Thinking Aloud on Scotland and Nigeria

Of course there must be some kind of link between the recent referendum in Scotland and Nigeria. Or is there? Well, if there isn’t, let’s find one.

In reality, a Yes vote would have made it easier to draw parallels with Nigeria (especially the Niger Delta) – it’s hard to imagine which parts of Nigeria would vote to remain as one country if the vote were put them freely today. But that is mere speculation. Where I think there are interesting parallels to draw is in the structure of the countries and how they are run.

First, a simple equation (apologies, if this comes across as patronising) – England + Wales + Scotland = Great Britain + Northern Ireland = United Kingdom. The UK has no states. Scotland has a parliament, Wales and Northern Ireland have Assemblies, Scotland has a Parliament, England has nothing in particular. They all have varying powers – Scotland’s Parliament for example has what is called the Scottish Variable Rate (SVR) which allows them to adjust income tax up or down by 3%. They have never used this power which the other ‘countries’ don’t have ergo, wherever you work in the UK, you pay the same amount of tax. At least for now. There are other varying powers – Scotland can control the NHS in Scotland in a way that no other ‘country’ can.

It gets worse (or better, depending on how you view such a system) as the chart below shows:

Budget spending and tax receipts visualised

 

 

The chart above is self-explanatory and shows that the biggest source of government revenue is Income Tax and National Insurance. The oil revenues from the North Sea will fall under Corporation Tax which makes up 9% of the total revenues (This partly explains why Scotland is only 8% of UK GDP).

What is unusual about all this is that all that money – with the exception of council tax – is collected centrally. You will not find any other G7 country with a system like this. It is odd and quite frankly it’s a mess. Even council tax which is collected at the local level is strictly policed – councils are free to reduce the rates as low as they want but any increase has to be within set limits. Councils can also raise money from things like parking fees and fines but to prevent this from turning into a cash cow, they are again restricted from spending money raised from roads on any thing other than roads i.e. you can’t use money raised from parking fees and fines to collect waste. At least in theory. Even things like the annual filling of potholes during winter is controlled by the central government – in years when the winter is worse than expected and there are more pothole fillings required, the central government has to ‘find’ extra money to give to the councils.

So what do all the elected politicians all over the country outside of Westminster do? They collect allocations based on all kinds of formulas and spend it. The central government holds a strong hand at all times given that almost no region can survive on local taxes alone. So it’s quite easy to punish those who don’t toe the line especially when it comes to capital expenditure. This is completely different from America where you will find, say, different sales tax rates from one state to the other – across the UK it’s all 20% VAT.

In Scotland, this led to situation where different statistics were being quoted by each side during the whole independence debate. For those who wanted to vote Yes, the favoured stat was that Scotland paid more in tax per head (£10,000) on average than the rest of the UK (£9,200). For those who wanted to vote No, the favoured stat was that Scotland received £12,300 per head in public spending (allocations) than the rest of the UK which got £11,000, on average. For 2 years, both sides flung these numbers at each other. Northern Ireland pays the least in taxes but gets the most in spending while London gets less than it pays in taxes back as spending. You start to get the picture of how the numbers eventually add up.

How can a developed economy like the UK run such a centralised system where all the money flows up and then back down again? Surely, giving more powers to the regions and councils would be a no brainer? Well, it’s not that clear-cut. The fact that the UK has no constitution makes it even more messy because powers (and the money that comes with power) are handed down from the central government on a case by case basis. For example, if you consider London to be a state within the UK, it only got a Mayor in 2000 after a referendum in 1998 in which the voters said Yes to the idea.

So other cities should get Mayors too no? In 2012, the 11 largest cities in the UK were asked, via referendums, if they wanted to have their own Mayors (one city, Doncaster, already had a Mayor and was asked if it wanted to keep or abolish it). The results are below:

Screen Shot 2014-09-19 at 23.44.02

Only one city, Bristol, voted to have a Mayor. Doncaster also voted to keep its existing Mayor. All the other cities said no thanks. To be fair, the Mayors would have started with minimal powers that mostly covered transport policy – London only has powers to raise 12% of the money it spends every year, the Mayor has to fight for funding from the central government for almost everything else. But given the ‘muddle through‘ nature of government described above, Mayors would surely have gotten more powers over time.

