Scottish Government funding per person 30% higher than England, says think-tank

The Scottish Government’s funding per person is 30 per cent higher than the English equivalent, a leading think-tank says, with the difference almost entirely due to the Barnett formula.

The Institute for Fiscal Studies (IFS) said the Scottish Government had chosen to use some of its temporary coronavirus funding to pay for permanent spending commitments.

An IFS briefing note said the Holyrood administration had received an additional £9.5 billion from the UK Government in Covid-related funding.

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Combined with a special funding guarantee, the think-tank said per capita coronavirus funding was likely to be higher in Scotland than in England for the next fiscal year.

Finance secretary Kate ForbesFinance secretary Kate Forbes
Finance secretary Kate Forbes

The IFS said not all of the extra funding was going to Covid-related spending, with some being used to extend free school meals and free bus travel.

It warned these would have to be funded from the core budget in 2022/23 and beyond, where money is likely to be “tight”.

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About two-thirds of Scottish Government funding comes from the block grant it receives from the UK Government, but Scottish income tax will contribute 27 per cent and other Scottish taxes 5.5 per cent, with borrowing contributing the remaining 0.5 per cent.

The IFS found the Scottish Government’s devolved taxes were contributing a modest, but growing sum to its funding.

Plans suggest core funding will be about 3 per cent higher in 2021/22 than in 2010, but population growth means this is around 2 per cent lower per person.

The think-tank has published its first briefing note ahead of the Holyrood election campaign, focusing on how funding has changed in recent years.

David Phillips, associate director at the IFS and author of the report, said: “Excluding temporary Covid-19 funding, the Scottish Government has over £1.30 per person to spend on public services this year for every £1 of spending per person on comparable services in England.

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“This is almost entirely due to funding received from the UK Government via the Barnett formula, with less than 2p of the gap due to the Scottish Government’s borrowing and higher income taxes.

“Indeed, the relatively weak performance of the Scottish economy means the net revenues received from income tax have only increased slightly, despite tax increases in Scotland.

“They would have fallen relative to a world without tax devolution had those tax rises not been implemented, reminding us that devolution brings risks as well as opportunities.”

Mr Phillips continued: “Likely tight spending plans in Westminster could mean the next Holyrood administration will have to consider tax increases or cuts to some services – not least to pay for long-term policies on free school meals, public transport, council tax and mental health services, that this year will be paid for using temporary Covid-19 funding.”

In February, finance secretary Kate Forbes said devolved tax policies had delivered “certainty and stability” during the pandemic.

During her Budget statement, she said: “The net contribution from devolved taxes in 2021/22 to the Scottish budget will be £539 million.

“In addition to this we have used our limited borrowing and reserve powers to their maximum effect.

“In total that means that the Scottish budget will be over £1.7 billion bigger than it otherwise would have been.”

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Pamela Nash, chief executive of Scotland in Union, said: “This is further confirmation that Scotland is stronger in the UK.

“All parts of the UK pool resources and share according to need, meaning we can spend more on our NHS, schools and other public services."

Scottish Lib Dems economy spokesperson Katy Gordon said: "At some stage the nationalists are going to have to admit that if they ever achieved independence they would be throwing away billions of pounds a year for public services.

"Over the course of the pandemic the broad shoulders of the Bank of England have helped us to weather the storm.

"For 14 years, the SNP have taken their eye off the ball when it comes to growing Scotland's economy."



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