Scotland: A New Fiscal Settlement

67 Pages Posted: 7 Apr 2010

See all articles by Andrew J. Hughes Hallett

Andrew J. Hughes Hallett

George Mason University - School of Policy, Government, and International Affairs

Andrew Scott

affiliation not provided to SSRN

Date Written: March 30, 2010

Abstract

This paper makes five contributions to designing a new fiscal regime for Scotland: 1). It provides the intellectual case for fiscal autonomy in Scotland, and examines explicitly how far autonomy should go. 2). It provides a blueprint for how the tax system could be devolved, and explains why. 3). It details the institutional arrangements necessary to support such a regime and specifies how they might work. Specifically we look at mechanisms to limit public debt, and provide a blue-print for how they might be implemented to ensure credible fiscal policies. 4). Fiscal autonomy trades efficiency and better economic outcomes against spreading adverse spillovers or tax competition to other regions in the UK and a possible lack of discipline. We show how fiscal autonomy can be set up in a way that is consistent with the UK macro-economic framework, and consistent with EU rules on state aid. 5). Under our blueprint, the Scottish budget for 2007-08 would have been in a stronger position than the UK as a whole, being in balance or a mild deficit (0.8% of GDP).

Keywords: Tax and expenditure devolution, inter-government relations, fiscal federalism, state budget, fiscal coordination

JEL Classification: H71, H74, P43, E61

Suggested Citation

Hughes Hallett, Andrew and Scott, Andrew, Scotland: A New Fiscal Settlement (March 30, 2010). GMU School of Public Policy Research Paper No. 2010-15. Available at SSRN: https://ssrn.com/abstract=1585209 or http://dx.doi.org/10.2139/ssrn.1585209

Andrew Hughes Hallett (Contact Author)

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

Andrew Scott

affiliation not provided to SSRN ( email )

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