Too big to fail and too big to know

A wicked Tory cast into the pit of the virtuous left! That’s how I felt while attending the 20^th Freudenstadt Symposium in southern Germany a week ago. Wales is still loosely twinned with Baden-Wurttemburg and the original accord signed by Peter Walker was the inspiration for the first symposium in 1991. The themes since have ranged widely but always around the fixed point of regionalism within Europe.

We have come a long way from the heady days of the early 1990s when a Europe of the Regions seemed such a powerful idea. Europe was then still in the first flush of its post Cold War youth. The mistakes that dogged Europe – east and west – after World War Two suddenly seemed amenable to all sorts of innovative solutions. Yet twenty years on the EU is gripped by a currency crisis, a deficit problem and a bewildering lack of transparency in its procedures. Not all hopes have been dashed, of course, and devolution in the UK has become a reality. Nevertheless, is the citizen any more powerful now in what one speaker called austerity Europe?

In Scandinavia, we were told,  there is still a consensus that the state must supervise the provision of a broad range of high quality public services. The citizen is often directly involved in this model and innovative services continue to develop and emerge to meet the demands of a rapidly changing society. Perhaps the most striking example is the Norwegian system of early year’s education for 0-3 year olds. It is based on the principle of play and adventure – often out-of-doors. Our foundation phase, while a very welcome advance, almost seems tame in comparison. There are no gold plated ‘health and safety’ regulations impairing progress in Norway. The focus is on the child and even the odd accident is accepted as an educative experience.

It is clear that in Britain the citizen has been let down for many years by the state’s indifference towards vocational education, or so another speaker claimed. Certainly in Germany vocational education is highly prominent. The British participants avidly watched a German TV commercial which proclaimed society’s need for excellent vocational education. Those involved in ‘handcrafts’ – alas in Britain we now shy away from using the powerful description ‘artisan’ – keep modern life going. The advert starts in a typical German street and over a couple of minutes the people are stripped of clothing and all electronic wonders as the buildings first decay and then fall down around them. The scene ends on a sort of defunct, stone-age savannah. Now we know what happens to a world without plumbers!

Localism, a term now in vogue on left and right, has been greatly undermined by the financial crisis and the forces of globalisation. It is getting more difficult to tax, and many citizens feel angered by the tax burden that is falling on them and not the bankers. Public servants seem likely to suffer most as our economies slow down and shudder through the present financial crisis. And do we understand the underlying processes at work in the global economy? Apparently not …

We were told, in an elegant phrase, that banks that were ‘too big to fail’ were also ‘too big to know’, such is the complexity of international finance. I don’t know whether this comes as a comfort or not because as an interested citizen I had assumed the fault for lack of economic understanding lay with me not the ineffable nature of the system. We were also told, in a dark whisper, of the Minsky thesis that stable economies inevitably generate instability in the financial system. Now we know the extent of the challenge facing the regulators!

If all this is gloomy stuff, the energy crisis seems to put the citizen at the centre of most successful strategies to conserve and generate green energy. Germany already offers some stunning best practice such as the estate of ‘plus energy’ houses in Freiburg which generate more energy than the inhabitants consume. And everywhere in Baden-Wurttenburg it seems ‘active homes’ dot the landscape with an array of micro generating devices.

And so to my own contribution to the symposium. How will devolution develop in the next five years or so? The general election marked the further decline of the two major parties but also the willingness of the electorate to ‘produce’ a hung parliament. Britain is at its most politically fluid since the 1920s and this is creating challenges and opportunities that would have been difficult to conceive in the early 1990s.

Fiscal devolution is now the big game in Scotland and one that casts a shadow over WAG’s desire to reform the Barnett formula. There is an obvious tension between Calman’s call for more of the Scottish tax base to be devolved (the Canadian model) and Holtham’s appeal to base funding on a modern, needs based formula (the Australian model). The Scots favour more power over their tax base and see this also as a way to preserve their current advantages. While in Wales – with a much weaker tax base – there is a strong demand for a substantial needs based block grant. Could England/Britain ever agree to asymmetric fiscal devolution? Or is it too much to expect Westminster to pay twice and permit two different systems for Scotland and Wales that share only one obvious factor – English disadvantage.

Finally, is Britain working towards a fuller constitutional settlement? The West Lothian question is to be examined by a commission but this seems to leave the matter in the long grass. One is reminded of the response of a former Cabinet Secretary who said “The most coherent reply to the West Lothian question is not to ask it!” There is a danger in all this that the devolution ‘conversations’ taking place around Britain are very insular. The Scottish debate is focused on Calman, the Welsh on Holtham, and the English conversation is barely a whisper. This is parallel talking not conversation.

Whatever the future may hold for a Europe of the Regions it remains a popular and potentially powerful idea. Opinion polls around Europe consistently show an appetite for local and regional decision making wherever possible. But there is also an equally prevalent ‘devolution paradox’. Citizens want localism but also consistent, high quality public services. Post code lotteries – inevitable in devolved structures – are always unpopular.

One way to at least manage this paradox is to agree federal structures. But my own call for a federal Britain was treated sceptically, even in Baden-Wurttemburg.