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

Paul Hallwood

No 2010-19, Working papers from University of Connecticut, Department of Economics

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.

Keywords: Barnett formula; Calman Commission; fiscal autonomy; fiscal federalism; non-cooperative game; regional finance; Scottish Executive; Scottish Parliament; secession. (search for similar items in EconPapers)
JEL-codes: H77 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-07
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (2)

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