Only ‘full fiscal autonomy’ can prevent the break up of the United Kingdom, says GEORGE FOULKES

 

I fear that events have overtaken the Calman commission and its report.

Frankly, block grants are wrong and the Barnett formula should not be revived on a needs basis, or on any other basis, and should be scrapped. Block grants mean that all the easy decisions about spending money and priorities are made by the Scottish Parliament, which does not make any of the difficult decisions about raising that money.

That is why no one has suggested the use of the plus-or-minus three pence in the pound that Scotland already has. The Auditor-General in Scotland has already indicated that free higher education, free prescriptions and free personal care will not be sustainable in the near future without substantial additional income. They will be under threat. What will happen? Alex Salmond, like Oliver Twist, will say, “I want some more”. He is already doing it – asking for more in the block grant and more taxation powers. If he does not get them, who does he blame? He blames Westminster.

That is why I think that the time has now come when we must seriously consider a more radical change in funding devolved governments. It is described by some as full fiscal autonomy; I would describe it more appropriately as full fiscal responsibility, so that the responsibility for raising money as well as spending it goes to the Scottish and other governments. Of course, there has to be an agreed pre-eminence of the United Kingdom Government in defence, foreign affairs, welfare and other reserved areas.

It also means that we have to start moving on from our present asymmetrical devolution towards a fully federal system. I am astonished that the Liberal Democrats, who, traditionally, have espoused federalism, are so quiet. Apart from the centralised system, which we have abandoned, or the break-up of the United Kingdom, it is the only stable, justifiable system.

We should all be getting together to argue for it. If we do not, if we do not move towards a fully federal system with each of the devolved parts (and I am open to argument whether it should be England or regions of England; we have tried regions of England) raising their resources and putting money into the central United Kingdom Government, if we unionists do not become federalists, we will see the break-up of the United Kingdom, which would be a disaster for all of us.

This is an edited version of a speech given by The Rt. Hon. The Lord Foulkes of Cumnock to the House of Lords on 15 June. Follow George on Twitter at @GeorgeFoulkes.

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20 thoughts on “Scrap the Barnett Formula

  1. Absolutely, we also need to devolve the benefits system as part of that. We should be raising all taxes in Scotland and sending to London our share of funding for things like defence and the DVLA to Westminster.

  2. There are only three fully sustainable models for the UK – no devolution, seperation or federal.

    The first will not occur – now they have had some power, they won’t want to give it back.

    Seperation is frought with so many obstacles and complexities I don’t think that this will happen

    Federal – This is by far the best outcome now, and requires an English parliament with an overarching Parliament to enact federal laws, defence and foreign affairs. It would also allow the borders to remain open. On top of that, the republic of Ireland could be asked to join as a united Ireland (we could even write off the loan) although that might be a bit much for the EIRE (we’d have to make them come back to Pound Sterling of course).

    Good article.

    1. I dont know, why dont you ask him? Unlike some other parties, we dont all have to believe the exact same thing as the leader. And unlike some other parties, if we want to pursue a policy that our leader doesnt like, then tough.

  3. The issue of funding is an interesting one, and is no doubt pertinent what with the possible far reaching changes of the Scotland Act looming on the horizon. However, is it an argument that Scottish Labour really needs to be embroiled in right now? I suspect that pushing “full fiscal responsibility” as a hot topic of debate is driven mainly by the devilish intent of putting pressure on the SNP administration, and not because it is an issue which will directly assist the rebuilding of the party north of the border.

    Scottish Labour should be fighting to establish a set of core policies that reflect the centre left roots of the party, and thus appeal to the mass of voters we have hemorrhaged since the initial Holyrood elections in 1999. After all, the fact that we were viewed as a party with a policy vacuum played a significant part in our defeat in May. Furthermore, it is now clear that the Scottish electorate’s connection with the dreadful “unionist” tag is not as strong as many in the upper echelons in the party clearly mistook it to be.

