Scotland: Devolution

Lord Shipley Excerpts

Wednesday 29th October 2014 Lords Chamber

[Lord Shipley (LD)]

My Lords, as someone who also comes from the north-east of England, I congratulate the noble Lord, Lord Lennie, on his admirable maiden speech.

I am much encouraged by the Government’s achievements in devolving power across the UK since 2010, with the Scotland Act 2012, with the Wales Bill, together with city deals and local growth deals in England, which have enabled local economic areas to lead investment decisions. The referendum result in Scotland is now accelerating that process in England where there is an appetite for greater devolution.

There is, however, a huge difference between Scotland—which already has a parliament and significant devolved powers, and which debated independence for two years—and English regions and subregions, which have no directly elected structures and few devolved powers and have not, with a few honourable exceptions, been thinking much about devolution other than in terms of general ambitions. Defining what is wanted in detail, with clarity about governance and resourcing, place by place, is an essential prerequisite to successful devolution.

There have been a number of think tank reports on devolution within England, together with policy statements by bodies such as the Local Government Association, of which I am a vice-president, Core Cities, the County Councils Network and the London Finance Commission. With the City Growth Commission adding its weight last week and with two further independent commissions reporting over the next three months—the Independent Commission on Economic Growth and the Future of Public Services in Non-metropolitan England and the Independent Commission on Local Government Finance—a detailed set of evidence is being assembled.

Scotland voted no in the knowledge that even a no vote would result in extensive new powers following the vow delivered from Westminster a few days before polling day. Newspapers across the north of England followed up on the day after the Scottish referendum result, asking the Government, “Now what is your vow to the North?”. It is a reasonable question, but it invites the reply “Exactly what powers do you want?”.

Thankfully, ResPublica, with Greater Manchester, has produced for that part of England a route map, Devo Max—Devo Manc. Sensibly, it understands the need for incremental devolution leading within a few years to the full devolution of the £22.5 billion annual public sector spend in that area. This is where we need to be headed for all parts of England willing and able to take on greater responsibilities.

This is because there are two major advantages to the UK in devolution within England. First, it will help to drive growth, as many think tanks have demonstrated, particularly through a better fit in skills investment, which responds more directly to the needs of employers, and in planning for housing and transport. Secondly, it will make public services more efficient because they will be better joined up when run at a local level.

We must combat the silo approach of Whitehall departments and the 50 central institutions which channel public spending into England with more than 1,000 funding lines. I am pleased that my own party resolved at our Glasgow conference that it would introduce a devolution-enabling Bill in the new Parliament to permit devolution on demand to councils or groups of councils.

During the passage of the Scotland Act 2012, the UK Government set out three devolution principles. These were that proposals should have broad cross-party support, should be based on evidence and should not be to the detriment of other parts of the UK. I think those principles should apply to those parts of England now wishing to secure devolved powers from Westminster. There are others.

First, on equalisation of resources, however the detail of devo max for Scotland turns out, it will inevitably and rightly give Scotland much greater responsibility for tax raising. In this situation, even without the Barnett formula, tax raised and public spending would be broadly in balance if Scotland keeps the corporation tax raised there. This is a very important matter, not least because it establishes the principle of geographical ring-fencing within the UK.

Some voices in London, not least some mayoral candidates, are suggesting that what is good for Scotland is good for London. There is an increasing demand for London to keep more of the tax raised in London. This has the potential to become a very dangerous trend for the rest of England and for Wales if it is not handled extremely carefully.

In the case of Greater Manchester, for example, the ResPublica report shows that public spending is £22.5 billion yet tax raised is only £17.7 billion. Devolution of responsibilities to Greater Manchester would make public spending go further and would increase tax revenues by increasing growth. The ambition is to bring tax and spending further into balance, and that is right, but not all places can do this, and we will still need a system of equalisation which protects those areas less able to increase their tax revenues.

Secondly, the UK must remain responsible for UK-wide policies, such as major infrastructure investment, and for the core policies behind public services and welfare provision.

Thirdly, on governance, with devolved powers come extra responsibilities for delivering growth and greater efficiency and for managing investment and risk. Having a governance structure that is fit for purpose and commands public support will be essential. We will have to build on the structures we have, on city regions and, we hope, county regions and combined authorities. As they grow in their responsibilities, such authorities will need a more secure democratic mandate. I think that must mean direct elections using a system of proportional representation.

In conclusion, the next step has to be a constitutional convention to examine powers, responsibilities, capacity building, governance, tax-raising powers and spending powers for devolution within England. I hope that we will do that.