Why tax is actually taxing

Dividing up the UK’s revenue among all its nations is a tricky task

May 03, 2021
The Duke of Queensbury, Commisioner to the Scottish Parliament, presents the Act of Union to Queen Anne. Credit: Alamy
The Duke of Queensbury, Commisioner to the Scottish Parliament, presents the Act of Union to Queen Anne. Credit: Alamy

It’s no secret that the UK’s constitutional arrangements are creaking under the strain of Brexit as well as Scottish nationalism. Equally pertinent to the political and economic debate is how—and to what extent—the state redistributes through tax and spending. The UK is an outlier among advanced economies regarding the extent to which fiscal functions are both centralised and politicised.

Julian Hoppit’s new book brings together these two themes. The current debate over what Boris Johnson calls “levelling up” the north, and the supposedly disproportionate share of public expenditure allotted to London and the southeast—or the fiscal “black hole” that would face an independent Scotland—should be seen in the context of debates that go back to the Union’s founding. As Hoppit illuminates in an engaging account of three centuries of the UK’s economic history, redistribution for the purposes both of equity and economic development are central to the state’s role: it’s a feature, not a bug, and one that was built in from the start.

But Hoppit, a historian at UCL, thinks that the UK’s economic and political stability—it has never defaulted on its debts, never lost a major war—has become a curse. As he points out, after the Second World War, the UK bequeathed the Germans a carefully constructed federal system and a written constitution within which the inevitable tensions between the regions and the centre could safely play out. It was a similar situation with former imperial possessions such as Canada, India and Australia. We just never thought to design a similar written constitution for ourselves. Hoppit endorses the judgment of Ian McLean: “the fiscal constitution of the UK has contained only one rule: what is politically acceptable is fair.” And while Hoppit outlines an agenda for reform—a new, more equitable settlement, with needs-based funding for the nations and regions of the UK, and a shift in resources and power to local government—he does so more in hope than expectation. As he concludes: “muddling along as at present will almost certainly happen, but there are better, less-travelled roads to take.”

The Dreadful Monster and its Poor Relations: Taxing, Spending and the United Kingdom, 1707-2021

by Julian Hoppit (Allen Lane, £25)