Reform of the Barnett Formula with needs assessment: can the challenges be overcome?

Block grants to the UK's devolved administrations are allocated using the Barnett Formula. There have been calls to replace this formula with one based on spending needs assessment, but two obstacles to doing so have been raised. First, that the devolved administrations would be unable to agree on how needs should be assessed; and second, it is unclear how needs assessment might work for devolved governments that can pursue different spending policies. This paper investigates the first issue by analysing whether the Scottish and English formulae for allocating health and education funding within each country are statistically similar; and the second issue through a hypothetical policy simulation analysis.