Public spending levels in Wales, Scotland and the UK

Eurfyl ap Gwilym says the latest data shows Wales is still underfunded

At the end of July the Treasury published its annual Public Expenditure Statistical Analyses (PESA) report[1], which set out in detail the levels of public expenditure by UK government departments and by the devolved administrations in Scotland, Northern Ireland and Wales. Identifiable expenditure covers spending both on devolved and non-devolved functions but excludes non-identifiable expenditure such as defence, international development, and foreign affairs. One of the drawbacks of the PESA reports is that they do not readily provide information that facilitates comparisons between England and the three devolved administrations.

Since the onset of the financial crisis in 2008 public expenditure has been cut. Table 1 shows the level of identifiable public expenditure per capita in real terms (i.e. after taking into account inflation). The first column of figures is for 2009-10 because this was the year of peak public expenditure.

Table 1: Total identifiable public expenditure per capita in real terms[2] (£) and

 Indexed (UK=100).





9,407 (100)

8,940 (100)



9,169 (97)

8,676 (97)



10,618 (115)

10,327 (116)



10,225 (110)

9,877 (110)


N. Ireland

11,335 (123)

11,064 (124)


Across the UK public expenditure per capita has fallen in real terms by an average of 5 per cent. One of the principal reasons for the differences in the level of cuts lies in non-devolved Social Protection expenditure, an area which encompasses: personal social services; incapacity, disability and injury benefits; old age pensions; and family benefits, income support and tax credits. Non-devolved Social Protection accounts in Wales for approximately 36 per cent of total identifiable public expenditure and 88 per cent of non-devolved expenditure. These benefits are needs related and are paid directly by the central UK government to recipients irrespective of where they live.

Real terms expenditure on social protection increased in all the areas as would be expected given a combination of ageing populations, the protection of pension increases and increased unemployment during the financial crisis and its aftermath. The increased cost was particularly pronounced in Wales. If the change in non-devolved Social Protection expenditure is allowed for then the remaining identifiable public expenditure per capita in Wales declined by 7.3 per cent in real terms over the four years from 2009-10 to 2012-13. This is a rough and ready measure of the decline in spending by the Welsh government and local government in Wales given that Social Protection is by far the most significant element of non-devolved identifiable public expenditure.

Relative identifiable expenditure per capita (index numbers in italics in Table 1) has remained stable over the past five years and as can be seen Scotland continues to fare well and continues to be overfunded when compared with Wales. If Wales had received the same level of funding per capita as Scotland this would be worth an additional £450 per person or £1.4 billion in total in 2012-13. In practice given that Scotland has a relatively high level of GVA per capita (94 per cent of the UK average) and Wales languishes at 72 per cent, the difference in funding is even more striking. It is against this background that the failure of the UK parties to address the fair funding issue needs to be viewed.

Table 2 shows the spending per head in real terms on health. (Given the preponderant weight of England in terms of population one would expect the UK figures to be close to those for England).

Table 2: Identifiable public expenditure per capita on health in real terms (£).  




















N. Ireland




These data show the very different priorities in terms of spending trends between the UK government which is directly responsible for health spending in England and has increased spending by 2.5 per cent and the Welsh Government which has overseen a real terms cut of 2.5 per cent. It is true that spending per capita on health remains marginally higher in Wales compared with England but given the unfavourable demographics of Wales the change in relative spending over the five years is noteworthy. If spending in Wales had kept pace with that in England then and additional £315 million or just over £100 per person would have been spent on health in Wales in 2012-13.

Table 3 shows that Wales is spending materially less than Scotland on education and is now on a par with England. Education is another area where spending is completely devolved to the Welsh government which has cut such spending more than the UK government has in England. Of course the population being used by the Treasury in its analysis is the whole population and not that of school attending age. Nevertheless it is striking how much lower expenditure is in Wales compared with Scotland and how much deeper have been the cuts in Wales compared with England. If changes in spending in Wales had tracked those in England then an additional £135 million would have been spent on education in Wales in 2012-13.

Table 3: Identifiable public expenditure per capita on education in real terms (£).              




















