Magazine article Public Finance

Wake Up Call for England

Magazine article Public Finance

Wake Up Call for England

Article excerpt

The devolution settlement is about to face its severest test. For the past eight years - the first two terms of the Scottish Parliament and Welsh National Assembly - there have been plenty of political squalls, but the basic devolution arrangements have proved largely uncontroversial.

This success has been for both political and economic reasons, the latter often under-appreciated.

The obvious political factor has been that the same party has been in control both in London and in the devolved executives (in the Scottish case shared with the Liberal Democrats). Labour has talked to Labour.

That has permitted a divergence of approaches on the running of key public services between the Blair government and the devolved administrations. A reinforcing factor has been the co-ordinating work of the Scottish and Welsh secretaries.

It has all been underpinned by the sharp rise in public spending since 2000, averaging more than 5% a year in real terms. That has allowed the Scottish Executive to have more generous student finance and residential care for elderly people than in England without having to squeeze other programmes.

All this could be about to change. Whatever the exact results, Labour looks like doing badly on May 3. The Scottish Nationalists could become the largest single party at Holyrood. But even on the most optimistic polls so far, the SNP would still be a long way short of an overall majority.

However, Labour and the LibDems might not win enough seats to renew their eight-year-old coalition - and it is possible that the LibDems might prefer opposition to being linked with a losing Labour group.

That could mean either a grand coalition of the main unionist parties or a minority SNP administration, possibly with some of the smaller Left-wing parties.

Despite some alarmist headlines, that does not mean we are heading for the break-up of the UK. The SNP would find it very hard, if not impossible, to get a majority in the Parliament for legislation on a referendum on separation. And the polls suggest that an independence ballot would be lost.

However, even short of such a constitutional confrontation, there would certainly be conflict, strains and tensions. Alex Salmond, as SNP first minister, and Gordon Brown, as incoming prime minister, are not exactly best friends, and each would be trying to get the better of the other.

Whatever happens on May 3, relations between the centre and the devolved administrations are certain to become trickier because of the Comprehensive Spending Review.

We already know that the overall rate of spending growth will halve to around 2% a year in real terms from 2008 onwards. …

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