Writing in The Times on Wednesday (June 13), 13 Scottish Conservative MPs said the UK Government had “to be involved in investing directly in communities across Scotland.” They said:

“That means moving beyond the arguments of constitutional politics and instead onto doing what is best for people and businesses. The Scottish government has already moved into the reserved space by having an international aid budget. It is time for the UK government to do the same.”

Similarly, on a visit to Edinburgh last month, Conservative leadership contender Michael Gove MP referred to “a Treasury rule which means that the UK Government can’t spend money in areas that are devolved.” He proposed: “Once we’ve given the Scottish Government their fair share, the UK Government should be able to spend additional money on the basis of need for projects that will strengthen the Union.”

In response to The Times article, the SNP MP Kirsty Blackman called it an “out and out Tory plot to tear up the Scotland Act” by mounting “a power grab on Holyrood.”

This Insight looks at whether the Scotland Act 1998 prevents the UK Government from spending in policy areas devolved to Scotland.

What does the Act say?

Part III of the 1998 Act deals with Financial Provisions such as the Scottish Consolidated Fund, debt and borrowing, but it does not cover spending decisions by the UK Government.

Section 28(7) notes that the section on ‘Acts of the Scottish Parliament’ does “not affect the power of the Parliament of the United Kingdom to make laws for Scotland,” a standard statement of UK Parliamentary sovereignty which is also included in the Government of Wales Act 2006 and Northern Ireland Act 1998.

Section 28(8), which was added by the Scotland Act 2016, states : “it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament.”

If the UK Government wanted to spend in devolved areas and that involved primary legislation, then it would – as per the now-statutory Sewel Convention – require legislative consent from the Scottish Parliament.

What are the rules governing UK and devolved administration spending?

So, there is nothing in statute which prevents the UK Government spending in policy areas devolved to Scotland (as well as to Wales and Northern Ireland). Instead, the rules in this respect are set out in the Treasury’s non-binding Statement of funding policy (most recently updated in 2015).

The majority of the devolved administrations’ spending is funded by grants from the UK Government – the ‘block grant’ being the largest. Since the late 1970s, the Barnett formula has determined annual changes in the Scottish, Welsh and Northern Irish block grants. The formula does not determine the total amount of these grants, just the yearly change.

Barnett does not exist in statute, it is a policy the Treasury chooses to follow. In theory, the formula can be used or changed by the UK Government as it wishes. The Statement of funding policy makes it clear that:

“Funding policy and public expenditure allocation across the United Kingdom, as non-devolved or reserved matters, remain the responsibility of the UK government.”

But the Statement also makes clear that once “overall public expenditure budgets have been determined,” then the devolved administrations “have freedom to make their own spending decisions on devolved programmes within the overall totals.”

The Statement goes on to detail “Principles for inter-administration financial relations,” which include the UK Government and devolved administrations working together “in a spirit of mutual respect,” in accordance with the Memorandum of Understanding between the UK government and the devolved administrations.

Finally, the Statement notes that changes in UK Government funding for devolved administrations in relation to devolved responsibilities “will generally be linked to changes in planned spending on comparable areas by departments of the UK government.” It then repeats that the allocation of public spending to services under the control of devolved administrations will be for them to determine.

How else does the UK Government allocate grants?

The UK Government already provides other grants beyond the Scottish block grant. These are usually for less predictable demand-driven spending. Changes in these grants are negotiated by the UK Government and devolved administrations; the Barnett formula is not used to determine any change.

Examples of what are sometimes called “non-Barnett additions” include City Deals in Scotland and the V&A in Dundee, both of which involve UK Government funding in devolved areas, i.e. regeneration, infrastructure and cultural policy. The National Audit Office’s recent Investigation into devolved funding gives further details of non-Barnett additions.

Disputes over spending policy

The Treasury’s Statement of funding policy sets out the process for dealing with disputes between the UK Government and devolved administrations over spending policy. Section 11.3 says the Treasury will “consult” on any “proposed changes to the Statement or the policies to which it applies.” If any disagreement cannot be resolved between the Treasury and devolved ministers then “matters can also be raised through the Joint Ministerial Committee.”

There has been further speculation regarding changes to the current funding arrangements between the UK Government and the devolved administrations. In October 2018, the Welsh Government suggested UK Ministers were attempting to “stipulate” how it spent its budget and used its borrowing powers, an interpretation denied by the Secretary of State for Wales.

And in March this year, reports suggested the UK Government planned to let local authorities in Scotland, Wales and Northern Ireland bid for money from a new Stronger Towns Fund rather than allowing the three devolved governments to allocate their share under the Barnett process.

Further reading

About the author: David Torrance is a Senior Library Clerk at the House of Commons Library, specialising in devolution and the constitution.