The Coalition UK Government and Devolution

1. Presentation for SOLACE annual conference, Cardiff, 12 October 2010 Alan Trench (University of Edinburgh and the Constitution Unit, UCL; Author, ‘Devolution Matters’ blog) The Coalition UK Government and Devolution

2. The Coalition’s commitments • The Coalition’s Programme for Government included several devolution pledges, mostly reflecting shared or Conservative policies: • Implementation of Calman Commission(C & LD manifestoes) • Referendum on legislative powers in Wales (C & LD) • Commitment on Corporation tax in NI – (Con only – itself a concession to UUs) • Commission on West Lothian question (Con only) • Calman-style commission on finance in Wales, in lieu of any substantive response to Holtham (neither) • Review of retention by UK of Scottish fossil fuel levy receipts (Lib Dem only) • 1 and 2 call for immediate action; 3 and 6 for starting processes now, to produce results later; 4 and 5 are largely ways of kicking issues into touch

3. Key dates in the diary for the coming year • 20 October – spending review results • Late November (maybe early December) – bill on implementation of Calman Commission recommenda-tions to be published • Early March 2011 (3 March?) – referendum on primary legislative powers for National Assembly for Wales • 6 May 2011 – elections to Scottish Parliament, National Assembly for Wales, Northern Ireland Assembly (and AV referendum?)

4. The politics of cuts • The way the Barnett formula works means UK level cuts feed through directly into devolved spending • But the commitments to shelter health and education spending offer significant advantages – these account for about 70-75% of devolved spending • Indeed, disparities in levels of public spending are likely to increase (convergence going into reverse) • Territorial impact of cuts will depend on where they are made • If they are borne largely by ‘comparable functions’ in England, cuts will affect devolved spending too; so an intergovernmental politics of protest • Apparent for some time in Wales; all 3 FMs have now joined in • Being tee-ed up by SNP in Scotland: ‘independence is the only way to stop Tory cuts’

5. The politics of cuts II • If they are borne largely by UK-level functions, they won’t involve the same intergovernmental politics. But they will reduce the visibility and apparent importance of UK level in devolved parts of UK • UK public spending still 40-50% of public spending there • Most obvious area is social security • Area most clearly where it’s ‘what UK does for us’ • Therefore regarded as part of the fabric of the fiscal and social ‘deal’ that underpins the Union • And cuts will bear particularly hard on areas with low incomes or levels of employment: south Wales valleys, west of Scotland (and much of northern England) – traditional Labour heartlands • But also has an intergovernmental dimension: devolved govts emerging as ‘spokesmen for their nation’ • Other areas important too – e.g. large defence contracts

6. The price of Calman • The chief Calman recommendations • UK to devolve part of income tax in Scotland, by reducing personal income tax by 10 points and allowing Scottish Parliament to set its own rate in that vacated ‘tax space’ • A share of savings & dividends income too • With a ‘commensurate’ reduction in the block grant • And three small taxes also to be devolved (stamp duty land tax) • Would mean Scottish Parliament would raise about 35% of devolved spending • No devolution of other taxes (serious problems with VAT and corporation tax) • Intended to give Sc Parliament a measure of ‘fiscal accountability’, not fundamentally to alter division of powers between London and Edinburgh

7. Criticisms of Calman • Real figures for tax revenues or Treasury estimates? • Taxes as levers of economic policy or just sources of revenue? • Control of progressivity • Should Calman apply just to Scotland, or be an opt-in regime for Wales and N Ireland too? • Holtham Commission showed how something very similar could work for Wales too, and argued that it should using the ‘accountability’ argument • Wales likely to get 115% of English spending as a side-effect of the Spending Review + sheltering of health & education • SNP Scottish Govt demands for ‘full fiscal autonomy’ – to give control of Scottish economy to Scottish govt

8. Where might we be in a year’s time? • Calman bill on statute book – due for implementation in 2015 • Welsh referendum – primary legislative powers for NAW from next Assembly, if passed • But what use is the Assembly likely to make of those powers? • Squeeze on public spending leading to greater intergovt tension (devolved scepticism about UK Govt’s ‘respect agenda’) • Who will be in office? • Scotland – anyone’s guess. Labour polling well, but who knows? But coalition options will be limited, as will ‘props’ for any minority govt. • Wales – Labour likely to show strongly, on wave of anti-Tory votes. Minority govt or another coalition with Plaid Cymru? • N Ireland – continuation of status quo fairly likely. But might UUP or SDLP choose to leave govt? • UK Coalition therefore likely still to have to deal with different parties in the devolved governments.

9. Where might we be in a year’s time? II • UK Govt strategy: strong assertion of UK-level supremacy, little strategic interest in seeking to manage the UK’s complex territorial structure more actively • And little desire to reshape devolution beyond the commitments made in the Programme for Government • Where will constitutional debates go if nationalist parties are out of office? Will Labour devolved govts avoid raising constitutional issues, even if they find themselves seriously constrained by the existing framework? • And if they do, how will a unionist Coalition respond?

10. Read more on the ‘Devolution Matters’ blog http://devolutionmatters.wordpress.com/