Fiscal Austerity and Devolved Government in the UK

Abstract

Fiscal Austerity has arrived for UK governments, with a promise of more to come. The Devolved Governments of Scotland, Wales and Northern Ireland are faced with declines in the Barnett formula determined transfer payments from Westminster, which constitute the majority of their revenues. Sharp transfer declines, coupled with little or no ability to raise own revenues pose significant policy challenges for these Devolved Governments. Are the transfer payments and related cuts relatively fair across regions? Should the Devolved Governments have some fiscal means to respond to transfer cuts? Fiscal austerity also raises basic questions about devolution and selfgovernance for Scotland, Wales and Northern Ireland.