Is federalism the answer?

Professor Jim Gallagher asks whether federalism offers a way forward in challenging times.

Following the former Chancellor’s push behind a Northern Powerhouse, and the flurry of City Deals and new Metro Mayors that followed, in recent times even the once-centralist Labour Party has embraced the notion of federalism. This is a big change for a party which traditionally embraced the power of the state to redistribute across places, as well as classes of people, in the interests of social justice. What question is this the answer to, and does it work? In this time of huge hope and uncertainty, could federalism now offer a way ahead for the UK and our democracy?

Around 40 per cent of the world’s population live in federal countries, and most large countries have some sort of federal structure. Federalism seeks to accommodate different feelings of identity, but also different political choices according to local circumstances and priorities. It is a political, not an economic, system; although some argue decentralising power over tax and spending can promote economic growth.

Some federations are a coming-together of pre-existing states, notably the USA. Others represent conscious decisions to decentralise power within larger existing countries. The legal and constitutional mechanisms of federalism vary widely.

Union, Federacy and Federation
The UK has never been federal, despite being a union of preexisting nations. From the perspective of Belfast, Cardiff or Edinburgh, however, it has very much the look and feel of a federation. (In the academic jargon, it’s perhaps a “federacy”, like a federation, but not quite.) [1]

As in federal countries, two levels of government reflect different claims of identity. Powers are distributed to the level at which they work best. Insurance against old age, say, is almost invariably a federal responsibility and is a central government responsibility in the UK. The same is true of currency and macroeconomic policy. But public services – health, education, transport – are more responsive at the decentralised level. The two levels of government cooperate or compete as politics demand. A politician from a federal country would feel at home in Scotland or Wales.

It feels different in England. Its Parliament is Westminster and its government the UK’s. That is the traditional roadblock to a formally federal UK. Back in 1974, the Royal Commission on the Constitution concluded that if England, with 85 per cent of the UK’s population, were to be a separate unit in a federal system, the federal government would swiftly become irrelevant.

The union model – under which the much smaller nations get a special, protected status at the price of some constitutional untidiness (the West Lothian question) – was thought to be more attuned to the reality of the UK. Attempts to promote regional government in England have fallen flat because they are not driven by identity. The iron grip of central government (informed by a political and media culture in which policy divergence is a ‘postcode lottery’) has if anything strengthened.

So, calls for a federal UK have largely been from the fringes. The Campaign for an English Parliament has gained some prominence, responding to greater devolved powers in Scotland, but remains outside the mainstream. Even the long-standing Liberal Democrat commitment to federalism is ill-defined and ambiguous about England.

So, are Labour now too embracing a quixotic fringe notion? Perhaps not. First of all, the party’s commitment to centralising power to promote social justice (as with the NHS, aptly caricatured in Bevan’s joke about the falling bedpan in Tredegar echoing in the halls of Whitehall) has always been in tension with a historic commitment to Gladstonian home rule. This came to a head in 1974 in Scotland, when the party flipped over to supporting devolution.

More important, federalism may provide an answer to Britain’s two most pressing spatial questions, both flushed out by Brexit. One is about Scotland, the other mostly about England.

Brexit, Britain and Scotland
Scotland could be a federalism case study. Its competing claims to identity are almost evenly split. It has, supposedly, different political priorities from the rest of the UK. (Hard evidence for this, apart from different voting patterns, is thin on the ground.) Devolution reserves to central government only what needs to operate at a UK level; and the bundle of devolved spending and tax powers is greater than in most federal constitutions. It lacks, perhaps, the explicit constitutional embedding that codified constitutions provide elsewhere, but recent legislation declaring the Scottish Parliament permanent, and having primacy in its own competence, move towards that.

Scotland’s problem, however, is the division created by competing identities. 45 per cent of the population voted for independence in 2014. Polling shows a substantial minority (28 per cent) still deeply committed to independence, but a bigger minority (38 per cent) utterly opposed. To be at ease with itself, Scotland needs a strategic compromise a majority can sign up to. So far, devolution has not provided that compromise, perhaps because it has lagged behind the median view – crudely, that all domestic policy should be devolved.

Unexpectedly, Brexit offers an opportunity to fashion a more powerful devolution settlement, repatriating EU responsibilities to Edinburgh rather than London, and perhaps allowing imaginative options – such as EU relations on devolved matters – which together could offer a settlement to satisfy a substantial majority of Scots. [2] Hence Labour’s interest in a settlement which can be described, from Scotland anyway, as a powerfully federal one.

Mrs Gaskell Rides Again
The Scotland-UK relationship is an example of ‘coming together’ federalism. But what about for federalism within England? This is the federalism of decentralisation, not of identity. Its economic roots have been laid bare by Brexit.

Non-Metropolitan England, notably the North, tipped the vote to Leave. In all referendums, voters (like students in an exam) can choose to answer whatever question they want. The correlation between poverty and Leave voting, as in the Scottish referendum, suggests that the losers from economic change are expressing dissatisfaction with the system. Hardly surprising: income has been static while economic insecurity for many has grown. This has of course little to do with EU membership. Indeed – as recent research by McCann et al shows [3] –
the regions of England which voted to leave the EU are most dependent on trade with Europe (rather than the wider world), as well as getting the most EU investment.

This is the symptom of a much deeper problem. Mrs Gaskell’s novel North and South (1855) contrasted the life of the leisured classes of the South with wealth creation in the industrial North, and its social consequences. England remains divided: the post-industrial North retains those social consequences, but the wealth-creation is now concentrated in the commercial South East, from which the North is increasingly disconnected. Northern voters attracted by “taking back control” were arguably aiming at the wrong target. Political and economic control over their prospects is in London, not Brussels.

Hence the argument for English decentralisation. The conception of federalism we have seen from Labour will, however, inevitably involve untidiness and asymmetry. The Napoleonic decentralisation envisaged three decades ago, with regional assemblies sitting above Michael Heseltine’s standard regions, was killed off by the vote of the North East. Labour’s proposal instead is for a Council of the North, indirectly elected.

Political decentralisation does not guarantee economic change. It delivers voice, and so perhaps political leverage. But it needs to be matched by the central government redistribution of resources. Here again Brexit offers unexpected opportunities: the UK can now devise a new regional economic policy to replace the ineffective European structural funds.

So federalism is potentially at least a cure for divisions – within Scotland, between Scotland and England, and within England itself. For sure, without some political and economic action not just Scotland and England, but also Elizabeth Gaskell’s North and South, will increasingly resemble Benjamin Disraeli’s ‘two nations between whom there is no intercourse and no sympathy’.