    Let the SNP and the Tory-led administration fight this battle over funding. As a party Scottish Labour does not have its troubles to seek. We would do well to get our own house in order before arguing over the constitutional agreements between two parliaments where we are no longer in government.

    1. Can labour really afford not to have policies in this area?

      Labour at the moment are almost like the tories of the 80s/90s. ie behind the curve in constitutational matters. Labour shout no more powers in the way the tories continued to argue against a Scottish parliament until they were wiped out.

      Opinion in Scotland seems to be overwhelmingly to move to a much more powerful Scottish parliament. By not satisfying that demand then the way is left open for the SNP to fill that vacum. With the libs giving up their policy of dev max and fiscal autonomy there is no party articulating a dev max position which is what people seem to want.

      Also how can you have policies in the Scottish parliament if you do not have powers to see them through. The Scottish parliament was designed without the serious economic levers. As such no party can really go into a Scottish election saying truthfully that they will make a serious difference to our medium and long term economic performance and growth which has been pretty poor.

      Labour position at the moment constitutionally is effectively to say it is better for the tories to set the spending limited on the scottish parliament than for either labour or the snp. If Westminster is cutting public spending off course then Westminster will get the blame and rightly too. How can labour seriously say they are against the public spending cuts coming to scotland when they prefer the tories in control to the democratically elected government in Scotland?

  4. ‘Of course, there has to be an agreed pre-eminence of the United Kingdom Government in defence, foreign affairs, welfare and other reserved areas.’

    Why?

  5. George, you do know, surely, that the Green manifesto proposed to use the SVR once restored, right?

  6. Can anyone explain full fiscal autonomy. Income tax is around 30% of taxation. Does this mean that Scotland would directly receive ALL taxes (VAT etc) and then send a proportion to Westminster?

    Are taxes such as VAT based on the Headquarters of a company e.g. The oil companies have their HQ’s in London – would the VAT / Company tax etx go to Holyrood or London?

    It seems a rather complex situation and open to abuse / complaint.

    1. If you look at the big wide world, there are plenty of examples of countries out there which have tax systems which contain some or all the features that “full fiscal autonomy” would demand. The thrilling Wikipedia articles “Taxation in Canada” and “Taxation in the United States” might be helpful. They show two systems which are far more complex than anything likely to be needed in the scenario proposed here. It is the current highly centralised UK taxation system which is unusual as a voyage of discovery through Wikipedia’s “Taxation in …” series will quickly show.

      1. The Uk’s tax system needs a complete overhaul and simplification. That way we can make it harder for companies and rich individuals to avoid paying their fair share of taxation (and possibly resulting in a lower tax bill for the rest of us, or better public services).

  7. Lord Foulkes-Can we expect to hear you speaking as you write here in the House of Lords?

  8. Regions of England is off the agenda so don`t even bother including the phrase,the only fair way is to have an english parliament and all constituant nations have equality,which is a far cry from the situation the labour party has left england in.

  9. As long as fiscal autonomy extends to ALL aspects of fund raising…including the funds raised through the exploitation of scottish natural resources then I think you’ll have few Scots arguing against this. However, I suspect that Westminster would try and include so many hidden restrictions, caveats and clauses that it would render the whole exercise pointless.

    Make it fair, honest and open and you’ll have virtually the whole country behind you (including most Nats).

  10. On many of your points you are in agreement with Nationalists, for example-

    1. Scottish Government actually WANT to make all the difficult decisions about raising and spending revenue and would have no need for Barnett or any other formula.
    2.The Scottish Government recognise that substantial additional income is required to maintain the policies for the people of Scotland- and have proposed exactly how that should be done- by separation whereby the country owns and controls its own resources and sets its own taxation policy.

    However, you then jump to statements without logic or argument-“Of course, there has to be an agreed pre-eminence of the United Kingdom Government in defence, foreign affairs, welfare and other reserved areas.- Why “of course” and why should these in any case be the reserved areas?

    “we will see the break-up of the United Kingdom, which would be a disaster for all of us.” What exactly would be the ills to befall Scotland, or for that matter the remaining joint components of the UK?

