The Impact of Enhanced Regional Fiscal Autonomy: Towards a Scandinavian Model for Scotland?

The "Scandinavian model" has often been held up as one that Scotland, if it had the necessary fiscal powers, might wish to emulate, although the emphasis has typically been on the high level (and quality) of public services rather than the associated high level of taxation that characterises the Scandinavian economies. Its current tax powers would allow the Scottish Government to raise average income tax rates to Scandinavian levels and use the revenues to implement a substantial increase in public spending. This paper explores the likely consequences of such a shift as a contribution to our understanding of the likely impact of Scotland pursuing a differentiated income tax policy from that in RUK. It will be critical for any future Scottish Government that may be contemplating the use of significant differential income taxes carefully to assess the likely implications for the Scottish economy and society.