Fiscal Aspects of Constitutional Change

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This fellowship will produce original research on fiscal aspects of the constitutional change debate in the UK. It will encompass both taxes and spending. The tax side will principally involve a detailed microeconomic assessment, using tax-benefit microsimulation where possible, of the incidence, distribution, administrative arrangements and behavioural responses to the different possible configurations of taxes in Scotland following the independence referendum. These range along a fiscal powers spectrum from the new status quo (the Scotland Act 2012) to full independence. This work will be joint with IFS and possibly with NIESR. Other perspectives on tax powers will be gained from an international colloquium to be held in Scotland in September 2013. This will consider tax and other fiscal issues associated with the possible break-up of states. For example, will the existence of a new international border affect trade? Can joint markets, such as that for energy, continue after independence? The colloquium will also compare fiscal issues in the UK with those in other states under threat of break-up - e.g. Canada, Spain and Belgium. It will also draw evidence from countries where break up has occurred - e.g. Ireland. In relation to spending, the research will consider which parts of society gain from existing spending patterns, particularly Scotland's seemingly generous universal benefits. Thus, it will ask questions such as who benefits most from free personal care? Some voters will be concerned whether these benefits are the best way to use scarce resources. Others will be concerned whether existing patterns of spending can be maintained if Scotland becomes independent. Taxpayers will also be concerned whether they can be afforded. This work will also be joint with IFS and involve detailed analysis of the spending patterns in Scotland as set out in its annual budget. The applicant is the budget adviser to the Finance Committee of the Scottish Parliament. It will also involve comparisons with public spending patterns in other parts of the UK, since atitudes to constitutional change in RUK are somewhat coloured by perceptions of Scotland's seemingly generous spending allocation.The final piece of research will involve using data from a web-based survey to test whether individuals attitudes to risk and how they trade off the present against the future affects how their attitude to constitutional change. Those who dislike risk and are concerned that an independent Scotland would lead to higher taxes may vote against independence. Those who have little interest in the future may not be willing to engage with the debate, or be less concerned with the arguments as to whether Scotland's economic prospects be post-independence might be good or bad. These behavioural economics issues have not been addressed in the context of a state, like the UK, which may break up in the near future. This work will be joint with Liam Delaney, a young behavioural economist with a growing reputation in this field. Once the research results are produced, an equal amount of effort will go in to disseminating them in such a way as to maximise their impact.