The London Finance Commission looking into funding for the capital has to take into account the realities of ever tighter central control of all aspects of government, says Damian Hockney.
At a time when regions across the EU are having their powers stripped away at the behest of Brussels, there is, he believes, no chance that London will buck the trend. But of course this may be the start of a City Hall grab for the boroughs’ money…
If it really means to have an impact and intellectual credibility, the Commission needs to address some serious issues which have been ducked, and must face squarely what it is really asking for – is it just asking for more money? If so, how much and what taxpayer (or local authority’s existing budget) is it going to come from, and what’s the money for? And if not, is it just creating complicated ways of helping politicians in their game of grabbing power and asserting some form of faux independence?
Is this a way of trying to pitch the Mayor against the boroughs, with the Mayor trying to take away their income? The use of Bankrupt Berlin and its financially dependent Begging Bowl Boroughs by the Commission as a possible example to follow is not very promising (see below). And New York is almost irrelevant as an example.
Fizzy pop powers
While Mayor Bloomberg in New York just casually slaps a ban on large containers of fizzy pop in his manor (“they are”, as Terry Wogan used to say “not all locked up”), the UK government itself no longer has the power to even fix the price of a bottle of scotch in its borders without contravening ‘higher’ law: sorry, says the EU, but we control the pricing of a bottle of scotch in the UK. We’ve twice been challenged on minimum pricing and twice won in the courts. We might consider some latitude if you beg and give the EU some new power in return.
In fact the UK government itself cannot fix the price of alcohol without going cap in hand to the EU or facing a court fight (third time lucky maybe?) because it does not have the right to fix a minimum price unless the EU kindly agrees. In this matter (as in so much else) Westminster itself is just a “devolved” administrator of the rules made by a higher body. Unlike the US situation where Mayors have real powers. These cannot be devolved in the UK because they have already been “devolved upwards”, whether it’s banning fizzy pop or changing the price of a drink.
Those trying to compare New York with London, as will be inevitable in any investigation of finances, are not dealing with institutions which are even vaguely comparable – EU law, which trumps UK law in a conflict, simply will not allow the breadth of independence and responsibilities and real powers for the London Mayor allowed to Mayors in the USA. The almost comic exposure of this on Swiss tv many years ago when it was made clear by the EU that almost all the referenda in that country’s recent history would have been ruled against EU law if it joined is simply an example of the impact upon devolution.
Swiss devolution would end at a stroke on accession. Politicians in New York are astonished when you list for them the limitations on London’s Mayor, never mind the limitations on Westminster. And this has an enormous impact on responsibilities, funding mechanisms and amounts, and crucially what you are permitted to do with the cash.
Bankrupt Berlin’s Begging Bowl Boroughs
As mentioned above, ‘Bankrupt Berlin’ (as the rest of Germany calls it) is being quoted as a possible type of template but this does not bear examination of the German capital. Berlin is not just a city but one of the 16 states/lander, and London following its example would mean tearing up all the established principles of London government and boroughs and starting again, but with control from City Hall – oh yes, the Mayor would have more money alright…under this model, that would be all the cash currently collected from the boroughs’ ratepayers! If London were to adopt the Berlin model, then the cash of the local authorities would be, that’s right, “devolved upwards” to the more remote City Hall. And then the boroughs would be given handouts by the Mayor – and he/she who controls the pursestrings…
Is that what they mean by “fair shares” in these early announcements and referring ominously to Berlin as a shining example – spiriting away the powers (and money) of Bromley and Tower Hamlets, Richmond and Kensington & Chelsea? One wonders whether the German government was being intentionally ironic when last year it added to its information about the Berlin boroughs that they are funded by “lump sum payments” from the centre (effectively the Mayor) to carry out their responsibilities, a method which “increases their autonomy and independence”. Yeah right. Presumably that’s how the councillors of the London Boroughs would view handouts from the Mayor as an alternative to raising their own cash through local taxation? Much better to be under the thumb of the Mayor, right, and be the equivalent of the Berlin Begging Bowl Boroughs?
This is the problem with flagging up an example like Berlin, wonderful city though it is.
And if it’s anything like the newly formulated fix for Scotland or Wales, all that will happen will be politically-driven shenanigans which will shift the funding pieces around the board, to allow politicians to claim a victory and to give a superficial notion of separate taxation. But the dead hand of the centre will control everything in just the same way.
We want more cake
And has anyone also noticed the inconsistency in the remarks of the Mayor and those involved in the Commission about not arguing for London to take resources from other parts of the UK…while at the same time complaining that London “subsidises” the rest of the UK and demanding a “fair share” of “what it contributes”.
