The Institute for Government will be hosting the First Minister of Wales, Rt Hon Carwyn Jones AM, to give a keynote speech on constitutional reform.
Following the referendum in Scotland, constitutional reform has moved up the political agenda. Mr Jones has argued since 2012 that devolution has fundamentally changed the constitution of the United Kingdom, and he has called repeatedly for an inclusive and holistic process to address this. Speaking in support of the No campaign, he argued for enhanced devolution as a means of responding to national aspirations within a reformed union. His speech develops this theme in the light of the Scottish referendum outcome.
Transcript of speech
Peter and colleagues -Thank you for inviting me to speak today on the future Union. It is good to be here at the Institute for Government, where issues like governance and accountability are taken seriously.
This is a bit of a minority interest in some quarters. I should know, I have been talking about constitutional reform for years. It was a struggle to get people to recognise the importance of having a sensible and established position well before the Scottish vote. Then of course, we have the referendum and suddenly the Union is centre stage.
So, now we face a new reality. After the referendum, can we meet the challenge of reforming the Union? Or will we do the minimum necessary to honour the pledges given to Scotland and hope the problem goes away. That is the issue I want to address today. My fundamental point will be, let’s stop talking about devolution, whether to Scotland or Wales, and let’s start thinking about the Union as a whole – and that means England too.
Why? Because devolution has already fundamentally changed the governance of the United Kingdom. This was clear before the Scottish referendum was even in prospect, and it has become blindingly obvious since then. Public support for the devolved Parliament and Assemblies has created a presumption of popular sovereignty in the different parts of the UK, which has fundamentally challenged assumptions about a centralised British state.
So much so, that I believe we should stop talking about devolution, what powers can be handed down by a reluctant Whitehall, and start talking about the Union, and the issues we must share with each other. The referendum campaign underlined this.
Let me put my cards on the table: I believe in the United Kingdom. Just not the one we have today. I want change for the very reason that I want the component parts of the UK to stay together, our people travelling freely, trading freely, sharing the institutions we have built together.
I was relieved when the people of Scotland voted decisively to reject independence and remain within the UK. The result of the referendum was clear - with a greater than ten point gap in favour of the ‘no’ side.
As far as Wales is concerned, we have never been interested in independence. I have no desire to see a separate Welsh pound. We value Britain’s common defence and our contribution on the international stage. And events in Scotland have emphatically not led to a surge of separatist sentiment west of Offa’s Dyke. If anything, it appears that people in Wales have seen what was taking place in Scotland and concluded that we are - in last month’s terminology - Better Together.
That’s not to say that the media aren’t too quick to think that Wales is, or ought to be, a mini Scotland, always running to catch up with our Celtic cousins. If Scotland is considering leaving the UK, then surely Wales should want to do the same? And, when Wales fails to fit that convenient template, the explanation has to be that there is something wrong with us. We lack ambition. We are timid. We are missing the chance to achieve our historic destiny. This is all nonsense.
But then we’ve long realised that it isn’t easy being Welsh. For years we’ve had to put up with football commentators who referred to the English team as “we”. We saw the interchangeability of the terms “English” and “British”. The newspapers we read are mainly printed in London and in the main don’t cover what happens in Wales. Many have Scottish and Northern Irish, but not Welsh editions.
For years our language was ignored or worse, and we’re not represented on the flag of the state that we’re a part of. Even Lord Ashcroft called Cardiff Central and “English marginal” recently.
Before I turn into a younger version of R S Thomas, I should add that Wales’s cultural identity is strong. It is thriving.
The fact that it survived a period when we had virtually no national institutions is remarkable. But we reject the binary choice – Welsh or British. We are Welsh, British and European. Welsh for the Six Nations, British for the Olympics, European for the Ryder Cup. Simple!
But this is about so very much more than sport or culture. In the last stages of the independence campaign, I travelled to Scotland to put the spotlight on the social case for the Union. Indeed, Gordon Brown made these arguments the feature of the last days of the campaign. In essence he made the case for the Union on the basis of social citizenship and solidarity. For Wales, this issue is critical, because it is a project which we identify with. We feel part of it.
Throughout the nineteenth and twentieth centuries, Wales was heavily involved in movements for reform. These battles, for democracy, for trade union rights, for basic living standards, had a Welsh dimension, but they were part of a broader canvas. We worked to build a better Wales AND a better Britain, side by side with our compatriots in other parts of the UK.
I believe that this is why independence holds so little appeal in Wales. Our battles were never for Wales alone – and improvements in the lives of ordinary people were never won by Wales alone but through the solidarity of united peoples acting for the common good. Irrespective of thirteenth century history, Wales in 2014 is part of a voluntary union of four nations, by the consent of the overwhelming majority of Welsh people. This is not some craven or supine position – it is based on a cool, collective analysis of our vital interests.
