Stress testing the fiscal framework

Bell, David and Eiser, David and Phillips, David (2023) Stress testing the fiscal framework. National Institute Economic Review, 260 (1). pp. 64-80. ISSN 0027-9501 (https://doi.org/10.1017/nie.2022.20)

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Abstract

The part of the UK fiscal framework which determines how UK government funding is allocated across the four home nations has undergone profound change since 2012, given tax and social security devolution. The UK government's post-Brexit plans for regional development funding, state aid, regulation and trade negotiations have led to significant disagreements about the nature of the devolved fiscal and constitutional settlement. And the COVID-19 pandemic provided a major shock to a fiscal system with limited flexibility for the Scottish, Welsh and Northern Irish devolved governments. This paper reviews the changes and challenges faced during these reforms and policy shocks. We find that: tensions about reforms to funding arrangements reflect the inconsistency of principles guiding the reforms; that the UK government’s post-Brexit plans do reduce the policy autonomy of the devolved governments, but reflect powers central governments often have in even highly decentralised countries; and that temporary changes to rules and the nature of the COVID-19 pandemic prevented a subnational fiscal crisis, but that more systematic change may make the system more robust to future shocks. This suggests that a review of the principles underpinning the UK's subnational fiscal and economic policies would be highly worthwhile.

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• Item metadata

  Item type:	Article
  ID code:	83671
  Dates:	Date Event 11 January 2023 Published 11 January 2023 Published Online 1 January 2023 Accepted
  Subjects:	Social Sciences > Economic Theory
  Department:	Strathclyde Business School > Economics
  Depositing user:	Pure Administrator
  Date deposited:	11 Jan 2023 10:12
  Last modified:	09 Apr 2024 03:47
  URI:	https://strathprints.strath.ac.uk/id/eprint/83671