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Reforming Taxation in the Scotland Act (1998): Hard Budget Constraints and the Inadequacy of the Calman Commission Proposals

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  • Paul Hallwood

    (University of Connecticut)

Abstract

We demonstrate that both the Barnett formula used to calculate changes in public spending by the Scottish Parliament and Government under the Scotland Act (1998), as well as the recent Calman Commission proposals for fiscal reform, are soft budget constraints that do not and will not encourage the Scottish Government and Parliament to promote economic growth in Scotland and do not offer true accountability. However, fiscal autonomy would offer a hard budget constraint, and would encourage the adoption of policies aimed at growing the Scottish tax base and make the Scottish polity truly accountable. Secondly, fiscal autonomy is argued to be a viable fiscal reform within the existing and continuing UK constitutional settlement. Thirdly, existing empirical studies in-so-far as they relate to the Scottish case are shown to largely support the case for tax devolution.

Suggested Citation

  • Paul Hallwood, 2010. "Reforming Taxation in the Scotland Act (1998): Hard Budget Constraints and the Inadequacy of the Calman Commission Proposals," Working papers 2010-19, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2010-19
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    References listed on IDEAS

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    1. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    2. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
    3. Josep Lluís Carrion-i-Silvestre & Marta Espasa & Toni Mora, 2008. "Fiscal Decentralization and Economic Growth in Spain," Public Finance Review, , vol. 36(2), pages 194-218, March.
    4. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
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    2. Peterman, Amber & Quisumbing, Agnes & Behrman, Julia & Nkonya, Ephraim, 2010. "Understanding gender differences in agricultural productivity in Uganda and Nigeria," IFPRI discussion papers 1003, International Food Policy Research Institute (IFPRI).

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    More about this item

    Keywords

    Barnett formula; Calman Commission; fiscal autonomy; fiscal federalism; non-cooperative game; regional finance; Scottish Executive; Scottish Parliament; secession.;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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