Esmond Birnie: A quarter of a century on from the dawn of devolution, there's not much to celebrate economically

In a blog published this week on the Economics Observatory website (that website is funded by the ESRC UK research funding council), the economic impact of UK devolution is considered.

There is a distinct lack of evidence that devolution has improved the economic performance of any of the three devolved nations.

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Has the economic performance of Scotland, Wales and NI improved since devolution started in 1999?

There is little evidence for this. The best summary indicator is the level of GDP per person compared to the UK average. Essentially, the devolved nations have either flat-lined compared to the UK average or made only small gains.

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What are the institutional features of devolution which could have impacted on economic performance?

The blog considered five of these:

(a) Did devolution operate continuously throughout 1999-24?

This was not the case in NI where a devolved executive failed to operate fully for just over 40% of the time. This must have had some negative impact on economic performance although this is very hard to quantify.

In fact, in terms of level of GDP per person compared to the UK average there is some evidence that NI performed better when Stormont was not operating!

It probably would be wrong to conclude that this proves that devolution actually harmed the economy - one of the periods of non-operation of Stormont (late 2002 to mid-2007) coincided with very rapid growth in UK public spending.

Such ups and downs in UK-wide economic policy probably swamped the impact of whether there was an executive in operation.

(b.) Different party in power in the devolved administration compared to the UK government

Since 1999 this has usually been the case across the three devolved administrations.

This could lead to a lack of co-ordination of policy across the UK (e.g. during the pandemic?).

(c.) One party governments or coalitions

The three devolved administrations displayed a lot of variations in this regard. NI has had three, four or five-party coalitions. Whether multi-party governments lead to (good) consensual policy making or (bad) lowest common denominator policy is debatable.

(d.) No second/revising chamber

All three devolved administrations are single chamber assemblies/parliaments. This may be indicative of a lack of policy making capacity in small population regions.

(e.) Use of ministerial directions

These are where a senior civil servant requests that his/her minister records in a formal sense that civil service advice has been over-ruled. In terms of numbers of directions we know that NI has by far the largest (despite having the smallest population of the three devolved administrations).

This raises the question- was this a canary down the mine in terms of the extent of rigour of public expenditure control (and we know, in 2022-23 and 2023-24, the NI departments accumulated substantial over-spends)?

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Case studies of devolved policies

If devolution was having a substantial positive impact on the economy and society one would expect to find many examples of policies in Cardiff, Edinburgh and Stormont which were both original (i.e. not copied from England/Whitehall) and beneficial.

Instead, such a list of policies appear to be distinctly short - especially in the case of NI!

For possible examples of original and beneficial policies:

- Scotland’s replacement of the stamp tax (this anticipated the change which would subsequently occur in England).

- Wales’ introduction (the first part of the UK to do so) of the plastic bag levy.

Rather more common, especially in Scotland and NI where cases were the devolved governments went down the route of “super parity” - they used the advantage relative to England of higher public spending per person to fund public services with a lower level of charging. Hence, the absence of university tuition fees in Scotland and the absence of domestic water charges in NI.

However, it is far from clear these are sustainable policies - Scotland’s higher education suffers from comparative under-funding and the water supply and treatment industry here in NI is struggling in terms of funding necessary long-term investment.

Devolved policies may sometimes even have been harmful in themselves - Wales has varied compared to England in terms of the content of the schools’ curriculum emphasising so-called “skills” and “well- being”, and it is notable that Wales’ performance has slumped in terms of international comparisons of school/educational performance (the PISA measures).

Conclusion

There may still be some political arguments for UK devolution but the economic evidence rather suggests substantial negative trade-offs in terms of policies and policy outcomes. Common place arguments that England should be envious of the devolution elsewhere in the UK lack a solid evidence base.

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Dr Esmond Birnie, senior economist, Ulster University Business School