Intergovernmental Financial Relations in an Age of Austerity
Edited by Richard Eccleston and Rick Krever
Chapter 5: The gathering storm: federalization and constitutional change in the United Kingdom
This chapter provides an analysis of the changing nature of intergovernmental relations in the UK in light of its unique historical and constitutional context as a ‘state-nation’, of which England is overwhelmingly the largest component. England may have become more economically dominant within the union owing to London’s important role as a global financial centre, yet politically the City of London was also a cause of the financial crisis of 2008–9. While fiscal policy is determined centrally, ongoing devolutionary reforms have conferred some budgetary independence on Scotland, Wales and Northern Ireland, and fiscal equalization under the ‘Barnett formula’ is now generating political controversy amid long-lasting economic austerity policies in the aftermath of the financial crisis. The greater level of fiscal federalism being created in the longer term will pose increasing political challenges for the devolved administrations, and the prospects of the constituent nations of the UK holding together.
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