Fair representation is the first pillar of constitutional renewal. Federalism is the second. The third and final pillar is fiscal federalism.

Without financial autonomy, political devolution is incomplete. Without it, devolution is symbolic. With it, it becomes real.

The United Kingdom remains highly centralised not only politically but financially. Most revenue is collected by Westminster and redistributed through complex grant systems. This creates dependency, weakens accountability, and encourages short-term decision-making. Governments often spend money they do not raise and raise money they do not directly spend.

A durable federal settlement requires power, responsibility, and funding to be aligned.

Under fiscal federalism, state governments in Scotland, Wales, Northern Ireland, London, and the English regions would control meaningful portions of major tax bases, including elements of income taxation, business taxation, and consumption taxes. They would gain genuine responsibility for shaping economic development and funding public services.

In return, they would assume responsibility for major domestic functions including health, education, housing, transport, infrastructure, and regional economic development.

This alignment is crucial. Those who make decisions should manage the consequences. Citizens should be able to see clearly who raises revenue, who spends it, and who is accountable for outcomes.

Local government would also gain stronger fiscal powers. Councils could make greater use of land value taxation, tourism levies, congestion charging, and other locally appropriate revenue sources. This would reduce dependency on central grants and improve responsiveness to local priorities.

National solidarity would remain essential. Fiscal federalism is not a race between regions. A federal equalisation system would ensure that wealthier areas contribute more to support less prosperous parts of the country. This preserves cohesion while allowing genuine autonomy.

Such arrangements are common in successful federations because they balance fairness with decentralisation. Regions gain freedom to innovate and tailor policies to local conditions, while citizens retain the benefits of belonging to a wider national community.

Fiscal federalism also encourages policy innovation. Different regions can pursue approaches suited to their own economic circumstances. Successful policies can then be adopted elsewhere, creating a system of practical experimentation rather than uniform central direction.

The political appeal is broad. Labour supporters gain stronger tools for long-term regional investment and economic rebalancing. Conservatives gain reduced bureaucracy and clearer accountability. Greens gain the ability to tailor climate, energy, and infrastructure policies to local conditions. Reform UK supporters gain visible and meaningful decentralisation of financial power away from Westminster.

Just as importantly, fiscal federalism need not expand the size of government. Indeed, by replacing complex grant mechanisms and overlapping administrative structures with clearer responsibilities, it may allow government to operate more efficiently and transparently.

Together, the three pillars form a single constitutional settlement. Fair representation ensures votes translate into representation. Federalism ensures power is exercised at the level where decisions are experienced. Fiscal federalism ensures that authority, responsibility, and funding operate together.

Each pillar depends on the others. Fair votes without devolution leave power concentrated. Devolution without fiscal autonomy leaves governments dependent. Fiscal autonomy without democratic legitimacy risks weakening accountability.

Taken together, however, they create a coherent vision: a United Kingdom where votes count, where power is closer to people, and where funding reflects real economic geography rather than political convenience.

This is not a programme for breaking up the Union. It is a programme for making it work. By restoring the connection between democratic choice, political authority, and financial responsibility, it offers a more balanced, durable, and genuinely democratic future for the United Kingdom.

* Iain Donaldson is the treasurer of the Rochdale Liberal Democrats.