| Abstract: | This article examines the new system of Scottish local government finance in theory and practice. It argues that reform is based on an economic theory of local fiscal behaviour, and examines the empirical evidence regarding the application of marginal cost pricing principles through the linking of marginal spending to taxation. The research reveals that the application of such principles in practice will be difficult, as only a few services offer direct benefits to all individuals, and as yet the technical precision needed in assessing needs for grant distribution has not materialized. There is little evidence of any impact of financial reform on local expenditure, as a number of intervening variables and assumptions can skew the accountability process. |
