David Eiser

Reform of the Barnett Formula with Needs Assessment: Can the Challenges be Overcome?

King D. and Eiser D. Reform of the Barnett Formula with needs assessment: can the challenges be overcome?, Regional Studies. Block grants to the UKs devolved administrations are allocated using the Barnett Formula. There have been calls to replace this formula with one based on spending needs assessment, but two obstacles to doing so have been raised. First, that the devolved administrations would be unable to agree on how needs should be assessed; and second, it is unclear how needs assessment might work for devolved governments that can pursue different spending policies. This paper investigates the first issue by analysing whether the Scottish and English formulae for allocating health and education funding within each country are statistically similar; and the second issue through a hypothetical policy simulation analysis.

The economic case for further fiscal decentralisation to Scotland: theoretical and empirical perspectives

This paper examines the background to calls for further fiscal decentralisation in Scotland in the light of theories of fiscal federalism. In particular, it examines whether spatial differences in preferences, which are central to ‘first generation’ theories of fiscal federalism can be argued to play a central role in the case for granting Scotland further tax and spending powers. ‘Second generation’ theories of fiscal federalism draw attention to the political economy of allocating tax powers to different levels of government. Some of the authors in this strand of theory argue that the case for allocating tax powers to subnational governments can be made in terms of ‘accountability’ – the notion that local politicians can be better held to account for the outcomes of policy actions. Our empirical analysis suggests that there is no clear difference in preferences between Scotland and the rest of the UK along a number of key political dimensions. However, the Scottish parliament enjoys substantially higher levels of trust among the Scottish electorate than does the UK parliament.

Allocating Grant to the UK's Devolved Territories by Needs Assessment: Lessons from School Funding Formulae in England and Scotland

The UKs devolved administrations (DGs) receive block grants to finance almost all their expenditure. The Barnett formula used to calculate these grants is often criticised because it does not consider the DGs’ spending needs. However, the feasibility of allocating block grants by needs assessment is often questioned, given the contestability of spending needs. This paper compares the formula used within England to assess the education spending needs of local authorities there with the equivalent Scottish formula, by using each formula in turn to calculate the relative spending needs of the UK territories. The rationale is to consider how similar the two formulae are in how they estimate the territories’ relative spending needs for education, a major responsibility of the devolved governments. The results show that the English and Scottish education allocation formulae produce similar estimates of the territories’ relative education spending needs. This suggests that it may be more feasible to allocate education resources to the UKs devolved territories based on needs assessment than some have suggested. The results also suggest some inequity in current patterns of education spending across the UK. This article is protected by copyright. All rights reserved

Funding pensions in Scotland: would independence matter?

Economic issues will be key determinants of the outcome of the Scottish referendum on independence. Pensions are a key element of the economic case for or against independence. The costs of funding pensions in an independent Scotland would be influenced by mortality risks, the costs of borrowing and the segmentation of costs and risks (i.e. pricing to Scotlands experience rather than pooled across UK experience). We compare the overall costs of providing pensions in an independent Scotland against the resources that are available to cover these costs. Scotland has worse mortality experience than the UK as a whole, and Scottish government debt is likely to attract a liquidity premium relative to UK government debt. An independent Scottish government would have to create a bond market for public debt. The liquidity premium would make pensions cheaper to buy, but taxpayers or the consumers of public services would have to pay the cost.