But even so, there is growing support for Wales to take greater control of its own affairs. In a nutshell, we don’t want to undermine the ties of solidarity and citizenship that link us to the rest of the UK, but we want to be able to respond to the needs of Wales in line with our political values. And, at the expense of trying your patience, I have to insist that we want and need to be able to do this within an overall financial settlement that is demonstrably fair to us and fair to the rest of the UK.
Financial reform is key to ensuring a stable and lasting Union. The current funding system that operates in Wales, Scotland and Northern Ireland – the Barnett formula – makes no attempt to answer that most fundamental question: how much does each nation actually need to spend in order to deliver its public services? Instead, the formula rolls forward an arbitrary baseline established in the 1970s and adjusted only for population size. Barnett is, frankly, the constitutional equivalent of fixing a hole in the roof with blue tack and cardboard.
Lord Barnett is one of the least complimentary people you’ll hear on this subject. Indeed yesterday was his 91st birthday and perhaps the best belated present he could have would be a new system of providing fair funding to the constituent parts of the United Kingdom.
The British state has done an amazing job in managing to ignore this problem for over 30 years. Nonetheless, if there is to be a lasting settlement that can secure support of citizens in all parts of the UK, it has to be addressed. The Whitehall/ Westminister shoulder shrug does no one any credit.
By far the best solution from a UK perspective would be for the funding of the devolved administrations (and the regions of England too) to be put on a new basis, with an assessment of needs at its core. That really shouldn’t be controversial. Needs-based funding simply means that the distribution of resources across the UK should take account of factors such as demography and health status. That seems straightforward to me.
This is not special pleading on the part of Wales, which does badly out of the present arrangements. Nor is it the politics of grievance, in fact it is the reverse. It is about recognising that all parts of the UK are entitled to a fair share - no more and no less.
In Wales we do not hand out the begging bowl. We contributed greatly to the prosperity of the United Kingdom through coal, steel, tinplate and slate. Is it unreasonable therefore that we should receive a fair share of the pot?
In politics, of course, you can never let the best be the enemy of the good. Given what the Prime Minister is reported to have said last week, I recognise there may be significant barriers to securing this sort of reform. If Barnett reform is not on the cards, then my priority has to be a fair deal for Wales within the present architecture. There is a perfectly straightforward proposition on the table, involving an adjustment to the formula as applied to Wales. This would take away its inbuilt tendency to drive our relative funding levels ever downwards. I’ll spare you the technicalities, but this so-called funding ‘floor’ would go a long way to securing a stable basis to devolution finance in Wales.
Devolving tax and welfare powers
So I believe that financial reform is in the best interests of the United Kingdom. Once achieved, it is then perfectly sensible for devolved Governments to take on greater responsibility for raising their own resources. Both Wales and Scotland have taken steps in this direction in recent years. As someone who is instinctively pro-devolution, I cannot object to moving further towards financial autonomy for Wales and Scotland. I would also welcome England, joining that journey, if that is their wish.
But, if handled badly, tax devolution has the potential to cause havoc with the integrity of the UK. As a believer in the UK and in fairness, I recognise that many taxes are better run from the centre on a pan-UK basis. There are real dangers in devolving corporation tax, for example, to some parts of the UK, but not to others. That risks handing a permanent tax advantage to certain nations or regions, leading once again to damaging perceptions of unfairness. Unfettered tax and spend autonomy would create a situation where the poorest areas had the worst public services. This would ride roughshod over equity and needs, and would present real risks to the Union’s stability and cohesion.
On the other hand, there is a good case that different parts of the UK should be able to influence the balance between levels of personal taxation and levels of funding for public services, provided they bear the cost of variation. Partial devolution of income tax, if underpinned by a fair overall settlement, would be one way of achieving that goal.
Thinking more radically, we may over time want to look at fundamentally restructuring our tax system, drawing lessons from places such as Germany. For example, it could make sense to me, to combine pan-UK solidarity taxes, which ensure equity across the Union, along with extensive devolved flexibility to top-up or reduce certain tax rates (and budgets) in line with local preferences.
I have spoken at some length on finance, because it is so critical in enabling us to deliver for the people who elected us. But let me then briefly address one key aspect of the other side of the coin. It remains to be seen whether devolution of welfare powers will be on the table for Scotland and indeed for Wales. Whatever is on offer, the Welsh Government will want to weigh up the benefits and risks very carefully. Without financial reform, and a proper transfer of resources, our room for manoeuvre is limited.
