss how, through joint working and the sharing of power, we manage practical challenges like disease control, social care, regeneration and employment.’

This week, Brown returned to his theme in an article in The Telegraph. Brown warned: ‘I believe the choice is now between a reformed state and a failed state. It is indeed Scotland where dissatisfaction is so deep that it threatens the end of the United Kingdom.’ Opinion polls in Scotland have for several months given those who seek independence a noticeable lead. In addition to ‘citizens’ assemblies’ Brown wanted a ‘commission on democracy’ to ‘review the way the whole United Kingdom is governed’. Brown suggested replacing the House of Lords with a ‘senate of the regions’ (NB not nations and regions). Brown argued: ‘While the crisis is deepest in Scotland, it is far from alone. Regional metro mayors – from Newcastle, Manchester and Liverpool to Sheffield, Bristol and London – are demanding more powers from what they see as an insensitive, out-of-touch and overcentralised centre.’ Newcastle, Manchester and Liverpool to Sheffield, Bristol and London are all Labour dominated areas.

Brown might like to present himself as a concerned elder statesman, but he has form and is largely responsible for the steady erosion of the stability of the UK. It was the Labour government, of which Brown was chancellor (at that time, before becoming prime minister), which introduced devolution to Scotland and Wales. Their unstated aim was to create Labour fiefdoms in Scotland and Wales, where they had large support, so that they would remain in power there no matter the outcome of a UK general election. Furthermore, despite having home rule, the Scots and Welsh MPs would continue to vote on English affairs in Westminster. The English had no parliament and were governed from the UK parliament. This was anti-democratic and outright vote rigging.

The plan went spectacularly wrong when the Scottish nationalists, the SNP, virtually wiped the Labour party out in Scotland. Scotland was no longer a Labour fiefdom, but an SNP one.

The Labour Party’s plans for England, were to balkanise it. A referendum in the North East region proposing an elected regional assembly resulted in a lost vote. Regionalisation was rejected. The Tories, on taking office, started creating regional mayors which was another form of regionalisation.

Given that we are now in 2021, it would be useful to contrast the above self-serving agenda with the speech given by Iain MacLean at the Demos Scotland 2020 conference in 2005, regarding the future of Scotland and where it might be in 2020. In that speech, Iain MacLean said:

‘The tap which controls the flow of UK tax proceeds into Scotland will be turned off soon. I don’t know when, but certainly before 2020. Before it is turned off, there has to be a mature public debate in Scotland on what should take its place…

Scotland has enjoyed a higher public spending per head than England since about 1900. For that there has been one big reason, and it is not the one that people think. People think that Scotland gets more because it is colder, poorer, and has more difficult geography than England. All of these things are true (although 100 years ago and now, it was not much poorer than England). But the reason for higher spending is that Scotland poses a credible threat to the United Kingdom. In the 1880s, when formula funding started, it was named the Goschen proportion after the Chancellor of the Exchequer in Lord Salisbury’s Unionist government. The big problem was Ireland, not Scotland. To try (vainly in the end) to keep Ireland in the Union, the Unionists threw money at it. This was called Killing Home Rule by kindness. Not many people in Scotland wanted to secede, and almost none of them were violent. But governments decided to placate them too, starting with the crofters of Skye, who got the Crofters’ Commission (1886 and still with us) to settle their land grievances and prevent them festering as in Ireland…

By the time the ghost of Goschen finally vanished in the 1970s, public spending per head in Scotland was about 20 per cent above that of England (and substantially higher than in Wales, which was as poor and almost as sparsely populated as Scotland, although it has fewer midges). The secretary of state could protect the Goschen proportion because he had a credible threat at his back. He could tell the Cabinet that unless they protected Scotland’s spending share the Nationalists would start winning elections, and where would the United Kingdom be then? All secretaries of state have done this, but the supreme practitioners have been Tom Johnston (Lab, 1941-5), Willie Ross (Lab, 1964-70 and 1974-6), Ian Lang (Cons, 1990-5) and Michael Forsyth (Con, 1995-7). It is easier for Conservatives, because theirs after all is the Conservative and Unionist Party. Although public spending in England was squeezed during the Thatcher administrations, the gap with Scotland stayed as wide as ever.

