Devolving Income Tax Powers within the UK

Question 1: Do you agree that the economic benefits of devolving full income tax powers to the Scottish Parliament and Welsh Assembly outweigh the possible costs?

Question 2: Do you agree that that there is a clear economic case for establishing "English votes for English laws" with the same tax and spending powers as the Scottish Parliament?

Summary:

This month's survey looks at the devolution of extensive new fiscal powers to Scotland following the independence referendum in September, which showed a majority of Scots preferred Scotland to be within the UK. The Smith Commission is overseeing the process of finding an agreement to 'strengthen the powers of the Scottish Parliament within the UK' (emphasis added). We therefore asked our respondents to answer our questions from the perspective of the whole UK, rather than from one constituent nation or another.

A full list of written responses from our panel of experts and the background information to the questions can be found here [add link].

Only 14% of our survey respondents agree that the economic benefits of devolving full income tax powers to Scotland and Wales would outweigh the costs. Many respondents suggest that it would lead to economic inefficiencies and require extensive borrowing powers, which will lead to difficulties arising from implicit central government support. Only 33% of respondents think that there is a clear economic case for establishing 'English votes for English laws' for the same tax and spending powers as the Scottish Parliament. Many respondents question whether this would be consistent with the functions of the UK Parliament and support for the Union.

Background

The outcome of the Scottish referendum shows that it is the will of the Scottish people to stay in the UK. However, the referendum also revealed considerable dissatisfaction. Two days before the vote, the leaders of the main UK political parties made a vow to deliver 'extensive new powers' to the Scottish Parliament. The Smith Commission is overseeing the process to take forward the willingness ‘to strengthen the powers of the Scottish Parliament within the UK’ (emphasis added).

The UK is a highly uneven union of nations. The English make up 84% of the population, the Scots 8% and the Welsh and Northern Irish the other 8%. In 1998, three devolved legislatures were created – the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly – and granted some powers previously held by the UK Parliament.[1] Most taxes across the UK are collected by the UK government. Funds are then allocated to the devolved legislatures by block grants based on the UK government's Spending Review.[2] Each legislature then decides how to spend the grant on devolved areas of spending. Devolved spending powers account for between 50% and 70% of total public spending in each nation, higher than the share in most federal countries.[3]

Under the Scotland Act (2012) and the Wales Bill (currently before Parliament), further tax powers have, and are likely to be, granted to the Scottish Parliament and Welsh Assembly. The most important taxes to be fully devolved are stamp duty, land, council and landfill taxes and a share of income tax revenues. The Scottish Parliament will be allocated 10p (or 10 percentage points) of the UK income tax rate, which it can raise or lower with its block grant reduced accordingly. Income taxes account for 27% of all UK tax revenue – the largest and most visible source of income for the UK government.

Devolving full income tax powers

Many of the Scottish political parties participating in the Smith Commission propose that income taxes are fully devolved to the Scottish Parliament. No OECD federal state currently devolves all income tax powers to sub-central levels of government.[4]

Criteria for assessing whether a tax ought to be devolved include efficiency, stability and equity. From an efficiency perspective, different income tax rates may lead to greater tax competition. This could be beneficial in terms of disciplining government largesse or it could be counterproductive as resources are allocated on the basis of tax rather than economic efficiency. Tax competition may lead to a Nash equilibrium with a lower overall tax rate, or divergent tax rates may encourage avoidance and lead to greater complexity. In any case, income tax yields are closely tied to the economic cycle and so unless fiscal reserves are accumulated in advance, or much wider borrowing powers are permitted, lower tax yields may require pro-cyclical tax hikes or spending cuts.

While tax revenues are not hypothecated, revenues support the functions of central government including reserved spending (defence, social security, foreign affairs), redistributing resources across the UK, financing debt interest payments and acting as 'insurer of last resort' for all constituent nations of the UK.

Q1:         Do you agree that the economic benefits of devolving full income tax powers to the Scottish Parliament and Welsh Assembly outweigh the possible costs?

