Fiscal Aspects of Constitutional Change

This fellowship will produce original research on fiscal aspects of the constitutional change debate in the UK.

It will encompass both taxes and spending. The tax side will principally involve a detailed microeconomic assessment, using tax-benefit microsimulation where possible, of the incidence, distribution, administrative arrangements and behavioural responses to the different possible configurations of taxes in Scotland following the independence referendum. These range along a fiscal powers spectrum from the new status quo (the Scotland Act 2012) to full independence. This work will be joint with IFS and possibly with NIESR. Other perspectives on tax powers will be gained from an international colloquium to be held in Scotland in September 2013. This will consider tax and other fiscal issues associated with the possible break-up of states. For example, will the existence of a new international border affect trade? Can joint markets, such as that for energy, continue after independence? The colloquium will also compare fiscal issues in the UK with those in other states under threat of break-up - e.g. Canada, Spain and Belgium. It will also draw evidence from countries where break up has occurred - e.g. Ireland.

In relation to spending, the research will consider which parts of society gain from existing spending patterns, particularly Scotland's seemingly generous universal benefits. Thus, it will ask questions such as who benefits most from free personal care? Some voters will be concerned whether these benefits are the best way to use scarce resources. Others will be concerned whether existing patterns of spending can be maintained if Scotland becomes independent. Taxpayers will also be concerned whether they can be afforded. This work will also be joint with IFS and involve detailed analysis of the spending patterns in Scotland as set out in its annual budget. The applicant is the budget adviser to the Finance Committee of the Scottish Parliament. It will also involve comparisons with public spending patterns in other parts of the UK, since atitudes to constitutional change in RUK are somewhat coloured by perceptions of Scotland's seemingly generous spending allocation.

The final piece of research will involve using data from a web-based survey to test whether individuals attitudes to risk and how they trade off the present against the future affects how their attitude to constitutional change. Those who dislike risk and are concerned that an independent Scotland would lead to higher taxes may vote against independence. Those who have little interest in the future may not be willing to engage with the debate, or be less concerned with the arguments as to whether Scotland's economic prospects be post-independence might be good or bad. These behavioural economics issues have not been addressed in the context of a state, like the UK, which may break up in the near future. This work will be joint with Liam Delaney, a young behavioural economist with a growing reputation in this field.

Once the research results are produced, an equal amount of effort will go in to disseminating them in such a way as to maximise their impact.

The users likely to benefit are principally the Scottish public, as well as particular interest groups in Scotland. However, others outside Scotland also have an interest in the outcome of the constitutional change debate and are catered for in the impact strategy.

The proposed project will generate at least 4 influential publications:
1. Contribution to IFS Green Budget for Scotland on Tax Proposals for Scotland
2. Paper on distributional aspects of universal benefits in Scotland
3. Paper with Liam Delaney on behavioural responses to fiscal uncertainty
4. E-book with Francois Vaillancourt on fiscal aspects of separation

Findings from these will be widely disseminated. The dissemination strategy is based on attempting to use as wide a range of methods as possible, including conferences, presentations, newspaper articles and media appearances. Likely venues for public presentations include Edinburgh, Inverness, Newcastle, Cardiff and Belfast. These events would be facilitated by bodies that can credibly argue to have a neutral position in respect of constitutional change - such as the RSE, DHI and BBC. Involvement with young people is important since the young will have to live with the outcomes of the 2014 referendum. In addition, 16 and 17 year olds may be allowed to vote in the referendum. Such events are likely to have high potential impact on key opinion formers.

In addition, the project will work with NIESR (if the NIESR application is successful) to support any events that it might wish to engage with in Scotland, while NIESR will offer reciprocal support to us for London events.

In Scotland, newspaper articles relating to this research agenda are generally easy to place. However, because the quality newspaper market is shrinking, greater emphasis will be placed on social media. An "Economic Aspects of Constitutional Change" blog will be constructed along the lines www.irisheconomy.ie, which provides high quality academic commentary on Irish economic issues. This will be accompanied by a linked Twitter account. We would also support the establishment of a joint website and Twitter accounts for the Senior Research Fellowships. It is difficult to know how to measure the final impact of social media, though metrics such as number of hits should provide an initial measure of the extent to which issues raised by the research are of interest.

We would expect to hold private meetings with specific stakeholders. These might include: Scottish Trades Union Congress, Confederation of British Industry, Institute of Directors, Scottish Chambers of Commerce, Scottish Financial Enterprise, Scottish Council of Voluntary Organisations and staff members of the Scottish Parliament. All of these bodies have been contacted and shown an interest in the project. Private meetings are likely to be more attractive to those who may not wish to take a public position on constitutional change. These meetings are likely to be an important aspect of the impact from this project, because they will inform such bodies in ways that may help them arrive at a public stance prior to the referendum.

The applicant will also promote the role of the ESRC through its ability to provide an independent, quality-assured support for this project.