Quite apart from the financial pros and cons, we should also think very carefully about why, exactly, specific benefits should be proposed for devolution. In recent days, a number of people – and I am one of them – have spoken about establishing “Home Rule” for Scotland and Wales. We should remember that that language was first used long ago, before government accepted responsibility for establishing universal systems of social protection for all our citizens in the UK: in other words before the welfare state was put in place. If there is to be a modern form of Home Rule, we must be careful that it does not serve to undermine that enormously important achievement.
Our welfare state establishes a certain set of rights and entitlements for our citizens which apply wherever they live within the UK. I place a strong value on the fact that we all have an equal claim on the safety net that protects us – however imperfectly – from Beveridge’s five famous ‘giant evils’. So I see social security as one of the core components of our common citizenship – one of the great achievements of the UK. I would not want that safety net to fray as a result of ill-considered or rushed reforms, which seems to me what we might get from Whitehall, particularly when it is all being bundled up in the English votes for English laws debate. Indeed, we often talk about devolution in terms of the three smaller nations, but let me be clear, we must address devolution for England too.
The Union of the future
That brings me to my final point – where are we heading as a Union and how do we get there? The key issue is cultural – there has to be a change of mindset at the centre. As I said earlier, we have to move from a devolution mindset to a New Union mindset.
A devolution mindset starts with the assumption that the Westminster Parliament is sovereign and we are fundamentally a centralized state. That thinking has led us to making concessions to national feelings, by way of specific limited delegations to the so-called devolved administrations.
A New Union mindset, on the other hand, says that the UK is a state governed by four representative institutions. Those Parliaments and Assemblies embody popular sovereignty in each part of the country, and yet work with one another for our mutual benefit.
From that standpoint, the focus should then be on a realistic assessment of the benefits of a New Union, on defining the powers which it is agreed should be held at the centre. Everything else should be decided locally, with direct accountability at that level, and transparency of decision making to the citizen.
On the day after the Referendum there were encouraging signs of a change of mindset. There was a recognition that the Old Union had been swept away. The Prime Minister recognized (at least for a few moments) the implications for the whole of the UK, and said that Wales should be at the heart of the debate. Music to my ears – but how real is this change?
Only a few short weeks since the referendum, there is talk of opting out of the European Convention on Human Rights and a new UK Bill of Rights. Let us not get into the substance of the argument, although I do find it astonishing.
For today’s purposes, the point is that such proposals are simply not within the gift of Westminster to deliver for the whole of the UK. The consent of the other Parliament and the Assemblies would be needed. We made this point very clearly in evidence to the Commission on the Bill of Rights. Again, my point is that Westminster has still not woken up to the fundamental shift that was already underway before the referendum. Indeed, three weeks later it doesn’t appear that lessons have been properly learned if some of the rhetoric coming from Westminster is taken at face value. I should make clear at this point too that I believe nothing will damage the Union more than the reneging of the “vow” made during the Scottish campaign.
That is why I think we need some federal thinking. In the UK we seem incapable of addressing questions of state structure and governance on grounds of principle. In the summer I was invited to speak to a conference of political scientists in Montreal, and this gave me an opportunity to talk about federalism in a UK context. I observed that here, federalism is associated with the spectre of a centralised European super-state located in Brussels. But we can look at it differently. As the Swiss socialist Andreas Gross has observed:
“Rather than constituting a model for an ever closer political union or a European state, federalism implies a process of balancing power in a differentiated political order which enables unity while guaranteeing diversity.”
Enabling unity while guaranteeing diversity is precisely the challenge we face. In other words, striking the best balance between national citizenship and local flexibility. Federal thinking gives us a new starting point to challenge the way we habitually view the state.
The Old Union starts the discussion in the wrong place, because it starts with a presumption of centralization and undivided sovereignty. By contrast, the New Union starts from a premise of diversity and the legitimacy of different tiers of government. Now that we have democratic mandates at different territorial levels, we need to rethink where power lies and genuinely embrace multi-level sovereignty.
These are complex issues and that is why, for the last two years, I have been pushing for a constitutional convention, something I have repeated again to the Prime Minister in recent days. I have suggested some outline terms of reference, and stressed the importance of the convention being jointly owned and supported by all four administrations, and not by the UK Government alone. I look forward to his reply. Because the work cannot stop there. To have true relevance, and to break through the anti-politics sentiment that risks suffocating the old, established parties, we must give ownership of the Convention to the people of the UK. The last thing this can become is a stitch-up behind closed doors, which gives the impression that politicians are carving things up in their own interests. A genuine re-founding of the Union, which I think is essential for its survival, must be done with society as a whole at the heart of the process.