Summary of responses

Leaving aside respondents who neither agree nor disagree, 85% of our panel members disagree or strongly disagree that the economic benefits of devolving full income tax powers outweigh the costs. Some experts, such as Christopher Martin (Bath) consider that ‘devolution of power over income tax would undermine the nation state’. Jonathan Portes (NIESR) observes that Scots would ‘be paying nothing directly from their incomes to finance quintessentially state-level functions’. Sir Christopher Pissarides (LSE) says that the ‘costs of possible (if not likely) tax competition between the component parts of the UK far outweigh [the benefits]’ and the ‘accounting difficulties will be a nightmare’. Similarly, Tim Besley (LSE) comments that it is ‘best to keep income tax, VAT and corporate taxes in the hands of the national [UK] government’.

Other respondents recognise that devolving full income tax powers would require extensive borrowing powers, which raises the question of what would happen in a crisis. Michael Wickens (York) thinks that the build-up of debt might be such that ‘they may well be forced to seek a bail-out from the rest of the UK’. Silvana Tenreyro (LSE) raises the need for a ‘well-thought [out] plan for resolution in a crisis’. And many experts warn that devolving full income tax powers would undermine the UK's capacity for macroeconomic management: Morten Ravn (UCL) describes this as ‘the loss of a fiscal instrument for macroeconomic stabilisation for the central authority’; and Tony Yates (Bristol) suggests that this would ‘inhibit the ability to conduct countercyclical fiscal policy’.

Several respondents note in their comments the benefits of not raising taxes and spending money at a more central level of government than is necessary. For example, John Driffill (Birkbeck) suggests that the UK ‘badly needs better regional and local government with stable powers and responsibilities’. Of the few respondents who consider that the benefits outweigh the costs, Andrew Mountford (Royal Holloway) cautions that there would need to be safeguards to prevent a ‘race to the bottom competition, which will leave each country worse off’.

English votes for English laws

England does not have a devolved assembly and its affairs are decided in the UK Parliament at Westminster. The eight regional assemblies in England introduced in 1998 were abolished between 2008 and 2010, although Greater London has an elected London Assembly. However, immediately after the Scottish referendum, Prime Minister Cameron linked the devolution of further powers to Scotland to the same powers for England, saying that ‘just as Scotland will vote separately in the Scottish Parliament on their issues of tax, spending and welfare, so too England... should be able to vote on these issues’ and the question of 'English votes for English laws' requires a decisive answer.’[5]

The economic case for devolving power is to provide for different local preferences. Principal-agent arguments suggest that regional representatives may be more accountable to their electorate than in higher levels of government. Also Brennan and Buchanan (1980) argue that the size of central government could be contained through the decentralisation of fiscal powers. However, Oates (1972) states that one of the conditions for regional provision is an absence of spillovers to other regions. There is a high degree of economic integration between the four constituent nations – for example, total trade between Scotland and the rest of the UK is equivalent to 70% of Scotland's GDP and the population of England is 10 times that of Scotland. Finally, devolving large fiscal powers to all constituent nations would reduce the tax-raising powers of the UK government, which may be inconsistent with the stability of the UK's monetary union.

Q2:         Do you agree that that there is a clear economic case for establishing 'English votes for English laws' with the same tax and spending powers as the Scottish Parliament?

Summary of responses

In the survey, 33% agree and 50% disagree that there is a clear economic case for 'English votes for English laws', with the rest neither in agreement nor disagreement. Many responses note the practical difficulties of one nation having 84% of the population and that there is no clear economic case for this level of governance within the UK. However, several panel members in their responses argue in favour of devolving more powers within England to regional assemblies. Marco Bassetto (UCL) suggests that ‘further devolution to regions within England could be a valid alternative’, and Tim Besley (LSE) notes that ‘City regions makes little sense unless the core governance is regional parliaments’.

Nicholas Oulton (LSE) notes that ‘there cannot be any argument in equity for giving Scottish and Welsh MPs power over English affairs while denying the same powers to English MPs’. Yet the dominance of England within the UK raises some practical difficulties. Jagjit Chadha (Kent) notes that ‘the impact of England on the rest of the UK is likely to be such that it would seem quite proper to allow the views of representatives from [the other nations]’. David Cobham (Heriot-Watt) suggests that the argument is ‘disingenuous’ as England would dominate and ‘inevitably have large repercussions for other parties’. Others, such as Wouter den Haan (LSE), think that it would be ‘very difficult to figure out what is meant with 'English laws' as the UK is such an integrated economy’.

