Taking control of our finances is the natural next step for Northern Ireland…

Devolution is a process, not an event. Contrary to popular belief, it wasn’t actually Donald Dewar, the first First Minister of Scotland, who said that. It was the lesser-known former Welsh Secretary, Ron Davies. It was just another soundbite, but it does contain an important political point about the purpose and character of devolution.

At the time, there were two dominant and opposing trains of thought. One was that devolution would satisfy the appetite of the majority of the voting public for greater self-government and therefore quash Scottish, Welsh and Irish nationalism. The other, which featured heavily in Northern Ireland, was that the project would fatally undermine the Union by dilution and was a stepping stone to constitutional change.

For arguably the first time in two decades, the devolution settlement has come alive in the minds of the ordinary voter as a result of the COVID-19 outbreak, and there will be a natural inclination to wonder what’s next. Historically, this has been the experience in Scotland and Wales, where a “shock” has given the devolution settlement a kick onwards. For example, the Calman Commission and the 2012 Scotland Act followed the SNP election win in 2007.

Having worked in Stormont but also having spent the best part of a decade living and working around Holyrood and Westminster, I’ve been able to witness first hand the impact of further devolution on policymaking and political debate more generally.

Scotland, for instance, is now responsible for raising nearly half of the revenue it spends (about 10% in NI). It has full control of income tax, the largest fiscal level available to a government, an assignment of half of VAT receipts, stamp duty and few others. Interestingly, the Scottish Government can also create its own new taxes with permission from the Treasury.

Now is the time for us to discuss the next steps in our devolution process, appreciating that it has been somewhat of a challenge to keep devolution as an event here, let alone anything else.

The closest we’ve come, other than some limited devolution of Air Passenger Duty, was on corporation tax. Ironically, as the only policy area where there was more or less universal agreement among our political parties, it was quite a flawed idea. For starters, it assumed an incorrect comparability and causation between the Celtic Tiger and the economy of Northern Ireland, ignored the major structural supply-side issues in NI that would hamper any benefit of tax variation such as huge infrastructure and skills deficits, and conveniently forgot the enormous volatility of corporation tax receipts which would, in turn, introduce huge uncertainty into the Executive’s budget.

A few years back, NICVA commissioned PwC to review the fiscal settlement in Northern Ireland, led by reputable economist Esmond Birnie, but it was far too narrow in scope, resources, and time to mirror its counterparts in Scotland and Wales.

I can already see the tweets and hear snorts of derision about RHI etc and how our politicians can’t handle the powers they already have. Having had to explain how the Barnett Formula works to members of Stormont’s Finance Committee as a junior public finance researcher I’m aware of our elected representatives’ limitations in this area more than most. That said, I would politely suggest that this antipathy towards new ideas is a major part of our collective problem. So, at least hear me out.

The study of how fiscal levers are distributed between national and subnational governments is known as fiscal federalism. Of course, the UK is a bit of an ugly duckling in this regard. I say ugly duckling because there is still time to emerge as a beautiful swan to follow the metaphor through.

There are a number of very good reasons why we should consider devolving a package similar to that in Scotland. The first is to do with the economy itself. Northern Ireland suffers from a few very fundamental economic ailments that have existed for decades and significantly hamper us – lower productivity, lower wages, higher economic inactivity, major skills and infrastructure deficits.

Without the ability to change economic behaviour and grow or reduce tax bases and yields, it’s very difficult to address these issues as a purely spending administration.

The second, and something I’ve seen here in Edinburgh, is the impact the responsibility has on accountability in policy-decisions. You tend to be much more careful with the money you have to earn yourself over that which is just given to you. This is a good thing for democracies.

It has the further impact of introducing a more grown-up public discourse. At elections, our politicians would have to set out their stall in much more detail, including stating how they would fund the many commitments they make in manifestos. This has the additional benefit of introducing greater demarcation and choice between the parties beyond the constitution.

Again, a good thing.

Finally, it would allow us to get creative with the economy here and potentially raise more revenue to fund the important investments, particularly in infrastructure, we need. For example, the Scottish Government has increased the tax paid on purchasing a second home to raise more revenue. You may not agree with this, but the point is you could then vote for someone who wanted to reduce the tax paid on your dream holiday home at the Port.

There are, of course, risks and it is complicated. We would be importing risks into our budget allocation, and we would finally be properly accountable for the economic performance of our wee world. But we’re adults, we can handle it. At the very least, we should have an open mind.

Photo by Evelyn Chong is licensed under CC0

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