In Summer 1974, Prime Minister Wilson overruled Willie Ross and Labour’s Scottish executive, and announced that the party favoured devolution. This was to head off the expected SNP triumph in the polls. In fact, the electoral system did for them more effectively than Wilson. In October 1974, the SNP got 30 per cent of the vote to the Conservatives’ 24 per cent, but only 11 seats to the Conservatives’ 16. Labour retained the majority of Scottish seats on a minority vote. Nevertheless it had been a very close shave. On 35 per cent of the vote, the SNP would have swept the board, won more than half the seats in Scotland, and started to negotiate independence. Therefore, Labour prepared its flagship devolution plans. The Treasury started to prepare for life after devolution, and conducted (some would say bullied the Scottish and Welsh Offices into) a Needs Assessment…

But by 1979, devolution was dead. An English backlash caused a government defeat which killed the original flagship bill in 1977. Separate bills for Scotland and Wales were then enacted, but the rebels added sections requiring a referendum on the plans, with a “Yes” vote not to be confirmed unless at least 40 per cent of the electorate voted Yes. In Wales, the referendum led to a crushing No; in Scotland to a faint Yes, far below the 40 per cent threshold. The government fell on a Conservative-SNP confidence vote, and the reign of Mrs Thatcher began.

However, the Treasury’s other preparative step has lasted. This was the Barnett Formula, so named (by David Heald in 1980) after Joel Barnett, the Chief Secretary to the Treasury form 1974 to 1979. Barnett’s officials designed the Formula as a temporary expedient to reduce Scotland’s relative spending advantage until a needs-based formula could be introduced. Lord Barnett, as he now is, told a Commons select committee that he expected “his” formula would not last more than “a year or even 20 minutes”. It has not only lasted, but was embedded into the 1997 devolution settlement … However, the Formula is not statutory. It is not in the Scotland and Wales Acts, and it could be revoked unilaterally by a future UK government…

The Barnett Formula is not about needs. It is just based on relative population. It leaves unchanged the baseline block grant from year to year. It merely stipulates that for every £1 of extra spending in England each year, Scotland (and Wales and Northern Ireland) will get an increase in their block grant proportionate to their relative populations … [The original] population proportions were too generous to Scotland (and too mean to Wales) until altered by that hammer of the Scots Michael Portillo in 1992 to the correct population proportions. Now they are rebased every spending review for the next two years. So they track Scotland’s (declining) share of the British population, but with a time-lag that works in Scotland’s favour.

…the property of this formula is that in the long run it will converge until spending per head is the same in all four countries of the UK …

The long run has been longer than anyone anticipated in 1978. Up to 1999 there was no perceptible convergence, even though the Barnett Formula supposedly operated throughout. Elsewhere we have given some technical reasons for this, but the main one is political. For all but the last two years of that period, the Conservatives were in office. As the pre-eminently unionist party, they so feared a nationalist threat to the continuation of the United Kingdom that whenever Barnett threatened to produce embarrassing results they bypassed it and found a way to supply off-Barnett goodies to Scotland. The change of government in 1997 caused no immediate change because of Chancellor Brown’s hair-shirted decision not to increase the Conservatives’ planned spending totals. If there is no increase in England, there is nothing for Barnett to bite on.