The same year, the government tried to allow cities elect their own Police and Crime Commissioners. This time it descended into farce with a cumulative turnout of 15% (Merseyside in Liverpool had a 12% turnout). There were numerous stories of polling stations that did not see a single voter on election day. And it’s not just a recent thing either – In 2004 the government planned referendums in the North East, North West and Yorkshire areas to ask the people if they wanted their own regional assemblies with limited powers on various matters from the local economy to the environment. The referendums were supposed to be held one after the other but by the time the first one was held in the North East and 80% of voters voted against having regional assemblies, the government did not bother holding the 2 others.

Why would people reject the opportunity to have government closer to them? Again, I can only offer a simplistic answer – British people, for some reason, have a deep suspicion and hatred of politicians that is almost comical to observe. As far as people were concerned in those elections, they were being asked to create new politicians and they responded by voting No or staying at home. The Royal Society for the Protection of Birds has more members than all the main political parties combined. It’s hard to think of a class of people who are held in lower esteem than politicians (perhaps only journalists are despised more).

 

If you are a Nigerian, what I have written above might be surprising or amusing or both. First of all, the way we organise ourselves is written down in a constitution (regardless of how often we like to test its limits). A few days ago, there were stories in the papers of Lagos state internally generating N384bn in 2013. This money comes mainly from income tax and various other things like advertising signage etc. Imagine if Lagos had to send all that money to Abuja and then have it given back to it? At the moment, that’s what happens with VAT and even that is a source of annoyance that continues to be tested in court. Most Nigerians are rightly frustrated by states that generate no revenues and just wait for a monthly allocation from Abuja to the extent that IGR is now a useful measure of performance of state governors. That is to say, the UK system is unthinkable for a country like Nigeria.

So what happened in Scotland? The Scots are a proud people with a long and illustrious history. At different points in time, they have fought the English and either won (e.g Bannockburn) or lost (e.g Falkirk). Since the end of the ‘excitement’ of Empire (which the Scots contributed disproportionately to), there hasn’t been much to excite anyone in the UK. Today’s battles are over mundane things like tax rates and where to park nuclear weapons that are very unlikely to be used anytime soon.

When you have a history like the Scots do, the idea of having your taxes flow up to Westminster and then handed back to you based on some Barnett Formula must get really irritating after a while. What is so special about Westminster that my money has to go there before coming back to me? That is to say, the Scots are quite different from those other parts of the UK that rejected Mayors, Regional Assemblies and Crime Commissioners. Even though they currently have the most powers of any region in the UK, they want more. The problem, and where I disagree with the Independence movement, is that they would always have gotten more powers if they wanted it without tearing the Union apart in the process and caricaturing the rest of the UK as enemies of Scottish progress. Indeed, all the main parties were falling over themselves to promise them more powers if they voted No and those conversations will begin soon.

What does this all mean? The obvious one is that, if you accept that the UK is a developed economy, then there is more than one way to get to that point for a country. I cannot imagine any Nigerian looking at the UK and saying ‘the system seems to work well for them so maybe we should have a more centralised system too’. Derivation for the Niger Delta currently stands at 13%. The only direction that can move in is for it to increase. Or imagine the chaos of a Nigeria without a constitution?

Also bear in mind that if you point to any working federal system around the world today, the British almost certainly had a hand in creating it. Yet, as Scotland has just shown, the UK is only now trying to figure out the whole business of federalism for itself.

Like I said, I am just thinking aloud but one thing is for sure, if we ask for more federalism in Nigeria we should be prepared for how it can yield wildly varying outcomes in different parts of the country. If you give more powers to local governments, half will seize the opportunity to do good things with it while the other half will squander it and make things worse than they were. Some will want more, others will want less. If you give some parts of the country more powers, it might even lead to them wondering why they cant have everything and be in charge of their own destinies.

There are no ‘neat’ countries anywhere and part of being a country involves taking from one place to give to another. This will happen whether you are a federal system or a highly centralised one.

FF

 

P.S

Many political unions subsist on creative ambiguity.  That is, if the right question were posed, and the citizenry forced to answer it definitely, political order might spin out of control.

All praises of democracy must be embedded in a broader understanding that a) formal questions can be destructive, and b) we cannot be allowed to pose questions without limit, at least not questions which require explicit, publicly verifiable, and commonly observed answers.

Once a question is posed very explicitly, and in a manner which requires a clear answer, it is hard to take it off the table

The quotes above are taken from Tyler Cowen’s blog and it really made me think. Democracy is a funny thing – It is supposedly the will of the people but to keep it going, there are some questions which must not be asked.

Selah

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2 thoughts on “Thinking Aloud on Scotland and Nigeria

  1. Pingback: Thinking Aloud on Scotland and Nigeria – Y! Opinion

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