Following failure of the stimulatory policies post the 2008 financial crisis and the resulting instability of the Euro, national fiscal consolidation with real sanctions for non-compliance has become a key focus of most governments as they address escalating budget deficits and rapidly rising public debt. The problem is that agreement by central governments to adopt national fiscal rules, whether self-imposed or imposed by some supranational institution, leaves unaddressed how such rules and sanctions should be adopted by (or imposed on) sub-central and local governments. To date, the primary focus has been on whether the encouragement given over recent decades to fiscal decentralisation has worsened public debt levels and made national fiscal consolidation by central governments more difficult. This article argues that what is missing from this discussion is attention to the intergovernmental institutional arrangements and how they and their reform are potentially crucial to both national fiscal consolidation and ensuring retention of the benefits of fiscal decentralisation.

Fiscal decentralisation theory calls for enhanced local revenue and spending responsibilities to promote the efficiency of public service delivery. However, some have pointed to the danger of local capture cancelling out these effects. I examine the argument that organised crime violence (OCV) intensifies as mafias fight for access to local government resources, which they consider an attractive income source. I regress violence on local spending (LS) in Mexican municipalities over the period 1995–2015. I find a significant relationship between LS and the intensity of violence: higher levels of LS per capita are strongly related to higher homicide rates, conditional on them being positive. However, LS does not determine the probability of OCV taking place in the first place. The results suggest that caution should be exercised when initiating decentralisation reforms in the context of local capture and OCV.

This paper examines the background to calls for further fiscal decentralisation in Scotland in the light of theories of fiscal federalism. In particular, it examines whether spatial differences in preferences, which are central to ‘first generation’ theories of fiscal federalism can be argued to play a central role in the case for granting Scotland further tax and spending powers. ‘Second generation’ theories of fiscal federalism draw attention to the political economy of allocating tax powers to different levels of government. Some of the authors in this strand of theory argue that the case for allocating tax powers to subnational governments can be made in terms of ‘accountability’ – the notion that local politicians can be better held to account for the outcomes of policy actions. Our empirical analysis suggests that there is no clear difference in preferences between Scotland and the rest of the UK along a number of key political dimensions. However, the Scottish parliament enjoys substantially higher levels of trust among the Scottish electorate than does the UK parliament.