Martin Ellison (Oxford) observes that because 84% of the UK population is in England, then the ‘efficiency loss of non-English input into English laws should be low’. Other respondents raise concerns for what this might mean for the UK overall. Angus Armstrong (NIESR) notes that if the same powers were devolved to an English chamber as proposed for Scotland, then ‘the UK government would lose control over one-third of its tax base’, which would ‘change the value of the claim of gilt holders’. Morten Ravn (UCL) sees the English votes proposal as ‘potentially leading to a fragmented fiscal union, which I do not see as a good outcome’.

To see how individual panel members answered and to see their comments, click below under "How the Experts Responded" on the question

References

Brennan, Geoffrey and James Buchanan (1980) The Power to Tax: Analytical foundations of a fiscal constitution, Cambridge University Press.

Oates, Wallace (1972) Fiscal Federalism, Harcourt Brace Jovanovich.

The Smith Commission (2014) https://www.smith-commission.scot/

 

 

 

[1] The UK Parliament remains sovereign, and retains the power to amend the Devolution Acts.

[2] The powers of the regional assemblies are the complement of powers reserved by the UK government, which include, for example, defence, the constitution, foreign affairs and financial and economic matters. The Scottish Government has the power to introduce an income tax rate of up to 3p, but this has not been used.

[3] Spending by regional assemblies as a share of total public spending in each devolved region is 69% in Scotland, 56% in Wales and 53% in Northern Ireland.

[4] The Basque Region in Spain has a particular autonomous tax arrangement.

[5] See BBC news coverage for quotations, for example: http://www.bbc.co.uk/news/uk-politics-29303827

