It’s not often, I contend, that a serious report on government funding contains – indeed gives prominence to – the word ‘luck’. One finds it used in the conclusions of this report:
Bell, Eiser and Phillips (2021) Designing and funding the devolved nations’ policy responses to COVID-19. Fraser of Allander Institute report, 22 April 2021. (https://fraserofallander.org/wp-content/uploads/2021/04/Designing-and-funding-the-devolved-nations-policy-response-to-COVID-19.pdf )
The report notes that the devolved governments in Scotland, Wales and Northern Ireland are responsible for designing and implementing major parts of the public health response to the COVID pandemic in their respective nations plus significant elements of the economic response. These governments have to “operate within fiscal frameworks which protect their budgets against shocks that affect government spending needs in a similar way across the whole of the UK”. More precisely, the “Barnett formula automatically provides them with a population-share of additional funding in England.” (my emphasis)
However, the authors caution that these fiscal frameworks provide much less protection against shocks that have significantly different impacts across the UK. This is important because strict limits on how much and for what purpose devolved governments can borrow mean that the devolved governments have limited budget flexibility.”
The report examines the financing of Covid responses in the early stages of the pandemic when the UK government applied the Barnett formula to its spending announcements in the normal way. It goes on: “But in the early stages of the crisis, two potential problems with the Barnett formula emerged.
- the first was time-lags between English policy announcements and the confirmation of subsequent Barnett consequentials for the devolved governments
- the second was the risk that the impact of the crisis and hence the spending needs of the devolved governments evolved differently from those of England”
Picking up on the second point, the general implication in the report seems to be that the devolved governments are blessed with good ‘luck’ when the impact of a ‘shock’ requiring a costly response from one or more of them is either the same or less in scale than the impact on England. The further implication is better known: what England needs, Westminster gives and what the devolved governments are given is determined by a formula applied to what England needs and gets – at least when it suits Westminster to apply it.
The authors acknowledge that Westminster did eventually mitigate the negative effects of these limitations: “the Treasury moved to a system of guaranteed funding for the three devolved governments in July 2020. These were minimum guaranteed increases in the devolved governments’ block grants for the 2020/21 financial year. “ So it was only in July 2020 that the devolved governments had some certainty over Westminster’s Covid support funding?
But even this was a fix that did not resolve all problems. The report points out that in autumn 2020, “uncertainties around whether the furlough scheme would be available within a devolved nation if a devolved government felt the need to apply tighter restrictions than prevailed in England created significant inter-governmental tensions, and may have marginally influenced the timing of particular restrictions being applied in Scotland and Wales.” I suspect the just ‘marginally influenced’ assertion may be difficult to stand up without forensic analysis. And was this same uncertainty of only marginal influence on businesses’ decision making?
The authors then conclude: “the devolved governments’ funding arrangements have largely coped with the COVID-19 pandemic. This is the result of a combination of luck, the huge sums of money provided by the UK government to address the crisis in England, and ad-hoc bypassing of the normal rules of the frameworks.“
The report’s authors are prepared to touch on hypothetical matters in the sense that they consider ‘what if’ the effects of Covid had turned out to be more different in different UK nations. And the report refers to it being “the huge sums of money provided by the UK government to address the crisis in England” which in turn enabled devolved governments to ‘cope’. It does NOT hypothesise on a glaringly related matter: what would have happened if relatively huge sums of money had been required in NI, Scotland and/or Wales but NOT in England. Or should we in the devolved nations’ just be thankful for our lucky break on this occasion?