COVID and the UK nations' fiscal frameworks: impacts, performance and lessons

The UK's devolved governments (UKDGs) have substantial policy autonomy over health, social care, business support and education and training, and hence are responsible for determining much of the policy response to the COVID-19 crisis for 10.5 million people. Their funding is governed by fiscal frameworks and settlements. These include a combination of grant funding, tax powers, and limited borrowing and other budget management tools. The COVID-19 crisis is an unprecedented health and economic shock that these frameworks were not designed for, demonstrating some strengths, but also revealing weaknesses. The UKDGs have articulated a number of particular problems. First are grant allocations, which take no account of economic or health needs, instead reflecting historic funding and changes in spending in England via the Barnett Formula. Second are strict limits placed on their own borrowing and reserves. Together, these mean that UKDG spending is constrained by English policy priorities, which may be inappropriate, especially if crisis impacts are assymetric. Moreover, these priorities have sometimes been poorly communicated, creating budgetary uncertainty. This project will address two issues. First it will consider how the current frameworks are affecting the UKDGs' ability to respond effectively to the COVID-19 crisis, taking account of the differential impact of it across the UK. Second it will appraise options for reform of these fiscal frameworks to enhance the capacity of devolved governments to support recovery from the pandemic. We will directly engage with governments, parliaments and other stakeholders to achieve these aims and inform key policy decisions.