Border wars

ANYONE naive enough to think that devolution for Scotland and Wales would leave their relations with England untouched has been disabused these past few weeks. Deprived regions of England are now getting decidedly uppity about alleged Scottish and Welsh financial privileges.

This conflict is already spilling into the House of Commons. On November 18th there was the most awful row before the Trade and Industry Committee of MPs. It concerned the various inducements available to would-be investors in Britain to go to the less-favoured regions of England, and to Wales, Scotland and Northern Ireland. Representatives of the English regions used harsh language (“gazumping”) to describe what their Celtic brethren would sometimes do to capture juicy inward-investment projects for themselves.

Although the chairman of the committee, Martin O'Neill, a Scottish Labour MP, described this as “whingeing”, the English have a point. The Northern Development Company (NDC), whose job is to lure firms to northern England, is still fuming over LG, a South Korean electronics company.

Having spent months negotiating a deal to give the firm £80m to build a factory promising 4,000 jobs near Newcastle, it was outbid by the Welsh Development Agency (WDA). The WDA offered £250m, claims the NDC. The Welsh loftily refuse to say what they hand out on specific projects. “We do not enter into recriminations or into exercises of backstabbing,” James Turner, managing director of the international division of the WDA, told the committee of MPs.

The Scottish Office, however, is happy to rebut another of NDC's complaints, that its development agency, Locate in Scotland, offered ISL, a Tyneside firm which makes printed-circuit boards, £23m to move to Scotland. The Scots indignantly claim that it was not they, but the company, that did not play it straight, by pretending that it was bent on moving in order to expand. When it turned out that ISL intended to stay by the Tyne, the Scots dropped their offer. Maybe so, says the NDC, but the Scots bid forced the northerners to promise an extra £4m of taxpayers' money on top of the original £12m the firm had been offered to expand in South Shields.

In fact, the English regions and the Scots and Welsh are not as far apart as they seem to be. A mechanism already exists to prevent bidding wars in offers of Regional Selective Assistance (RSA), the main subsidy to incoming firms. These have to be cleared by the Department of Trade and Industry's Industrial Development Unit (IDU).

But two bones of contention remain. First, the Scots, Welsh and Northern Irish—the “territorial agencies”—do not have to clear offers of other types of help in the same way: for example, land for factories, new roads, training and local-authority grants. Second, the English regions claim that the territorial agencies cheat by telling companies how much help they might get right at the start of the process instead of waiting for IDU clearance.

The territorial agencies retort that to tackle these problems would mean an extra layer of bureaucracy to vet them. But industry ministers seem to be siding with the English regions. Margaret Beckett, the industry secretary, has talked of a “concordat” to control competitive bidding. Donald Dewar, the Scottish secretary, and Ron Davies, the Welsh secretary, seem prepared to settle for that rather than have Mrs Beckett's department control all subsidy offers. Mr Dewar, in particular, is greatly relieved that nothing will now be written into the law setting up the Scottish parliament to take away its ability to control inward investment, which would have given the Scottish National Party a stick with which to beat the government.

But some restraints will be introduced. Ian McCartney, a deputy to Mrs Beckett, told the Trade and Industry Committee that the system had to be recast so all forms of assistance were covered at an early stage. Ministers are also thinking about limiting the subsidy that any agency can give to a foreign investor.

That would be an improvement on the present mess—but perhaps a greater improvement would be to cut all the huge subsidies now on offer to potential inward investments. Some cash subsidy may still be needed to fend off rival bids from Ireland and other European countries, but Britain's attractions should surely not rest on the willingness of the government to hand out enormous sums of taxpayers' money to big international companies.