At present, the devolved governments in Scotland, Wales and Northern Ireland get most of their money in the form of a block grant from the UK Treasury. How this grant changes from year-to-year is largely determined by the Barnett formula – which aims at providing the same pounds-per-person change in funding for the devolved governments as is the case in England.
The devolved governments – particularly Scotland’s – may soon find themselves raising and keeping more of their own tax revenues. But the Barnett formula looks set to stay in place. A new report published today by the IFS, funded by the Economic and Social Research Council (ESRC), looks at how the Barnett formula interacts with business rates (a tax that is already fully devolved to Scotland and Northern Ireland), and the lessons that can be learned for further tax devolution.