The Unintended Consequence of English Votes for English Laws
Angus Armstrong () and
National Institute Economic Review, 2015, vol. 233, issue 1, R37-R44
The Scotland Bill 2015â€“16 would make the Scottish government one of the most powerful sub-central governments in the OECD in terms of its control over spending and taxation. The UK government has also announced plans to introduce â€˜English Votes for English Lawsâ€™ (EVEL), where the support of a majority of English MPs would be necessary to pass legislation deemed to impact on England only. The objective of this paper is to examine the potential for spillovers to arise in monetary unions of asymmetric nations where fiscal policy choices are taken locally. We extend a model of Chari and Kehoe (2008) to show the sub-optimal consequences of devolved fiscal policy in a moneteary union with a dominant member state. Because England is so much larger than the other constituent nations of the UK, its fiscal policy choices will have a commensurately stronger impact on UK monetary policy. As a result, UK monetary policy might be inappropriate for the smaller nations, calling into question the economic efficiency of EVEL. This is a general result which arises from the asymmetry of nations rather than specific UK funding arrangements or behavioural responses.
Keywords: devolution; English votes for English laws; fiscal and monetary policy; coordination; spillovers (search for similar items in EconPapers)
JEL-codes: E42 E58 E61 E63 H77 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:niesru:v:233:y:2015:i:1:p:r37-r44
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