If the capital takes a “fairer” (they mean “bigger” and should just say it 100 times) share of this money pouring out to other parts of the UK from the capital, then that share has to come from, er, another part of the UK as a result of lowering the amount of that subsidy to other regions. Unless, like much of government, the Commission decides that we can just hike more taxes and more ways of taking ever more cash from a buckling and dwindling productive sector of the economy. Carry on giving the SAME cash to the regions and also give London a “fairer” share (more cash).
I’m afraid this is Alice in Wonderland economics if it ignores any need to increase taxation or take away from someone, and let us hope that the deliberations of the Commission are better than the public impressions created so far, or by off-the-cuff stormy sky thinking. It has to be said that no businesspeople appeared to be on the first list of Commission members I saw, although that may have changed (and I may have missed them as the detail of the members has not been widely aired)…
If we are talking about MORE cake (I think we know that we are) then that has to come from somewhere. You can’t just hack away at a Victoria sponge with a blunt instrument and high hopes and fondly imagine more cake will magically appear in the process. And at the end of the day the extra cash has to come from some taxpayers. The Commission has to address who will have to stump up, how much and what for? It is central to arguments about funding.
Putting off business
This too is the type of thing that private business (real business, that is) does NOT like. It wants consistency in taxes and demands, and it wants simplicity – not a complex set of bureaucrats all fighting turf wars and trying to raise ever more cash by way of taxes and fines and inspections through a growing labyrinth of bodies all with a vested interest. The only businesses that can work in these nightmare circumstances are government-funded so-called ‘businesses’ which spend half their time in lovingly filling in forms because that’s what the bureaucrats who have set them up tell them a business is all about. And that is why most real business heaved a sigh of relief when cities recently voted overwhelmingly to prevent the beginning of the elected mayor boondoggle in their areas. Fewer people to attack them, milk them and try to control them (and therefore damage them).
In the early 1990s, the wretched Major government was faced with what it knew would be a tidal wave torrent of regulations and rules and directives from the EU. Over these it knew it had no power to alter, amend or repeal. So to blunt the effect and draw the sting, it set up a diversionary ‘Deregulation Task Force’ as a way of pretending that the Government was in fact planning to introduce FEWER regulations. And of course, none of the new regulations were actually “the government’s” (ie Westminster’s) – they were just rubberstamps of EU directives.
What better than to issue a few edicts repealing laws banning “ye pigges from breedeing in yon Towere of Londonne” (after checking with the EU first to make sure it was aok to junk outdated laws from the Middle Ages) and call it deregulation. A classic cynical con, designed to pull the wool over the eyes and to enable tame journalists writing for on-side newspapers to ignore the torrent of embarrassing new laws from the EU and to give glowing pap coverage to the government’s ‘bonfire’ of rules about yon pigges.
Powers devolved upwards
The same smoke and mirrors, sadly, applies with ‘devolution’. Government in all its forms has never been more centralised and is becoming ever more so – rules right down to the tiniest aspects of our lives are set at a higher level and they cannot be altered, amended or repealed.
So devolution, which could have had such force in the 1960s or even 1970s, is in fact being accomplished within structures specifically designed to ensure a continued and ever increasing iron control from the centre and to permit the centre to seize control at any stage of any aspect if those to whom admin has been ‘devolved’ step out of line in even the tiniest way. And in fact while admin is being devolved ‘downwards’, actual powers of course have been ‘devolved upwards’.
As usual in the UK, the tendency is to think that foreigners begin at Calais and the EU is overseas news brought to us via satellite and the Eurovision Song Contest and nothing to do with blighty.
Dismantling of EU regions’ powers
It is therefore more sensible for the Commission, if it looks at media to try and find out about devolution, is to look at the running German commentary if its members really want to know what is happening in regard to genuine devolution of finance. All over the EU, governments which either HAD a tradition of serious devolution (Germany itself since the war), or developed one after decades of tight central authority (post-Franco Spain) are seeing massive encroachment on the actual powers of these authorities, carried out by national governments at the behest of the EU. The Spanish government, under strict orders from the EU, is planning to remove as many of the financial powers of its autonomous regions as it can without suffering revolution; the centuries long tradition of Sicily’s financial independence is now (at the behest of an unelected Italian PM appointed by the EU) under serious threat with demands that it surrenders all meaningful independence.
Rules to rescue the elite, its bankers and their collapsing euro require total central control over all budgets and increased monitoring of the detail. The constant backdoor interference by the German government in Berlin state affairs is another example. Devolution means increasingly – “well give you x billions and here is a list of what you will do with them and the rules on how you will spend the cash and even who you will spend it with”.
And of course then, to justify seizing control of the regions’ historic powers, along come all the carefully rehearsed lazy xenophobic arguments for the masses about not trusting Sicilians (‘hoho…Mafia… lazy…afternoons in bed with the mistress’) or Catalan politicians – so, casual unevidenced slurs backed only by stereotyping make it OK to unilaterally seize existing and actual powers from established elected bodies.
