New powers for Scotland could spark demands for greater freedoms for northern England

IPPR North, devolution and localism, regional issues

Author(s):  Lewis Goodall
Published date:  27 Jun 2012
Source:  Progress Online

Hadrian’s Wall took six years to build and provided security for the north of England in the centuries that followed. Some there are now thinking about what its modern equivalent might be as they question what impact independence or more autonomy for Scotland might have on the north of England. For some it is the source of considerable trepidation.

In part, this is because recession has focused minds. For example, year-on-year unemployment is up by some 25 per cent in the north-east and, as a result, anything perceived to offer economic advantage to neighbours is viewed with suspicion. More concretely, alarm was raised when Amazon decided to invest in a development on Princes Street, Edinburgh, as opposed to Quorum Business Park in North Tyneside, following incentives offered by Scottish Enterprise. The whispers got louder: if this is what they can do now, what happens if Scotland gets more autonomy?

One oft-expressed fear is that an independent Scotland would poach business and capital from England by slashing its corporation tax rates, something Alex Salmond has indicated he aspires to do. Skipping over the all-important question of whether the Scots are likely to back independence, in the short term at least it seems unlikely that a newly independent Scottish government would be able to ‘do an Ireland’, not least because reducing Scottish corporation tax to the Irish rate of 12.5 per cent would cost around £1.8bn (or around 10 per cent of Scotland’s current budget deficit, even if oil revenue is included). To be able to deliver such a tax cut in the short run Scotland would either need to cut spending further or borrow on the international markets – suffice it to say, this has not been the easiest way for small, indebted European economies to raise money over the last year or so.

For these reasons many in the north are more concerned about the prospect of ‘devo-max’. The exact parameters of such a proposal are yet to be hammered out but many question the equity of a situation in which Scotland is cushioned via British fiscal transfers yet possesses economic and political powers other parts of the UK cannot begin to match.

The playing field is already far from level. Scotland receives around £1,000 per head in public spending than the northern regions of England do. The concern is that devolving further economic powers will not only give Scotland an advantage over its neighbours, it may even be to their detriment. For example, if Scotland was able to reduce airport passenger duty it almost certainly would do so, critically damaging northern English airports.

This is not an argument against devolution. Rather it is an argument about the unsustainability and shortcomings of the way England is governed. After all, the economy of the north of England is twice the size of Scotland’s and if it were a country it would be the eighth largest in the European Union. Its needs are, like Scotland’s, complex and ill-suited to total governance from a political seat 200 miles away. Worse still, since the abolition of the regional development agencies, centralisation has quickened and much of the limited economic freedom won over the last decades reversed.

In order to counter the economic gravitational pull of a newly unleashed Scotland to the north and the global powerhouse of London to the south, Whitehall needs to dramatically extend the leash on the rest of England. It must re-empower local authorities with greater powers to invest, provide much greater flexibility over spending and look anew at how our biggest conurbations are governed, with a view to the introduction of city-regional or ‘metro-mayors’.

Perhaps the Scots will help the English in this regard. Substantial further changes to the Scottish settlement are likely to precipitate renewed debate about how England is governed. This cannot be confined to a discussion about an English parliament and English votes on English laws at Westminster. Whatever happens, our political leaders north and south must be imaginative about how they empower the north to take control of its future. One thing is certain: this time, protecting the north will take more than just a wall.