THE INTERGOVERNMENTAL POLITICS OF GERMAN FEDERALISM

  A crucial feature of German federalism emerges from the above: the high level of interdependence which exists between federation and Länder/Bundesrat in the process of making and implementing law. Only in the few areas of exclusive competence at either level of government do federation and Länder act separately from one another. In the vast majority of policy fields, their activities are intertwined through the functional division of competence between federal legislation and Länder administration and the scope of the Bundesrat's powers in federal legislation and EU matters. In order to make policy in Germany, elaborate mechanisms facilitating the co-operation and co-ordination of the two levels of government are therefore required. For this reason, German federalism is often described as "co-operative" federalism.

  The separation of legislative powers in devolved and reserved matters will require a less close and formalised form of intergovernmental co-ordination between the Scotland and the UK authorities than in Germany.

However, the role of the Scottish Executive in administering aspects of UK reserved powers and in the EU policy process will require co-ordination. In addition regularised interaction to discuss the implications of the legislative programmes of the Scottish and UK parliaments for one another can be expected. It is unlikely, though, that intergovernmental co-ordination will achieve such an intensity as to expose it to similar accusations of inflexibility, expense and accountability as are made in Germany.

  These, characteristically, are highly structured, require intensive bureaucratic interaction, and are open to a number of criticisms: the need for co-ordination slows down the policy process, limits flexibility, and can lead to immobilism; the co-ordinative operation is expensive, requiring immense input of civil service time; and it is carried out largely outside the public view, raising additional questions of democratic accountability.

(a) Intergovernmental Relations between Federation and Länder

  If the Länder wish to maximise their influence in the policy process, they must as far as possible act collectively. The Bundesrat's veto powers can only be effective if enough Länder agree to deploy them. Intensive co-ordination between the Länder is therefore a necessary launching point for federal-Länder intergovernmental action. It is carried in a number of ways: in conferences bringing together representatives of the Länder ministries responsible for the same policy areas in their respective Länder; in formal and informal co-ordination between the "missions" each Land maintains in the federal capital; in Bundesrat committees (which broadly cover the policy areas of federal government departments); and ultimately in the Bundesrat plenary. Equivalent forms of co-ordination also take place between the Länder and the federation up to and including the convening where necessary of a Mediation Committee whose function is to bridge differences between the Bundesrat and the Bundestag, the directly elected first chamber of parliament.

  Given the asymmetry of powers between different devolved units in the wider devolution process, it is unlikely that extensive co-ordination of activities between, e.g., Scottish and Welsh, or Scottish and London executive authorities will occur. The mechanisms which will facilitate Scottish-UK co-ordination are unclear. They will presumably involve the UK Secretary of State for Scotland, though the role and rationale of this position after devolution is not uncontested. Most co-ordination is likely to take place between Scottish and UK ministries responsible for equivalent policy fields. Pressure may grow for a form of Scottish "mission" to be established in London to act as a clearing house for the co-ordination process.

  While these processes of intergovernmental co-ordination are usually technocratic, consensual and uncontroversial, they do at times veer into overt political conflict. There is, for example, always a party political dimension in the co-ordination process. The parties represented in the Bundestag and in the federal government coalition are (with few exceptions) the same as those forming the governments represented in the Bundesrat.

Informal party-political linkages interlace the co-ordinating bodies noted above. They become most significant when the party majorities in Bundestag and Bundesrat are incongruent. When this has occurred (e.g., in the 1970s and currently) the Bundesrat is vulnerable to being instrumentalised as a tool of the parliamentary opposition in the Bundestag. Conversely, congruence of party majorities in Bundestag and Bundesrat can be used—as was the case in the mid-1980s—to override or ignore the concerns of the Länder led by the parties at the time in opposition at the federal level.

  Such overt party-politicisation of the Bundesrat is, however, rare and often exaggerated and is in any case inherently limited by a tradition of broadly consensual party politics. A more frequent form of conflict concerns money. To understand this, though, first requires consideration of the allocation of financial resources in the federal system.