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How the experts responded

Devolving Full Income Tax Powers to the Scottish Parliament and Welsh Assembly

Participant Answer Confidence level Comment
Martin Ellison's picture Martin Ellison University of Oxford Disagree Confident
Whilst there are benefits to bringing decision making closer to the regional electorate, there is a danger of generating a populist "race to the bottom" as different regions compete to offer the biggest tax breaks, e.g. to businesses thinking about location. In the short term there may also be concerns about the strength of regional institutions and their ability to deliver good quality governance.
Jagjit Chadha's picture Jagjit Chadha National Institute of Economic and Social Research Disagree Confident
I am not quite sure how any plans for full devolution will stack up with overall gross spending plans and debt issuance for the UK as planned by HMT. Would there be specific overall spending limits imposed on devolved areas? And if regions raise their own taxes for expenditures, investment or otherwise, the temporal mismatch between receipts and expenditures will surely lead to a case for borrowing, for which limits or rules have not been agreed.
Silvana Tenreyro's picture Silvana Tenreyro London School of Economics Disagree Confident
I don't think this is the right time to do this. To consider devolving full income tax powers, Scotland and other UK regions should be in a much stronger fiscal position, with clear provisions for what would happen in the event of a debt crisis (e.g., is the monetary union going to behave as a lender of last resort? In the future, however, this possibility could be revisited, provided the UK fiscal position is improved and the regions agree on a well-thought plan for the resolution of fiscal crises.
Patrick Minford's picture Patrick Minford Cardiff Business School Strongly Disagree Very confident
I look at this issue from the perspective of the political preferences of the dominant political parties in Scotland and Wales. Both of these favour higher social spending and redistribution. Hence if tax powers were devolved it is likely that taxes will be raised in both places in order to fund higher spending. This will drive capital, business and employment out of Scotland and Wales. Yet the UK is committed under the Barnett formula to equalising the outcomes of public services across the UK. As these two parts of the UK impoverish themselves, English citizens will be under pressure to raise transfers. In effect therefore net incomes (even including public spending as an offset to the higher taxes) will be reduced across the UK- not just in Scotland and.Wales but also in England. There is a parallel to be found in the taking away from local authorities of the business rate; this was being used as a (politically) cheap way of funding local services. Yet it drove business away from these jurisdictions, putting more pressure on central government for funding via the Barnett formula.
John Driffill's picture John Driffill Birkbeck College, University of London Disagree Not confident
The principle of not raising taxes and spending public money at a more centralised level than necessary -- subsidiarity, in the EU's language -- is sound. Local government in Britain has been persistently undermined by the Westminster government over the years, by reducing its ability to raise taxes and spend them. Britain badly needs better regional and local government with stable powers and responsibilities. It is important that they should be stable and not repeatedly fiddled about with by central government. But I am not convinced that the present proposals pass this test.
David Cobham's picture David Cobham Heriot Watt University Strongly Disagree Confident
The economic benefits of such a move would rapidly be overtaken by political costs which will then entail significant economic costs. I would favour devolution of only part of income tax, plus a part of VAT proceeds. It is important to retain cross-UK arrangements which express the solidarity between the different parts of the Union and embody the risk-sharing that justifies the existence of the Union, as Gordon Brown has argued.
Jan Eeckhout's picture Jan Eeckhout University College London Agree Very confident
Alan Sutherland's picture Alan Sutherland University of St. Andrews Disagree Very confident
Michael McMahon's picture Michael McMahon University of Oxford Disagree Confident
I can see some potential benefits but my main concern is that there could be detrimental effects of income tax competition which affect the allocation of public services. Moreover, in the absence of devolved borrowing powers, there could be a large cost from counter-cyclical fluctuations in taxes as I am not confident that there would be enough discipline to build up sufficient resources in good times.
David Smith's picture David Smith Sunday Times Disagree Confident
My concern is that this would be the start of a process which would make co-ordination of fiscal policy within the UK more difficult.
Wouter Den Haan's picture Wouter Den Haan London School of Economics Strongly Disagree Very confident
