Saturday, September 13, 2014

Scotland

It is my hope that Scotland votes to keep Britain together next week, partly for emotional reasons- I'm half Scottish and much of my family is from there and I feel a sense of nationhood that doesn't stop at Berwick. It also seems to me that Britain is a stronger and more formidable country than merely England, Wales and Northern Ireland.

Having said that I do think the 'No' campaign are wrong to concede nationalist demands on control of the welfare system in North Britain. Single currency areas like the UK require transfer payments from rich to poor areas in order to compensate for poor areas being unable to devalue their currency to compete. One of the quickest ways that an economically hard hit region to receive transfer payments is through the welfare system.

Paul Krugman (who despite his hyper partisanship is a renowned economist) explains the process with a comparison of how Spain and Florida were affected by the global recession here. Essentially when Florida's economy crashed, it automatically received more money from Washington whereas Spain did not automatically receive extra cash from Brussels leading to a much weaker fiscal position- because despite currency union Germany isn't willing to fund Spain's welfare system.

If Scotland manages it's own welfare system some of the automatic stabilisers won't work in the case of a shock to Scotland's economy.

More devolution is inevitable but welfare should remain substantially a UK wide issue.

8 comments:

A K Haart said...

I don't have a dog in this fight, but I hope the vote is Yes. Otherwise the issue will fester and fester.

Anonymous said...

Why should welfare be UK wide? In other countries it is much localized e.g. Switzerland, US, Denmark etc.
Also of which don't have such a bad system, encouraging people to not work as we do.
I would like local councils - with a better system of governance to do it - we could not have a worse system than now.

James Higham said...

Well, not long to go now.

Ross said...

Anon- Even in the USA though, not all Welfare is done at state level, unemployment payments, food stamps and social security are all done federally.

L fairfax said...

Ross,

Good point about the US.
However Switzerland has a very federal system of welfare - it is at canton level.
Anyway my point being a localized system could not get much worse than what we have now (famous last words I know).

Ross said...

If it works in Switzerland then I could well be mistaken. Does the central government carry out transfer payments between cantons?

L fairfax said...

http://www.spectator.co.uk/features/6142898/swiss-welfare-runs-like-clockwork/
I like this bit
"So what happens if you are, say, a young mother in Switzerland with a little baby but no husband or similar on the scene and nowhere to live? There is no countrywide answer to this question because it is not dealt with on a national basis. It is not even dealt with by one of the 26 cantons. It is dealt with by your local commune. There are 2,900 of these and their population can be anything from 30 to 10,000 or more.

Inline sub2

Officials from this ultra-small local government will come and investigate your individual circumstances. The father will be expected to pay. The mother’s family, if it is in a position to, will be expected to house and pay for her. As a last resort, the young mother will be given assistance by the commune. But the people who pay the local commune taxes will be paying part of the cost. You can imagine that they will not be thrilled at paying for a birth or separation that need never have taken place. Putting yourself in the position of the mother — and perhaps the father — you can imagine that you will be embarrassed as you pass people in the street who are paying for your baby. Instead of feeling you have impersonal legal rights, as in Britain, you are taking money from people you might meet at your local cafĂ©. No wonder unmarried parenting is less common."

James Higham said...

Interesting re-reading after the event.