Single Market - A Recent Case Study #1

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The Calman Commission hasn't used this argument for its defence of the UK's supposed "single market" but it has been used by the political parties that set it up.

Their argument is that the recent financial crisis and the effects it has had on the Royal Bank of Scotland and Halifax Bank of Scotland underscore why we need the "union" since it was only by being in such a "union" that they could be bailed out.

However this doesn't stand up to international scrutiny.

On September 28, 2008 Associated Press reported that the three independent Benelux countries did the same for the Fortis bank:

Benelux nations partially nationalize Fortis bank

...The bailout will see Belgium invest €4.7 billion ($6.88 billion) and the Netherlands €4 billion ($5.86 billion) in Fortis' banking operations in the two countries. In return, they each receive 49% ownership in those national arms of the bank. Luxembourg will invest €2.7 billion ($3.95 billion) in the bank's Luxembourg operations, also for a 49% stake.

Following this, on 6 October 2008, the French bank BNP Paribas took control of Fortis's operations in Belgium and Luxembourg.

And on 30 September 2008 the French-Belgian bank Dexia was bailed out by the Belgian, French and Luxembourg governments who put in 6.4bn euros ($9bn; £5bn) to keep it afloat.

If we were to believe the arguments of the political parties that the supposed "single market" of the "union" was the only way to bail out RBS and HBOS then Dexia and Fortis could only have been bailed out by Napoleon's French Empire!

As the facts above show this is patent nonsense and it actually raises questions about the nature of the very "single market" they are supporting.

Since Halifax bank of Scotland by the very definition of it's name operates throughout both England and Scotland (and even the Republic of Ireland); and the RBS Group owns Natwest and Ulster Bank, the bailout of Dexia and Fortis by a number of independent states shows that similar arrangement amongst the nations of the British Isles was equally possible.

In fact in the case of Bradford & Bingley, Santander, a Spanish bank (and owner of Abbey National and Alliance & Leicester) was able to buy Bradford & Bingley's branch network and £21bn deposit book after a deal with Alistair Darling.

If the "union" was such a single market then those parties using that argument in Calman will have to explain what single market was in operation to bail out Fortis, Dexia and Bradford and Bingley?

The fact that Fortis, Dexia and Bradford and Bingley can be bailled out across sovereign state borders shows you can do so without a "union" and with a union of unity.

And if Calman raises the Credit Crunch in future reports as a reason for the "union" and uses the RBS/HBOS bail out as an example of its supposed "single market", then it will have to answer questions about why they have ignored those examples which show that a wider single market than the constitutional reach of the "union" is actually in operation?

What does "deeply integrated" mean?

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"4.43 As well as a political Union, the UK is also a deeply integrated economic Union."

- Calman Commission, First Report, Page 33

"6.39 Tax devolution has potential for disruption to that trade"

- Calman Commission, First Report, Page 66

"9.8 With the rest of the UK, Scotland forms a deep and well-integrated single market"

- Calman Commission, First Report, Page 100

Why does Calman precede the expression single market with the qualification "deeply integrated" or "deep and well-integrated"?

What does this mean?

And the second quote above says "Tax devolution has potential for disruption to that trade".

Yet as the quote from Gordon Brown in this post shows there is a lack of consistency here. After all he has said:

"I set up the Calman Commission to review devolution."

And by saying that tax devolution "has potential for disruption" is this not going further than just rejecting fiscal autonomy but setting the scene for a rejection of any devolution of tax powers?

How can the Liberal Democrats therefore continue in the Commission since they have set that as one of their main aims?

As well as the US example Brown uses it also doesn't stand up when you consider that Council Tax is not deeply integrated across the UK.

In Scotland there are 32 Unitary Authorities. Added to this there are 81 Counties, 354 Districts and 46 Unitary Authorities throughout England with different levels of Council Tax. Then there are the 12 Unitary Authorities in Wales.

On top of that the 43 police areas in England & Wales also have the power to "set a precept on the Council Tax."

And below that level "Parish councils receive funding by levying a "precept" on the council tax paid by the residents of the parish."

In fact Council Tax doesn't even cover the UK. In Northern Ireland they have rates which cover 26 Councils - soon to be 11.

Then we have Business rates. They are "uniform" but only at a Scottish, England & Wales and Northern Ireland level.

Is this differing tax levels not "disruptive" to the UK's internal trade as the Commission is saying? If not, why not?

And if the UK is so "deeply integrated" as a single market then why are there three separate Companies Houses for Scotland, Northern Ireland and England & Wales to cater for the three different legal systems?

