John KincaidHow should the UK proceed with devolution, promised by all main parties in the wake of the Scottish independence referendum? John Kincaid lays out the issues and principles to think about.

The practice of devolution in the UK will differ from the precepts of decentralisation because devolution has been long underway, the boundaries of regions desiring devolution are fixed, outcomes thus far have been asymmetric, some regional political forces prefer disunion, and the European Union is a complication absent from the world’s 170-some non-EU states. There is no best model of decentralisation, but the architects of devolution would benefit from adapting the precepts found in the theoretical and empirical literature to the UK.

The core precepts are that local (or regional) governments are closer to the people, more responsive to citizens, better able to match services to citizen preferences, and more accountable to voters. Local accountability and superior information channels in decentralised systems improve service and resource-allocation efficiency. When citizens have more voice in government, they often consent to pay more for services. Additionally, competition among jurisdictions can foster innovation and efficiency while restraining government budget growth. Some theorists argue, too, that decentralisation can mitigate ethnic conflict.

Empirical research, however, shows that the desired and predicted outcomes of decentralisation are often unrealised. The precepts of decentralisation are politically difficult to institutionalise, and theories of decentralisation may have some flaws. Even so, theory and practice offer valuable guidepostsAn important question is whether to pursue big-bang or trickle-down devolution. The former involves a comprehensive devolution package adopted all at once; the latter involves piecemeal devolution over a long period. Trickle-down devolution already characterises the UK. Initiatingbig-bang approach might not be feasible.

Another question is whether to employ a constitutional process, perhaps even adopting a written constitution, or a political process of negotiation. A constitutional process requires broad citizen participation, including possibly a specially elected or appointed constitutional assembly. A political process should be broadly consultative, but the locus of power lies with political party elites, plus key economic and civil-society elites. A constitutional process can be difficult to manage and runs the risk of catastrophic failure. A political process can more easily manage conflict and finesse failures.

Whatever the process, there will be tension between bottom-up and top-down perspectives. The former emphasises the customary precepts of decentralisation such as local responsiveness and allocative efficiency. The top-down perspective emphasises country-wide devolution benefits such as welfare enhancement, efficiency improvement, deficit reduction, and union preservationThese point to another question. Is the ultimate objective maintenance of an essentially unitary state, however much devolved, or establishment of a federal union?

Another issue is tolerance of two types of asymmetry, both present in the UK. One is population asymmetry; England dwarfs the other regions. This asymmetry makes it difficult to achieve equitable and stable devolution. The other asymmetry is differential devolution across regions. This type of asymmetry is not unusual, and there is often a long-run drift toward symmetry as all or most regions press for comparable powers.

Successful devolution does require a general societal consensus on the roles and limits of the union, regional, and local orders of government. In communally divided societies, however, devolution often requires high levels of central redistribution to fend off regional revolts. But such policies defeat key benefits of devolution because they generate economic inefficiency and political instability.

A successful process integrates the political, fiscal, functional, and administrative facets of devolution. A common cause of failure is decentralisation of functional responsibilities but not fiscal or political authority. In the UK, though, the latter top the agendas of devolution advocates.

Successful devolution also requires devolved jurisdictions having a critical mass of people, economic activity, and wealth to realise devolution’s benefits, especially allocative efficiency. Scotland has about three million fewer residents than New York City. Scotland, Wales, and Northern Ireland are, in this respect, local governments. But they occupy larger territories and harbour national aspirations. If nationalist objectives override efficiency objectives, many benefits of devolution will be truncated.

Generally, devolution should follow certain rules of congruence. As much as possible, government benefits should align with their costs so that citizens pay for what they want and get and do not pay for what they do not want or get. This rule, of course, is limited by citizens’ willingness to support redistribution for fellow citizens in need.

Devolved regions should not engage in tax exporting that loads local tax burdens onto non-residents. Limits should be placed on taxes likely to ensnare nonresidents such as pre-retail sales taxes, natural-resource levies, and taxes on non-residential real property. More suitable revenue sources are user charges, residential property taxes, special benefits taxes, per capita or poll taxes, retail and excise taxes, and income tax surcharges piggybacked on the central government’s income tax.

Each government function should be assigned to the smallest order of government able to perform the function efficiently and achieve economies of scale in producing the good or service. But cost and benefit externalities from smaller governments should be internalized by larger orders of government.

To the extent possible, elected officers in any government who have the pleasure of spending tax money should first experience the pain of extracting it from the taxpayers. Separating spending and taxing decision-making weakens accountability. Likewise, smaller jurisdictions should pay the debts of their governments and state-owned enterprises and not expect big-government bailoutsIn contrast to the Barnett formula, however, properly designed fiscal equalization, common in federal systems, can enhance efficiency and equity.

Most government functions are amenable to devolution. Those best provided centrally are redistributive programs, functions for which demand does not differ significantly across regions, functions that generate interjurisdictional spillovers that cannot be mitigated by intergovernmental grants, and functions for which local administrative costs exceed benefits.

Reality, however, is highly marbleized such that all orders of government have legitimate interests in most functions—health, education, welfare, infrastructure, crime prevention, and so on. A regional government that fails to maintain roads or adequate policing generates negative externalities affecting the entire country. In turn, regional governments can play roles in redistributive policy when the central government sets benefit floors but not ceilings.

A vision of devolution that seeks watertight compartments is a path to conflict and failure. Devolution’s key challenge is not so much dividing powers as it is sharing powers.

Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting. Featured image credit: Joel Suss CC BY 2.0

About the Author

John KincaidJohn Kincaid is the Robert B. and Helen S. Meyner Professor of Government and Public Service and Director of the Meyner Center for the Study of State and Local Government at Lafayette College, Easton, Pennsylvania, USA. He is former executive director of the U.S. Advisory Commission on Intergovernmental Relations, an elected fellow of the National Academy of Public Administration, editor of Federalism (4 vols. 2011), and co-editor of the Routledge Handbook of Regionalism and Federalism (2013).

 

Print Friendly