  Party politics will also play a role in the co-ordination process. Co-ordination between parties in Edinburgh and Westminster can be expected. This may facilitate Scottish-UK co-ordination if party majorities are congruent. If they are incongruent, the co-ordination process may be more difficult especially if the incongruence also extends into differences of conception about the merits and/or scope of devolution. It is unclear how UK traditions of adversarial party politics will impinge in these circumstances on the necessity and practice of power-sharing between units of government inherent in a devolved system of government.

Excursus: Financial Equalisation

  The allocation of resources between federation and Länder is governed by a complex system of financial equalisation designed to ensure that each has sufficient funds to fulfil its constitutional responsibilities. This system, like the rules shaping the allocation of competences, is guided by the "mission" of maintaining common standards of "living conditions" across the federation. The Länder have only a very limited autonomy to raise, or vary the rates of, taxes (although the revenues, or shares of revenues, of certain taxes are constitutionally guaranteed to them in Article 106 of the Basic Law).

  The mechanism for resource allocation to the Scottish Parliament will remain, initially at least, much as that through which the activities of the Scottish Office are currently funded, i.e., funding through a "block" whose initial level was set in the 1970s by a needs assessment exercise, and which has varied since according to a formula relating changes in government expenditure in Scotland to changes made to government expenditure in England. In addition, there is an income tax-varying power of ×3 per cent.

  The net allocation of resources between federation and Länder ("vertical" equalisation) is periodically adjusted according to a formula designed to balance tax revenues and expenditure obligations at the two levels of government."Horizontal" equalisation of resources among the Länder is, by contrast, primarily revenue-driven.

The aim is to equalise tax income per head of population and is realised by a series of allocation mechanisms designed to ensure that each Land has at least 99.5 per cent of the average income per head of all the Länder taken together. It involves a range of financial transfers from economically stronger to weaker Länder, plus a number of "top-ups" by the federation.

  Horizontal equalisation is much criticised system for a number of reasons. First, it has an extraordinary complexity which obscures financial accountability; it is scarcely possible to identify whose tax payments pay for which (or more precisely, which Land's) public services. Second, the levelling effect of 99.5 per cent income equalisation is felt by the economically stronger Länder to penalise them for their economic success and (what they perceive as) their sound financial management, while failing to offer the weaker Länder real incentives for managing their economy and/or finances better. Third, the system is guided by income criteria, and takes differential expenditure needs among the Länder into account only marginally or in ad hoc and inconsistent manner. Länder with weaker economies and therefore higher expenditure needs (e.g., on social security or economic restructuring) feel the system fails them.

  The inherited system of block funding based on needs assessment, together with the new tax-varying power can be commended for their simplicity. In addition, though marginal in scope, the tax-varying power is widely seen as a tool for ensuring the accountability of financial decision-making. Given the publicity the tax-varying power has raised in the devolution debate, any decision to invoke it—especially upwards—will generate extensive public discussion and require strong parliamentary justification.

  The latter two criticisms reveal problems for the operation of the intergovernmental co-ordination process.

There exists first the possibility that conflict among the Länder over the allocation of financial resources can restrict their consensus-building capacity in intergovernmental co-ordination (as exemplified in a series of constitutional complaints issued by one or other of the Länder about the financial equalisation system in the 1980s). Second, such conflict also opens up the possibility for the federation to "divide and rule" and short-cut the federal-Länder co-ordination process by offering financial incentives—the so-called "golden leash"—to one or more Länder.

  Dispute over the allocation of resources to the Scottish Parliament can be expected given that the funding formula "locks in" an assessment of Scottish expenditure needs two decades old. Arguably, as many—including UK Government Ministers—have suggested. Scotland is no longer in "need" of such expenditure levels with the implication that resources should revert to the purview of the UK Parliament (and/or to other parts of the UK whose blocks may not cover their expenditure needs). In addition, pressure for a reassessment of needs is set to grow as parts of the UK not currently in receipt of block funding seek their own blocks. In other words, devolution is opening up potentials for "vertical" (UK-Scotland) and "horizontal" (e.g., Scotland-North East England) competition for resources. As in Germany, it can be expected that resource issues will inject new complexities and controversies into intergovernmental relationships in the post-devolution UK.

