Central Control of Local Expenditure: Central/Local Fiscal Relations: The Macroeconomic Dimension

Abstract

Central/local fiscal relations are being re-evaluated by policy makers intent upon reducing the alleged burdens of a large and growing public sector. The reforms of the Thatcher administrations during the 1980s placed central-local relationships high on the policy agenda and many powers were taken back to central government in an effort to achieve greater control over public spending. Behind many of the reforms in the 1980s was a set of economic arguments advocated primarily by the Treasury. More recently in its evidence to the Hunt Committee (1996) the Treasury has reaffirmed these arguments, despite the counter-evidence supplied by academic economists and others over the past 20 years. This article rehearses some of the earlier arguments and reviews the most recent contributions. Arguments which were contingent upon the prevailing conditions of the late 1970s and early 1980s might no longer be relevant to the world of the late 1990s.