By failing to address these matters which actually contradict the Commission's report the only conclusion can be that the qualification of "deeply integrated" is used so it can specifically refer to the UK if other international and state examples are broached.

In other words it means the "union" and absolute sovereignty remaining at Westminster.

Single Markets & Single States

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The previous posts considerations of Calman's presentation of a single market is even more instructive when you consider that they never even looked at the example of Denmark or Norway.

Greenland and the Faroes are part of the Danish Realm just as Scotland is part of the UK Realm. The same as Svalbard being a part of the Kingdom of Norway.

Yet both Greenland and the Faroes are not part of the EU nor the EEA, and whilst Norway may not be in the EU it is part of the EEA. Yet as this shows Svalbard is not in the EEA:

"Svalbard, the Faroe Islands and Greenland are not covered by the EEA Agreement."

However it's not just those examples. There are ones closer to the UK in the shape of the UK Overseas Territories like Bermuda of which this site says:

"The Overseas Countries and Territories do not form part of the EU, yet they are constitutionally bound to four of the EU’s Member States: Denmark, France, the United Kingdom and the Netherlands."

That the Commission did not even address how member states of the EU/EEA can have areas of their constitutional sphere outwith the EU/EEA begs the question of why arrangements for Scotland to have a similar special relationship were not considered?

The only conclusions can be that they either don't understand constitutions or the Commission members who do are solely focussed on retaining absolute sovereignty at Westminster over the major levers of Scotland's economy regardless of whether that is in the best interests of Scotland or not.

A Single Market?

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"4.43 As well as a political Union, the UK is also a deeply integrated economic Union. This has its origins in the customs Union and the currency Union that were central to the 1707 Treaty. Over the centuries since then, the UK has developed into well-integrated single market in goods, services, labour, capital and knowledge."

- Calman Commission, First Report, Page 33

"6.39 As the Independent Expert Group notes, goods, capital and services are constantly being traded across the United Kingdom's internal borders. Tax devolution has potential for disruption to that trade, but this has to be balanced against other considerations."

- Calman Commission, First Report, Page 66

The implication is clear. Only with the "union" can we access to markets in other parts of the UK. However that wasn't the driving force behind a section of those who voted for the "union". It was access to the colonial markets. Even the UK Parliament's own website says as such.

"Scots hoped for a union 'of trade' with vital access to English colonial markets"

The single market we are talking about grew into this.


And has now shrunk to this.


So since the "union" no longer provides this larger single market what does? Answer. The European Economic Area and the Single European market.

The EEA, based around the EU, is in the words of Calman "a single market in goods, services, labour, capital and knowledge".

As it says it has developed and is developing:

• A Single Market for Goods


• A Single Market for Services


• A Single Labour Market


• A Single Market for Capital

And as for "knowledge" Calman stretches the imagination by suggesting that we need to send 59 Parliamentarians to Westminster to get access to this.

Considering the EU/EEA is now the single market that operates for Scotland that poses the question of why it is not even mentioned in the Commission's report?

However that would presuppose it was acting to secure what was best for Scotland. But it isn't. It is to protect the "union".

If it did address the real single market that Scotland operates in it would have to address how that single market is constructed constitutionally for the countries within it.

Since it is a union of sovereign countries it would mean Calman would have to consider Scotland as one of those sovereign countries.

It would mean the Commission would have to concede that you can have a union of unity and a single market and that would mean an end to the singular sovereignty that is held at Westminster. An end to the "union" which benefits the parties who want to have power there.

Fiscal Autonomy

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6.31 The Independent Expert Group concluded that to the extent that a region with full fiscal autonomy is to all intents and purposes independent, full fiscal autonomy is not consistent with the maintenance of the Union; the Commission agrees.

- Calman Commission, First Report, Page 64

However, as this post on the Tartan Army Message Board makes clear, the former part of that sentence would then mean that the following British Crown Dependencies and UK Overseas Territories have just been declared independent by the Calman Commission because they have fiscal autonomy:

• Isle of Man
  

• Jersey
  

• Guernsey
  

• Gibraltar
  

• Anguilla
  

• Cayman Islands
  

• Falkland Islands

It is the former part of the quoted sentence - "full fiscal autonomy is not consistent with the maintenance of the Union" - that gives the game away for the above dependencies and territories are not part of the UK whilst remaining united with the UK.

It is a case that shows that the Calman Commission is not addressing the issue of unity but retention of the constitutional legal position that retains power at Westminster.

It is avoiding addressing the issue of what is best for Scotland in terms of taxation but what is best in retaining the constitutional status quo of power at Westminster. It allows for the continuation of taxes to be set at Westminster regardless of whether their effect would be detrimental or beneficial to Scotland.