(b) Federation, Länder, and the EU

  Intergovernmental co-ordination in EU policy-making has become more intensive and formalised following the constitutional amendments of 1992. An outline framework for the co-ordination process was set out in Article 23 of the Basic Law, and then further refined and fleshed out in subsequent legislation. In addition, the Länder boosted their own co-ordinative capacity by establishing a Conference of European Ministers of the Länder. Broadly, these arrangements replicated for the European context the same kind federal-Länder co-ordinative procedures used in the domestic policy process.

  The role foreseen for Scotland in the EU policy process will require co-ordination with the UK government and in some areas (e.g., co-ordination of Structural Funding bids) with other devolved units. Such co-ordination of Structural Funding bids) with other devolved units. Such co-ordination can be expected to follow (or be incorporated in) the pattern of relationships developed for co-ordination in domestic policy.

  The capstone of the new constitutional amendments was the opening up of the Council of Ministers to the Länder in matters centrally focused on areas of their exclusive legislative competence. Two features of co-ordination in this field are worth noting. First, the Bundesrat mandates a representative to pursue on its behalf a collective policy line in the Council. An initial tendency to issue over-rigid mandates unsuitable for the consensual political style of the Council has been rectified, and the system is generally deemed to work satisfactorily. Second, the Bundesrat representative in no sense legally represents the Länder in the Council, but the German member state, and merely takes the (temporary) lead for a delegation also and always comprising representatives of the federal government. In these circumstances, the Bundesrat's positions for the Council are invariably subject to prior co-ordination with the federal government.

  Scottish ministerial access to the Council of Ministers requires some comment. First, Scotland will be the only EU region with individual access to the Council; others in Germany, Belgium and Austria have common representatives pursuing collective sub-national positions. Second, Scottish representatives will not speak for Scotland, but for the UK; intensive pre-Council co-ordination with the UK government will therefore be required. And third (given the early experiences of the German Länder) initial circumspection in Scottish involvement in the Council would be recommendable.

  Two further features of Länder engagement in the European Policy process are worth noting. First, though the main force behind the establishment of the Committee of the Regions in the Maastricht Treaty, the Länder have been disappointed by the operation of the Committee in practice. This is less a reflection of the Committee's as yet weak, consultative powers and more of its composition as a body of regions and local authorities (including, alongside at least one representative for each Land, three representatives from the German local authorities' associations). The Länder have found it difficult and of limited utility to pursue common cause with constitutionally weaker local government units which have different perspectives and interests in EU policy-making.

  The nature of post-devolution Scottish involvement in the Committee of the Regions is unclear. Post-devolution Scotland will develop affinities with other "strong" regions like the German Länder, and may, like the German Länder, feel the Committee to be unsuitable to its status. If this is the case, it would seem sensible for the Scottish Parliament to nominate Scottish local government representatives to sit on the Committee.

  Second, all of the Länder maintain liaison offices in Brussels, some of them with more staff and splendour than some national embassies. Although some of the Länder style these (without legal foundation) as quasi-diplomatic "representations", their function is rather more prosaic. They do not serve primarily as autonomous lines of influence into the Commission or Parliament (much less the Council), but rather as information channels whose main function is to supply early and thorough intelligence which the EU policy operation "at home" then feeds into the intergovernmental co-ordination process.

  The significance of the proposed "representative office" of the Scottish Executive in Brussels should not be overstated. Scottish access to EU decision-making will be channelled through, and co-ordinated with, the UK central government. The representative office's main role will be equivalent to that of the German Länder offices: to get hold of information from EU institutions or other sources of intelligence in Brussels in order to bolster the Scottish Executive's capacity to bargain with the UK government.

(c) The Länder and Local Government

  An additional dimension of the intergovernmental interaction in Germany is that between the Länder and their local governments. Each Land has a separately configured structure of local government, and Land-local government relations therefore vary widely and cannot be recounted in detail here. There are, though, a number of commonalities. First, local government autonomy is constitutionally entrenched in the Basic Law (Article 28). Second, the scope (and the financing) of local government autonomy is constitutionally delineated—and therefore protected—in the various Land constitutions. Third, local governments perform important functions, in particular extensive administrative responsibilities delegated downwards by the Länder.

