The changing distribution of territorial public expenditure in the UK

Abstract:

The financial arrangements for devolution in the UK have been subject to conflicting criticisms regarding the purpose and impact of the Barnett formula, which is said to have been designed to promote convergence of public expenditure per capita in the devolved nations towards the UK average, yet has failed to deliver this in practice. This paper shows that the impact of Barnett on the devolved nations is mixed, resulting in convergence in the case of Northern Ireland; stability in the case of Scotland; and divergence in the case of Wales. This reflects the impact of differential population trends, and ad hoc budgetary allocation made outwith the formula. The paper concludes that Barnett should not be replaced on the basis of theoretical argument, but only when a robust and convincing alternative is available.