Tag Archives: devolution

The Chancellor giveth… and the Chancellor taketh away?

There seems to be some confusion over what the Chancellor’s announcement of £2 billion extra for the Health Service across the UK would mean for Northern Ireland. All are agreed that it would mean an uplift in Northern Ireland’s budget, but how much and where?

The system is in fact fairly simple. “Territorially identifiable expenditure” is established for each financial year in the Budget, the Comprehensive Spending Review and in other announcements. Population estimates are used for each country of the UK to establish how much money in “territorially identifiable expenditure” must be spent in each country for every £100 spent in England – currently this is £3.45 for Northern Ireland (and £10.03 for Scotland, as that’s currently in the news). This means for every £100 added to spending on Health, or roads, or education in England, £3.45 must be added for Northern Ireland.

From this, we reported initially a figure of (just under) £70 million for Northern Ireland, on an original understanding that the £2 billion figure was going to be announced for England. If the £2 billion figure applies to the whole UK, however, that reduces the Northern Ireland figure, by our calculations, to just under £60 million. BBC NI is reporting £41 million – we don’t know where this figure comes from, but perhaps it is based on a lower overall figure – we will see when the Autumn Statement takes place.

However, money allocated to devolved authorities is in fact allocated to that country’s Secretary of State, who passes it to the relevant Department of Finance in the devolved Executive (or Government). That Department may choose to allocate the extra money wherever it wishes. There is no obligation, therefore, for Northern Ireland to spend all the extra on Health. In fact, it could spend all of it on something else if it wished. It was ever so, and indeed it has frequently happened – of “territorially identifiable expenditure” Health already accounts for 22% in England but less than 19% in Scotland and Northern Ireland, precisely because Scotland and Northern Ireland have generally chosen to spent part of the money allocated from rising Health spending in England on things other than Health in Scotland and Northern Ireland.

There is a big catch. When, for example, Scotland chose to move away from Tuition Fees altogether and Northern Ireland chose to retain them at previous levels as England tripled its, the reverse happened – money was removed from university education in England, and thus taken from Scotland and Northern Ireland. The assumption is always that Scotland and Northern Ireland (we are leaving Wales out of it because it is a little different) will do the same as England – if they don’t in the case of a reduction in spending in England, they have to find the money to cover that reduction elsewhere.

Here is the warning for Northern Ireland. An pre-election give-away uplift in Health spending (and perhaps also in other areas) will see anything from £41 million (by our calculations, from £59 million) added to the Northern Ireland Departmental budget now. However, all sides are agreed that post-election, the reverse will happen – further spending reductions will be implemented and that means in effect that Scotland and Northern Ireland will have to implement them too (although they could choose to close the gap by raising taxation/rates/charges if they wished). Those of us operating in Scotland and Northern Ireland need to be keenly aware that what the pre-election Chancellor giveth, the post-election Chancellor probably taketh away…

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Notes on Smith Commission on Scottish Devolution

The Smith Commission’s report on Scottish devolution will prove a momentous change in the UK’s constitutional history. Unfortunately it defies the relatively simple headlines put forward by the media in this age of sound bytes; it deserves more scrutiny not just about what is in it, but about what it may mean including beyond Scotland.

Parliamentary Sovereignty

The momentous change is essentially the proposal that the Scottish Government and Parliament be made permanent in legislation – in other words that absolute Parliamentary sovereignty be ended and that, in the case of Scotland, national sovereignty effectively be pooled between Westminster and Holyrood. This constitutes a clear shift towards federalism, which may soon be matched in Wales (it is effectively already the case in Northern Ireland but in a different manner, as its devolved institutions are formed under an international agreement).

Tax/welfare structures

Structures under a Memorandum of Understanding are required to manage differential tax and welfare systems. Their establishment sets a precedent which could then be repeated in Northern Ireland and Wales.

