commission on fiscal imbalance 合集

27 the difficulty in using the tartan tax is

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Unformatted text preview: l deficit in 1994-95 as a subsidy from England to Scotland. Another example is the way in which the condition of the London Underground is routinely blamed on Scotland (McLean, 1998), a tactic which found much favour during the 2000 Mayoral election campaign in London. Before the referendum, there were suggestions that, unless it accepted the status quo, Scotland should be evicted from the Union (McLean, 1997a,b), in the manner in which it is claimed that Slovakia was evicted from the Czechoslovak federation. Recent’ discussion of the Scottish fiscal position goes back to McCrone (1969). Commission on Fiscal Imbalance 4.2. Weak Fiscal Accountability There is weak fiscal accountability, in part because of the extent of Vertical Fiscal Imbalance (VFI). However, public finance economists sympathetic to UK devolution have stressed that, in the UK context, attention should focus on fiscal accountability at the margin (Blow et al., 1996, Smith, 1996, Bell et al., 1996). This would allow devolved bodies to vary total budget size, as well as to vary expenditure composition. For the reasons explored elsewhere in this paper, there is not much likelihood either of full revenue decentralization or of a recourse to the principle of derivation (public expenditure in a region depends solely on taxes raised in that region). The twin dangers of blaming the devolved bodies, both for UK fiscal centralism and for the genuine constraints imposed by context, should be avoided. Quite apart from the Labour Party’s explicit electoral commitment not to use the tartan tax in the first term of the Scottish Parliament,23 there have been other considerations pointing in the direction of caution. There was always a case for caution, in that the first step for the newly elected Parliament and Assemblies was to assess the expenditure situation, notably composition and the possibilities for greater VFM. Moreover, contrary to all expectations prior to devolution, the devolved Executives have been awash with money in financial years 2000-01 and 2001-02.24 Rather than a shortage of cash, the problem has been mobilizing real resources, as manifest in high levels of underspend across both the devolved Executives and UK central government more generally (Treasury, 2001b). A movement to greater fiscal accountability at the margin, if it occurs, is likely to be gradual. The combination of unexpected fiscal plenty25 and expected political hesitation runs the risk that the tartan tax machinery, carefully developed between 1997 and 1999, will atrophy (Heald and Geaughan, 1997). There will be a long-term issue of how the tartan tax mechanism, whether restricted to Scotland or extended to Wales and Northern Ireland, interrelates with changes to central government taxes. After a period dating from the 1980s when considerable importance was attached by the Treasury to the stability of the personal income tax structure, the Treasury under Gordon Brown has engaged in a great deal of micro-management of tax bands, credits and rates. One such change considerably increased the potential yield of the tartan tax, but did this by taking its threshold lower down the income distribution, thereby making it more difficult to levy.26 At the 1999 Scotti...
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This note was uploaded on 03/06/2013 for the course ECON 220 taught by Professor Paulo during the Spring '13 term at University of Liverpool.

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