Northern Ireland report claims Wales is over-funded by UK Treasury

Martin Shipton

An independent body that advises the Northern Ireland Executive has claimed that Wales is over-funded by the UK Treasury in terms of the nation’s needs.

The conclusion of the Sustainability Report 2026 from the Northern Ireland Fiscal Council has been firmly rejected by the Welsh Government.

The report states: “The First Minister [Sinn Fein’s Michelle O’Neill] and Finance Minister [John O’Dowd, also Sinn Fein] have recently argued that NI is funded less generously than Scotland and Wales, because they receive funding-per-head well above their estimated need while NI is funded broadly in line with need.

“They claim that if NI was to be funded like Wales it would receive around £1bn more per year, and if like Scotland, around £3bn more per year … Our analysis suggests that these estimates are reasonable. But it would not necessarily be good policy to increase NI’s funding well above need simply to match Scotland or Wales, especially from the UK Government’s perspective. “One might conclude that it would be fairer and more sustainable to reduce funding in Scotland and Wales closer to need. But this would be very politically challenging for any UK Government, which helps explain why the Barnett formula and the historical funding premium that Scotland has enjoyed have persisted so long. It should also be remembered that Northern Ireland was funded well above need until relatively recently.

“The Finance Minister is quoted as saying: ‘Wales is funded 8% above its level of need and Scotland is funded 20% above its level of need, which equates to £1bn and £3bn respectively. I assure you that, if our Executive had access to such funds, we would have a multi-year Budget in place…’.

“Both Scotland and NI were found to be funded above need in reviews conducted by the Treasury in 1979 and 1993. The indications for Wales were less clear, and this gave rise to a 2010 independent review of need by Professor Gerry Holtham which estimated a level of need for each of the devolved administrations, and made recommendations for addressing the situation in Wales. The Holtham review estimated that need for funding per head in Scotland was 105% of that in England, Wales 115%, and NI 121%. This excluded the devolution of policing and justice, which was not devolved in Wales and which was expected to have a much more significant impact in Northern Ireland than in Scotland.

“The Treasury periodically assesses and publishes estimates of the actual level of funding premium in each of the Devolved Administrations. In the past, this was done in some detail in the Block Grant Transparency report. So we can compare relatively recent calculations of the funding premium with the rather less recent estimates of need for Scotland and Wales in the 2010 Holtham review. Treasury also carries out this comparison in its open book review – stating in broad terms that all three DAs receive more than a 20% premium over England, compared with relative needs levels of 105% (Scotland), 115% (Wales), and 124 per cent (NI).

“It is immediately clear even from the general treatment in the Open Book Review that this means Scotland is funded at least 15 percentage points above its need as calculated by the Holtham assessment (with a 120+ % premium compared to a 105 % need level), Wales at least 5 points (120+ premium compared with 115 need). And it leaves it ambiguous whether or not NI is funded above, below or at need (120+ premium compared with 124 need).

“But we can derive a more accurate estimate of the funding premium for Scotland and Wales than this, using two sources: the HMT Block Grant Transparency Document and data recently published by the Finance Minister. funded at a premium higher than NI (at 127) despite having significantly lower need (105 compared to 124).”

According to the report, Scotland is currently funded at a level very close to 20 percentage points above its need (not below 125%, compared with a needs level of 105%). The situation in Wales is also in line with that asserted by the First Minister and the Finance Minister at around 8 percentage points above need (123% premium compared with a needs level of 115).

Flawed

A Welsh Government spokesperson responded: “Claims that Wales is ‘overfunded’ are based on flawed comparisons and do not stand up to scrutiny.

“The Barnett formula is outdated and unfair. We will seek to work with the UK Government to devise and implement a new formula that funds Wales according to its genuine needs.”

The spokesperson added: “The level of relative funding per person in Wales is around the same as set out in the Fiscal Framework Agreement in 2016 and is lower than in either Scotland or Northern Ireland.

“Far from having surplus funding, the Welsh Government is facing real terms cuts in its budget in the years ahead.”