Funding arrangements for the devolved administrations are complicated and are becoming more so as tax and social security powers are further devolved, requiring adjustments to the way their funding is calculated. The largest part of funding for Scotland, Wales and Northern Ireland is fixed at Spending Reviews, but there are often significant funding changes during the financial year, either at budgets or ad hoc announcements. Baseline levels of funding for the nations were agreed over 40 years ago when the Barnett formula was introduced, and most funding is simply rolled forward from one year to another without being revised for changes in relative population or need. HM Treasury therefore does not know to what extent the funding provided to nations is meeting the needs of their populations. It has recently agreed a needs-based up-lift to funding for Wales, but it has not committed to providing similar uplifts in future for other nations.
Funding arrangements and calculations are not explained in a way that is readily understandable to taxpayers. The information HM Treasury publishes at Spending Reviews does not allow taxpayers or Parliament to identify what proportion of funding has been rolled forward or to understand how funding for the nations has been affected by changes to budgets for major UK government projects in England, for example Crossrail.
Published: 26 July 2019