So Barnett began to bite only when the Labour government started to increase public spending in England. This grew most in the spending reviews of 2000 and 2002, and less but still substantially in the spending review of 2004. The three territories (as the Treasury calls them) are getting their population share of the extra largesse. But, as a proportion of the baseline that they were getting before, the extra is less than in England. Barnett convergence (in Scotland known as the “Barnett squeeze”) is in progress…

The English regions, especially but not only the poorer ones, hate Barnett because they think it embeds privilege for Scotland. The campaign is strongest in the North East, engine-room of the 1977 defeat of the Scotland and Wales Bill. It is only too obvious there that spending per scholar is much higher in Duns than in Alnwick, and spending per patient is much higher in Berwickshire than in Berwick-on-Tweed. Strictly speaking this difference is not only due to the Barnett Formula, but also to the formula for distributing public expenditure around the regions of England – also broken. But English politicians will continue to put the blame on Barnett…

More important still, Wales and Northern Ireland have changed sides … Barnett never did Wales any favours. As her baseline spending was below her needs, the Barnett squeeze would take Welsh spending further and further below needs. Instead of converging towards relative need, it would diverge away from it. Under the Conservatives, this was masked by the generosity of the Unionist secretaries of state. Under Labour, the quiescence of Welsh Labour is more puzzling. It may be because their eyes were mistakenly fixed on the tawdry prize of EU Objective One status, which will be broken by 2006. Objective One areas are the poorest areas in the European Union. An artificial confection called West Wales and the Valleys has Objective One status. But with ten new member states, all poor, in 2004, no area in the UK will qualify for Objective One in future grant rounds…

Northern Ireland has no elected government at the time of writing, but its civil servants have become anti-Barnett militants. They argue that (even leaving aside security, which mostly does not come under Barnett) Northern Ireland has high spending needs because of its young population, with more children and more of them staying on (in two separate school systems, it has to be added). They believe that by 2006, the block available under Barnett will be insufficient to fund Northern Ireland’s needs…

Academic commentators insist that the formula is a very poor way of distributing block grant. Unless Scotland becomes independent, there will always be a distribution of block grant to Scotland from the UK government. But the Barnett arrangement breaks every rule in the public finance economist’s book. It is bad for the UK and bad for Scotland. It is bad for the UK because it distributes grant in a way unrelated to need. It fails to give the UK government control over things it should control and gives it control over things it should not … They control the amount of public sector debt and borrowing in the UK. But the UK government cannot control what the devolved administrations do – under the devolution settlement they can switch their block grant between current and capital spending at will.’

And:

‘More profoundly, the Barnett arrangements give no incentives for efficiency. Wales and Northern Ireland have no power to tax at all. Scotland has only the 3p in the pound Scottish variable rate of income tax, so far not used. As the Scottish Executive cannot control the amount of money it gets, it might as well just spend it all. Faced with a choice between spending that will make the Scots richer and spending that will not, it has no incentive to choose the former, because it will not see any of the enhanced tax revenue that will result. For that reason, the recent discussions of fiscal autonomy for Scotland are welcome.

Fiscal autonomy comes in two main shades, a nationalist version promoted by SNP politicians, and a devolutionist version promoted by some Conservatives, some Liberal Democrats and some academics.

The nationalist version is just Scottish independence. If the Scots vote for independence in 2007 or later, they should have it. But they should not have any illusions about it. Some ingenious sums due to Alex Salmond MP purport to show that Scotland subsidises England. They rest on very dodgy foundations. In particular they assume that almost all North Sea oil revenues would flow to an independent Scotland, and that they would stay robust. But they would not all flow to Scotland; they fluctuate wildly (between £1billion and £5billion per annum in the last decade) and they are in long term decline…

Scotland would begin life with a seriously imbalanced budget. It could not sustain public expenditure £8billion ahead of tax revenue. If oil revenue stayed at its 2001/02 peak of £5.2billion and if an independent Scotland got 70 per cent of that, the fiscal gap would close, but only to £4.4billion. To put this sum into perspective, the Treasury estimates that a 1p change in the Scottish variable rate of income tax in 2002/03 could be worth approximately plus or minus £230million. The entire 3p in the pound would therefore yield about £700million – a trivial contribution to closing the fiscal gap.