N. Ireland



Given that the Welsh government, which is responsible for expenditure on health and education, has chosen to cut these programmes more deeply than has been the case for England and Scotland, it follows that some other areas of expenditure have been cut less. The principal area of lower cuts is in local government, which has been subject to severe cuts in England. Given the recent, adverse comment on the performance of health and education in Wales the Welsh government is under pressure to protect these programmes from further cuts and local government is likely to be the principal sufferer due to this change of course.

Much attention has been focussed on capital expenditure following the Welsh government’s announcements regarding the M4 relief road and the UK government’s response to the Silk Commission’s first report which form part of the Wales Bill currently passing through parliament. Table 4 sets out the capital spending in Scotland and Wales, respectively. Scotland with a population of 1.7 times that of Wales is allocated twice the capital budget. (The Treasury does not set out in PESA the corresponding figures for England.)

 Table 4: Capital Investment Departmental Expenditure Limits in real terms[3] (£ ‘000s)






















The planned £1bn expenditure on the M4 relief road represents about 70 per cent of the total capital budget in any one year. Of course the M4 expenditure will be spread over a number of years and the Welsh government is being allowed to borrow up to £500 million for the M4 scheme. The Welsh government has also announced that it may seek other sources of borrowing.  Nevertheless the M4 relief road will absorb a material proportion of the capital budget.

All three UK political parties are committed to further austerity after the general election next year. The Institute for Fiscal Studies[4] has estimated that by the end of this year 55 per cent of the planned tightening will have occurred leaving 45 per cent to the next parliament: almost all this future fiscal tightening will be through spending cuts rather than tax increases.

In the shorter term Table 5 shows the outlook for Wales’s Departmental Expenditure Limits in real terms out to 2015-16. As can be seen capital expenditure is planned to increase modestly but current expenditure will continue to fall

Table 5: Departmental Expenditure Limit for Wales in real terms (£’000s)[5]









Current  14,104







Capital    2,085







Total  16,189







The data in this PESA report once again underline what a poor funding deal Wales gets compared with Scotland. Labour has committed not to change the Barnett formula in the case of Scotland should there be a No vote in the independence referendum. In the case of Wales the Conservatives and LibDems have simply said that they will review the position as and when there are indications that the ‘Barnett squeeze’ restarts. More recently the Chief Secretary to the Treasury, Danny Alexander, has defended the Barnett formula and stated ‘Within the UK there is no prospect for changing the Barnett formula’[6]. When Labour introduced the Barnett formula in 1978 it did so knowing from estimates made at the time by the Treasury that Scotland was relatively overfunded and that Wales was underfunded. In 2009 the Holtham Commission came to a similar conclusion. The pattern of underfunding Wales has continued for over thirty-four years. Given the pronouncements of the three London based political parties in the context of the forthcoming Scottish independence referendum, if there is a No vote, there appears to be little likelihood of Barnett reform and fair funding for Wales after the next UK general election.


[1] Public Expenditure Statistical Analyses. HM Treasury Cm 8902. July 2014.

[2] Real terms are the nominal figures  adjusted to 2013-14 levels using GDP deflators from the ONS 27

June 2014.

[3] The figures for the years 2009-10 to 2013-14 are outturns and for 2014-15 are plans.

[4] IFS. Green Budget 2014. March 2014

[5] Figures for 2009-10 to 2013-14 are actual outturns and for 2014-15 and 2015-16 are planned DEL.

[6] Financial Times June 11, 2014.

Eurfyl ap Gwilym is Plaid Cymru's senior economics adviser and Trustee of the IWA.

26 thoughts on “Public spending levels in Wales, Scotland and the UK

  1. It is questionably valid to compare Wales with England – a better comparision IMHO would be with another deprived/uncompetitive NUTS1 Region like the North East.

    I’m also still waiting for a realistic evaluation of what Wales’ self-inflicted top-sliced public sector overhead called the Welsh language costs since that materially affects how funds are actually utilised and it makes direct NUTS1 comparisons more difficult.

  2. Eurfil demonstrates in his piece that Wales is unfairly funded with respect to Scotland. What it does not show is whether Wales is unfairly funded with respect to the UK. The sub title “Wales is underfunded” is therefore inaccurate or at least incomplete.

