FUNDING THE SCOTTISH PARLIAMENT, NATIONAL ASSEMBLY FOR WALES AND THE NORTHERN IRELAND ASSEMBLY
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Statement of Funding Policy - 2004
This statement was issued on 12 July 2004 following the Chancellor's 2004 Spending Review statement
The arrangements set out in this Statement represent, in most cases, the continuation of long-standing conventions that have guided funding of Scotland,Wales and Northern Ireland prior to devolution and are consistent with the Devolution White Papers and the Devolution Acts. A short summary guide is set out below.
Devolved Administrations Funding - A Summary
Government funding for the devolved administrations’ budgets is normally determined within spending reviews alongside departments of the United Kingdom and in accordance with the policies set out in this Statement. The United Kingdom Parliament votes the necessary provision to the Secretaries of State;they make payments to the devolved administrations.
Each devolved administration’s budget is not funded exclusively by grant from the United Kingdom Parliament. Further elements of the budget are covered by funding from locally financed expenditure (including non domestic rates and the Scottish Variable Rate of Income Tax if a decision is taken to use the tax varying power), and through borrowing by local authorities of Scotland,Wales and Northern Ireland and other public bodies to und their capital spending. As for United Kingdom Government Departments, European Structural Funds expenditure alls within the devolved administrations’ Departmental Expenditure Limits.
The block grants (or assigned budgets) are contained within the devolved administrations’ Departmental Expenditure Limits.Changes to these budgets are generally determined by the Barnett formula. This largely removes the need to negotiate directly the allocation between Treasury Ministers,Secretaries of State and Ministers o the devolved administrations.
Under the formula, Scotland,Wales and Northern Ireland receive a population based proportion of changes in planned spending on comparable United Kingdom Government services in England. Changes in each devolved administration’s spending allocation is determined by the quantity of the change in planned spending in departments of the United Kingdom Government, the extent to which the relevant United Kingdom programme is comparable with the services carried out by each devolved administration and each country’s population proportion. The introduction of resource budgeting means that this approach is applied to resource and capital budgets but the principles remain the same.
The allocation of public expenditure between the services under the control of the devolved administrations is for the devolved administrations to determine. Consistent with the arrangements for departments of the United Kingdom Government, the devolved administrations will normally be expected to accommodate additional pressures on their budgets,with access to the Reserve being considered in exceptional circumstances only. Unforeseen pressures should be catered for by offsetting savings and re-allocating priorities.