I am nervous this morning and lost sleep last night, which is relatively rare for me. I can do stress, but it usually leaves me alone at night. So I had to ask myself what I was worried about.
I am not worried about Scotland voting Yes. I think its economy is sufficient for it to survive as a state. I think there is sufficient self identity for it to be a nation. I guarantee problems. But potentially only a few more, for a a while, than would have happened anyway. That, of course, is a best guess.
What is not a guess is that a No vote could be very much worse. Tory MPs are queuing up to wreak havoc on Scotland - which they already consider a Scottish country only of use for grouse shooting. There is, as a result, no certainty that the promises of the No campaign will be delivered. And if they are separate taxation and major independent borrowing powers within a monetary union are problematic, to say the least.
But more problematic will be the calls for federalism. London will demand the power to tax. That power will be granted to Wales and Northern Ireland and maybe the North. Labour thinks it's down to big City states. And in every scenario three things follow.
The first is a race to the bottom on corporate and business taxes to supposedly lure business to relocate. Internal tax haven UK will have its foundations in a No vote. No wonder business wants it. The tax burden will shift still further from business to labour.
Second, there will be increasing inequality as take yields are steadily localised so that wealthy areas reduce tax by in turn reducing their cross subsidy to poorer areas of the UK. Inequality will increase.
And third? As the idea of the UK - and most especially England and Wales - working as a whole falls apart so will national infrastructure and with it the cohesion of the economy. We will all pay for that. GDP will fall. The green agenda will suffer. And social tension will rise with the variation in regional supplies of essential services.
There are good reasons for devolving some more powers in the UK. And there are incredibly good reasons for reforming local taxation - because what we have is deeply regressive. But the deliberate construction of a state built on the theory of the firm where each area competes when what we need is a nation that pulls together with the strongest helping the rest, and each feeling they are part of a whole, is the last thing we want.
But that is what I fear we will get.
And that is enough to keep me awake at night.
No might be very much worse than you feared.
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Your concerns seem a bit topsy-turvy.
You are worried – rightly – about monetary union combined with tax competition. Yet that is precisely what the Scottish independence campaign is promising. Yes it’s possible Devo Max could lead to the problems you describe, but it seems a little far-fetched – there’s never been any political demand for even the gentlest form of federalism in England (the fate of the 2004 referendums should give anyone pause).
So you see one scenario where monetary union and tax competition are promised, and one where it is theoretically possible, and you worry about the second?
You are also under-estimating the disruption that negotiating and disentangling the two economies will cause for both countries. It will dominate our politics for years – and no space for progressive politics at all.
I have argued against Scottish monetary union and we are assured it will not happen
But we are assured by the Independence campaigners that it will!
Seems somewhat eccentric to support independence on the basis that the “yes” campaign’s key economic policy is a lie…
Good point on infrastructure. Belgium is a good case in point, where as soon as you cross the line separating the wealthy North (Flanders) with the socialist and corrupt South, the potholes appear. Only the railways, which are still centrally managed by the federal government, are of equal quality both sides of the border. What people miss is that the whole fight by a certain part of the Flanders is to stop the social transfers.
The UK has a big advantage compared to Belgium (regional accents set aside), namely that there is no language barrier for people to move. The latter is certainly not desirable, but is clearly a reason the UK (with or without Scotland) should be very weary about regional imbalances growing even more.
Two of the developments your fear have been underway for most of the period of our current government – although in a slightly different form to that you outline here, Richard. The funding of, and cuts inflicted on local government have led to a situation where already wealthy local authorities in areas of low need (eg.in the SE of England have done very well while councils in poorer areas with higher social need have done very poorly (ie. In 2014-15 the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities compared with 2010-11).
Secondly, people may have noticed the consistent and ongoing attacks from the government and Tory politicians in general of pretty much any policy the Welsh Assembly adopts. This has been most marked, perhaps, in the case of the NHS where Jeremy Hunt never misses an opportunity to attack health policy and practice in Wales.
So I think your analysis correct, in that a fair amount of it will simply be a continuation (in variant forms) of the geographically, politically and economically devisive policies of the current government. Of course, if the Tories aren’t still in power come next May, things may be different.
As usual, appreciated
I’d frequently like to do more, as for example, with the Hayek/Austrian/Chicago schools’ debate your blog kicked off yesterday (where I wanted to point out that it’s no accident that these schools of thought/theories are very popular in business and management schools), but anyway, as you know yourself, other (paid) work has to take precedence.
“if the Tories aren’t still in power come next May, things may be different.”
This is highly unlikely-expect more of the same with a slightly different wrapper from Labour. Westminster is defunct and only a cipher for corporate interests and the legitimisation of asset stripping and a revenue-raiser as a tourist attraction. We need change.
That was supposed to be tongue in cheek, Simon. And I was also trying to be a little less pessimistic/fatalistic than I usually am with my comments.
Ah….but to argue against localism is to disagree with almost every political party at the moment………..they all want more power to local authority and promise to hand over tax and spending to the regions.
As you point out this will completely undermine your Statist approach and allow competition between regions, see the recent Polly Toynbee article for more details.
Not very democratic though…….stopping peopling having their right to self determination because they might lower taxes and undermine your desire for higher tax….
