Members of the Scottish and Welsh governments have claimed that they will not receive any new funding to match the UK government’s £150 council tax rebate in England for homes in bands A-D.
Last week @HMTreasury said Wales would receive £175m from its English council tax rebate plan.
Just as we’re finalising our plans to tackle the #CostofLivingCrisis, we’ve learned there’s no extra money for Wales.
We will continue to work to support those who need it the most.
— Mark Drakeford (@PrifWeinidog) February 9, 2022
This echoes the position for Scotland. Nevertheless we will honour our commitment to allocate £290m to deal with the cost of living crisis in Scotland, with details announced tomorrow. It will require us to revise the latest budget position I set out to the Scot Parl last week. https://t.co/wm0GuJjUxG
— Kate Forbes MSP (@_KateForbes) February 9, 2022
The policy was announced to help families with the rising cost of living, but the truth around whether Scotland and Wales will receive money to replicate the policy is more complex.
Technically, the Scottish and Welsh governments will receive money to match this commitment.
However, they will receive less than they had previously expected to receive this year because the UK government has revised down the amount it expects to spend on healthcare in England, which affects the amount the devolved governments are allocated.
How the devolved governments are funded
In the UK, the responsibility for some parts of public services are reserved by the UK government for the whole of the UK (e.g. defence).
But other public services, for example, healthcare, are devolved. This means the UK government is responsible for healthcare in England, while the devolved governments are responsible for healthcare in their respective countries.
The money to fund these areas largely comes in the form of grants from the UK government to the devolved governments, funded out of taxation from across the UK.
When the UK government decides to change the spending on things in England which are devolved, it also changes the funding for the governments in Wales, Northern Ireland and Scotland in proportion to their populations.
The Institute for Government says: “For example, if spending on healthcare in England increases by £100m, the Scottish government’s budget would increase by £9.7m since Scotland’s population is 9.7% of England’s. Similarly, the Welsh government’s budget would increase by £5.6m and the Northern Ireland Executive’s budget would increase by £3.4m.”
Council tax rebate
On 3 February, the UK government announced it would fund a £150 rebate on council tax for homes in England in bands A-D, to help with the rising cost of living. This rebate will apply to around 80% of homes in England.
Council tax is a devolved area. So, alongside announcing the plans for England, the UK government announced that about £565 million would go to the devolved governments, in what are called ‘Barnett consequentials’.
This would allow the devolved governments to institute similar policies, though devolved governments don’t have to spend that money on the same things as in England.
Separately to this, the Treasury confirmed to Full Fact that, due to the Omicron variant of Covid-19 having less impact than expected, health spending in England is expected to be lower than previously forecast this year.
This means that the devolved administrations will be receiving less money than they previously expected in the form of Barnett consequentials arising from health spending in England.
ITV News has reported that, for Wales, the downward revision in health-related Barnett consequentials amounts to £178 million, almost exactly what Wales will receive in addition as a result of the council tax rebate plans, hence why the First Minister has claimed “there’s no extra money for Wales.”
Scottish Finance Secretary Kate Forbes also indicated that the downward revision in funding outweighed the increased funding from council tax rebate consequentials in a statement to the Scottish Parliament, saying: “Last week’s announcement of funding for the cost of living crisis has changed the position again – not by increasing the expected consequentials but by decreasing the funding”.
So, you can see why the Welsh and Scottish governments have said they will not be receiving any more money to fund an equivalent council tax rebate, above the amount they had been expecting and budgeting for.
But it’s important to note two things.
Firstly, this doesn’t compare the funding for last year to the funding expected for the coming year. It compares what the devolved governments thought they’d be getting for the coming year a few weeks ago, to what they now expect to be getting for the coming year since these policy changes have been made.
A Treasury spokesperson told Full Fact that it regularly shares an estimate of the amount of funding the devolved governments are due to receive to help inform their spending plans and is clear these are estimates, with the final allocations confirmed in February.
Secondly, if you want to argue that Scotland and Wales are not getting any more money to fund the council tax rebate (by suggesting they will be paying for this out of the previously assumed health budget) then by that logic, neither is England.
Wales and Scotland are not going to be relatively worse off than England as a result of these policy changes.
Image courtesy of Conference of Peripheral Maritime Regions
