Is federalism the answer to the Scottish constitutional question?

Federalism is regularly cited as an answer to the constitutional question, but implementing could prove difficult. Picture: Greg Macvean

The Institute of Economic Affairs (IEA) was in Glasgow on Monday to discuss the “economic myths and opportunities” of Scottish independence, with senior SNP MPs Pete Wishart and Kirsty Blackman, the party’s economy spokeswoman at Westminster, among those taking part.

What the left-leaning Nationalists have in common with the firmly pro-business IEA is a desire to see the current UK constitutional settlement radically altered. While the SNP is of course in favour of full independence, many in the party would be unlikely to dismiss the beefed up powers for Holyrood that ‘full federalism’ would bring.

The IEA claims that if Whitehall was willing to hand over a further 15 per cent of taxraising powers to the devolved nations, the stimulating effects could be “dramatic”.

Some estimates suggest it could boost GDP per capita by as much as six per cent, about £1,800 per person.

“If the UK is to hold together over the medium term, it is reasonable for foreign affairs and defence to be determined at a UK-wide level,” IEA director Mark Littlewood wrote in The Times this week.

“But the entire structure of the welfare system, the setting of all taxes and the level of private involvement in provision of state services of all kinds can be left entirely to the discretion of the four constituent nations.”

Mr Wishart himself said that “any proposal for an international, federal UK is, I think, something we should welcome and treat as part of that conversation about the future of our country.”

Welcoming the IEA report, he added: “There’s so much nonsense spoken about federalism.

“This idea that somehow Scotland would be equal to some region of England in terms of a federal solution across the UK is totally, utterly unacceptable to this party.”

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So what is the IEA proposing?

It believes “the most appropriate system of governance” in the UK is an “entirely federal solution”. In practice this means creating a federal level of government which would be responsible for a limited number of powers including defence, foreign affairs, banking regulation and border controls.

All other powers would be exercised by two separate governments covering Scotland and the rest of the UK, which could be expanded in the future to grant Wales and Northern Ireland the same status as Scotland.

The IEA believes that the current devolution settlement lacks “meaningful tax competition” between the nations, with a tendency towards higher public spending as a result.

“Divorcing spending and revenue-raising decisions also blurs who should be held responsible for poor outcomes,” it adds.

Implementing such a radical restructure would, of course, be difficult.

As Scotland, Wales and Northern Ireland make up just 15 per cent of the UK’s population, the question remains whether popular support – and a majority of MPs – could be found.

Dr Wilfried Swenden, a senior politics lecturer at the University of Edinburgh and federalism expert, explained some of the challenges to The Scotsman in 2016. “Would the UK government be willing to give a veto right to Scotland, Wales and Northern Ireland? The logic of federalism would say yes,” said Dr Swenden.

“If the UK was a truly federal  multi-nation state, it would somehow have to accept that some decisions are subject to the consent of not just a popular majority, but a majority of the nations that constitute the UK.

“But geographically, this is difficult. I think one of the weaknesses of the UK set-up is the absence of regional governments in England or the absence of an English parliament.”