A Restatement of the Case for Fiscal Autonomy (or: The Barnett Formula - a formula for Rake's Progress)

Paul Hallwood and Ronald MacDonald

Working Papers from Business School - Economics, University of Glasgow

Abstract: In this paper, we rebut the case that Ashcroft, Christie and Swales (2006) make in favour of the status quo fiscal settlement in Scotland that stems from the Scotland Act 1998. This Act in creating the Scottish Parliament and Executive effectively separated public spending by the Scottish government from the need to raise taxes to finance it; rather, financing comes from Westminster through the Barnett formula. We do not think that these arrangements provide a stable political solution in the UK, as is evidenced by the so-called West Lothian question - a matter that may be becoming of greater concern in England than hitherto. Scotland, therefore, should be forewarned that even if it does not move from the status quo, movement might anyway be forced on it.

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