Financing Options for Devolved Government in the UK

This study provides a comprehensive overview of the financing options for devolved government in the UK. Starting with a discussion of the present situation, the consequences and the possible future of the Barnett formula, the key economic and political principles for devolution finance are examined and then applied to possible financing options. The conclusion draws together the main points of the analysis and comments on the alternatives for funding the devolved administrations. While currently there appears to be considerable cross-party support for the Barnett system, it continues to be a contentious arrangement, with some observers even talking of a “fiscal crisis” (McLean (2005)). The paper therefore reviews the strengths and weaknesses of the present system, together with suggestions for possible changes.