Development of needs-based funding models for the devolved territories in the UK

The UK's devolved administrations (DAs) have autonomy over policy and spending decisions for devolved services. To finance this spending they rely almost entirely on a block grant from the UK Government. This grant is determined by the Barnett Formula, which is often criticized as being inequitable, because it makes no attempt to assess the spending needs of the DAs. Instead, it bases grant to the DAs on historic spending and changes to spending in England.
This project investigated the feasibility of instead allocating grant to the DAs based on spending needs assessment.To see how far Scotland and England might agree on how this could be done, we compared how their governments assess the education and health spending needs of local authorities and health boards within their countries; these are the two biggest components of devolved spending. We also explored how needs assessments might be made if the DAs had substantial tax powers which led to large differences in spending levels between territories. The analysis provides insight into the extent to which there might be political agreement on the format of a spending needs formula to replace Barnett, and into which elements of needs assessment might prove most contentious.