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The unintended consequence of English votes for English laws

Published online by Cambridge University Press:  01 January 2020

Angus Armstrong  and
Monique Ebell
Monique Ebell*
Affiliation:
National Institute of Economic and Social Research and Centre for Macroeconomics
*
E-mail: [email protected] or [email protected]
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Abstract

The Scotland Bill 2015–16 would make the Scottish government one of the most powerful sub-central governments in the OECD in terms of its control over spending and taxation. The UK government has also announced plans to introduce ‘English Votes for English Laws’ (EVEL), where the support of a majority of English MPs would be necessary to pass legislation deemed to impact on England only. The objective of this paper is to examine the potential for spillovers to arise in monetary unions of asymmetric nations where fiscal policy choices are taken locally. We extend a model of Chari and Kehoe (2008) to show the sub-optimal consequences of devolved fiscal policy in a moneteary union with a dominant member state. Because England is so much larger than the other constituent nations of the UK, its fiscal policy choices will have a commensurately stronger impact on UK monetary policy. As a result, UK monetary policy might be inappropriate for the smaller nations, calling into question the economic efficiency of EVEL. This is a general result which arises from the asymmetry of nations rather than specific UK funding arrangements or behavioural responses.

Keywords

devolutionEnglish votes for English lawsfiscal and monetary policycoordinationspilloversE42E58E61E63H77
Type
Research Articles
Information
National Institute Economic Review , Volume 233 , August 2015 , pp. R37 - R44
Copyright
Copyright © 2015 National Institute of Economic and Social Research

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Footnotes

The authors are supported by the Economic and Social Research Council through its Centre on Constitutional Change.

References

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