    It sounds more like fear of stepping out of the collective comfort zone than any rational analysis of the prospects.

    Would a less restrictive form of alliance not be beneficial, whereby two neighbouring sovereign states work and trade for the common good (where a genuine common good exists). At the same time each maintains responsibility for the welfare of their own citizens as paramount. It works with some of our closest neighbours in Scandinavia, with whom an independent Scotland would also be free to negotiate alliances for the common good.

    1. “What exactly would be the ills to befall Scotland, or for that matter the remaining joint components of the UK?”

      And what exactly would be the benefits? This is why the case for Full Fiscal Autonomy (however it is defined) has so often failed to find support amongst non-nationalists. The SNP always jump in and claim its the next step to full independence, it proves the case for, etc, etc.

      1. I see the benefits of full fiscal autonomy as only some of the following- The others are benefits of independence which is why I would favour that option- The benefits to Scotland as far as I can see would be multifold- depending on your perspective and belief in the talents available to an independent and reinvigorated Scotland.

        1. Scotland would have a government leading all aspects of life which is line with the aspirations of the people- we don’t end up with a Tory government, which we did not vote for, spending our millions on Defence, Welfare and Foreign Policy in a way that does not represent the way that the Scottish electorate want these areas to be developed. (Trident, Foreign Wars, Military Bases).
        Scotland would be in a position to decide on the type of defence force she wants to pay for. She can be free to say- “No we can’t afford that” without falling foul of any special relationship. This could have the positive side effect of drawing back the hand that UK currently plays.

        2. Scotland would have the power to frame taxation policy in a way that maximises the income from inward investment based on the Scottish strengths and opportunities for development, without regard to interests of other adjacent areas. This maximised income would remain in Scotland. Under current proposals Scotland would see only a percentage of any increase in tax take and increased productivity.

        3. Scotland can take control of her own resources. fishing grounds, Oil and Gas, Agricultural policy. The decision on whether to proceed with the hugely worrying development of nuclear power in Scotland can be made by the Scottish electorate as can the level of investment in the renewable sector.

        4. If the desire is there, Scotland can be free to negotiate, or not entry into Europe or into trade agreements with Europe based on the interests of Scotland and not based on interests of maintaining huge hitting power on the world stage.

        5. If the notion took the people Scotland, in common with Ireland could declare herself a neutral or non-aligned country without costly obligation to NATO- which has in any case become a costly irrelevance looking for a purpose. May be unlikely, but we would have the freedom to choose; to be in control of our own path.

        6. In general Scotland can take the opportunity to develop a strength of nationhood that can become a driving motivation to the people to succeed, where the government are in touch with the people and running the country for the good and benefit and comfort of the people. To be a government on the side of the people rather than ruling over the people. That is a two way street. It gives the people a chance to re-establish control of its governmnet and put in place the mechanisms to hold them to account. Westminster has long ago stepped beyond that.

        A bit disjointed but just off the top of my head, and to be clear I owe allegiance to no party.

  11. Totally agreed with George, scrap Barnett and let the Scottish Gov raise its own revenue..Something the Fist Minister has been shouting for as well.

    A small reminder. George Foulkes also shouted for the end of Proportional representation in the Scots parliament..Good shout George, that would give the SNP 53 seats, “Labour 15” The Tory’s 4 and the Lib’s 2.

    Be careful for what you wish for George!!!

  12. Surely welfare should be devolved as part of any move to fiscal autonomy.

    Tax and benefits and economic mgt are so intertwined that keeping welfare reserved would be daft if you move to fiscal autonomy.

    Also does George not miss the real purpose for fiscal autonomy. ie by devolving serious economic powers to Scotland maybe we could do something about our cronically slow economic growth over the past 3/4 decades.

    Economic policy designed for the South East and London has failed Scotland. The purpose of devolution is surely the idea that decision taken in Scotland will fit the needs and the desires of Scotland better than the one size fits all policies that have failed the UK and Scotland in the past.

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