FISCAL FEDERALISM IN THE UK

Abstract

be known as a result of Its association with the analysis of fiscal relations between central and local (state) governments in federal states such as Australia, Canada and the U.S. As an expositional device I will focus on the issue of whether it would be possible to introduce a decentralised system of local and regional finance which embodies the ideas of fiscal federalism as they have been developed in such federal countries. The history of constitutional development in the United Kingdom suggests that the prospects for such a radical reform are slight. However, some form of fiscal federalism is the logical consequence of the arguments for Scottish and Welsh devolution - perhaps accompanied by regional devolution within England - and of the case for greater local government autonomy so eloquently argued in the report of the Layfield Committee (1976). An analysis of the feasibility should thus provide useful insights concerning the consequences and success of less drastic moves in the direction of fiscal decentralisation. Much of the literature on fiscal federalism is concerned with issues related to what one might term the 'fiscal constitution', i.e. the allocation of responsibility for public expenditure and taxation between national and sub-national units of government - which may be states, cantons, municipalities and a variety of other local government units. Since the literature can be applied equally to regional government units - i.e. states, provinces, cantons, Lander - and to local (in the conventional sense) government units - i.e. counties, municipalities, communes, districts -1 shall use the term local government to refer inclusively to all sub-national units of government. The