Fiscal Autonomy in Scotland: The case for change and options for reform

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Footnotes

1 Choosing Scotland's Future http://www.scotland.gov.uk/Publications/2007/08/13103747/0

2 The Scottish Government's Response to the First Annual Report of the Scottish Council of Economic Advisors http://www.scotland.gov.uk/Publications/2009/01/15111700/0

3 The Government Economic Strategy http://www.scotland.gov.uk/Publications/2007/11/12115041/0

4 OECD, OECD.StatExtracts: http://stats.oecd.org/WBOS/index.aspx

5 As at 30 September 2008, Source: NBIM Quarterly Report Q3, 2008 - Table 5.1.
http://www.norges-bank.no/templates/reportroot____65330.aspx

6 OECD Economic Outlook, Number 84, Organisation for Economic Co-operation and Development - www.oecd.org

7 IMF World Economic Outlook Update, 28 January 2009 - http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

8 European Commission, Directorate-General for Economic and Financial Affairs, Interim Forecast 2009 - http://ec.europa.eu/economy_finance/pdf/2009/interimforecastjanuary/interim_forecast_jan_2009_en.pdf Economic Outlook, Number 84, Organisation for Economic Co-operation and Development -OECDand www.oecd.org

9 General government net financial liabilities is a measure of long-term indebtedness

10 OECD Economic Outlook, Number 84, Organisation for Economic Co-operation and Development - www.oecd.org

11 Pre-Budget Report ( PBR) 2008, HM Treasury - www.hm-treasury.gov.uk

12 IFS Green Budget 2009, Institute for Fiscal Studies: London - www.ifs.org.uk

13 US Treasury - Financial Stability Plan Fact Sheet (February 2009)

14 The Swedish government moved to stabilise its financial system by guaranteeing up to £138 billion of new bank borrowing and creating a £1.4 billion fund to help recapitalise its banks.

15 The Irish government was the first to guarantee all deposits, bonds and debts in its six main banks for two years. Ireland has now also approved a £5.5 billion plan for recapitalising its banking sector.

16 Norwegian Ministry of Finance Press Release No. 17/2009 (08.02.09) available at: http://www.regjeringen.no/en/dep/fin/press-center/Press-releases/2009/norway-presents-new-measures-for-industr.html?id=545244

17 The Scottish Government's Response to the First Annual Report of the Scottish Council of Economic Advisors http://www.scotland.gov.uk/Publications/2009/01/15111700/0

18 See for example: Reform Scotland, Nov 2008, "Fiscal Powers"; David Hume Institute, Nov 2008, "Options for Scotland's Future - the Economic Dimension"; The Steel Commission, March 2006, "Moving to Federalism - A New Settlement for Scotland" and IPPR, July 2008, "Fair Shares? Barnett and the Politics of Public Expenditure".

19 Instituto Nacional de Estadistica National Accounts www.ine.es/

20 See MacDonald R., and Hallwood P., 2006, "The Economic Case for Scottish Fiscal Autonomy: With or Without Independence", The Policy Institute, Edinburgh; Imi, A., 2005, "Decentralisation and Economic Growth Revisited: An Empirical Note"', Journal of Urban Economics, Vol. 57, pp. 449 - 461; Stansel DB., 2005, "Local Decentralisation and Economic Growth: A Cross-Sectional Examination of US Metropolitan Areas", Journal of Urban Economics, Vol. 57, pp. 55 - 72 and Thie_en, U., "Fiscal Decentralisation and Economic Growth in High-Income OECD Countries", Fiscal Studies, Vol. 24, pp. 237-274.

21 Lee Y., and Gordon RH., 2005, "Tax structure and Economic Growth", Journal of Public Economics, Vol. 89, pp. 1027-1043; Linn H., and Russo L., 2002, "Growth effects of capital income taxes: how much does endogenous innovation matter?", Journal of Public Economic Theory, Vol. 4, pp. 613 - 640; Schwellnus C., and Arnold J., 2008, "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-country Evidence from the Amadeus Dataset", OECD Economics Department Working Paper, Number 641; and Vartia L., 2008, "How do Taxes Affect Investment and Productivity? An Industry-Level Analysis of OECD Countries", OECD Economics Department Working Paper, Number 656.

22 Scotland Act 1998, c.46 - http://www.opsi.gov.uk/Acts/acts1998/ukpga_19980046_en_1

23 Government Expenditure and Revenue Scotland ( GERS) 2006/07, Table 6.8, page 60. http://www.scotland.gov.uk/Topics/Economy/Key-Publications/GERS.

24 It is estimated that a one pence change in the SVR would be worth approximately plus or minus £380 million in 2008/09 and £400 million in 2009/10. (Source: HM Treasury Budget 2008)

25 Scottish Budget - Spending Review 2007 - http://www.scotland.gov.uk/Publications/2007/11/13092240/0

26 Scotland Act 1998, section 66 and 67 - http://www.opsi.gov.uk/Acts/acts1998/ukpga_19980046_en_1

27 For a review of borrowing autonomy in other countries see Debrun et al., 2008, "Tied to the mast? National fiscal rules in the European Union", Economic Policy, Vol. 23, pp. 297 - 362 and Rodden J., 2002, "The Dilemna of Fiscal Federalism: Grants and Fiscal Performance around the World," American Journal of Political Science Vol. 46, pp. 670 - 687.

