The early operation of the 2016 Scottish Fiscal Framework and the divergence of UK and Scottish income tax rates highlights the practical issues of devolved tax policy in the context of UK fiscal centralization.
Politics and fiscal mechanics play interwoven roles in the public finances of devolved Scotland. Asymmetric devolution, in the context of divergent economic performance and relative population size and growth rates, has contributed to the longevity of the Barnett formula. Though criticized for either overfunding or underfunding Scotland, its resilience stems from its role as political convention in reducing overt conflict, and from maintaining the expenditure autonomy of the Scottish Parliament. The low level of self-financing from devolved taxes stimulated allegations that the Parliament lacked accountability and fiscal responsibility. Extended taxation powers advanced through the cautious Calman Commission to the rushed Smith Commission, and were driven by imperatives for a ‘counter-offer’ after the 2014 Independence Referendum. The early operation of the 2016 Scottish Fiscal Framework and the divergence of UK and Scottish income tax rates highlights the practical issues of devolved tax policy in the context of UK fiscal centralization. These developments have been driven by changes in Scottish political circumstances rather than by changes in fiscal fundamentals.
IN: The Oxford Handbook of Scottish Politics
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