  Local government throughout the UK lacks constitutional status and guarantees of its autonomy, though still performs important functions, especially in policy implementation. Legislation relating to Scottish local government will be a responsibility for the Scottish Parliament.

  The status and functions of local governments embed them in a relationship of interdependence with their Land government. This, though, is less extensively formalised as a system of intergovernmental relations than that between Länder and federation, and leaves open rather more scope for the Länder to neglect the principle of local government autonomy in favour of their own (often financial) prerogatives. Local government frustration at this situation has grown (not least in view of the success with which the Länder invoked the principle of subsidiarity as an argument for improved access to the EU policy process) and has led in some of the Länder to institutional proposals designed to meet local government concerns.

  The Scottish Parliament's responsibility for local government will be an important indicator of the qualities of post-devolution governance in Scotland. When formerly centralist states decentralise powers to the regional level, local government can suffer from the "decentralisation of centralism" (as has, for example, been the case in Belgium). And, as the case of Germany shows, local government autonomy can be "squeezed" even in states with a long decentralised tradition.

  These—local government "chambers" or "councils"—would have the right to object to (but not reject) Land parliament bills and even to initiate legislation. One such council has been established in Rhineland-Palatinate, and another seems set for introduction in Lower Saxony. At the cost of course of additional complexity and expense in Land legislation, such innovations do seem set to add additional flesh in practice to what can currently be a haphazardly realised constitutional commitment to local government autonomy.

  It is unclear, though, whether and how the Scottish Parliament and Executive will see it as a priority to guard against such tendencies—e.g., through institutional mechanisms such as those emerging in Germany.

CURRENT ISSUES: FROM CO-OPERATIVE TO COMPETITIVE FEDERALISM?

  To recap: the German federal system has evolved over the postwar era into a "co-operative federalism" which is based mainly on a functional division of power and which seeks through intense intergovernmental interaction to ensure common standards of public policy and services—"equivalence" of living conditions—across the federal territory.

  The UK devolution process is asymmetrical and for Scotland consists primarily of the separation of legislative powers between Edinburgh and Westminster. It will require a lesser degree of intergovernmental co-ordination than in Germany.

  However, co-operative federalism had become entrenched as a method and ethos of government by the late 1960s. This was an era when, relatively speaking, "living conditions" did not significantly diverge from one part of the federal territory to another. In those circumstances, ensuring common standards was both an uncontroversial and feasible goal.

  These conditions are no longer met. In the 1980s a north-south divide emerged in West Germany between northern "smokestack" Länder facing structural economic decline in traditional industries and a group of southern Länder riding a wave of economic success in high-tech manufacturing and/or the expanding service sector. Since German unification in 1990 and the integration of the eastern Länder into the federal system, economic divergence has, of course, become much starker. As a result the question of whether the pursuit of common standards is desirable or feasible is increasingly being answered in the negative.

  Economic divergence leads the Länder to pursue increasingly differentiated and at times conflicting policy interests which are less amenable to co-ordination in the intergovernmental relations of German federalism. In addition, economic divergence brings with it a greater volume of financial transfers in horizontal equalisation from the economically strong to the economically weak. As a result, the sense of solidarity between the Länder has become increasingly strained, raising doubts about whether co-operative federalism remains appropriate as a method and ethos of government.

  Bavaria has been most vocal among the Länder in criticising the existing institutional configuration of the federal system, arguing in the words of its Minister-President, Edmund Stoiber, for the replacement of the "uniform corset" within which all Länder have to operate with "made-to-measure suits" whereby each Land would pursue its own regional priorities on the basis of its own resources. The aim is to establish a competitive, rather than a co-operative federalism.

  In this sense, Scottish devolution equates broadly to Stoiber's recommendation of a "made-to-measure" suit: the Scottish Parliament and Executive will be able to pursue separate Scottish priorities and will have sufficient resources (through block and tax-varying power) to do so.

  Bavaria has not as yet secured regular support for its aims elsewhere among the Länder. Indications are, though, that other economically stronger Länder in western Germany are beginning to endorse the Bavarian agenda. It seems likely, therefore, that the ethos of co-operation which has been central to postwar Germany federalism will continue to dissipate in the coming years.