  3. It seems IWA has chosen not to publish my earlier submission. Shame on it. Does it have anything to do with the fact that Eurfyl ap Gwilym is a ‘trustee of the IWA’?

    Only in Wales!

  4. The problem is that only direct health expenditure is measured and there the growth has been in hospital rather than primary care. Expenditure in areas that improve health or reduce acidents such as leisure, housing, environmental health and road maintenance show substantial rductions. Also cuts in adult social services as part of local authority cuts increases hospital costs.

  5. Is one right in assuming that the health expenditure figure includes paying for the ‘free’ prescription charges? If so, then the underfunding of direct service provision by the Assembly must be even greater.

    Of course the assembly gets away with it because half the people of Wales do not even know that it is responsible for health, so they can still push the traditional ‘blame the Tories’ line when the next UHW or Princess of Wales is uncovered.

    Meanwhile the assembly can still find a spare £200,000,000 to burn on an unnecessary reorganisation of local government.

    Incidentally, does anyone know the final cost of their previous unnecessary reorganisation of the health service and the consequent necessary re-reorganisation?

  6. Given that the Barnett formula is about the distribution of UK funds to Northern Ireland, Scotland and Wales, how is a comparison with the rest of the UK appropriate?

  7. Table one is the overall picture and even that covers only public expenditure. Tip of the burg.
    The Scots/Welsh /Irish see the union in financial terms only and guess who is the paymaster.
    They ask what is in it for them.
    It is no basis for a union and the union only serves to deny England the same self determination and representation that the others demand of right. How about asking what is in it for England, why should we alone be saddled with a destructive British government. If we are a union we are all entitled to a say and only the British government stands between justice for England and exploitation on a monumental scale.
    We need the Brits out!

  8. Rhobat the Barnett formula does distribute money between all of the countries in the UK.I agree that isnt the usual description but it is never the less true.
    If Scotland is allowed to retain its financial advantage and yet Wales is given more money then that must mean that England gets less. It is idle to debate this subject as if England does not have an interest in the outcome.

  9. So we have all the evidence and all the figures dating back 34 years thanks to the stirling work of Mr ap Gwilym but what does it say about the inadequacies of our politicians in getting the situation rectified? Are we under-powered, under-represented, under-franchised, under-formula-ed and under-classed as well as under-funded? Is Mr ap Gwilym the only one with a head for figures and formulae? The implication seems to be that in the event of a NO vote in Scotland then we in Wales will have even less as the Scots will have to be ‘appeased’ further to keep them in the Union.
    I think I will start wearing my Yes sticker.

  10. In my summary of some of the expenditure data contained in PESA 2014 I sought to show how trends in spending on some key, devolved areas such as education and health varied from country to country. The differing trends should provide food for thought and material for debate and there may well be other considerations as Mike Hedges claims.

    Jon Owen Jones is not content with the sub-title of my posting and I will simply observe that I was not responsible for it.. To answer Jon’s material point regarding whether or not Wales is underfunded compared with the UK (or Engalnd) one would need to undertake an assessement of relative need. In the context of the Barnett formula as far as I am aware there have been four assessments of relative need. The Treasury undertook an exercise based on 1976-77 data in the run up to the devolution referenda in 1979. Their conclusion was that relative to England, Scotland’s per capita need was 116% and actual expenditure was 122%. In the case of Wales relative need was 109% and expenditure was 106%. For Northern Ireland need was 131% and expenditure 135%. In the event, on implementing the Barnett formula in 1978, the Labour government decided to take no action to correct these mismatches and allowed Scotland to continue to be relatively overfunded and Wales to be underfunded.. To add insult to injury the population ratio of Scotland was rounded up and that of Wales rounded down. We thus suffered a ‘double whammy’ from which we continue to suffer. The Treasury undertook another needs assessment in 1984 but according to Professor Ian McLean of Nuffield Colege, Oxford the Scottish Office refused to accept the figures and the Treasury let the matter drop. Two assessments of relative need were made by the Holtham Commission in 2009 and in 2010 and both reports concluded that Wales was underfunded relative to need: the first estimate was a shortfall of £300 million and the second a shortfall of £400 million.

