Replacing the Barnett Formula by needs assessment: lessons from school funding formulae in England and Scotland

The UK’s devolved administrations (DAs) receive block grant to finance almost all their expenditure. The formula used to calculate the block grant is often criticised because it does not consider the DAs spending needs. However the feasibility of allocating block grant 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 formulae in turn to calculate the spending needs of the UK territories. The rationale is to consider how similar the two formulae are in how they estimate the spending needs of UK territories for education, a major responsibility of the devolved governments. Results show that the English and Scottish education allocation formulae produce similar estimates of the relative education spending needs of the UK territories. This suggests that it may be more feasible to allocate education resources to the UK’s devolved territories based on spending needs assessment than some have suggested. The results also suggest some inequity in current patterns of education spending across the UK. 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.