Argues for federalism in public funding where taxation is devolved. This would improve the link between public finance and democracy.
Propositions from the theory of fiscal federalism are used to argue for closer matching of taxes raised in Scotland and spending by the Holyrood government. Incentives would then be enhanced for Holyrood to provide public goods and services in quantities Scottish taxpayers are willing to pay for. Empirical evidence shows that this increase in vertical balance improves rates of regional and national economic growth. Two sequential games are used to show that whether Scotland chooses first or second in the public spending game with Westminster it still ends up with overly-generous funding. The argument is made that, in fairness to taxpayers in the rest of the UK, (increased horizontal balance) Scottish fiscal autonomy should be moved to.
IN: Hallwood P. (2020) Minimizing the Cost of Union: Fiscal Autonomy and the Case of Scotland. In: Interpreting Historical Sequences Using Economic Models. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-53854-5_8
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