States are not microeconomic entities
We cannot afford that they fail
That’s why your comment reveals either profound misunderstanding or a loathing for the structures that underpin democracy
‘Not very democratic though’ your comments seems to imply that all in an area will be in agreement. In an imperfect world we have to come to compromises. Competition of different goods and services is not quite the same as competing in lowering taxes. Too much competition without some redistribution, leads to poverty on one hand and gated communities on the other. The statist approach enables us to co-operate and achieve things which otherwise would not happen. Ultimately, it comes down to how far one feels part of and has a responsibility to the wider community.
Richard, many thanks for this – a helpful contribution and insight for one such as I, who AM a federalist, and who deplored the failure of John Prescott’s regionalization project.
However, what you have outlined here shows that federalism needs VERY careful planning and implementation to avoid the dangers you describe (and let there be NO doubt that the picture you paint is JUST what the neo-liberal/neo-feudal 1% are after, with the enserfed regions squabbling over scraps from the table. Thatcher and her gang were always hostile to cross-subsidies, which led her to one of her greatest crimes – the abolition of the I.L.E.A., a masterpiece of cross a subsidization, to the general benefit of London’s learners of all ages, which was replaced by a very patchy and inefficient Borough-based system, to the intensified disadvantage of the already disadvantaged).
So the question is how to make it work – because the pressure for significant devolution to the regions will become unstoppable – my native north (Yorkshire) will certainly ask for more freedom from Westminster, if Scotland gets what the No Campaign is offering (and why not?). Seems to me that we have a Federal Parliament in Westminster, with control over things like corporation tax, with regional Parliaments, and we ditch the House of Lords, which would be replaced by the Federal Parliament. Primary legislation for the UK then comes from the Federal Parliament, for ratification by Regional Parliaments, on sort of “qualified majority” system as in the EU, leaving Regional Parliaments free to pass regionalvlaws, insofar as they do not conflict with federal law. A sine qua non of this, of course, is a written constitution. and a German-style “basic law”, setting out such parameters.
Irrespective of the above, what is beyond dispute is that the dystopia you have outlined MUST be guarded against and avoided at all costs, and if that means a London-centric system, then so be it.
Andrew
The left desperately needs to work this out
Richard
And Andrew outlines how the left (and anyone else for that matter) could sort it out, Richard.
As an example of how this is not rocket science I should point out that for a number of years a taught British local government to 2nd year undergrad politics and public admin students. One of the seminar tasks I set them was to come up with an outline for a system for real local government (as opposed to one based on political rhetoric and points scoring as was the case then, as it is now). For this – and to encourage them to undertake comparative research – they could draw on existing examples from anywhere else in the world (though in practice this was usually continental Europe). I shan’t pretend all of the seminar groups got it right, but in the space of a week there was always at least one group that did, and complete with a list of benefits and drawbacks.
Interestingly, the overwhelming view of those students – year on year – was that effective local government, rather than the sham system we have (which is even more denuded of ‘localism’ now than in was in the mid 1990s) would be a significant benefit to Britain – democratically, socially and economically. And one of the major reason why was it would allow innovation (e.g. in political practice, policy making, delivery and so on).
Of course, that is EXACTLY why no central government – Tory or Labour – will allow it (as well, of course, they would have to surrender power and control). Imagine a Tory or Labour local authority coming up with policies that were actually more effective than those devised by central government! That would never do.
I will have to reframe how I put my position on this in the light of that
The London problem is simple. Two things: (1) The rUK stops subsidising London infrastructure projects like the Olympics and Crossrail. (2) London gets independence only on condition that it closes down its tax haven in toto.
Failing that, passport barriers to be erected immediately inside the M25 (the rUK to keep ownership of the motorway on the basis that they paid for it), and Londoners to be denied use of the pound.
Mad dream? Less mad than some of the garbage printed in the newspapers…
James. What a thought. 🙂
In business terms Scotland is a subsidiary with declining value in its main asset bases and a product profile that is increasingly out of date in today’s markets. It’s most recent development ambition, to model itself on Ireland’s Celtic Tiger is now a high risk option. It seems that to allow a management buy out may be the best strategy for the current owners.
It really makes little difference which way the vote goes. Either way, the union is effectively ended.
Salmond is a winner in either case.
In the case of a ¨yes¨ vote, things become considerably more problematical. With a general election next year it looks highly likely that sitting members in Scotland would have their seats removed for the election.
Cameron will not be there for the conservative victory in 2015.
¨The social attitudes of Scots, and the policies of the Scottish Parliament, are pretty much standard for a European country. Scotland isn’t the exception, it’s the rule¨
¨As the Radical Independence Campaign has pointed out, it’s Britain that is the fourth most unequal developed country on earth, in which pay has in recent years fallen faster than in all but three EU countries, in which people work the third longest hours in Europe for the second lowest wages in the OECD despite having Europe’s third highest housing costs, highest train fares and the second worst levels of fuel poverty¨
https://www.opendemocracy.net/ourkingdom/adam-ramsay/scotland-isnt-different-its-britain-thats-bizarre
Spot on Richard. One of the many problems that faces any federation, is that the states/authorities making it up don’t have the resources to deal with the responsibilities they’ve been given. In Australia, this is a big problem. The states each have responsibility for their respective health systems, transport infrastructure, education, police, etc, but just never seem to have enough money to do the job right.
The states have to go cap in hand for the majority of their funding from the Federal government, so then you have the squabbling over one state getting more than another or smaller states vs larger states, etc, etc. We could go in the direction where each state has extensive taxing powers, but I suspect we would end up with a situation like what you describe, where each state tries to entice businesses to its territory. Federalism seems to me to have more minuses than pluses.