National Audit Office Press Releases
Investigation into devolved funding
Today’s investigation by the National Audit Office sets out how HM Treasury allocates funding to Scotland, Wales and Northern Ireland (the devolved administrations).
At Spending Reviews, which take place every 2-4 years, HM Treasury decides how much funding it will allocate to each of the devolved administrations. Initial funding allocations are based on the funding they received in the previous year plus a population-based share of funding for changes in planned UK government spending. HM Treasury uses the Barnett formula to calculate these changes1.
In 2017-18, total UK spending on public services was £617 billion2, of which England accounted for £505 billion, Scotland £59 billion, Wales £32 billion and Northern Ireland £21 billion. The highest spend per person on public services was in Northern Ireland (£11,190), followed by Scotland (£10,881), Wales (£10,397) and England (£9,080). As a large part of funding is simply rolled forward annually and unaffected by population changes, funding per person is increasing for the devolved administrations as their populations increase at a slower rate relative to that of England.
Outside of Spending Reviews, the devolved administrations can receive extra funding when spending priorities change and more funding is provided to UK government departments. The devolved administrations told the NAO that they received less money than they expected following an announcement in June 2018 that NHS England would be given £20.5 billion of additional funding. This is because they only receive additional funding if the money given to UK government departments by HM Treasury is financed from new funding rather than from within existing budgets. The extra money for the NHS was part-funded by HM Treasury from within existing Department of Health & Social Care budgets.
The devolved administrations are not required to use their funding allocations for the same service or area of spending as the UK government. For example, more than 50% of the additional funding given to the devolved administrations at the 2018 Budget resulted from their share of the increase in funding to NHS England, but there is no requirement for this to be spent on the same services within the nations.
Where services or activities are partially devolved, such as transport, HM Treasury’s decisions can be more subjective as to why one devolved administration benefits from additional funding but not others. For example, the categorisation of Crossrail as a ‘local’ rail project has triggered payments of around £500 million to Scotland, and some additional funding for Wales and Northern Ireland. Whereas the High Speed Two project, where rail infrastructure is again to be located in England, is categorised as a ‘national’ project, with the result that additional funding is payable to Scotland and Northern Ireland but not to Wales.
In other examples, England, Scotland and Wales did not receive additional funding as a consequence of funding directly allocated to Northern Ireland as part of the agreement reached between the Conservative party and the Democratic Unionist Party in 20173. Meanwhile, England did not receive additional funding as a consequence of the £375 million allocated to the devolved administrations for ‘city deals’ since the Spending Review 2015, even though Scotland, Wales and Northern Ireland have previously received additional money because of funding allocated to the Department for Communities and Local Government for spending on city deals in England.
In some instances, it can be difficult to determine the basis of how funding has been allocated. For example, Scotland, Wales and Northern Ireland have been given additional funding as a result of money being allocated to UK government departments for EU exit-related work. However, it is hard to understand how HM Treasury calculated the additional funding, which has led the Scottish government to query how much it has received.
The additional administrative and legal powers that have been devolved to each nation has changed the way their funding is calculated, with nation-specific adjustments in place depending on the extent of devolution. Scotland is subject to the most adjustments, reflecting its extra powers for setting its own income tax bands and retaining revenues. Greater tax and revenue-raising powers have also been extended to Wales and Northern Ireland, but they have yet to exercise these to the same degree.
Notes for Editors
- For more information about the Barnett formula, see Part One of the report. As the Barnett formula is not set in law, HM Treasury is able to decide whether and how the formula applies as new funding is announced at annual budgets or when UK Government spending priorities change. These decisions can have the effect of increasing or decreasing the initial calculation of funding to devolved administrations. Additional funding allocations are often referred to as Barnett consequentials – their calculation will depend on the extent to which the service or activity that is subject to a change in funding has been devolved to the nations.
- This is based on spending by the devolved administrations and UK government departments that can be identified as benefitting the population of individual regions – HM Treasury, Country and Regional Analysis, November 2018
- UK government financial support for Northern Ireland: https://www.gov.uk/government/publications/conservative-and-dup-agreement-and-uk-government-financial-support-for-northern-ireland/uk-government-financial-support-for-northern-ireland
- The investigation focuses on UK government funding to the devolved administrations. We did not examine any other income sources available to the devolved administrations, their tax and revenue-raising activity, or how spending decisions are made by the devolved administrations, or the value for money of their spending decisions. These are all topics that fall within the remit of the respective audit offices of Scotland, Wales and Northern Ireland.
- Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
- The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £741 million in 2017.
NAO Press Office
+44 (0)20 7798 7400 or email email@example.com
Latest News from
National Audit Office Press Releases
NHS waiting times for elective and cancer treatment22/03/2019 10:25:00
While the NHS has increased the number of people it treats each year, the percentage of patients treated within waiting time standards continues to get worse for both elective (non-urgent care) and cancer treatment, and the waiting list for elective care continues to grow, according to today’s report by the National Audit Office.
Regulating to protect consumers: Utilities, communications and financial services markets21/03/2019 13:10:00
The National Audit Office has found that the four main regulators – Ofwat, Ofgem, Ofcom and the Financial Conduct Authority – understand the significant difficulties facing consumers across utilities, communications and financial services markets, but cannot prove if they are effectively responding to consumer concerns or offering enough protection for those who need it.
Progress of the 2016-2021 National Cyber Security Programme15/03/2019 14:15:00
Failings in the way the Cabinet Office established its current cyber security programme mean that the government does not know whether it will meet the programme’s goals and raises questions about its plans to tackle cyber-attacks after 2021, according to today’s report by the National Audit Office (NAO).
Reforming the civilian workforce11/03/2019 14:15:00
The Ministry of Defence has made little progress in reforming its civilian workforce. It has not yet modernised the roles that they perform and is missing its targets to reduce headcount and achieve savings by 2020, according to the recent (08 March 2019) report by the National Audit Office (NAO).
The apprenticeships programme07/03/2019 11:15:00
The Department for Education has some way to go before it can demonstrate that the apprenticeships programme is achieving value for money, with numbers of apprenticeships below pre-reform levels, says the National Audit Office.
Investigation into Verify05/03/2019 14:15:00
The National Audit Office (NAO) has today published its investigation on Verify, the government’s flagship identity verification portal.
Transforming Rehabilitation: Progress review01/03/2019 15:15:15
Reforms to probation services have failed to meet the Ministry of Justice’s targets to reduce reoffending and cancelling contracts with probation providers early comes at an additional cost to the taxpayer, according to today’s report by the National Audit Office (NAO).
Planning for new homes11/02/2019 11:15:00
The government’s planning system is underperforming and cannot demonstrate that it is meeting housing demand effectively, according to the recent (08 February 2019) report by the National Audit Office.