I see several problems. First, there is likely to be tax competition (possible race to the bottom). Second, it is not credible that the UK will not bail out the Scots or the Welsh if they get into trouble. This would mean that there would have to be agreement on how high deficits and debt can be high. This is difficult as we have seen on the continent. I understand that there are political reasons and some economic benefits (local government may know better what the region needs), but I think that the cost will be substantial.
Giancarlo Corsetti's picture Giancarlo Corsetti University of Cambridge Disagree Confident
As the background information to the question correctly points out, how much devolution of power is desirable requires an assessment of its effects on efficiency, stability and equity 'within the UK'. This assessment is a complex task. Devolving full income tax powers may in principle be a solution, but as an outcome of this comprehensive assessment, not as a starting point. There are examples of strong devolution (the Basque Region in Spain) that could provide a relevant benchmark.
Tony Yates's picture Tony Yates University of Birmingham Disagree Confident
I have blogged on this topic. I worry that devolution of tax and spending powers will i) inhibit risk sharing and ii) inhibit the ability of Federal fiscal policy to conduct counter-cyclical fiscal policy to smooth the business cycle, especially at the zero bound, and also to undertake extraordinary operations like bailing out the banks. The risk being that some areas may choose to tax and spend up to the maximum, leaving little further room to tap the tax base. And also that devolved borrowing that might follow from devolved tax powers would constrain borrowing capacity of the centre, and perhaps lead to tragedy of the commons problems.
Andrew Mountford's picture Andrew Mountford Royal Holloway Agree Extremely confident
Yes but.....there needs to be safeguards against a race to the bottom competition in income tax rates which -- as we have seen with corporate taxes -- will leave each economy worse off
Angus Armstrong's picture Angus Armstrong National Institute of Economic and Social Research Strongly Disagree Very confident
I suspect there is a fallacy of composition here: what may 'appear' beneficial to Scotland would be detremental to the Union and therefore Scotland within the UK. First, different tax rates on mobile factors lead to inefficiency, complexity and evasion. Second, as income tax is the most 'visible' tax, there would be even less connection to UK policies. Third, income tax in Scotland is more volatile than in the UK which itself seems to have variable trends. There may need to be substantial revenue borrowing powers or pro-cyclcial policies. Fourth, if other nations follow, the UK government would lose direct control over its biggest source of tax revenue, which ould be 'careless' to say the least when the UK govt has a high borrowing requirement.
Michael Wickens's picture Michael Wickens Cardiff Business School & University of York Strongly Disagree Extremely confident
Income tax in the UK pays for more than just the expenditures on the items under consideration such as welfare, health and education. There are also pure public goods to fund for the whole UK. As noted in the brief, in any devolution there is a real danger of expenditures exceeding revenues and hence a build up of debt in Scotland and Wales that they might well be forced either to default on seek bailout from the rest of the UK. This danger is real because it seems that the main reason why Scotland wants such devolution is in order to spend much more than at present.
Paolo Surico's picture Paolo Surico London Business School Disagree Confident
Francesco Caselli's picture Francesco Caselli London School of Economics Agree Not confident
Sir Christopher Pissarides's picture Sir Christopher... London School of Economics Disagree Extremely confident
Although there are some benefits like accounting for local preferences and containing the size of government in London, the costs of possible (if not likely) tax competition between the component parts of the UK far outweigh them. Think for example about location of industry and individuals and where they pay taxes. Will Scottish income be regarded as foreign income in England for tax purposes? The accounting difficulties that this will generate will be a nightmare
Paul De Grauwe's picture Paul De Grauwe London School of Economics Neither agree nor disagree Very confident
Morten Ravn's picture Morten Ravn University College London Disagree Extremely confident
I disagree with FULLY devolving income tax powers to the Scottish Parliament and the Welsh assembly. I agree that some fiscal federalism is a good idea. Here is where I come from: Devolving fiscal authority definitely have advantages in terms of bringing spending and taxing powers closer to the local communities thereby catering better for local preferences, needs, and building better on local knowledge. Against this are aspects such as the loss of a fiscal instrument for macroeconomic stabilization for the central authority, the issue of externalities, and how to deal with regional disparities. A simple principle in terms of devolving tax power would be to decentralize the taxation of the least mobile and least elastic sources of income which one would think relates to consumption and income taxes. However, full devolution of income taxation, I believe, would be sub-optimal because of the large income differences across UK regions. Welsh income per capita is much below the UK level. With a fully decentralized system it is unclear how transfers could be sustained in the longer run. Moreover, although full devolution could help increasing the efficiency of the fiscal system within regions, the ensuing tax competition between local authorities could have negative side effects in terms of lower revenues which would have to be felt on the spending side (such as putting pressure on cutting health and education bills). Thus, I think a partial devolution would be a preferred outcome.