    Jon is quite correct to claim that if Wales’s underfunding were to be corrected the money would have to come from elsewhere. Arithmetically, but not politically, the issue is straightforward. The underfunding of Wales of ~£400 million would be switched from Scotland’s overfunding of approximately £4bn. The balance of Scotland;’s overfunding of ~£3.6bn would be allocated to each of the four countries on a population basis weighted according to relative need. Given that England accounts for 84% of the UK’s population the per capita increase for England arising from the £3.6bn (and for the rest of the UK) would be very modest: I estimate in the case of England an increase of less than £70 per capita or 0.7% of spending. (Spending between the regions of Engalnd is determined by a complex formula which is unrelated to the Barnett formula). Thus Wales would benefit materially from the £400 miilion and Scotalnd would suffer a major funding cut of £4bn. Engalnd would hardly feel the impact at all financially although politically it might be a different story.

    Perhaps I was too subtle in making expenditure comparisons between Scotland and Wales. The underlying message is that in detemining funding it is not fairness or relative need that counts but political leverage: Scotland has such leverage, Wales does not.

  11. @ Jon Owen Jones

    I wouldn’t dispute that the existence of the Barnett formula and its execution has an impact on the finances of England. My point would be that it is for the English to state what their position is regarding the effect of the formula rather than our attempting to second guess them.

    Our concern is surely that a population based formula rather than a needs based one is leaving us £300 million short according to the Holtham report. Once that is corrected, our problem is solved.

    If I could draw a comparison here, devolution for Wales, Northern Ireland and Scotland created a democratic deficit which was best summarised by the West Lothian question. It could have been argued that devolution should not have proceeded until those deficiencies in England had been rectified. However my argument would be that it is for the English to decide how they wish to deal with those issues and not allow that to inhibit the establishment of democracy in our own country. It appears that voices are now beginning to be raised calling for English only days in Westminster; and that is how it should be.

  12. If Scotland remains overfunded then some parts of the UK must be underfunded.Let us be clear what we are asking for.Scotland continues to be favoured as does Northern Ireland and Wales gets more money. It then follows that England has to pay and be underfunded itself. Eurfil is right to point out that though this would only have a small financial impact in England it would have far greater political consequences.
    The politics would be easier if we had a formula which allocated money between the English regions. It would then be much clearer that the state was distributing money from rich areas to poorer ones.
    Politics and economics are forever intertwined. The present political leverage exercised by Scotland is due to its threat of independence.Without its oil wealth there would be no realistic threat. The oil in turn makes Scotland a net contributor to the UK’s finances.They argue that Scotland isn’t overfunded its just getting some of its own money back.

  13. Jon, You state that ‘The politics would be easier if we had a formula which allocated money between the English regions’. Perhaps I am missing your point but as I stated in my earlier comment such a formula does exist and it is used to distribute money between the English regions. The Holtham Commission refers to this set of fomulae in its Final Report and uses them in its analysis. I am pleased that we agree that what really counts is political leverage and that Scotland has been adept at using this over the years: Wales has not. Prior to the Barnett formula there was the Goschen formula of 1888 which favoured Ireland and Scotland (Wales was lumped in with England). Oil wealth was not a consideration at the time and that attempt to buy off the Irish did not work.

  14. The original purpose of the Barnett formula was, I presume, to provide some political stability to the Union and to avoid any political turbulence that might result from disagreements over finance on a national basis. All this happened against the run-up to the 1979 referendums. As far as I can see, this remains the purpose of the Barnett formula.

    I agree with Jon’s view that it is is the threat of independence that accounts for the overspend and that the oil wealth gives substance to the threat. Nevertheless, that should not be a reason why Wales should be expected to sit in the corner and keep quiet for the sake of the greater good. The question of the underfunding of Wales was raised at a recent IWA event and the response of the shadow minister was that £300 million was a small amount, given the billions the Treasury has at its disposal. From a Westminster point of view, that may well be the case but when you’re trying to deal with the pressures on A&E or electrify the Valley lines, it is not an insignificant amount.