Since none of the examples above send MPs to Westminster it is retaining the partisan position that is the priority for the political parties involved.

However even that position is not under threat when one considers that the dependencies and territories pay for those matters they do not exercise such as defence and foreign affairs. The question could be asked why they are not given that privilege to send MPs to Westminster to represent them on those issues?

As Kenny Farquharson points out - "Calman seems determined to take on a bigger challenge – a constitutional version of the Theory of Everything". So if Calman can extend his remit why has he not addressed that issue unless it is to focus on retaining the Westminster power status quo?

And even if it were just to focus on Scotland as a part of the core state why is the Basque model of fiscal autonomy overlooked? Is it because such examples would embarrass the participating parties who have tried to argue that no such examples exist (even although they do within the British orbit)?

*** UPDATE ***

Interesting to see that Gordon Brown thinks "tax competition" is a good thing even within states.

"Competition between tax systems exists in the United States of America even where they have not just a single currency but a federal state. So far from the single currency requiring tax harmonisation, it is becoming generally recognised that tax competition is an essential element of the economic reform agenda. It can encourage innovation and thus more efficient ways of raising revenues; can help cut through bureaucracy and reduce compliance costs; and while tax competition must be fair and above board - the UK is working with our international partners to root out unfair and discriminatory tax competition - tax competition allows governments to respond to national preferences on the role, structure and aims of taxation."

So why the foot dragging on matters fiscally Scottish since, in his own words, it can "encourage innovation and thus more efficient ways of raising revenues; can help cut through bureaucracy and reduce compliance costs; and ... allows governments to respond to national preferences on the role, structure and aims of taxation."

Why?

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Because after reading this post on Calum Cashley's blog and this post on the Tartan Army Message Board I decided to read the report for myself.

And my thoughts? Well I thought there were a lot more issues within the report that needed airing. Why? Because for something that is meant to be an "independent" report, and one the taxpayer pays for, I believe it should be factually correct and impeccably upfront and honest in its intentions.

I don't believe it is as the two posts I have referred to above show. It is historically inaccurate and its remit "to secure the position of Scotland within the United Kingdom" never spells out clearly what it means by that "union". In short the Parliamentary union of 1707 which placed the sovereign power over lives at Westminster and still does to this day despite devolution. A "union" that is far cry from the concept that is often perceived of a partnership of four equal nations; a concept which I, as an SNP voter, feel not only comfortable with but supportive. A union of unity.

However that is not the "union" the Calman Commission is "securing". It is the one that totally centralises ultimate power in the hands of 650 individuals at Westminster only 59 of which are there to represent Scotland's interests - and even then they are subject to party prejudice. Rather than a union of unity it is a "union" for competing partisan power brokers. As Winston Churchill said of the UK in 1909:

Look at our neighbour and friendly rival Germany. I see that great State organised for peace and organised for war to a degree to which we cannot pretend. We are not organised as a nation, so far as I can see, for anything except party politics

It is that political partisanship which creates a fog around the concept of the centralised "union" of Westminster sovereignty. A fog which misleads about the Calman Commission and hence why we have, I suspect, the likes of Kenny Farquharson getting the impression that it is about the devolution of more responsibilities to make life better in Scotland when it is actually about protecting that "union" which dare not speak its name.

A "union" to which Calman Commission has co-opted other unions and institutions on to as if they are integral to that "union" of Westminster sovereignty. The fact is they are either not or their existence is not threatened by the "union" of Westminster sovereignty no longer continuing.

However saying all that should not be read as the members of the Calman Commission are somehow complicit in a deceit. I don't believe they are. Sir Kenneth Calman is simply acting under the remit he has been given and I believe many of the members are actually supporters of a union of unity rather than a "union" for partisan power brokers.

In short it would be good if they (and the parties that set it up) were questioned on what union they believe in.

One that keeps all sovereign power at Westminster - like Labour and the Tories - where devolution can be ultimately overruled or even abolished by Westminster?

One - like the Liberal Democrats - where sovereignty is shared on a federal basis between Westminster and Scotland but where Westminster superior?

Or one - like the SNP's - where sovereignty lies in Scotland but that institutions and responsibilities can be shared with other nations in the British Isles on the basis of mutual agreement?

Then there is the fundamental question that appears to be amiss from the Commission's remit? Are their deliberations about what is best for Scotland or best for the "union"?

Saying both are indivisible won't wash as no man (or woman) can ride two horses at the same time. But more on that later.