Devolution is (sort of) working in a (sort of) social democratic country, pace prophets of doom since Nye Bevan. But it could and should work better if we thought more clearly about how devolution and social democracy can live together. The failure of the London government to anticipate the effects of January's higher education white paper outside England is a clear sign of this. A recent Lords report has also pointed out that the secretaryship of state for Scotland is an unfair anomaly.
Let's start with Bevan. He detested the idea of devolution to Wales. In the 1970s his follower Neil Kinnock warned that a Welsh assembly could be an "obituary notice" for Labour. Why? Because they were both socialists and centralists. My colleague Vernon Bogdanor has argued (Prospect, February 2001) that they are right: that devolution is fundamentally incompatible with social democracy. Social democracy requires redistribution from richer regions to poorer ones and uniform standards in everything that the state provides. Some kinds of devolution make both of those things harder. Bevan insisted, for example, not only that the NHS should be funded out of centralised tax income but that it must be truly national in organisation?the minister must hear a bedpan dropped in Tredegar. (What would Nye have done? Gone to pick it up?)
But those, like Bevan, who still fear that national redistribution is undermined by devolution, forget that it is the tax and benefit system which does social democracy's heavy lifting?and that remains centralised in Britain. Today's devolved administrations have, basically, no power to tax. For a given pre-tax income and family situation, one's financial position after tax and benefits is identical throughout Britain.
Devolution does, however, mean letting the territories do things their way in some of the public services. As a result, some aspects of the public sector-health, education, and social services are likely to diverge. This has, indeed, been happening since 1998, especially between Scotland and the rest of the UK. Social policy has diverged the most in Scotland, because Scotland has both more extensive powers and more money to play with than Wales or Northern Ireland. The Scottish parliament has voted to pay teachers much more than in England; to entitle the elderly to free social care; and to abandon up-front tuition fees for Scottish students. Downing Street's attitude to these experiments has veered from nannyish scolding to lordly disdain. The nannyish scolding had to stop when nanny realised that she could no longer discipline little Mac. Lordly disdain ensued when it seemed that elderly people in search of care were not queuing up at Coldstream. Various facts have, until now, prevented the Scottish experiments from leaking directly into English social policy. They include the thinly populated border area and barriers to free movement of teachers or students (the Scottish fee arrangements apply only to students who live in Scotland).
But this is now beginning to change?bringing both advantages and disadvantages, but above all greater complexity. Last month's English higher education white paper got it just about right on paying for higher education. Higher education is mostly a private good, whose benefits accrue to the student. Therefore the student should pay most of the cost of his or her education?but later, when they have the money to pay it. England learnt from the Scots in abandoning up-front fees and being tender(ish) to would-be students from poor families. Such learning from one another's experience is, of course, one of the great benefits of devolution.
Nevertheless, the white paper is a lesson in how not to do devolution. It has only three paragraphs on its devolution implications, which say that we will talk to the Scots, Welsh, and Northern Irish about them when we get around to it. There were two signs that things went badly wrong here. One was the unanimously hostile reaction in the Scottish press the following day. The other was the speechlessness of normally forthcoming Whitehall mandarins on the devolution implications of the white paper.
The English white paper horrified the Scottish universities. You might think they would be delighted, as the English decision to charge students more for the private good they are getting might drive them into the arms of the Scots. Not a bit of it. The white paper promised a 6 per cent annual real increase in English university funding. But, the Scots said, the Scottish executive has offered us only 2 per cent. Most of our costs are wages, which are set nationally. Therefore our universities will be severely squeezed unless Scotland matches England. Even though Barnett formula largesse continues to flow to Scotland, such matching will be tough for the executive, which has already committed itself to the elderly, to teachers, and to students.
For devolution anoraks the English white paper throws up fascinating anomalies. For instance, the English higher education money flows through two departments: DfES (an England-only department for most purposes) and DTI (a UK-wide department). When DfES spending in England goes up, the Barnett formula guarantees some (but not as much) extra money per head to the three other territories. But when DTI spending goes up, the territories get nothing extra. The mandarins I spoke to had no immediate answer to this conundrum, nor have I yet seen the answers to "Who will pay the fees for Scottish students at English universities; for English students at Scottish universities; and will the new student tax liability, paid up front to English universities, and reclaimed later from the student through the tax system, count as public spending?"
Bogdanor has called Labour's conversion to devolution "Gladstonian." Gladstone cared deeply about constitutions; he did not care about uniform welfare standards, which he deplored as state intervention in matters that were not the state's business. But Labour's tentative conversion from Bevan to Gladstone involved low politics as well as high?and low politics has impeded devolution. To see why the government has made such a mess of the devolution implications of higher education, we need to remember some history.
Labour originally offered devolution to Scotland and Wales in 1974 for one reason only: that it was terrified of losing the capacity to govern the UK. The Scottish nationalists were on a roll and close to the tipping point where they would win over half the seats in Scotland and start negotiating for independence. Bang would go not only the United Kingdom but Labour's chance of governing the rump of it. Labour needed those 71 (now 72) Scottish seats and votes. John Smith warned that devolutionists could not have their Scottish parliament cake and retain their 71 MPs and their secretary of state. Tam Dalyell warned that his West Lothian question was unanswerable. But the abortive devolution bills of the 1970s offered a secretary of state, 71 continuing seats and full power for those MPs to vote on all non-Scottish matters. This so offended the Geordies that they killed the first bill in 1977. To placate northern England, Chief Secretary Joel Barnett proposed his now famous formula, which would gradually erode the per-head spending advantage of the three territories over England.
Fast forward 20 years to a Labour government that, for once, does not need those Scottish seats. Labour has a governing majority in England alone. The commitment to 72 seats has been ditched, so that Scotland will drop to its fair population share of Westminster seats (around 57) after the next boundary review. But that implies a reduction in the number of constituency MSPs at Holyrood. The Scots are crying foul at such interference in their right to order their own parliament. The commitment to long-run equalisation under Barnett remains. In fact, the Barnett formula is finally biting for the first time. So, just as devolution is supposed to be settling down, the three devolved territories?Scotland in particular?will find themselves with somewhat smaller proportions of UK public spending. What the SNP calls the "Barnett squeeze" is real, and will make it harder for the Scottish executive to placate the Scottish universities. The Northern Irish executive says that Barnett will make it impossible to fund their programmes during the life of the current spending review. Only the Welsh sail on oblivious, and even they are starting to realise that Barnett does them no favours.
So what is the point of Helen Liddell? The secretary of state for Scotland finds her existence under attack. The Lords committee on the constitution, chaired by the Conservative political scientist Philip Norton, has recently pointed out that Helen Liddell and her 120-odd staff are a first charge on Scottish executive funds. But neither can control the other. She has feistily defended her role as Scotland's protector in the London cabinet. OK Helen, so what were you doing when the English higher education white paper was going through its very public travails? Her failure to secure any Scottish input removes the last feeble justification for a secretary of state. As the Norton committee says, her role must go, and the expenses of her office should go to the Scottish executive for them to spend as they wish.
Sorting out finance will take longer. What we have seen, though, shows two things. Devolution does permit experiments?it has persuaded the English that up-front university fees were a mistake and, most topically, if Ken Livingstone can make a success of congestion charging in London, it will undoubtedly be rolled out to other large British cities. But until representation and finance are sorted out, devolution will not develop its full potential. The system has not yet adapted at the centre. Nye Bevan was wrong, but we have not yet got a Gladstonian alternative to his centralism
