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IPPR's fair shares or Salmond's fair shares?

Fair Deal
2 August 2008

Fair Deal (Slugger O'Toole): The Barnett formula has fundamental flaws and failed in its aim of equalisation. The IPPR report Fair Shares attempts to offer a new way forward for the UK, but the alternative has its own flaws, key questions are sidestepped and it will probably be Alex Salmond who determines whether Barnett reaches 40 years of age.

The IPPR desire to find an alternative is hampered as most are from formal federal structures, something the present constitutional settlement certainly is not.  So to a degree any option is a round peg for a square hole. Whilst it may fit the gap the fill will not be a perfect one.

Its preference is for a hybrid model of needs based grant and greater fiscal autonomy for the devolved administrations with a staged introduction in line with the powers of the different administrations.

As regards Northern Ireland, the Executive parties disagree on tax-raising powers (as well as other things).  The report's suggestion for delay is reasonable.  The continuation of NI's mandatory coalition system is to be part of a future review and the suitability of tax-raising powers could be addressed as part of those discussions.

Overall the hybrid model may address the flaws of Barnett but it has its own.  The report fully acknowledges that while it could address the issues between the constituent parts of the Union it will do nothing between English regions.  When you consider that there may be more in England affected by this than there are in Scotland, Wales and Northern Ireland combined this is far from insignificant. Is the English public support for change predicated on the assumption that it would see significant resources shift to English regions? If so, where it will stand on reforms that don't deliver that? Therefore in terms of equity within the Union the model is only a partial answer (not that such would be unusual in British constitutional developments).  

Fair Shares argues that the introduction of greater fiscal autonomy will prevent tensions within the Union when a tax-cutting party is elected to Westminster but parties elected to expand spending elected in a devolved administration.  However, this is a simplistic assumption.  There are strong suggestions that part of the Labour stealth tax agenda was to push up the local council tax rather than centrally raised taxes.  A central government could try the same with devolved administrations with tax raising powers causing unease.

The report chooses not to examine to any extent why the tartan tax hasn't been used. The theory of more powers may be popular in Scotland but it is significant that neither the former Labour/Lib Dem nor the present SNP government have used a power already on the books. Did they make the political judgement that while the public like the theory they would swiftly object to its use?

The research overlooks that a needs based approach can itself create perverse incentives.  The reward for success in tackling need will be a loss of resources.  Communities often have to paint the worst possible picture to access public resources reinforcing the negative stereotypes that have contributed to decline.  Is it healthy to encourage a statistical race to the bottom among the constituent parts of the UK?

Crucially the report also highlights that one of the reasons that Barnett failed to equalise was because of political interference:

"...the Conservative Party, as the pre-eminently unionist party at the time, so feared a nationalist threat to the continuation of the United Kingdom that whenever Barnett threatened to produce embarrassing results they found ways to bypass it throughout the 1980s and most of the 1990s.

Scottish nationalism is remarkably stronger today and for the foreseeable future. Record oil prices add to the political difficulties.  If this Unionist fear is rational then the practical politics should be against reform of Barnett whatever the ethical principles that should underpin the distribution of public monies.

Therefore the SNP reaction will be central to future reforms of Barnett.   Will they want the issue or the new powers?  If Salmond's behaviour so far is any indication my estimation is he will take the powers.  He appears to be working for independence as a medium to long-term issue.  His aim appears to be a considered decision for independence not hoping a fit of pique will last long enough to get over the four hurdles. Scottish nationalism could shift from Barnett's nursemaid to undertaker. 

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