Devolved funding coped with Covid, but changes are needed to make the system more robust - research

Funding arrangements for Scotland and the other devolved administrations have “largely coped” with the Covid-19 crisis, according to a study by leading academic economists.

But this was the result of a combination of luck, the huge sums of money provided by the UK Government and an ad hoc bypassing of the normal rules.

The study by the researchers from the Institute of Fiscal Studies (IFS), Fraser of Allander Institute and the University of Stirling said there had been “some tricky moments”.

These were “notably at the beginning of the crisis, when the devolved governments had to wait for confirmation of funding following the announcements of new English spending, and in the Autumn as the second wave hit”.

As the study points out, Westminster eventually bypassed the normal rules by giving up-front guarantees and allowing the flexibility to carry forward funding between years.

“This gave the devolved governments more certainty to plan their Covid-19 responses and helped avoid a wasteful rush to spend money at the end of the year.

“But such ad-hoc changes are not suitable for the long-term and may not be granted by future UK governments if other major crises arise.

“It has also been lucky that the crisis did not disproportionately impact one or more of the devolved nations more than England, either economically or health-wise.”

The study pointed out that if it had done, funding based on how much was spent in England could have been insufficient - adding that there is no guarantee that future crises - or indeed recovery from the current one - will be similarly symmetric.

“It is therefore important to consider how the fiscal frameworks can be made more robust to future crises, and better able to support recovery from the current crisis.”

David Phillips, an associate director at the IFS, and co-author of the report, said: “Luck - or the fact that the each of the nations was similarly unlucky in terms of the impact of the crisis - and ad hoc temporary changes to the usual rules helped avert major problems.

“In particular, the fact that the path of the pandemic and economy has evolved in similar ways across the UK, and required similar policy interventions, has avoided big differences in funding needs from opening up.

“It is therefore still vital to assess - and potentially change - the frameworks to make them more robust.”

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