Christopher Martin's picture Christopher Martin University of Bath Strongly Disagree Confident
I disagree for 3 main reasons: 1) Experience with devolving tax-and-spend in other countries is not impressive; I cannot think of an example where one could make a convincing argument that this this type of devolution has had unambiguous net benefits 2) This goes to the heart of what constitutes a nation state; devolution of power over income tax would undermine the nation state. I do not see strong support for this; even in Scotland, I felt the majority wanted the power to vary tax rates a bit but not to set them independently. There seems to be very little support for this idea in Wales. 3) Economic theory suggests regional devolution of tax raising powers is not ideal if there are spillovers between regions. There are spillovers: we have seen them in English concern (I put it mildly) at lower University fees and lower costs of caring for the elderly in Scotland.
Marco Bassetto's picture Marco Bassetto University College London Disagree Very confident
Income taxes are a staple of modern countries throughout the world, and it seems sensible that the central government of the United Kingdom should continue to be financed to a significant extent by income taxes, raised and collected centrally. That said, there is scope for further devolution to regional authorities, stopping short of full devolution. There is a much stronger case for devolving (and relying more) on property taxes to pay for investment in local public goods, better aligning taxpayers and beneficiaries.
Nicholas Oulton's picture Nicholas Oulton London School of Economics Disagree Not confident
The referendum debate in Scotland featured a lot of fantasy economics. Many Yes voters seemed to think (and the SNP encouraged this) that independence would mean a juster and fairer society in which welfare spending would be higher. Devolving full income tax powers to Scotland (and Wales) has the advantage that this belief could be tested. We will then be able to see whether the Scots are in fact willing to pay the bill for this vision. However, devolving full tax income tax powers may be going too far since it may lead to undesirable tax competition within the UK.
Costas Milas's picture Costas Milas University of Liverpool Agree Confident
I think that devolving powers at a regional level will be beneficial for the whole UK economy in at least one dimension: the housing market. Consider the following simplified example: Say that high public spending is set and this needs to be matched by a high (say) property tax. Balancing the regional books here really implies targeting the (regional) housing market since a high property tax will push demand and therefore (regional) house prices down. With this in mind, the Monetary Policy Committee and the Financial Policy Committee should (arguably) be the first one(s) pushing for this.
Tim Besley's picture Tim Besley London School of Economics Disagree Extremely confident
There is a strong argument for regional devolution in the UK. The mayoral model is not great (on the whole "Presidential politics" is a poor model). The property tax base should be devolved to regional parliaments but income tax variation should be minimal (and would be administratively complex). People, goods and capital are mobile across the UK so best to keep income tax, VAT and corporate taxes in the hands of national government. But full flexibility in relation to property taxes would make sense. There is a good case for devolving health, education, transport and infrastructure spending to regional governments. National priorites are welfare/pensions, defence, foreign policy, and science should stay with the Westminster parliament along with most forms of regulation and competition policy.
Jonathan Portes's picture Jonathan Portes KIng's College, London Strongly Disagree Very confident
Scotland already has a very large degree of freedom over public spending, both in terms of how the spending is allocated and how it is spent. So giving it more control over taxation - where the money comes from -makes sense. But giving it complete control over income taxes seems the wrong place to start, either from an economic or political point of view. The arguments against setting income tax purely at a sub-national level from an economic perspective are well rehearsed. Moreover, given that the Scottish people have, for better or worse, decided to remain part of the UK, there is a strong argument against complete devolution of income tax. There are some functions - defence, foreign affairs, etc - that will always remain at UK level. If income tax is devolved completely, then Scots will be paying nothing directly from their incomes to finance these quintessentially state-level functions. It is difficult to see how a nation-state is politically sustainable under such circumstances.
Kate Barker's picture Kate Barker British Coal Staff Superannuation Scheme Neither agree nor disagree Confident