    Both Jon and Eurfyl refer to the political consequences. The Scottish Government have made it quite clear that they will not tolerate a change to the Barnett formula which would leave Scotland worse off, not even for their Celtic cousins. Indeed Danny Alexander has stated publicly that there is no prospect of such a change. But Jon seems to be suggesting, and I hope I’m not misrepresenting him here, that the political consequences would come from the English regions. I can’t see however how they could attach their demand for resources to the Barnett formula. The funding of English regions is not something that is required to bind the Union.

  15. @ Eurfyl ap Gwilym

    “Perhaps I am missing your point but as I stated in my earlier comment such a formula does exist and it is used to distribute money between the English regions..”

    Let’s cut to the chase – what would Scotland, Wales, and Northern Ireland get if they were funded using the same formula as the English NUTS1 Regions?

    Does anybody have a valid reason why we should not simply return to this method of allocating funding and scrap the Barnett formula?

    Why should political leverage over-ride fairness and administrative efficiency? Complexity and inefficiency has to be paid for either through increased taxation or by reducing service levels.

  16. John R. Walker. If you read the Holtham Commssion report [Final Report, Chapter 3] you will see that using the intra- England formulae was part of one of the approaches they took in concluding that Wales was underfunded to the tune of £400 million.. Please read the report because I have to summarise here what is quite a complex argument advanced by the Holtham Commission. You will also see that the ‘solution’ is not as simple as you propose because there are differing degrees of devolution to the three countries with devolved administrations and the position in England is again very different. On a pedantic point: you advocate a ‘return to this method’ but it is not possible. You would either have to abolish devolution (you may well want to do this) or possibly go back to a period before the Goschen formula was introduced in 1888 or arguably the Act of Union of 1707. There is no going back: we can only go forward.

  17. The valid reason is that Wales, Scotland and Northern Ireland are governed by a legislature, English regions are not. Their legislature is to be found in London, just as Gwynedd’s legislature is to be found at Cardiff Bay.

    “Why should political leverage over-ride fairness and administrative efficiency?”

    Politics is by definition concerned with the exercise of power. Concepts such as fairness and efficiency are debatable concepts. There is no one definition on which everyone is agreed.

  18. In answer to John Walker, asking what the different countries would get if they were in England and subject to the distributional formula in use there is exactly how the Holtham Commission went about determining that Wales was underfunded and Scotland got too much – at least as I understand it. The Scots of course do not accept the premise of this discussion , which is the Marxist one “from each according his ability, to each according to his need”. The Scots think it matters where taxes come from. Look at it that way and things become very different. Scotland is overfunded on a needs basis but it is in rough balance with the rest of the UK when it comes to tax and spend. Whereas Wales is underfunded according to need but receives the biggest per head subsidy of anybody because our lousy economy yields very little tax. Welsh taxes would pay only about 65 per cent of public spending in Wales, the rest comes from a UK hand-out. In those circumstances I find our harping on the underfunding a bit embarrassing. It is particularly inappropriate coming from a member of Plaid Cymru like Mr ab Gwilym. His Party says it wants independence and a bigger hand out at the same time! One or the other, surely. Speaking as an old socialist, I must confess we have a benefits culture in Wales and not just among the poor. It runs right through Plaid Cymru right up to Carwyn Jones and everyone else moaning about fair funding. And how much have we squandered from the EU structural funds? Time to stop moaning and get a grip.

  19. I meant that a barnett + formula that included the English regions might make the politics easier.Though it would be more accurate to say that the politics would be different. It may create alliances between poor regions like North East England and Wales against richer areas.
    Eurfil I know that oil hasnt always been a consideration, which is why i used the word present to describe its political leverage. I am afraid I think that R.Tredwyn places his finger on a very sore nerve.

  20. The question remains as to why you would want to put a national legislature on the same basis as an English region. In part, the purpose of having this constitutional clout is so that we can exercise greater political leverage to the benefit of our economy. The National Assembly has no jurisdiction over the North-East of England. You refer to making the politics easier but do not state which politics you are referring to.

