Assessing relative spending needs of devolved government: the Case of Healthcare Spending in the UK

The UK’s devolved administrations (DAs) rely on block grants to finance most of their spending, but the level of grants allocated to them is not determined by any estimate of their spending needs. There are increasing calls to replace the current grant allocation mechanism with one which explicitly considers the DAs’ spending needs, although some commentators argue that assessing their needs is not practicable, given the normative dimension in defining need. This paper compares two existing formulae for estimating healthcare spending needs (used by the NHS to allocate resources within England and Scotland) by applying both formulae to the DAs. It is found that these formulae provide very similar estimates of the DAs’ healthcare spending needs, and both formulae imply that the current distribution of resources across the DAs may be inequitable. The implications for the possible development of grant allocation mechanisms based on estimates of spending needs are discussed. This research has been funded through ESRC Research Grant RES-062-23-2814, ‘Development of needs-based funding models for the devolved territories in the UK’. The grant runs from March 2011 – February 2013.