Extract from the Liberal Democrats policy paper "For the People, By the People", Autumn 2007.
6.3 The English Question
6.3.1 During the 1980s, the Conservative Government used its majority in the House of Commons to force through highly controversial legislation that applied only to Scotland, despite the fact that Scottish support for the Tories had substantially declined. Scottish voters were effectively disenfranchised and increasingly frustrated by the government’s activities. This gave added urgency to the cause of Scottish devolution.
6.3.2 However, devolution to Scotland and Wales has resulted in a new anomaly. Scottish and, to a lesser extent, Welsh MPs can vote in Westminster on legislation that will affect only England. While sometimes the opposite applies, with English MPs voting on legislation only affecting Scotland and Wales, this is far rarer. The issue arises because of the asymmetrical devolution so far introduced in the UK, with the Scottish Parliament having significant law-making powers, the National Assembly for Wales having more control over its own law and policy (though mainly over secondary legislation) and the English having no equivalent separate body.
6.3.3 Some advocate giving powers to an English Parliament as a way of overcoming this anomaly. Others believe that while all MPs elected to the UK Parliament deal with UKwide business, it would be possible for those MPs who represent English constituencies to deal with England only business in a separate forum and as an additional responsibility. To work properly, however, both models would require a separate executive arm for England. Clearly, if a different party were to hold a majority of seats in England to that which had an overall majority in the UK, this would be politically as well as constitutionally imperative.
6.3.4 Such a change would alter significantly the role of the UK Parliament in the affairs of the UK, reducing substantially the policy areas over which it had competence. If an English assembly of some kind were to be established within Westminster, composed solely of UK MPs representing English constituencies, inevitably it would be that assembly which dealt with much of the legislative business. On the Scottish model, the new English legislature and executive would gain power over health, education and training, local government, social work, housing, economic development, many aspects of transport law and home affairs (including, the police and the emergency services), and some policy concerning the environment, agriculture, forestry and fishing, sport and the arts, as well as statistics, public registers and records.
6.3.5 Importantly though, if the English executive were to be established along these lines, UK fiscal, economic and monetary policy would remain with the UK Parliament, with UK MPs deciding the level of taxation for, and allocation of resources to, each part of the Union. It is likely that an English executive, governing a large proportion of the UK in such a wide range of areas, would argue strongly that the UK Parliament should not frustrate its policies by agreeing on a financial settlement which has the consent of the UK Parliament as a whole, but not of a majority of English MPs. We believe this problem would be particularly acute if an English executive were not coupled with the arrangements for fiscal federalism we outline in 6.4, and would still be significant even if it were. It is for these reasons that many feel that a substantial layer of English governance – based, as it would be, on such a disproportionate part of the Union – would bring into serious question the continuing role of the UK Parliament and, by extension, of the UK itself, to which Liberal Democrats in England, Scotland and Wales are firmly committed.
6.3.6 Liberal Democrats want to see, as far as possible, decisions made, and services delivered, as near to the people and communities concerned as possible. To this end our local government policy paper, The Power to be Different, states that local authorities should be “the basic building block of government and public service delivery in England”. However, in the case of decisions and services affecting a large number of communities, or those spread over a large area, it advocates central government handing over powers and responsibilities to regional government. We also state in that paper our support for directly elected regional government in those areas where the public want it.
6.3.7 To this end, there is a wider party and national debate to be had as to whether domestic policy for England should be determined at national level or regional level. For many, England has a distinct national identity and they argue that it would entirely justified for there to be an English Parliament or Assembly and an English executive. Others argue that to devolve power from the UK Parliament, which represents c.60 million people, to an English Parliament, representing c.50 million people, would fail to bring government closer to the people and that instead there should be devolution to the English regions or to even smaller units.
6.3.8 In light of these arguments we believe that further consideration needs to be given to the mechanics and implications of such a constitutional change, and that any proposed change would require the endorsement of the British electorate. That is why we believe that this matter should be part of the remit of the constitutional convention that this paper advocates in chapter 2. The convention’s proposals, which would include a solution to the English question, would then be put to the UK public in the referendum seeking endorsement of the wider constitutional settlement.
6.4 Financial Issues Associated with Devolution
6.4.1 A key challenge of further devolution will be changing the funding system in the UK. The current funding regime throughout the UK is based around grants from Westminster. In the case of both the Scottish Parliament and Welsh Assembly their executives have considerable freedom over the use these grants are put to, while in England much of the grants given to local government are ring-fenced and have to be spent on policies defined by central government.
6.4.2 The amount of the grant given to Scotland, Wales and Northern Ireland is decided by the Barnett formula, which was a temporary measure introduced ahead of the expected devolution to Scotland in the late 1970s. The Barnett formula does not redistribute wealth between areas of the UK. Rather it links increases or decreases in spending in England to proportional changes in the grants to Scotland, Wales and Northern Ireland. It does not decide the overall size of budget or take into account public expenditure need. Indeed it was assumed that devolution would result in the establishment of a more needs-based funding calculation, which never took place due to the no vote in the referendum on a Scottish Parliament in 1979.
6.4.3 Liberal Democrats believe that, as well as devolving political power out from Westminster, fiscal power also needs to be devolved from the Treasury if the UK is to have a genuine federal system. While others propose full fiscal autonomy for the devolved governments (where they would raise all the taxes and then remit an agreed amount to Westminster), no other industrialised country has opted for this for a number of reasons. Fiscal federalism, however, avoids the pitfalls of fiscal autonomy and should give the institutions to which power is devolved substantial control over the levers of power controlling funding. That means the devolved institutions should raise as much of their own spending as practicable, and be able to significantly influence the development of their economy. It would also mean establishing agreed rules on such things as prudential borrowing. An essential element therefore of fiscal federalism is for devolved governments to have powers of taxation. Liberal Democrats endorse the principles of fiscal federalism set out in the Steel Commission report, and believe that the Scottish Parliament and Welsh Assembly should have more powers and freedoms to level their own taxes. We are also committed to increasing the percentage of revenue that regional and local authorities in England raise.
6.4.4 How fiscal federalism would work has been considered in detail for Scotland in the Steel Commission report. The Commission concluded that fiscal federalism in Scotland would mean the Scottish Parliament is given responsibility for all taxes except for those reserved to the UK, and that this would include the right to abolish and introduce new devolved taxes. Under these proposals the Scottish Parliament would have the ability to vary the rate and tax base for each devolved tax, and the power to borrow, subject to specific criteria. Were the Steel Commission’s proposals to be extended, the funding powers devolved to each nation and region would be a matter for each to decide and should be considered alongside work on the legislative and policy powers of the directly elected assembly representing it.
6.4.5 As the UK is a diverse country in terms of wealth, income and need, raising a greater proportion of taxation locally means there would have to be an element to redistribution in the interests of national unity and if poorer areas are not forced to have punitively high tax rates or sub-standard services. We believe the Barnett formula should be replaced by a new needs-based equalisation formula – the Revenue Distribution Formula – as set out in Policy Paper 75 Fairer, Simpler, Greener. This would take into account factors such as geography, how rural an area is, health, the state of infrastructure, poverty and deprivation and the cost of delivering services. The Formula would be drawn up by a Finance Commission of the Nations and Regions (FCNR). This would be made up of representatives of the UK government and representatives from the National Assembly for Wales, the Northern Ireland Assembly, the Scottish Parliament and the London Assembly, plus those from any English regional chambers or assemblies. It would reach its conclusions by consensus and any proposals would be ratified by the respective executive bodies. As well as agreeing the equalisation formula, the FCNR would also be charged with developing work on the whole agenda of fiscal federalism.