Funding for devolved governments 'complex and opaque', committee says

Greater transparency is needed over the “complicated and opaque” funding model for devolved governments, a Westminster committee has found.

The Public Accounts Committee has published a report on the way that funding is calculated for Scotland, Wales and Northern Ireland, concluding that arrangements are “increasingly complex” and calling on the UK government to justify the current system’s ability to “meet the needs of the UK as a whole”.

The committee also raised concerns that the delay to the 2019 Spending Review, caused by the Conservative leadership contest, has created “uncertainty” for devolved governments.

The report highlights the way that newly devolved tax raising powers, as well as one-off direct payments, are making it increasingly difficult for the UK Parliament and the public to fully understand the value and impact of funding decisions.

The Scottish Government is funded by annual block grants that are adjusted in relation to public spending decisions made by Westminster using what is known as the ‘Barnett Formula’.

Some spending decisions, however, do not affect the amount of money devolved governments are given.

Money given directly to Police Scotland to meet the cost of policing US President Donald Trump’s visit, for example, or the additional £400m given to Northern Ireland as part of a deal between the Conservatives and the DUP did not lead to increases in public spending elsewhere in the UK.

The varied and complex way that money is allocated around the country has lead to a situation where the Treasury does not know whether the funding it is allocating reflects the needs of people in different regions, the committee has found.

Commenting on the report, committee chair, MP for Hackney South and Shoreditch, Meg Hillier, said: “The complicated and often opaque method for calculating funding levels for devolved administrations is based on population levels and needs across the UK agreed 40 years ago.

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“At future spending reviews, when the block grant to the devolved administrations is allocated, HM Treasury should publish more detailed and transparent information about its funding decisions.

“Ministers are able to allocate funding outside of the Barnett formula, which is HM Treasury’s primary mechanism of calculating funding for Scotland, Wales and Northern Ireland.

“A lack of detailed supporting information to Parliament on this money makes it difficult for such ministerial decisions to be properly scrutinised. At future spending reviews, HM Treasury should publish information about how these decisions are made.”