I am all for Scotland having full fiscal independence. But the Scots should choose it in full awareness of what it would involve.

Turning to the Conservative version of fiscal autonomy, I will describe it in words they would not necessarily use. Nor do you have to be a Conservative to support it. The Scottish Liberal Democrat conference backed it, against their leaders’ advice, and some Labour figures such as Wendy Alexander have started to raise the flag cautiously for what she calls fiscal federalism. The UK has one of the largest vertical fiscal gaps (also known as vertical fiscal imbalances – VFI) in the democratic world. A vertical fiscal gap exists when one tier of government has the power to raise tax and another has the duty (or the pleasure) to spend it. The Scottish Executive has the power to vary the standard rate of income tax by up to 3p in the pound … The Welsh and Northern Irish assemblies have no power to tax, and none is proposed for the English regional assemblies either. Local government, which in the three territories is funded from their Barnett blocks, in England is funded by another set of broken formulae. Here again VFI is unusually high by international standards. Local government spends about 25 per cent of the identifiable public spending in England, but raises only about 4 per cent of the tax receipts because it has access to only one tax base, namely domestic real estate, taxed via the regressive and unsatisfactory council tax.

VFI is a bad thing. It reduces the incentives for central and local government to tax efficiently, and it encourages politicians to play games against one another. Especially, to play blame games. If citizens are unclear who provides which service then each tier of government can blame the other. As Scotland is not fiscally autonomous, Scots politicians can turn from the difficult task of blaming their problems on the English … When [Barnett] disappears, as it must, they will face a tougher world. If the Scottish Executive raised more of what it spent, say the fiscal autonomists, it would face the tougher world immediately, to maybe short-term pain but long-term gain. Scots politicians and Scots citizens would face the true costs and the true trade-offs between public services and tax savings. Fiscal autonomy would require radical change.’

Iain MacLean then listed some of the ways in which fiscal autonomy could be implemented in Scotland, Wales and Northern Ireland – but not to an English parliament – which should each have the same power to tax. That ‘a certain proportion of, say VAT and income tax receipts’ should be retained by the devolved administrations. Iain MacLean further advocated the introduction of a ‘more progressive and more comprehensive’ taxation of ‘real estate’.

He then continued:

‘This regime would introduce fiscal federalism to the UK … Fiscal federalism reduces VFI by making each tier of government responsible for raising what it spends – or at least a higher proportion of what it spends. The Scottish variable rate of income tax would not be serious fiscal federalism even if implemented, because it could only fund a laughably trivial proportion of Scottish public expenditure. Serious fiscal federalism requires the Scottish Executive to raise a serious amount of tax revenue, and/or requires the UK government to assign a serious proportion of its tax revenue to Scotland (and Wales and Northern Ireland)…’

Given that this was a Scotland 2020 conference, Iain MacLean could be forgiven for looking at matters from a Scottish point of view. Nevertheless, he raised a number of important points.

Regarding the West Lothian Question (where Scots, Welsh and Northern Irish MPs vote on English affairs in the House of Commons despite the English having no say on how the Scots, Welsh and Northern Irish govern themselves) English votes on English laws (EVEL) in the House of Commons is not a solution. It comes nowhere near to addressing the issue of the devolution settlement. EVEL is a typical Tory fudge, and those who advocate it are merely ducking the issue and trying to con the English public. In the event, following the Scottish referendum on independence, and the increased powers the Tories agreed to give Scotland, the Tories promised the fudge of EVEL, and then fudged the fudge. They fiddled about with the standing orders to give EVEL on the committee stage of legislation and allowed Scots and Welsh MPs to continue voting on English matters in the House of Commons. EVEL does not address the problem of the scale of the vertical fiscal gap.

