IFG - Devolved nations given £19bn extra funding to tackle coronavirus since March 2020
A new Institute for Government report shows that since March 2020 an extra £19 billion has been sent from the UK Treasury to the three devolved nations to tackle Covid.
A total of £9.7bn more has gone to Scotland, £5.85bn to Wales and £3.3bn for Northern Ireland. This is on top of the £67bn originally allocated to the three devolved administrations for the 2020/21 financial year. A further £4.7bn, including £2.6bn for Covid, is promised for 2021/22.
Funding Devolution: The Barnett formula in theory and practice shows how the Treasury calculates changes in the annual budgets of the governments in Scotland, Wales and Northern Ireland, and argues that the Barnett formula now shares out public spending in a way which is hard to justify and that it should be replaced.
The pandemic has exacerbated frustrations about the formula in Edinburgh, Cardiff and Belfast. With the UK government releasing additional funds only when it spends more in England, the devolved administrations complain that waiting for Westminster has made it harder to plan their own pandemic responses. Westminster’s power to bypass Barnett is also causing tensions, as shown by the fallout from the announcement that the Treasury will run the £4.8bn ‘Levelling Up Fund’ for all four UK nations, and over the UK Shared Prosperity Fund.
Barnett also produces lower-than-average (in the UK) public spending in poor English regions such as the Midlands and Yorkshire. The formula does not fully take into account different rates of population growth, and as the populations of Scotland and Wales have grown more slowly than England, the level of spending in those nations has outstripped their needs. Scotland receives funds for public services that is 29% above the level in England in per capita terms, even though Scotland is wealthier than most regions of England. Spending per person in Northern Ireland is also 29% above England. In Wales the figure is 23%.
The Barnett formula should be replaced by a system that shares out resources in line with a clearly stated set of funding principles. However, as this would likely lead to a fall in funding for Scotland, the UK government is unlikely to risk this outcome with Scottish independence on the agenda.
To improve how the devolution funding system works, the IfG report recommends:
- greater transparency about levels of public spending
- clarity about when UK government decisions will give more to devolved nations
- independent reporting (for instance by the National Audit Office) on how the system works
- a joint commission to analyse the relative spending needs of each part of the UK.
IfG senior fellow and report author Akash Paun said:
“The Barnett formula is simple to operate and can channel extra money to the devolved nations very quickly. However, the overall distribution of resources that the formula produces is hard to justify. In particular, Scotland does disproportionately well, while poorer regions of England, who don’t have strong devolved governments to speak up for them, appear underfunded.”
Notes to editors
Latest News from
Civitas - Anti-racism industry creating a dependency upon race experts in which ‘racial divisions are becoming ever more firmly entrenched’, says think-tank report08/04/2021 10:35:00
The anti-racism industry ‘creates a dependency’ upon a race discourse that sows division, finds a new Civitas report. ‘The tragic consequence’, the report finds, ‘is that racial divisions are becoming ever more firmly entrenched’.
The King’s Fund response to The Commission on Race and Ethnic Disparities report02/04/2021 09:10:00
Richard Murray, Chief Executive of The King’s Fund, commented on the report of the Commission on Race and Ethnic Disparities
UK economy will likely bounce back “more strongly than many expect,” says IEA expert01/04/2021 14:35:00
Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, responded to the latest GDP data from the Office for National Statistics
Civitas - ‘Nurturing Britain’s high-tech capabilities’ and ‘safeguarding critical industries’ should be central to managing potential risks of economic dependence on China, think-tank report finds01/04/2021 13:35:00
‘British policymakers should think carefully about the degree of economic reliance on China that it is wise to tolerate where critical infrastructure is concerned’, a new think-tank paper suggests.
Commit to new deal for healthcare workers or risk ‘deadly exodus’, IPPR warns government01/04/2021 12:35:00
As many as one in four healthcare workers – equivalent to 330,000 staff - say they are more likely to leave the NHS due to a year of unprecedented pressure, according to new polling by IPPR/YouGov. The figure - which includes the equivalent of 100,000 nurses and 8,000 midwives – adds pressure to a workforce that was experiencing a crisis of unfilled vacancies even before the pandemic.
UK right to call for WTO reform, says IEA expert01/04/2021 11:35:00
Mark Littlewood, Director General at free market think tank the Institute of Economic Affairs, responded to the news that Britain it to use its G7 presidency to press for reform of the World Trade Organization (WTO)
IFS - Scottish Government funding per person is over 30% higher than equivalent English funding. But it has still chosen to use temporary COVID funding to pay for some new permanent spending commitments.01/04/2021 10:35:00
Real-terms funding for the Scottish Government’s day-to-day (or resource) spending in 2021-22 is still set to be 2% lower per person than in 2010-11, after excluding temporary COVID-19 related funding, and adjusting for new responsibilities.
Financial Ombudsman Service needs “major reform,” says new research01/04/2021 09:35:00
A new report from the Institute of Economic Affairs, written by IEA Head of Regulatory Affairs Victoria Hewson, draws attention to the shortcomings of the Financial Ombudsman Service (FOS).