Matthew Heathcote is a Constitution Society research fellow, his report “The City and Federalism: the UK and Germany” will be published next week on 18 March 2024.
Over the last year, I’ve had the privilege to research and write on the potential for federalism within the UK state. Although I was enthusiastic about the issue long before my position with the Constitution Society, this year has done much to reinforce my belief that the federalisation of the UK is not simply a vanity project; it is essential for the improvement and future stability of the nation state and democratic culture.
Having joined the Society as a research student with a foot in both British and German history, I had an advantage in conducting this research. After two years living and working in Germany I had some understanding of the federal system and what it might have to offer the United Kingdom.
After a decade of inefficient economic growth, political instability and the traumatic collapse of the status quo in the UK, it’s clear to many that a new vision is required of our state and economy. Federalism, devolution and levelling-up have all been put forward, but too many visions are presented without much in the way of an evidentiary basis. Too often, federalism in particular is presented as a panacea which will cure all ills. Too often, federalism’s definition is clouded and it comes to mean anything to anyone.
My report for the Constitution Society, published next week, attempts something rather different. It documents and compares the different political, financial and social systems in British and German urban spaces. It then uses these as case studies in investigating how a federal system might benefit the British state through adaption and adoption of a German-style system. The enlightening comparison between these two similar but different countries draws on a range of evidence from across Germany. The report emphasises to readers through the German example that it would not be a single party or section of society that would profit from federal reforms. Federalisation would in fact strengthen our political culture and the financial base of the state through improving tax efficiency and promoting regional economic growth outside of London.
In the UK, the total absence of constitutional guidelines for local governance has created an unhealthy dependency upon central government, shielded by the constitutional principle parliamentary sovereignty. The history of regional governance in the UK, from the 1966 Local Governance Act to the abolition and subsequent revival of the London regional assembly, are evidence of this trend. Compare this with Germany, where the balance of power between local and national executives and legislatures is codified and protected, and it becomes clearer that Parliament must learn to tolerate local government and enshrine institutional rights for it.
However, as my report argues, constitutional reform providing rights for institutions must be matched by frameworks and practices which encourage and protect citizens in participating in local democracy and holding these institutions to account. It is as a result of this that in Bavaria, Germany’s most conservative and traditionalist state, the virtues of local democracy are praised and practised often. There, citizen’s groups bypass the financial and political barriers that largely currently impede UK voters from exercising political rights. Furthermore, the wide range of issues raised by such groups – from environmental to civic issues – demonstrate the benefits of including the whole of a diverse society rather than relying on a slither of the political spectrum.
The issue of taxation is central to constitutional federal reform and features prominently in the report. Taxation influences the political and institutional makeup on the British state, but more than that, it materially affects the lives of citizens. The recent collapse of Birmingham City Council, the largest municipal authority in Europe, is merely the beginning of a local financial crisis which will see many local councils buckle. One of the myriad reasons why this has happened is an over-reliance on council tax, and the straitjacket placed on local authorities in their ability to collect new taxes without central government intervention.
When contrasted with German cities, this dire situation is revealed even more clearly. When London’s and Berlin’s tax base is compared it is the German capital – with one third London’s population and 50% less GDP per head –which has the greater ability to tax and spend independently. London’s position as a financial and cultural hub consequently remains underdeveloped and reforms to the taxation process might benefit the city and the UK significantly, as I outline in the third chapter of my report.
The German model, with its codified relationships between national, federal and local administrations, offers a possible model for the UK, and with its emphasis on equality between the states, there could be significant popular support across the political spectrum for such reform. Reform means that local people could have the greatest say over how their taxes were spent, and idea hardly unique to the political left. By adopting a ‘consumer-based’ tax model such as that proposed by Charles Tiebout, my report argues that British federal states could promote financial competition, creating a dynamic but sustainable model to grow toward economic parity.
My report outlines all of these positions in greater depth. The reforms it discusses are not short-term solutions. They require long-term planning and execution. While both may lack appeal to political parties, the alternative is to continue with the malaise in which we find ourselves. The political party which seizes the initiative is likely to be rewarded.
The City and Federalism: the UK and Germany relies on quantitative and qualitative evidence to argue that the federalisation of the UK is not just a pipe-dream; it is an urgent necessity. Reforms to local government, codifying the division between national and local government and the overhaul of the local taxation model have great potential to improve the state of the United Kingdom. I hope that those who read the report, which will be available for free on the Constitution Society website, will agree.
Matthew Heathcote.
Matthew Heathcote is a final year PhD candidate, conducting research in German Studies at the
University of Manchester and Humboldt University, Berlin. He received his BA in History and Politics
and MA in Global Comparative History from the University of Warwick, and has twice received
funding from the Erasmus organisation to train and study in Germany. Since 2023 he has been a research fellow with the Constitution Society.
The Constitution Society is committed to the promotion of informed debate and is politically impartial. Any views expressed in this article are the personal views of the author and not those of The Constitution Society.