Importantly, the problem regarding the English subsidy to Scotland is not a recent one. Nor is it the result of the Barnett Formula. English monies have been pouring into Scotland for more than a century. The prime responsibility for this rests with the Tories. The policy is a failure in that it has reduced many in England into poverty (eg those old people who have their homes seized and sold by the state to pay for nursing home costs, when such costs are fully paid by the government in Scotland) and yet has failed to achieve its objective, which is to buy off the Scots. Furthermore, the subsidies are substantial and in excess of £25billion per annum.

Iain MacLean asserted that ‘there will always be a distribution of block grant to Scotland from the UK government’. But this is not necessarily so. If there is genuine fiscal autonomy, especially to deal with the vertical fiscal gaps which Iain MacLean identified, then there is no reason at all why Scotland should continue to receive any English money. Scotland is the wealthiest part of the UK outside after London and the South East.

The UK government has no money of its own. It is English money which is distributed to fund the deficits in Scotland, Wales and Northern Ireland – none of whom are meeting their own internal expenditure. It is English money which funds the interest payments on the national debt, foreign aid, defence, payments to the EU etc. Then there are the massive costs of mass immigration, a policy eagerly supported by the Scots and Welsh MPs even though the immigrants nearly all settle in England.

If the UK were to become a fully federal union, then Scotland, one of the wealthiest regions in the UK, would be expected to meet more if not all of its own bills – of which Iain MacLean was wary.

For there to be fiscal devolution and autonomy, then there must be a parliament to devolve matters to. That necessitates an English parliament to deal with England. Direct rule of England by a British parliament is not consistent with dealing with the vertical fiscal gap at all. There needs to be a clear division of responsibility between British matters and English matters, British money and English money, and British MPs and English MPs. There needs to be democracy and justice for the English.

Another problem is that of constituency boundaries. Back in 2006, the Boundary Commission launched its final draft for the suggested redrawing of constituency boundaries. This was supposed to update the boundaries to reflect demographic changes. Such reviews are ongoing and are supposed to ensure that the elections are as fair as possible.

There is a serious democratic injustice for the English in the electoral process, and this is not confined to the lack of an English parliament. In a report entitled Guide to the New Electoral Boundaries, by Anthony Wells, the details of the major proposed changes were listed. The opening paragraph of the Summary stated:

‘The Boundary Commissions of the UK (one for Scotland, England, Wales and Northern Ireland) conduct general reviews of the Parliamentary constituencies every 8 to 12 years. This is the fifth general review since 1949. The review started in 2000 and the new boundaries are based upon the population in each seat in February 2000. The new boundaries in Scotland have already been adopted and were used at the 2005 election. Unless there is a very early snap election, the new boundaries in England, Wales and Northern Ireland will be introduced in time for the next General Election.’

The proposed changes were not introduced. The boundaries have remained unchanged.

The Boundary Commission report made grim reading for those who genuinely believe in the democratic process. The previous general election resulted in a Labour majority of 66, which was completely out of step with its percentage vote (the outcome was Labour 36%, Tories 33% and Lib Dems 23%, which means that Labour received a substantial parliamentary majority despite a low vote and despite only being 3% ahead of the Tories).

The 66 Labour majority included 70 Scottish and Welsh Labour MPs. In other words, Labour governed England solely as a result of the manner of the devolution settlement imposed on England. Labour’s majority in England was totally dependent on its Scottish and Welsh MPs. This was an illegitimate government.

The Boundary Commission report stated:

‘The electoral quota in England and Scotland is 69,934 [per constituency], in Wales it is 55,640. If Wales were to use the English quota, it would be entitled to only 32, rather than the present 40. Given that Labour holds almost three-quarters of the seats in Wales the current over-representation is to their benefit, and gives them an extra 5 seats over the Conservatives. (In practice would probably still have more than 32 seats even if it did use the English quota – Scotland has 59 seats rather than the 57 it “should” have because of geographical considerations in the highlands and islands. Similar factors in Anglesey and the Welsh mountains would probably have a similar affect).’

(With respect to the Boundary Commission, this is no longer the age of the horse and cart. If MPs can go jetting off on fact-finding excursions to a variety of exotic locations across the globe, then, in this age of modern communications, they should be able to communicate with their constituents without too much difficulty.)

