Since the Scottish referendum, there has been much discussion about devolving power down to the regions, and the recent announcement by the Government that it intends to devolve a £6 billion health and care budget down to the Greater Manchester area has been largely greeted with approval across the political spectrum. For sure, it gives local authorities the responsibility to set health and care priorities and to shift cash around but does it actually increase accountability and promote value for money for the taxpayer?
Well, I expect that there are few that would disagree that centralized structures are unwieldy and often struggle to get value for money despite the attractions offered by the economics of scale. We’ve heard about the £10 Whitehall paperclip too often for this not to be true. There is also no doubt that a centralised and corrupt political system often directs resources for political purposes rather than on the basis of actual need. Where it is allocated altruistically, it is often misdirected owing to a lack of understanding about particular local conditions and requirements. Local spending also gets better scrutiny and is more transparent as budgets are smaller and easier to inspect than the national versions.
Devolved budgets look attractive then, but in my opinion it is only by owning the right to spend and to raise revenue that proper democratic accountability can be enforced. If it is only the power to spend a budget that is devolved then there is little to stop the spender using up all the cash and then pointing to the central government when it finds it has run out of resources. ‘It’s not our fault, you haven’t given us enough’ will be the excuse. Particularly from a Labour-run council with a Conservative Government (or vice versa). On the other hand, if an authority has to raise the cash that it wishes to spend then it is totally accountable for both sides of the equation. It may decide to raise more revenue through an increase in local taxation and spend a little more but to do this there will have to be a conversation with the local electorate who may see things differently. That is proper democracy at work and a powerful driver for encouraging tax-payer value for money. Moreover, if that conversation takes place at a local level then the debate is often better focussed and able to highlight the real issues rather than a centralized argument that gets lost in all the Westminster noise.
So, it’s an open and shut case: we should devolve the maximum power down from the centre. Well, perhaps not. Whilst a centralised treasury sometimes misdirects resources through corrupt politics or incompetence, it does allow the central authority to at least have a stab at resolving geographically competing needs. If we fully devolved tax-raising and spending powers to small regions then the sparsely-populated or poorer areas would be completely disadvantaged, and it is unlikely they would be able to offer the same standard of services. In extremis, this could encourage significant population movements
to the metropolitan areas which could be destabilising and suddenly increase the pressure on services in particular areas. On a more philosophical note, I suppose one aspect of belonging to a country is that the population has a common interest in looking after each other regardless of location. Isn’t that why we have the Barnett formula for Scotland? That collective insurance would soon disappear as the devolved regions started to become more like autonomous mini states.
I am instinctively against big government and so the devolved solution looks attractive. But it is not a straightforward case and it requires careful thought. It may be that a half-way house solution that partially devolves tax and spending would provide the right balance of efficiency and accountability. In this regard, a locally levied sales tax (with commensurate reduction in VAT) might be one way of devolving tax raising powers without going the full hog. However, our Union has already suffered some shocks recently following the Scottish referendum and I think we need to move cautiously to avoid the unintended effects of any fiscal actions we take too hastily. It is probably a question of scale. The Soviet Union was too big to run from a centralized authority but, on the other hand, we can’t live in little tribes. Thoughts?