The constitutional doctrine of separation of powers seeks to divide governmental power between three arms, or branches, of government – the legislative, executive and judicial branches – with the aims of preventing arbitrary or oppressive government, and of promoting efficiency in the operation of government. Separation of powers has historically played an uncertain role in the constitution of the United Kingdom as it is argued to be incompatible with the doctrine of parliamentary sovereignty. This chapter will examine how far the UK Constitution can be said to reflect a separation between governmental institutions and their functions, and how far the values of separation of powers can be seen in our constitutional arrangements.

So far, people in our model economy have had only one way to acquire consumption at a later time – by holding fiat money. In the real world, however, there are many other assets. In this chapter, we concentrate on one particular alternative asset, capital. Capital is different from fiat money in that when people acquire capital this period, the capital produces goods next period and thus affects an economy’s output.

In Chapter 14, we examined a model economy in which bank insolvency can arise. But there is nothing in the model that looks like money in the sense that there are no explicit trades. What banks hold are real assets as a young person deposits goods to withdraw at a future date. A bank chooses from either a storage good or capital. Yes, storage is more liquid than capital in the sense that it matures in one period instead of two periods, but there is no reason for intergenerational trade between people in Chapter 14.

This first part of this chapter examines what is meant by the term ‘human rights’ and the role of this concept in twenty-first century public law. The concept of human rights is intended to protect those civil, political, social and economic interests vital to maintaining human autonomy. Human rights law, in its modern guise, came to the forefront of public thought across Europe in the aftermath of the Second World War, an era which produced the European Convention on Human Rights (ECHR). The institutions established by the ECHR and the rights enumerated therein continue to evolve, providing the basis for some of the UK’s commitments in international law. The ECHR regime is designed to provide a framework not only for protecting human rights but, where necessary, for balancing competing rights against each other and against other important societal interests. The concept of human rights therefore provides a basis both for enumerating the most fundamental interests enjoyed by individuals within the UK and for restraining the actions of public authorities which conflict with those interests.

This chapter examines the doctrine of parliamentary sovereignty, the commonly used shorthand for the legal supremacy attributed to Acts of Parliament within the hierarchy of norms in the UK’s constitutional system. The characteristics of the doctrine are examined, alongside its historical origins and the crucial distinction between the idea of legal sovereignty and that of political or popular sovereignty. We then go on to examine potential limitations on Parliament’s legislative power, before examining and assessing contemporary challenges to the orthodox model of legal sovereignty. While the doctrine of legal sovereignty undoubtedly forms the backbone of the UK’s Constitution, it should be considered alongside the principle of the rule of law and – to a lesser extent – that of separation of powers. Parliamentary sovereignty is also closely aligned with the idea of political accountability. Each of these additional constitutional principles is considered in the chapters which follow.

In the last chapter, we saw that judicial review is not the same as an appeal against a lower court’s decision. The courts will only intervene in the operation of a public function on the basis of particular criteria. The longest-established and least controversial of these criteria is illegality, which primarily involves the courts checking that lawful authority exists for a decision maker’s actions (fundamental to even the most limited conceptions of the rule of law). The courts, however, have developed further grounds for judicial review beyond this core function. Even if a public body has lawful authority for an action, the courts may still scrutinise its activity on the basis that there was no rational basis for the action (controversially requiring the courts to consider the reasoning behind a decision) or on the basis that adequate procedural safeguards were not operative within the decision-making process (which can, equally controversially, involve the courts introducing procedural requirements upon exercises of a power beyond those imposed by Parliament). In recent decades judicial review has been further extended to protect the interests of claimants who received specific promises from a decision maker, preventing that public body from reneging upon those promises without good reason.

Perhaps you are seeing a recurring message appearing in Part II of this book. Specifically, when productive capital (i.e, when 𝑥 > 𝑛) is available as a competing store of value, fiat money can be inefficient in two possible ways. First, fiat money offers a lower return, which discourages people from holding and using this liquid form of money.

Parliament is the dominant legal force in the constitution of the United Kingdom. The Parliament of the United Kingdom, situated at Westminster, is also the hub of the United Kingdom’s political system. Our system, therefore, is one of parliamentary – not constitutional – government. But government in the United Kingdom is largely conducted through rather than by Parliament. Behind the idea of parliamentary government lie two important features of the United Kingdom’s legislature and therefore of the constitution itself: the pre-eminence within Parliament of the House of Commons and the dominance of the House of Commons by the government of the day. This chapter examines both features, in the context of the role, functions and composition of the House of Commons.

In this final chapter, we look into what it means for a central bank to be independent. We demonstrated that people holding nominal debt suffer a real loss in value when there is an unexpected inflation rate increase. So if the central bank operates in cahoots with the treasury, we can imagine a government tempted to rid itself of a burdensome national debt by inflating it away. Countries have taken some effort to make the central bank independent of the treasury. But there is no commitment that is so binding that a potential bond holder ever completely trusts the government not to inflate.

From Chapter 9, we have explained how banks can improve welfare by transforming illiquid capital into liquid deposits. An important by-product of this explanation is that there are two types of money: fiat money and deposits. One distinctive characteristic is that fiat, or outside, money is a liability of the monetary authority and a bank deposit, or inside money, is a liability of a commercial bank.

For nearly half a century the UK’s Constitution was part of the most globally significant supranational legal order. The UK, like other member states, granted the European Union (EU), or shared with it, competences over entire areas of law making, in order to secure the benefits of harmonisation of rules across the member states. Such deep cooperative commitments within this supranational order are maintained by binding rules, and throughout its membership UK policy makers struggled to reconcile to this loss of freedom of action. After the UK joined the European Economic Area (EEA), a nationwide referendum was held which approved this decision. Over four decades later, amid growing discontent within the Conservative Party over the UK’s EU membership, David Cameron as Prime Minister renegotiated the terms of the UK’s membership and called a referendum on whether the UK should remain part of the EU based on these terms. In June 2016, a majority of referendum voters voted to leave the EU. This chapter explores what the EU is, the consequences of the UK’s membership of the EU for its constitutional order between 1973 and 2020, the process of the withdrawal from the EU and the post-Brexit relationship between these orders.

Thus far, the banks we have studied have been very simple. A bank accepts deposits and makes loans. The bank does not face any risk and is always solvent. Yet banks are subject to risk as asset values change over time. One particular risk associated with a bank is that its primary job is to transform liquid deposits into illiquid assets. This transformation alone subjects the bank to risks.

This chapter explores the impact of devolution upon particular aspects of the UK’s constitutional arrangements. First, devolution required a major departure for the courts from their historic reluctance to review legislation. Devolution obliges the courts to become involved in politically contentious debates and, where necessary, to strike down legislation enacted by the devolved legislatures if it exceeds their competences under the devolution arrangements. As the devolved administrations push for increased autonomy, this may even require the courts to rule upon the legitimacy of legislation seeking independence. The chapter thereafter considers the place of England within the Union following devolution to the other constituent parts of the UK. England remains the only non-devolved territory within the UK and, as such, continues to be governed from Westminster. This gives rise to a number of representational, legislative and administrative difficulties. This chapter outlines the consequences of England lacking any meaningful devolved structures of government, and the proposed responses to the difficulties associated with this most obvious of devolution’s asymmetries.