Think piece: What does AV mean for fiscal policy?



Many claims are made about the impact of voting systems on government fiscal policies, but what does the international evidence say? In this think piece, James Paton assesses the impact of coalition government and systems of proportional representation on government fiscal policies in five different countries, and discusses the implication of his findings for the US.

Perhaps the strongest argument for FPTP is that the likelihood of forming a single party government is much higher than under proportional representation (PR). Single party overall majority governments are widely seen as being more stable than coalitions. As a single party has a majority within the legislature, a government should be able to push the legislative agenda through. The thinking goes that this should keep faith with credit markets due to the lower chance of the government collapsing, and tighter fiscal policy as the bargaining process involved in coalition formation leads to higher taxes and higher government spending. (In order to buy the support of the various interest groups the negotiating parties rely on.) This has been an area that has not been discussed in detail during the debate around Britain’s possibility of changing the electoral system.

In this think piece, I will examine whether PR is more likely to produce coalitions, and if so, whether coalition governments produce more fiscally profligate governments, in terms of fiscal policy. This will be kept within the years of 1987-2007 before the financial crisis. I will examine five western parliamentary democracies that have systems based on PR to see whether there is evidence suggesting that fiscal policy is looser than in the UK: Greece, Ireland, The Netherlands, New Zealand and Germany.

This of course is not an absolute science as there are a myriad of variables that affect fiscal policy. However the evidence that I explore shows a mixed picture from around the world. From it I will consider what PR could mean for the UK. [Whole piece]