'Constrained Discretion' in UK Monetary and Regional Policy

HM Treasury claims that the notion of “Constrained Discretion” which directs the
effective operation of UK monetary policy applies equally to other delegated and
devolved policies, such as the use of Regional Development Agencies in the delivery
of UK regional policy. We question this claim from a “transactions cost politics”
viewpoint. We argue that the delegation of responsibility for monetary stabilisation
raises principal agent issues quite different to those encountered in the delegation
of the responsibility for regional regeneration. Therefore the effectiveness and
transparency that characterises present-day monetary policy cannot be expected in
regional policy. Further, the detailed theoretical and empirical case for delegated
Regional Development Agencies has yet to be made.