Tax devolution

Income tax (on earned income, not dividends or savings), aggregates levy and air duty are fully devolved in the report. The latter of these was already the case in Northern Ireland, but Scotland may now compete. Income tax is not as dramatic as it first seems – it accounts for only about a quarter of all UK tax receipts and the likelihood is Scotland will not differentiate significantly (it hadn’t used its 3% option either way).

VAT and Corporation Tax, which had drawn attention in Northern Ireland, are not devolved. An announcement on the latter will follow next week, but it remains hard to see Corporation Tax being reduced in Northern Ireland without Scotland demanding and getting the same right soon after (as has happened with air duty).

However, the first ten points of VAT are assigned to the Scottish budget, which has the effect of raising the Scottish budget in the case of raised VAT receipts in Scotland comparative to the rest of the UK, and vice-versa – a similar system operates in Germany.

The National Minimum Wage remains reserved, so common UK-wide. This limits potential for “Living Wage” campaigns in any particular part of the UK.

Notably, Scotland takes full responsibility for any differential in administrative costs from applying different tax rates. That is a precedent which will be noted in Northern Ireland and Wales.

Welfare devolution

Scotland gets almost every individual aspect of working-age welfare devolved except the biggest, namely Universal Credit. It is entitled, even with Universal Credit, to use its housing powers and to vary the timing of payments. This is effectively the same as Northern Ireland, except Universal Credit is devolved there too in theory, right through to the requirement that Scotland meet any additional costs (administrative or otherwise) of doing things differently, although the concept of “parity” (making Scotland pay for its entire system if it does things differently) would not in effect apply.

Pensions and benefits to do with children/parenting are not devolved in the report. They are devolved to Northern Ireland but it is a convention (albeit one challenged by some Unions) that those powers are not applied and that pan-UK arrangements are maintained.

Scotland has discretion to introduce extra welfare payments in devolved areas with no prior consent necessary. A similar idea has been proposed using Northern Ireland’s powers to break the current welfare deadlock.

European Union

Other than pooled sovereignty, perhaps the most significant move in the report is the consultation with devolved Ministers on European issues and potentially even the representation of UK interests by devolved Ministers (thus access to the Council of Ministers). This applies to Northern Ireland (and, where appropriate, to Wales) just as to Scotland.

Super-majority

Most of the administration of the Scottish Parliament itself and of elections to it (and Scottish Councils) is fully devolved, but notably changes to some electoral arrangements (e.g. the number of MSPs) require a two-thirds super-majority to pass. That same super-majority has been proposed by some to replace “cross-community” (designation) votes in Northern Ireland.

Cross-border working

The role of the Joint Ministerial Committee is enhanced and a joint Parliamentary body is proposed. Are there lessons to be learned from the North-South Ministerial Council on the island of Ireland, which does something similar?

Election dates

The holding of Scottish Parliamentary elections in the same day as UK General elections (or any other elections) is prohibited. This is not the case in Wales or Northern Ireland, and indeed Northern Ireland Assembly Elections and Council Elections were held on the same day in 2011.

Consultative Roles

Scottish Ministers gain a consultative role in areas of broadcasting and regulation. These are markedly different across the UK. Regulation is devolved in Northern Ireland in some cases (Ofcom operates there but Ofgem does not; in the case of electricity, regulation is carried out on an all-Ireland basis in effect); S4C is a unique arrangement in broadcasting in Wales.

Comsumer advice and protection and certain aspects of supplier obligations with regard to energy efficiency are devolved to Scotland in the report. These are already devolved to Northern Ireland (often in the case of energy with a cross-border aspect).

Equality

Most aspects of employment are effectively devolved to Scotland in the report, but Equality is not. There is a view that abortion should be devolved to Scotland. Equality and abortion are both devolved to Northern Ireland.

Transport

Speed limits are proposed for devolution to Scotland in the report. They were already devolved to Northern Ireland.

Conclusion

The report is fairly comprehensive and sets some very interesting precedents. It is also notable for some omissions. It does set the scene for a Federal UK, yet significant powers remain reserved. Although the focus is on income tax, that may prove one of the least interesting aspects of how the new powers are devolved and used in practice.

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