by David Mathieson
It is ironic that just as the nationalist government in Scotland is churning the ground in preparation for a referendum on independence or ‘devo max’, another European country, Spain, is actively considering at ways of reining in a decentralised state.
The administrative system in Spain is one of the most highly devolved of any country in the EU and the wide range of powers exercised by the powerful regions or autonomias has long provided something of a model for the SNP.
Yet, with their economy under pressure, the costs of ultra-devolution are being increasingly questioned by Spaniards themselves. Some regions are close to bankruptcy whilst the leaders of others are would like to throw in the towel and revert to a more centralised state. A new political debate has opened up in which many ordinary Spaniards are openly asking ‘what is the point of further devolution – and is it worth the price?’
The 17 Spanish autonomias are generally responsible for the organisation and delivery of key public services such as health, education and justice and these alone account for some 80% of average regional spending.
The funding comes from a mixture of central and regional government revenues although not all regions enjoy the same spending powers nor do they raise revenue in the same way. The founding fathers of the post-Franco constitution decreed that whilst the pace of devolution would be determined by local needs the eventual goal should be a uniform provision of services or what the Spanish have dubbed café para todos or ‘coffee for everyone’.
A noble aim maybe, but in the meantime the mishmash of services can be confusing – even the most enthusiastic advocates of the system admit that there are failures of coordination – and it is costly.
The outspoken Conservative president of the Madrid region recently estimated that the autonomia could save several billion euros by devolving or recentralising some services to the state. Just how much the savings would actually be worth are debatable but there are many examples to suggest that that significant economies of scale could be gained by streamlining regional spending.
A particular problem has been the growth in the number of civil servants or funcionarios working in the regional administrations as powers have been handed over. Between 1998 -2008 the total number working for the regions to staff the devolved services almost doubled – from 667 000 to 1 345 000 – adding another 668 000 to the payroll. But during the same period the numbers of people working for central government only fell by half that number – 303 000.
The growth in regional spending – administrative or otherwise – has not been financed entirely from revenue but from borrowing. In the good times this was poorly scrutinised by central government which avoided a political stand-off with the powerful regional governments but serious shortfalls are now coming to light.
Just before Christmas last year, for example, the Valencia region appeared to be hours from defaulting on €123 million loan from Deutsche Bank and was only saved by intervention from Madrid.
What made the incident all the more startling is that Valencia is actually one of the wealthiest – not the poorest – regions in Spain. However, like others, it had become over-dependent on revenues from the construction sector bubble which have now all but disappeared.
The Spanish experience does not auger well for Scotland if it opts for either ‘devo-max’ or wholesale independence as there is nothing to suggest that either will be a cheap option.
A direct read-across from Spain maybe limited but the experience indicates that there are questions for the SNP to answer. The Economist recently provoked the ire of nationalists when the magazine’s skittish cover portrayed an independent Scotland as ‘Skintland’. First Minister Alex Salmond described it as ‘an insult’ but failed to address the serious points made in the analysis: that a go-it-alone Scottish economy would be over-dependent on (declining) hydrocarbons, that the nationalists have no plan B if profits fail to materialise from alternative energy development and that Edinburgh will struggle to recover as a global centre of financial services.
In an uncertain global economy it is evident that a country of 5 million people will be far more vulnerable to external shocks than one of over 60 million.
Perhaps the biggest question of all though is what currency will an independent Scotland adopt? The attraction of the Euro has dimmed, so will Scotland keep the pound? There are plenty of people in Spain who could tell Salmond about the dangers of being locked into a monetary union without fiscal union.
During a trip to Madrid earlier this month Alex Salmond sought guarantees from the new Spanish government that it would not block Scottish accession to the EU were it to become independent. He did not get them but in any event Salmond was asking the wrong question.
He should have been asking the Spanish for a candid assessment of the real costs of ‘devo max’ and independence.
David Mathieson is Chair of Labour International, the “CLP” for the 800 Labour members who live overseas.