Opinion: pragmatism and politics – thoughts on constitutional reform

<em>Picture: James T M Towill</em>
Picture: James T M Towill
By John Knox

There is no “end solution” or “settled will” to constitutional reform, as the Holyrood parliament has found out. It is all very well to go constitutional engineering, but it is a minority sport.

What is important is that any constitutional arrangement allows ordinary people to achieve their basic rights: freedom, a functioning economy providing enough jobs, decent housing, schooling, health care, a clean environment and welfare support when needed. So which level of government does what is largely a pragmatic matter of what works best.

I say “largely” because emotion does enter the calculation. The United Kingdom of Great Britain has been, for the last 300 years, “a happy breed of men, a precious stone set in a silver sea”. There is no turning back on either our history or our geography.

So even Alex Salmond’s independent country will not be the same as it was in 1707. It will be part of the “social union” of Britain, and part of the European Union. And its sovereignty will have to be pooled with many other countries and their trade and monetary systems.

Some decisions are best left to international bodies. War and peace, global trade, Third World poverty and climate change are all best handled by the United Nations. Agriculture, fishing, trading standards, taxes on aviation and financial transactions are best decided by the EU. Because, in each case, one country acting on its own would be powerless.

Within Britain itself, where power lies should depend on what works best for the ordinary citizens – they, after all, are sovereign. I share the view of the Steel Commission and others that power should lie as close to the people as possible and that each layer of government should be responsible for raising its own revenue.

There is one exception to this principle and it concerns the fight against poverty. A poor local authority or poor nation should be subsidised from the centre simply on the grounds of equality. To pull together as a United Kingdom, there has to be a moral agenda and the British sense of fairness and compassion will be on the list. There is also an economic case for helping those regions and districts which are suffering from unemployment and that is their lack of spending power.

One final principle I have tried to include in the following Home Rule scheme is that every citizen, however poor or rich, should pay something (however small or large) towards the benefits and services they receive. So, for instance, I am including a property tax as well as an income tax for local councils. Indirect taxes remain as they are.

And so to the details of Home Rule. Devolution means that Westminster is the ultimate authority, but some powers – indeed most powers – are transferred to Edinburgh, Cardiff, and Belfast. Devolution or Home Rule differs from federalism where ultimate authority rests with the nations who then delegate some of their powers to Westminster. The difficulty federalism faces in Britain is that England is so big compared to the other three nations and its regions do not seem interested in forming their own mini-nations.

In any case, Westminster should retain the obvious central responsibilities of regulating the currency, defence and foreign affairs. In addition, for the social cohesion of Britain, it should retain the universal benefit of the state pension. It should also have a fund for equality and for emergency aid. Westminster would of course continue to negotiate all issues pertaining to the EU, the UN and the International Monetary Fund.

To raise funds for these activities, Westminster should continue to set and collect National Insurance, oil revenues (because they are a UK natural resource), fuel duty, vehicle excise duty and inheritance tax. The funds raised from these taxes in Scotland at the moment totals £14.7 billion a year. Public expenditure in Scotland on pensions, benefits and defence totals £23 billion (GERS figures 2009–10). If Westminster was no longer responsible for welfare, it would need £13 billion less, which leaves it with £4.7 billion to fund special equalisation programmes, such as railways or broadband, or research and development or anti-poverty initiatives.

Coming now to Holyrood, its role should be to support and regulate the delivery of services by the 32 local authorities. It would need to retain specialised services such as advanced medicine, the exam system, the high courts, certain aspects of policing etc. And it should have responsibility for health and safety, financial regulation, transport, broadcasting and immigration.

It should raise its revenue from VAT, corporation tax, fuel duty, stamp duty and taxes on alcohol and tobacco – a total of £13.5bn a year. This is more than its central services require, but it makes sense to collect such taxes nationally to avoid people darting about between different tax zones. The excess, say £10bn, would be distributed by Holyrood – as it does at present – to the local authorities to run the up-front services.

Local councils would thus be the main provider of public services – schools, hospitals, GP clinics, social work, care for the elderly and infirm, welfare payments, unemployment benefit, colleges and universities – as well as all the local services they provide already, including police and fire. In addition, the national agencies or quangos should be devolved to local councils: health boards, Scottish Water, Scottish Natural Heritage, the Environmental Protection Agency, Sport Scotland, Creative Scotland etc.

This would provide the integration which is so often lacking in the public services. It would harness the local knowledge, expertise, innovative skill and enthusiasm of local managers and workers. Finally, they would be able to manage, take responsibility and see the outcome of their own schemes. The computer and the internet have made this localisation of services possible without losing the economies of scale much talked about. Managers can download programs to help them keep track of their own operations and benefit from best practice elsewhere.

These powerful local councils would need substantial resources. I suggest a council tax, made up of both a local income tax and a property tax, which would raise £12bn, plus a business tax which would raise – as at present – £2bn. Add to this the £10bn from Holyrood and the cost of all services could be covered.

So, the tax revenue regime I am suggesting would look like this:

National Insurance £8bn
Oil revenues £6bn
Inheritance tax £0.2bn
Vehicle excise duty £0.5bn
Total £14.7bn

VAT £7bn
Corporation tax £2bn
Fuel duty £2bn
Excise duty £2bn
Stamp duty £0.5bn
Total £13.5bn

Local councils
Local income tax £10bn
Council tax £2bn
Business rates £2bn
Total £14bn

In this model I have left the tax system and the local government system much as it is. Both have taken a long time to evolve. To change them at the same time as changing the constitution might be too much of a cultural revolution for poor old Britain to handle.

Thus the average person would see little change in the tax he or she pays, the only difference is that more of it is going to the local council rather than the central government. On an average salary of £26,000, income tax would be £3,800, national insurance £1,500 and council tax £1,200 – much as at present. I would argue that this is more efficient and more democratic. Over 90 per cent of taxes are set and collected by the Westminster government, making Britain one of the most centralised states in Europe.

Finally, there are suggestions from some people that devolution should go down below local council level. I guess they have in mind town councils and community councils being given a budget to run their own schools, street cleaning and dustbin collections, sports facilities, parks etc. I cannot see this working at present. It would rely too much on voluntary effort. I do not think people are prepared to put in the time or the commitment to make such ultra-local democracy work.

It would probably lead to factions or individuals taking power, leading to disputes and petty jealousies. There are just not enough talented people interested in politics – they just want the services to be run well. Concentrating services at district council level would, I think, invigorate local politics and make decisions interesting and close enough to encourage those interested in politics to take an active part.

In conclusion, none of the above need be rushed. I have been setting out a long-term vision, towards which we should strive. A lot of adjustments to my scheme would have to be made along the way. An interim definition of Home Rule may have to be agreed in time for a second question in the independence referendum. The point is to move devolution forward and give Home Rule a stronger meaning with every change. The second question can then simply be: If you voted No to the independence question above, would you like to see more powers for Scottish local authorities within the United Kingdom?

Donate to us: support independent, intelligent, in-depth Scottish journalism from just 3p a day