A Scandinavian ‘high-tax, high-spend’ model for regions? The impact of enhanced regional fiscal autonomy

The fiscal powers of the Scottish government have increased significantly, resulting in the first (modest) regional differences in income tax rates within the UK. In fact, the current degree of fiscal autonomy would permit a radical shift towards a high-tax, high-spend ‘Scandinavian model’. It is found that the impact of such a change on the Scottish economy is likely to be positive only if the public value the increased public spending and are willing, and able, to accept a corresponding reduction in their take-home pay. It is concluded that the current bargaining system is unlikely to deliver such an outcome.