ABSTRACT
The part of the UK fiscal framework which determines how UK government funding is allocated across the four home nations has undergone profound change since 2012, given tax and social security devolution. The UK government's post-Brexit plans for regional development funding, state aid, regulation and trade negotiations have led to significant disagreements about the nature of the devolved fiscal and constitutional settlement. And the COVID-19 pandemic provided a major shock to a fiscal system with limited flexibility for the Scottish, Welsh and Northern Irish devolved governments. This paper reviews the changes and challenges faced during these reforms and policy shocks. We find that: tensions about reforms to funding arrangements reflect the inconsistency of principles guiding the reforms;that the UK government's post-Brexit plans do reduce the policy autonomy of the devolved governments, but reflect powers central governments often have in even highly decentralised countries;and that temporary changes to rules and the nature of the COVID-19 pandemic prevented a subnational fiscal crisis, but that more systematic change may make the system more robust to future shocks. This suggests that a review of the principles underpinning the UK's subnational fiscal and economic policies would be highly worthwhile.
ABSTRACT
The part of the UK fiscal framework which determines how UK government funding is allocated across the four home nations has undergone profound change since 2012, given tax and social security devolution. The UK government's post-Brexit plans for regional development funding, state aid, regulation and trade negotiations have led to significant disagreements about the nature of the devolved fiscal and constitutional settlement. And the COVID-19 pandemic provided a major shock to a fiscal system with limited flexibility for the Scottish, Welsh and Northern Irish devolved governments. This paper reviews the changes and challenges faced during these reforms and policy shocks. We find that: tensions about reforms to funding arrangements reflect the inconsistency of principles guiding the reforms;that the UK government's post-Brexit plans do reduce the policy autonomy of the devolved governments, but reflect powers central governments often have in even highly decentralised countries;and that temporary changes to rules and the nature of the COVID-19 pandemic prevented a subnational fiscal crisis, but that more systematic change may make the system more robust to future shocks. This suggests that a review of the principles underpinning the UK's subnational fiscal and economic policies would be highly worthwhile.
ABSTRACT
During the first quarter of 2020, the global economy was rapidly hit by a pandemic which led to state-wide lockdowns and the worst economic crisis since the World War II. Both the supply and the demand sides of economies were severely affected, followed by a dramatic dip in global GDP. As a response, policymakers introduced an unprecedented number of interventions to back up employees, firms, and industries to counteract the collapsing markets. Our main objective is to explore how these fundamental policy interventions are likely to influence the future potential and functioning of markets. Historically swings in the pendulum favoring either market-based solutions or more regulated public sectors have coincided with disruptive crises. The overall question is what will happen during post-COVID-19, will governments withdraw their crisis policies and how will a possible retreat be organized? Are we entering an era of permanently increased governmental interventions? More precisely, we identify three specific threats to the market-oriented economy: the extension and development of governmental expenditures, protectionistic measures, and the level of state aid and the degree of competition at markets. We are particularly interested in the effect of the COVID-19 measures, and their possible extension, on Schumpeterian dynamics, both in terms of entry and exits (Schumpeter I) and how the position of large firms will be affected (Schumpeter II). © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.