28 CityMayors.com - 14 May 2008 - http://www.citymayors.com/finance/bonds.html#Anchor-47383

29 HM Treasury Budget 2008

30 The Government Pension Fund of Norway is made up of two elements: The Government Pension Fund - Global (the oil fund) and The Government Pension Fund - Norway. The latter is a general National Insurance scheme. For more information see http://www.government.no/gpf

31 NBIM Quarterly Report Q3, 2008 - Table 5.1 http://www.norges-bank.no/templates/reportroot____65330.aspx

32 OECD Economic Outlook, Number 84, Organisation for Economic Co-operation and Development

33 HM Treasury Budget 2008.

34 OECD Economic Outlook, Number 84, December, Organisation for Economic Co-operation and Development: It should be noted that fiscal balances across the world have deteriorated significantly in recent months as government's finance bank recapitalisation and fiscal stimulus programmes.

35 CBI, 2008, " UK Business Tax: A Compelling Case for Change", CBI, March 2008; MacDonald, R., and Hallwood, P., 2006, "The Economic Case for Fiscal Autonomy", Policy Institute, Edinburgh; Greenaway D., Gorg H., and Barry F., 2006, "Assessing the Case for a Differential Rate of Corporation Tax in Northern Ireland", Economic Research Institute of Northern Ireland, November 2006.

36 Government Expenditure and Revenue Scotland 2006-07 http://www.scotland.gov.uk/Publications/2008/06/18170334/0

37 Mclean I., Lodge G., Schmuecker K., 2008, "Fair Shares? Barnett and the Politics of Public Expenditure", Institute for Public Policy Research

38 Darby et al., 2003, "Fiscal Federalism in the European Union", in Jan Monnesland (ed.), European Research in Regional Science 13, Special Issue on Regional Public Finance, Pion: London.

39 McLean, I., "Fiscal Federalism in Australia", Public Administration, Vol. 82, pp. 21-38.

40 Public Expenditure Statistical Analyses ( PESA), 2008, HM Treasury. http://www.hm-treasury.gov.uk/pespub_pesa08.htm

41 Steel Commission, 2006, "Moving to Federalism - A New Settlement for Scotland", Final Report of the Steel Commission to the Scottish Liberal Democrat Spring Conference.

42 The First Annual Report of the Scottish Council of Economic Advisors - http://www.scotland.gov.uk/Publications/2008/12/04092147/0

43 SCDI (2006) identifies a range of economic and arguably more importantly, a range of political constraints that may limit the degree of de facto fiscal autonomy - SCDI, 2006, "Scotland's Economy - The Fiscal Debate", Scottish Council for Development and Industry.

44 Basque Government - Economic Agreement (2002) http://www.lehendakaritza.ejgv.euskadi.net/r48-2312/en/contenidos/informacion/concierto_economico/en_467/adjuntos/concierto_economico_i.doc

45 Oates W., 1999, 'An Essay on Fiscal Federalism', Journal of Economic Literature, Vol. 37, September, pp.1120-1149.

46 Brueckner J., 2006, "Fiscal Federalism and Economic Growth", Journal of Public Economics, Vol. 90, pp. 2107-2120.

47 Krugman P., 1991, "Increasing Returns and Economic Geography", Journal of Political Economy, Vol. 99, pp. 483 - 499.

48 Varney Review: "Review of Tax Policy in Northern Ireland" and Greenaway D., Gorg H., and Barry F., 2006, "Assessing the Case for a Differential Rate of Corporation Tax in Northern Ireland", Economic Research Institute of Northern Ireland.

49 Brennan G., and Buchannan J., 1980, "The Power to Tax", Cambridge University Press, Cambridge.

50 CBI, 2008, " UK Business Tax: A Compelling Case for Change", CBI, March 2008.

51 PWC/World Bank, 2009, "Paying Taxes: The global picture", Price Waterhouse Coopers.

52 MacDonald, R., and Hallwood, P., 2006, "The Economic Case for Fiscal Autonomy", Policy Institute, Edinburgh.

53 Rodden J., 2002, "The Dilemna of Fiscal Federalism: Grants and Fiscal Performance around the World," American Journal of Political Science Vol. 46, pp. 670-687.

54 De Mello L., 2000, "Can Fiscal Decentralisation Strengthen Social Capital", IMF Working Paper, Number 00/129, Washington DC.

55 IMF Government Financial Statistics Database 2008.

56 For a discussion of the academic literature and the merits of decentralisation in improving accountability - Lockwood B., 2006, "The Political Economy of Decentralisation" in Handbook of Fiscal Federalism (ed. E Ahmad and G. Brosio), Edward Elgar Publishing.

57 World Bank - Decentralization & Subnational Regional Economics - What, Why, and Where

58 There have been few formal studies of the relationship between fiscal decentralisation and macroeconomic stability. Those that have been undertaken focus on large Federal countries and their applicability to the Scottish case is limited - Rodden J., and Wibbels E., 2002, "Beyond the Fiction of Federalism: Macroeconomic Management in Multi-Tiered Systems", World Politics, Vol. 54, pp. 494 - 531.

59 Greenaway D., Gorg H., and Barry F., 2006, "Assessing the Case for a Differential Rate of Corporation Tax in Northern Ireland", Economic Research Institute of Northern Ireland, November 2006 - Page 6.

60 HM Treasury Budget 2008 - www.hm-treasury.gov.uk

61 OECD Economic Outlook, Number 84, Organisation for Economic Co-operation and Development - www.oecd.org

62 Government Expenditure and Revenue Scotland, 2006/07 - http://www.scotland.gov.uk/Topics/Economy/Key-Publications/GERS

63 Pre-Budget Report (2008), HM Treasury www.hm-treasury.gov.uk - Table B10.

64 IFS Green Budget 2009, Institute for Fiscal Studies: London www.ifs.org.uk

65 Scottish Government - National Conversation - http://www.scotland.gov.uk/Topics/a-national-conversation