    The point about asking for more while based in an underperforming economy is somewhat superficial, if not fatuous. Wales operates within the context of the British state and its mechanisms and therefore should receive from those mechanisms what it requires to function as an economy and a society. There is no contradiction here. The British state has failed to provide for Wales the same standard of living as is enjoyed over the dyke. It therefore has an obligation to put in place compensatory mechanisms that rectify that failure.

    That said, the question of the underperforming economy is the crucial one. As has been stated in other articles on this website, there have been many solutions by different political parties attempted at dealing with the economic effects of the decline of the coal industry since the 1930s but none have proved sustainable.

    A great deal of superficial commentary has been made about economic performance in Wales but has anyone come up with a persuasive analysis? Certainly Carwyn Jones’ recent overseas initiatives have borne some fruit; inward investment is, I understand, the favoured policy of the Welsh Economy Research Unit. Whether this proves to be sustainable remains to be seen. Professor Calvin Jones has written elsewhere on this site that a more thorough analysis of Wales’ economic position is required.

    In the meantime, we will continue to claim from Westminster what is due to us and not apologise for it.

  21. Rhobat If states have an obligation to provide the same standard of living to each and every part; it is an obligation only honoured in the breach.
    As i have already explained above Wales can have more money from Barnett either by reducing Scotland`s generous allowance or by underfunding England. If the latter is to happen then the poorest regions of England would probably complain loudly.
    The politics would be different if English regions and the UK nations were all allocated resources in the same system. Poorer regions would have coinciding interests.
    UK economic resources are hugely unevenly distributed. You seem to see that as an English problem I see it differently.

  22. Rhobat Bryn Jones. It is a question of taste I suppose but personally I find a combination of truculence and begging very unattractive. Claiming what is due to us indeed – who says the world owes us a living? Well over 30 per cent of public spending in Wales is an English subsidy already. Have we no shame? Any Labour politician with an IQ in double figures runs off to London to become shadow PPS to an insignificnat shadow minister, leaving people running our country who are plainly not up to it. And our apathetic, uninterested and politically ignorant electorate goes on voting for them anyway. Faced with such formidable opponents all Plaid Cymru can do is progressively lose support for ten years on end. And we moan about the Barnett formula! Physician heal thyself!

  23. @ Jon Owen

    I take your point about being honoured in the breach but there is presumably a purpose to the Barnett formula, which I have not devised, namely the redistribution of funds between the nations of the United Kingdom, given that England is the wealthiest nation, though I know that the Scottish Government currently contests that view.

    I think also there is an assumption in your argument as to what is meant by English regions. The idea that Wales would receive its just level of funding to the detriment of the underfunded North East of England is something that most people, including myself, would find inequitable. But the funds we are talking about are those to be found in London and the South East, a region that is vastly overfunded and receives a far higher proportion of investment than is justifiable on a per capita basis; hence the Barnett formula. We currently have a situation where £42.6 billion has been earmarked for HS2 and a further £15 billion for Crossrail, both projects contained entirely within England. According to Barnett consequentials, there should be a dividend for Wales here as has been argued publicly. Now you can argue that HS2 may benefit the economy of North Wales at a pinch but the fact that Westminster has decided that Crossrail is also a project that will benefit the Welsh economy shows that the degree of underfunding is far worse than that outlined in the Holtham report or by Eurfyl above.

    My point is that comparison with the North East of England misrepresents both the economic and political reality in which Wales finds itself. The proper comparison is with South East England. As for making common cause with NE England, I think that is a matter of perspective, as you say. I would just repeat that Wales has no jurisdiction over that region and vice versa. That does not mean that informal contact or sharing of information or ideas would not be possible, but Wales cannot wait for deals with English regions to be struck, or formulae that put Wales and English regions on an equal footing, in order to further its best economic interests. We have been doing that since the decline of the coal industry in the 1920s to little avail.

  24. @ all..

    I surprised to see little comment regarding, generating wealth through entrepreneurial means. We need to have a major culture change in Wales about what we want to achieve in the 21st Century.

    I think that would agree that Wales is underfunded compared to Scotland, but that isn’t going to change anytime soon in today’s political climate.

    What would be enlightening, is to hear politicians discussing their plans to create revenue for the welsh economy through the private sector.

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