Tag Archives: fiscal federalism

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.