English Votes for English Laws

Participant Answer Confidence level Comment
Martin Ellison's picture Martin Ellison University of Oxford Disagree Confident
With 84% of the UK population residing in England, the efficiency loss of non-English input to English laws should be low. In many cases the interests of constituent parts of the UK are closely aligned, so what is good for England is often synonymous with what is good for the rest of the UK. It is questionable whether any efficiency loss could be sufficient to dwarf the non-negligible costs of setting up new legislative arrangements.
Jagjit Chadha's picture Jagjit Chadha National Institute of Economic and Social Research Disagree Confident
The case for large and dominant member of union "to break away" is not as clear as that for peripheral nations. The impact of England on the rest of the Union is likely to be such that it would seem quite proper to allow the views of representatives from Northern Ireland, Wales and Scotland to continue to have their say. It might be different answer is we split the England into smaller region such as counties and cities, in which some localism and/or regionalism would make more sense.
Silvana Tenreyro's picture Silvana Tenreyro London School of Economics Agree Confident
Patrick Minford's picture Patrick Minford Cardiff Business School Strongly Disagree Very confident
My answer to this follows from my previous answer where I argued that the devolution of taxing powers to Scotland and Wales should be strictly limited. The problem lies in the lack of an intelligent and vibrant local democracy in what is a small nation with a representative Parliament. Political activity at the local level is limited to a small minority of the population; the local debate is weak and the talent pool small. Local politics is dominated by welfarist pressure groups. Thus devolving power to regions will lead to poor results. As for creating an English Parliament this is a non-starter in a unitarian state like the UK. Even with devo-max the role of the UK Treasury will dominate the devolved areas. Central state policy concerns everyone in the UK and devo-max makes little practical difference to this. However what devo-max does is increase the power of pressure groups for public spending because opinion is not well organised to oppose it at the devolved level, owing to the lack of good local politics. Hence more devolution equals more public spending and redistribution, paid for ultimately by the successful businesses and areas of the UK.
Ethan Ilzetzki's picture Ethan Ilzetzki London School of Economics Disagree Not confident
John Driffill's picture John Driffill Birkbeck College, University of London Agree Confident
There is a sound case for a move to a federal structure, where the UK legislature deals with matters affecting the UK as a whole, and regional bodies deal with matters that affect the relevant region separately. The role of the UK legislature in Westminster would be reduced.
David Cobham's picture David Cobham Heriot Watt University Strongly Disagree Very confident
The argument is disingenuous, to say the least. An ordinary federation is not possible when one party (England) constitutes 84% of the whole and will therefore inevitably dominate if it is allowed to make decisions which appear to be about itself only but inevitably have large repercussions (particularly in the presence of the Barnett formula) for the other parties. Change in this area also needs to ensure that there continues to be viable government at both English and UK levels. Politicians should not play dirty short-term politics with the UK constitution, which does indeed need serious revision, but this should be carried out with care and reflection, and with consensus.
Jan Eeckhout's picture Jan Eeckhout University College London Neither agree nor disagree Confident
Alan Sutherland's picture Alan Sutherland University of St. Andrews Disagree Very confident
Michael McMahon's picture Michael McMahon University of Oxford Agree Confident
Devolution of power may even benefit regions within England. This would allow, for example, the North of England to compete with Scottish fiscal decisions, as well as competing with the South of England.
David Smith's picture David Smith Sunday Times Disagree Confident
There is a case for Scottish and possibly other MPs absenting themselves from certain votes. But England's dominance of the UK economy means separate tax and spending powers are not necessary.
Wouter Den Haan's picture Wouter Den Haan London School of Economics Strongly Disagree Very confident
This just doesn't make any sense from an economic point of view. It will be very difficult to figure out what is meant with "English laws". The UK is quite an integrated economy and these things are not that easy to disentangle. Moreover, given the size of England, English laws are likely to have important consequences for the other nations in the UK.
Giancarlo Corsetti's picture Giancarlo Corsetti University of Cambridge Neither agree nor disagree Confident
The question is whether the entire UK should turn into a federal state, rather than a national state granting greater autonomy to some small regions. There are concrete examples of both models. One relevant issue is whether the fully federal system may require a reduction in the autonomy of small regions, relative to the existing aspirations by local constituencies.
Tony Yates's picture Tony Yates University of Birmingham Disagree Confident
For reasons stated above, I'm against devolving fiscal policy, both to Scotland and, therefore, to England. If devolution to Scotland proceeds, there is a clear political [not economic] case for reciprocating for England. But factors don't point all one way. The predominance of England in the UK as a whole will tend to afford certain advantages that might weigh against the need for formal devolution. And the 'favour' of one-sided devolution only might be a bribe to keep the union together, which might be worth paying.
Andrew Mountford's picture Andrew Mountford Royal Holloway Agree Confident
Yes but as in question 1 there needs to be safeguards
Angus Armstrong's picture Angus Armstrong National Institute of Economic and Social Research Strongly Disagree Very confident
