It will identify the mechanisms used in federal countries to manage these issues, consider how they might apply in a UK context, and what their implications might be for how the North is governed. The project aims to inform debate in the North of England regarding the implications of further devolution to the Scottish Parliament, and identify strategies and mechanisms to maximise opportunities and mitigate threats.

Background

The creation of the UK’s quasi-federal state was one of the first and boldest acts of the 1997 Labour Government.  But while many thought the establishment of the Scottish Parliament would answer the ‘Scottish Question’, recent history suggests those that considered devolution to be ‘a process rather than an event’ were right.  The question of further constitutional change for Scotland remains firmly on the agenda. 

The Scotland Bill, currently passing through the UK Parliament before passing through the Scottish Parliament, will increase the powers of the Scottish Parliament in a number of areas, including devolving powers over speed limits and air guns.  The fiscal powers of the Parliament will also be increased, with greater discretion over income tax devolved in return for a reduction to the block grant Scotland receives from the UK Government.

In addition, a lively public debate is currently underway regarding the devolution of powers over corporation tax.  As part of the 2011 Budget the UK Government published a consultation on devolving corporation tax to Northern Ireland; in response the Scottish First Minister has said devolving the tax to Northern Ireland would make it “inevitable” that Scotland would follow suit. The Scottish Government has subsequently published a paper proposing these powers be incorporated into the current Scotland Bill, so Scotland can cut corporation tax rates and boost economic growth. 

Furthermore, the Scotland Bill may not be the final word on Scotland’s constitutional settlement.  The SNP government is committed to holding a referendum at some point between 2014 and 2016 on whether Scotland should become an independent country.  However, it is possible that this referendum will be a multi-question referendum, offering the option of ‘devolution max’ as well as independence.  Under this scenario, the Scottish Parliament would become responsible for all areas of domestic policy with the exception of financial regulation, monetary policy and currency, which would remain the preserve of Westminster, along with defence and foreign affairs. 

To one degree or another, a more powerful Scottish Parliament seems a likely prospect.  And while these issues tend to be thought of primarily as questions for people living in Scotland, they do, of course, have implications for people living in other parts of the UK.  This impact is felt most keenly in the North of England, given its geographic proximity to Scotland. 

Some stakeholders in the North regard further constitutional change in Scotland with trepidation.  The North of England faces stark economic challenges: the recession hit the North particularly hard; the size of the public sector means the Government’s austerity measures will have a disproportionate impact; and parts of the North are still undergoing tough economic restructuring.  Against this backdrop, the possibility of damaging tax competition in the future and Scotland’s increasing ability to tailor policy to local circumstances are seen by some as further disadvantaging the North.  And while interstate cooperation provides opportunities for joint working for mutual benefit in federal states, the North does not have equivalent institutions or powers though which to engage. 

This lack of institutions for England has been described as the “gaping hole” in the devolution settlement.  In terms of economic governance, England as whole is so large, and her economic challenges and opportunities so diverse, that centralised decision making results in an unsatisfactory one-size-fits all approach.  But England lacks strong sub-national governance structures.  The current government was quick to dismantle the government offices for the regions and Regional Development Agencies.  These are now being replaced by new Local Enterprise Partnerships (LEPs), which are voluntary associations between local authorities and business at the sub-regional level.  However, LEPs currently lack a formal remit and powers, and how embedded they are varies widely between places.  It is uncertain whether LEPs can take on the role of legitimately speaking on behalf of (parts of) the North.

This project is generously funded by the Madison Trust.