Devolution and British Politics by Michael O'Neill

Author:Michael O'Neill [O'Neill, Michael]
Language: eng
Format: epub
Tags: Political Science, General
ISBN: 9781317873648
Google: u2-hAwAAQBAJ
Goodreads: 22483264
Publisher: Routledge
Published: 2004-04-01T00:00:00+00:00

Financial arrangements

A measure of financial autonomy is indispensable for meaningful devolution, whether revenue comes via direct fiscal transfers from the centre (as in Germany) or from fully fledged tax-raising powers (as in Canada and the United States). These are, of course, all examples of mature, fully federal systems with an entrenched culture of power sharing not yet remotely realised in Britain. The history of the financial arrangements for UK local government confirms wholly different norms about fiscal relations as between the central and subsidiary levels of government, reflecting the centre's marked reluctance to relinquish firm control over the public purse. Following the usual practice of unitary states, central government assumes responsibility for maintaining fiscal equilibrium, for balancing the books, and for cultivating a reputation for fiscal probity both with domestic taxpayers and in the international markets.

The excessive centralisation of decisions about financial disbursements was pointedly criticised in the Report of the Royal Commission on the Constitution, but without avail.59 Whitehall's determination to maintain close control of the public purse has actually increased over recent decades. This will, in turn, make for strained post-devolution relations, and the future tenor of financial relations will certainly become a critical determinant of a smooth or otherwise problematic devolution.

Even so, fiscal relations are far from passive or one-sided in any intragovernmental arrangement. Sub-national government will always direct its political energies to the acquisition of adequate revenue, for the most part from the centre, in order to fund local services provision. This, in turn, tends to make for tense relations with central government. The Conservative government, for instance, introduced rate capping in the 1980s precisely to curb ‘spendthrift’ Labour councils that threatened its national goal of reduced public expenditure, and the incoming Labour government in 1997 barely relaxed these constraints. The same government was just as much exercised by the prospect of future non-Labour administrations in Edinburgh and Cardiff acquiring tax-raising powers to fund social expenditure programmes in the devolved areas that would pose a threat to national financial prudence.

The fiscal arrangements of the union state did acknowledge what might be called the ‘territorial dividend’, a level of fiscal support from the centre for Wales, Scotland and Northern Ireland disproportionate to their share of public expenditure, and calculated solely on the basis of population. This differential was based on acknowledgement by the centre of specific patterns of territorial economic development and similar variations in the distribution of social exclusion. This calculus reflected a concept of territorial ‘need’ broadly subscribed to after 1945 by both major political parties, and indeed by the Treasury.60

Despite a marked shift in the ideological firmament of British politics during the 1980s, both major parties continued to broadly endorse this system for allocating public expenditure, though by now for quite different reasons. The Labour Party remains wedded, by and large, to its social democratic commitment to universal standards of social provision throughout Britain, whereas the Conservatives' recent flirtation with neo-liberal ideas of political economy has persuaded them of the need for both stronger financial discipline and retrenchment of public expenditure.

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