While I accept that devolving full income tax power to Scotland creates a clear case for some form of 'chamber' for 'English votes for English laws', I see this as problematic for the Union. The UK government would lose direct control of almost one third of its tax base (income, stamp, LAs and landfill taxes). This would change the value of the claim of gilt holders and reduce the capacity of the UK government to act as an 'insurer of last resort'. Indeed, the further that powers are devolved from the direct control of the central government the more this comes to resemble a monetary without a fiscal union.
Michael Wickens's picture Michael Wickens Cardiff Business School & University of York Disagree Very confident
Whatever the economic case this would be unworkable politically. Neither devolution to Scotland and Wales nor to English regions makes practical sense.
Paolo Surico's picture Paolo Surico London Business School Neither agree nor disagree Confident
Francesco Caselli's picture Francesco Caselli London School of Economics Agree Not confident
Sir Christopher Pissarides's picture Sir Christopher... London School of Economics Strongly Agree Extremely confident
I don't see any reason against it. Of course, there should be a UK Parliament making decisions about the UK but once powers have been devolved to a Scottish Parliament which takes into account Scottish preferences I don't see any economic argument in favour of having a UK Parliament, which will include Scottish MPs, accounting for /English preferences
Paul De Grauwe's picture Paul De Grauwe London School of Economics Neither agree nor disagree Confident
Morten Ravn's picture Morten Ravn University College London Disagree Extremely confident
It would seem logical to have the English Votes for English Laws if there is full devolution to the Scottish Parliament. But in the absence thereof, I see no reason for taking this step. It would potentially lead to a fragmented fiscal union which I do not see as a good outcome.
Marco Bassetto's picture Marco Bassetto University College London Agree Confident
As a matter of principle, the economic case for "English votes for English laws" is clear: English subjects will bear the consequences of such laws, and their elected representatives are in the best position to reflect their interests. In practice, there is more discrepancy in the interests of different English constituencies than there is between England and Scotland, which means that such a reform would create winners and losers within England. Further devolution to regions within England with more homogeneous issues and interests could be a valid alternative.
Christopher Martin's picture Christopher Martin University of Bath Strongly Disagree Extremely confident
There is strong case for investment in infrastructure in the English regions. This has been neglected for too long as in a drag on economic growth. There is also a good argument for mechanisms to offset the instinctive London-Oxbridge bias in policymakers and commentators. But this is very different from English-only power over tax-and-spend. I can see why this idea might appeal to the right wing of the Conservative party (and to a Prime Minister that is strong on tactics but has no strategy). But I cannot see any sound economic or social arguments that suggest this might be a good idea.
Nicholas Oulton's picture Nicholas Oulton London School of Economics Strongly Agree Extremely confident
If devolving more power to Scotland and Wales is a good idea, the same must be true a fortiori for England. In addition there cannot be any argument in equity for giving Scottish and Welsh MPs power over English affairs while denying the same powers to English MPs. However the real debate in England may be over what powers to devolve from a putative English parliament to English regional assemblies or metropolitan regions. Should a north eastern authority have the power to build a new bypass around Newcastle, using borrowed funds if necessary, or should this always be the responsibilty as now of the Highways Agency funded by the UK Treasury?
John VanReenen's picture John VanReenen London School of Economics Disagree Confident
There should certainly be some greater devolution of powers to city-regions within the England to partially match the greater decentralisation of powers to Scotland. The UK is extremely centralised by international standards. The method should follow the procedure suggested by the City Growth Commission which will be a procedure that depends on the capacity of the city-region to take on extra powers. Details are http://www.citygrowthcommission.com/publication/final-report-unleashing-metro-growth/ (I was a Commissioner) An independent commission should make the judgement on this. Property taxes should be devolved rather than other taxes.
Costas Milas's picture Costas Milas University of Liverpool Agree Confident
Tim Besley's picture Tim Besley London School of Economics Strongly Agree Extremely confident
But the devil is in the details. This needs institutional reform -- regional parliaments (5-8 would be a sensible number) would be my preference rather than having a two-tier Westminster parliament. City regions makes little sense unless the core governance is regional parliaments.
Jonathan Portes's picture Jonathan Portes KIng's College, London Strongly Disagree Extremely confident
The UK is an extremely centralised state. The case for devolving tax and spending powers from Westminster is strong. But the case for simply having "English votes for English laws" in the Westminster Parliament, simply with Scottish (and sometimes Welsh) MPs excluded, is weak and incoherent. It would not mean a significant decrease in centralisation. It would be incredibly difficult to define, particularly given the non or only partial hypothecation of tax revenues; and the fact that London already has some devolved powers and other regions (like Greater Manchester) are shortly going to acquire more (on plans that have all-party support). When London and Greater Manchester, as well as Scotland, have powers over skills policy and spending, financed from general taxation, (as seems inevitable under any government) how on earth will it be decided what "English Votes for English Laws" actually means? Far more sensible and sustainable would be a proper programme of decentralisation of power (over some taxation, especially property tax and business rates; and of some areas of spending, like skills and welfare to work programmes) to local authorities and groupings of local authorities (as proposed by the Local Government Finance Commission and City Growth Commission).
Kate Barker's picture Kate Barker British Coal Staff Superannuation Scheme Neither agree nor disagree Not confident