To give but two examples of the impact of these anomalies, firstly, the two Scottish constituencies of Orkney and Shetland, and Na H-Eileanan An Iar have electorates of roughly 33,000 and 21,500 respectively. Meanwhile, the Isle of Wight, an English island and single constituency, has an electorate of roughly 109,000. The English Isle of Wight constituency has an electorate roughly three times that of Orkney and Shetland, and more than five times that of Na H-Eileanan An Iar. It is roughly twice the size of a normal sized Welsh constituency.

Secondly, The three East Yorkshire constituencies of Haltemprice and Howden, Yorkshire East, and Beverley and Holderness (all Tory) have a combined electorate of roughly 222,500, compared with the combined electorate of roughly 189,500 for the neighbouring three Hull constituencies (all Labour). The 33,000 difference is equivalent to the electorate Orkney and Shetland and 50% greater than that of Na H-Eileanan An Iar. To put it another way, the three aforementioned East Yorkshire constituencies are equivalent to four normal sized Welsh constituencies.

The result of the 2017 general election, at the height of the Brexit brouhaha, was that the May Government lost its overall majority It did so as a result of the West Lothian Question. The Tories won comfortably in England, securing 297 seats to 227 seats for Labour, and a 61 seat overall majority. It was the phalanx of MPs from Scotland, Wales and Northern Ireland which rendered the Tories narrowly short of an overall majority. The governance of England was determined by non-English MPs.

The Boris Johnson Government has now embarked on another boundary review.

Both the Tories and Labour are opposed to equality for the English. They oppose the creation of an English parliament and a proper federal structure for the UK, with the Northern Irish, Scottish, Welsh, and English parliaments all having equal powers in a federal constitution. This shows itself in Brown’s articles when he referred to ‘nations and regions’, with England comprising numerous regions. His proposal for a senate referred to a ‘senate of the regions’ – ie being applied to England only, with the other national parliaments being beyond the senate’s jurisdiction, even though Brown wanted those nations being represented in the senate.

As a Scot, Brown has no business interfering in England’s internal affairs, and has no business trying to balkanise England against the interests and wishes of the English. The English are a nation and are entitled to equality in the UK. The English need to assert their nationhood.

Despite Iain MacLean’s confidence that the Barnett Formula would not last, it has – and with it all the problems. It is not Brexit that poses the greatest threat to the continuance of the UK, but the Covid-19 pandemic – not only due to the health threat, but also due to the devastating economic consequences of combating the infection, and the looming unemployment as the Covid-19 depression impacts. The scale of the UK’s debts far exceed that about which Jim Sillars was concerned and those debts are soaring.

The current arrangement, where the UK government governs England as a side issue on an ad hoc basis, is not working. The pandemic is but one example of that. Whereas the other nations have parliaments focused exclusively on dealing with the infection for their own countries, the UK government has been engaged in a balancing act between governing England, responding to the situation in and demands from Wales, Scotland and Northern Ireland, and its pursuit of its various globalist ambitions (the most glaring example of which is the refusal to secure the borders).

From an historical perspective, Iain MacLean referred to ‘Lord Salisbury’s Unionist government’. That Unionist government was a coalition between the Conservatives and the Liberal Unionists, who had split from the Liberal Party over the issue of Irish home rule. Leading that split was Joseph Chamberlain, who was initially sympathetic to the Irish nationalists. But, he took the view that either Ireland should be governed from Westminster like all the other countries of the UK, or else there should be the introduction of a federal structure for the whole UK. He opposed the creation of an Irish parliament by itself, on the grounds that to treat Ireland as being something separate would mean that it would eventually separate. Many years later, Ireland was treated as something separate and it did eventually separate. The policy of killing home rule by kindness failed.

It is reported that Boris Johnson is planning to offer the Scots another raft of ‘off-Barnett goodies’.