My argument is that the fundamental underpinning assumptions about the nature of our state have disappeared for ever, but have not yet been adequately replaced. We need a process which will think through how our institutions of governance at Union level can reflect this new reality, of a UK which is a voluntary association of nations, self-governing in many key respects, but working together for our common good in a dangerous world.
We need to think about new and better mechanisms to enable our legislatures and governments to work together more effectively on a basis of mutual respect. We have distinct identities in each part of the UK, but also shared cultural and democratic values which can serve as a strong foundation for a New Union. The task now is to think this through systematically in terms of our structures of governance at the Union level.
Working through the implications for the different legislatures and governments, and their relationships one to another, will not be straightforward. Our best days though can be ahead of us – but only if we accept the need for change and work together to make it happen.
Questions from the floor
The First Minister made a number of further points prompted by questions from the Chair and from the floor, including:
- He called for a quicker and less begrudging response to specific proposals – and demonstrations of popular will – regarding the devolution of specific powers (noting that the first Silk Commission report did not get a response from Westminster for over a year).
He mentioned a number of areas which he did not wish to see devolved:
- the welfare state
- employment law – where he ideally like to see Europe-wide protection
- a self-contained civil justice system.
He discussed a number of weakness in the current devolution settlement:
- The unclear boundaries of competence between Westminster and the Welsh Assembly, which has led to two bills ending up in the Supreme Court.
- The theoretical veto power of the Secretary of State for Wales over any Assembly Bill.
- The theoretical power of the UK Parliament to abolish the devolved legislatures without the consent of the electorate.
There was further discussion of some of the issues which might be tackled at a constitutional convention:
- He voiced his support for an elected House of Lords, or at the very least an upper house which recognises the four nations: although would not want to see the House of Lords become a second chamber for the Welsh Assembly.
- He argues that the convention should look at structure rather than powers. For example, there should be a single system through which specific powers are devolved to the devolved administrations, as opposed to three separate ones.
- He said there should be a mechanism for listening to the public in the constitutional discussion.
- He acknowledged that the English question is the hardest part of this discussion. People in the North of England and the Midlands can feel equally marginalised and distanced from Westminster. He said we need a new settlement for the whole of the UK. An English parliament is a possibility, as is a system of regional assemblies.
- He suggested that London could provide a template for English regional government – although noted that the London Mayoralty and Assembly were established on a wave of public support, unlike the North of England Regional Assembly where the momentum was lost.
- He said he does not want to see the convention process – which should deal with fundamental questions – delay the devolution of further powers.
- He noted that borders are not set in stone, they are porous (using example of the Republic of Ireland and Northern Island).
He spoke about the timetable for legislation, in light of upcoming elections:
- He noted that all four parties in the Welsh Assembly have called on the UK government to come forward with proposal for Wales by January. Acknowledged that it was unlikely that powers involving primary legislation would be passed prior the Welsh Assembly elections in May 2016.
- He responded to a point for the chair that Wales had a devolution process, not a settlement by saying that a settlement was something that was accepted by the majority – something which is lasting.
- He broadly supported the recommendation of the Williams Commission that the number of local authorities in Wales should be reduced.
- He described the debate on ‘English votes for English laws’ as ‘farcical’, because it is being carried out in reaction to events in Scotland, rather than being done ‘sensibly’. He noted the difficulties in defining an ‘English law’ without an English Parliament.
- He noted that all parties face the challenge of how to run their general election campaign, when certain pledges don’t apply in the devolved nations.
- He argued that the Barnett formula needs reforming: it is based on outdated data; Wales loses out, and so do many regions of England.
- He said that if Wales were to have its own income tax varying powers, there would be a natural break as to how far they could be applied, as people can go and live over the border. It wouldn’t work in terms of UK-wide solidarity, and it wouldn’t work alongside Barnett. There has to be a mechanism to ensure that money is redistributed to where it is needed.
- The Joint Ministerial Council could be a more useful machine for governments working together, and much more active, if it was taken more seriously. At the moment it is more a forum for grievances, and is not well-enough-attended by the Prime Minister, or the First Minister of Scotland. There is at the moment an ‘us’ (Scotland, Wales and Northern Ireland) sitting across a table from ‘them’ (UK). It should be a meeting of Heads of Government.
- He answered a final astute question: what would follow if, in an in/out referendum of Europe, the majority of Wales voted ‘in’? He said that it was ‘a constitutional difficulty’. Being a member of both unions is key to the Welsh Economy: they are a gateway to a market of 500 million. Without that EU access, Welsh jobs would be lost.