All the tinkering in the world with how this is done cannot mask the ultimate control by the centre and the ever greater use of that power.
“It’s (not) oor tax”
Any suggestions about more fund raising for London must take into account that the UK is not actually sat outside all of this. The billions the UK hands over to the EU through cash and through regulation and restriction are not just an entry fee and popcorn money to watch from the stands while a couple of dozen nations batter each other senseless in the first couple of decades of the 21st century in the fanatical pursuit of ‘the project’. The UK is indeed bound by a number of the stages of Economic and Monetary Union: all UK governments have taken that position seriously even if they affect to pretend that we are outside of it.
If you look at the two recent Commissions on amending the Welsh and Scottish bodies, you will see a lot of wittering on about how marvellous everything is and what a success it all is. But you will see precious little which allows major new freedom or devolution of real powers, just complex methods of making it look like there is more independence through replacing one form of funding with another and through inventing a novel wheeze in regard to a new “Scottish tax”. Look into this fully and it is not what it seems, of course.
On another related note with this Act, and one which sums up the game, much is made in glowing terms of the supposed fact that it offers “devolution of the right to fix drink drive limits”. Well, of course Scotland will not be allowed to do that, because Westminster can’t either. The upper limit is effectively set by the EU which, once all the nations have adopted it, will then issue the relevant Directive (a directive in an order). It says so. And if a country (whether the UK, England or Scotland) says ‘No’ to the EU demands on limits? Then it will issue the Directive to enforce them! It has said so…Scotland has the “power” to do what the EU is demanding, nothing more.
Tax competition or fix?
There is a case to be made for genuine tax competition, whether between London and the rest of the country, or Scotland or wherever. But the formula contained in the Scotland Act is not really that. It’s a kind of quid pro quo – cutting the central government block funding by the amount that the Scots raise in tax if and when. And because it looks better to have something you can call your own tax, then that’s what they’ll do. Still the tight grip on the purse strings, though, and still those limits on what can and cannot be done, many from the EU. It’s just another puppet on a string block fund by any other name.
And in fact, looking at the Scottish example on finance, it is fascinating to see that one area where of course Scotland could have pulled off a serious (if small) tax/business coup. It gives one hope that they almost did. It was cannily spotted by those composing this new mess of pottage and whipped away – on APD (the passenger tax on flights) the Scots for a brief moment thought they had managed to get away with it and that they would take control of this, like Northern Ireland. This is a tax which is NOT EU driven (as yet) and is a classic example of the argument that where there is NOT an overarching authority in charge setting the detail of the rules, devolution can be used to great advantage and leverage – some Scottish politicians had plans to reduce APD drastically, in light of the fact there is no EU telling you that APD has to be between one level and another.
APD is a serious barrier to travel for some people – a family travelling from the North of England, and all those flying from Scotland, to destinations even just a few thousand miles away would have been substantially better off flying from a low-APD Scotland. It would have seen a massive increase in business around Scotland’s airports (including more destinations and greater concentration of them) and corresponding drops in airports in the North of England.
It is very difficult for a family in Manchester to take the same advantage of a flight from Belfast, so safer for the devolvers to permit the authorities there to have that (as long as it is not too effective). But of course the sudden realisation of its certain impact just across the border in Scotland guaranteed it was removed from the table and not considered by the centre as up for negotiation. You cannot have effective and meaningful financial devolution in a tightly controlled centralising state like ours (ie the EU, with its subsidiaries).
Does anyone seriously think that central government will give London the right to collect APD and set its own limits? Let’s see what the Commission says about it.
Tell us what is possible
In the infamous Foreign Office advice note of the early 1970s at around the time when the UK joined “the Common Market/EEC”, it was said that no-one should mention the gradual encroachment of the EEC/EU on democracy and likely decrease in the power of the UK to make its own laws, and that decision makers should conceal this loss from the people for fear that it might provoke a public backlash. I appreciate therefore that the Commission will not want to admit that the EU’s role is a big one here, in both what powers can be exercised by devolved bodies or what they can spend their cash on.
But if their deliberations are to have any meaning, and they are to draw upon other EU cities like Berlin as examples, they must tell us frankly what is and is not possible and why. Maybe this exercise can start the process of getting real about power and where it lies. No point cherry picking and casting a wide ‘ideal world’ net which ignores realities and the law. And they need to explain in a simple way who is going to pay…and tell us if they are to declare turf war of any form on the boroughs to get hold of their cash.
And they may indeed find that under the current regime and rules the London Mayor is eternally cast as Oliver Twist, approaching the bullying Beadle (currently played by David Cameron) asking for more, with the beadle’s bosses in Brussels (“the board of well fed gentlemen who run the workhouse”) expressing outrage at the cheek.