'No taxation without representation' was a rallying cry for advocates of American independence from Great Britain in the 18th Century. The American colonies were obligated to pay taxes to London, yet had no representatives in Parliament, and felt, therefore, that they were being forced to fund a government into which they had no input. This historical reminder may seem irrelevant to Britain now, but it isn't. Let me explain.
Imagine a nation divided into two regions. Region A is slightly more populous than region B, yet region B has a greater representation in the nation's parliament. Region A contributes the majority of the tax revenue yet, as a proportion of GDP, region B receives significantly more government spending.
If this nation was in a former Soviet Republic in Central Asia there would probably be an armed struggle in which Region A aims to secede and declare itself an independent state. If, though, this state of affairs occurred in a more mature democracy, like Italy, for example, you would expect to see the formation of a well-supported regional political party in Region A that called for more autonomy - which is what has happened with the Lega Nord, or Northern Leagues, which claims to represent the interests of the prosperous North of Italy.
But the same state of affairs also prevails in the United Kingdom, although here with have no armed struggle and no regional political mobilisation - only a deferential acceptance.
The United Kingdom can be divided into two approximately equal parts, in terms of population, by drawing a rough line from the Humber Estuary to the mouth of the Severn. Let's call the regions SE Britain and NW Britain. The East Midlands region falls into the South East sector and the West Midlands region falls into the North West portion.
This year there were 22.3m registered voters in SE Britain comprising London, the South East, South West, East Anglia and the East Midlands, while there were 21.9m registered voters in NW Britain comprising Northern Ireland, Scotland, Wales, North East and North West England, Yorkshire and West Midlands. Despite having 400,000 less voters, NW Britain is represented by 337 MPs, nearly 10% more than the 308 MPs who represent the SE Britain. To put it another way, the average constituency size in NW Britain is 65,000, while in SE Britain it is more than 72,000.
Meanwhile, the contrast in public spending is even greater. In the UK as a whole, general public spending as a percentage of GDP is 41%. In North East England it is 59%, in Scotland it is 52%, in Wales it is 59% and in Northern Ireland it is 67% (which, incidentally, has risen from 64.7% in 1998 - so much for the Good Friday agreement in capping public order expenditure). At the same time public expenditure as a percentage of GDP is 34% in London and 33% in the South East.
So we have two quite different nations. In parts of NW Britain the level of public spending is on a par with Sweden and Denmark, while in London and the South East it is equivalent to Switzerland or the US. On the other hand, the levels of taxation are lower in NW Britain than in Sweden but higher in SE Britain than in the US.
Last month's general election is very instructive in this context. The areas where public spending as a share of GDP is high returned a Labour MP in 242 out of 337 seats with 41% of the vote. Meanwhile, that part of the country where public spending as a share of GDP is low returned a Labour MP in only 113 of the 308 seats in SE Britain with 30% of the vote.
In other words, one nation addicted to high public spending votes in a Labour government, while the other nation pays for it.
By Brian Durrant in The Fleet Street Letter.
Published in Economics
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