• This framing relies on the relative levels of need of Scotland, Wales and Northern Ireland when compared with England. 
  • Northern Ireland has generally been funded at or above its assessed level of need – 124% per capita funding when compared with England – although there is a risk it will dip just below this threshold in the current financial year.
  • The assessed levels of need for both Scotland and Wales are lower than those for NI. However, both of these nations are funded significantly above their levels of need – by 8pp in Wales and by 20pp in Scotland.
  • Calculations by DoF officials suggest that if NI were to be funded at Welsh levels – i.e. 8pp above levels of need – it would have around £1bn per year more. At Scottish levels, with 20pp extra, this would be £3bn per year.
  • However, funding inequity is not the same thing as actually being underfunded. Northern Ireland’s total funding has generally been at – and, in some cases, well above – its assessed level of need in recent years.
  • The Northern Ireland Fiscal Council has accepted the DoF calculations but denied that this means NI should get more funding, suggesting instead that Scotland and Wales should get less.

In comments published in the Belfast Telegraph on 23 April, First Minister Michelle O’Neill claimed:

“[Relatively] speaking, when you compare the funding that Scotland achieve and what Wales achieve compared to our starting point, there’s a distinct unfairness there … If we’re funded to the same tune as Wales, we would have £1.1 billion in additional funding. If we’re funded to the same tune as they are in Scotland above their level of need, we would have £3 billion in additional funding.”

Similar arguments have since been made by Finance Minister John O’Dowd in the months since, including during question time in the Assembly on 1 June:

“[While] the interim fiscal framework has supported our funding close to our 124% level of need, evidence has shown that we are not funded fairly when compared with Wales and Scotland. If the Executive were funded to the same levels, it would mean an additional circa £1 billion and £3 billion per annum respectively. Funding for the Executive has managed to meet levels of need only through the provision of one-off packages in recent years, which is not a sustainable or equitable position.”

These claims are supported by evidence – but context is important.

First of all, the arguments being made do not mean that NI is underfunded, objectively speaking.

Instead, calculations from the Department of Finance – which are described in detail below – indicate that Scotland and Wales are both funded well above their own levels of need.

If Northern Ireland were funded above its level of need to the same degree as Wales, it would currently receive approximately £1bn more per year.

If it were funded to the same degree as Scotland, it would receive an extra £3bn per year.

These DoF calculations are supported by the NI Fiscal Council – although NIFC also states that this is not an argument for more local spending and instead that “[one] might conclude that it would be fairer and more sustainable to reduce funding in Scotland and Wales closer to need.”

For more information, read on.

  • Source

FactCheckNI contacted the First Minister about her claims and were told this was a matter for “the party”, i.e. Sinn Féin. We contacted the party and received no response.

We also contacted the Department of Finance asking them to clarify these arguments. A spokesperson said: 

“The Minister has called consistently for fairer and sustainable funding for our public services. That is, while funding here is based on a current assessment of relative need, Scotland and Wales are funded well above their estimated levels of need (20 percentage points above need for Scotland and 8 percentage points above for Wales), providing them with significantly more capacity to manage emerging pressures. If the Executive was funded to the same levels, it would mean an additional circa £3billion and £1billion per annum respectively.”

  • Levels of need

To understand the arguments being made, it is crucial to note the various levels of need that have been assigned to Scotland, Wales and Northern Ireland regarding the funding devolved administrations receive.

In 2010, a Commission led by Professor Gerard Holtham published its analysis of the relative level of need of Wales, compared to England. Its assessment was that, for every £100 of public spending per capita in England, Wales would require spending of £114 per person – or, put another way, Wales requires 114% per capita spending compared with England.

Wales now has a “funding floor” in place meaning its funding can never fall below 115% of per capita spending in England.

Although focused on Wales, the Holtham Commission also carried out assessments for both Scotland and NI – finding their relative levels of need to be 105% and 121% respectively.

In 2023, the Northern Ireland Fiscal Council (NIFC) published an updated needs assessment for local spending, suggesting NI now requires 124% per capita spending to match English quality of services.

This is the level of need currently used for assessing funding in Northern Ireland, although this may change in future given a more recent updated assessment from Prof. Holtham.

  • The Department of Finance calculation

The rationale for why Northern Ireland could be considered to be underfunded relative to Scotland and Wales was laid out by departmental officials in a meeting with the Finance Committee on 16 June.

This involves an analysis of levels of funding over the current Spending Review period, which runs until 2028-29. One official told the committee:

“In calculating Northern Ireland’s relative need and funding compared with Wales and Scotland, we started by establishing relative needs across the nations. Northern Ireland’s level of need as recognised by the UK Government is 124% of that in England on a per capita basis. That is as agreed in the interim fiscal framework from May 2024 and was based originally on the report from the independent Fiscal Council …

“[Relative] need differs substantively across the devolved regions. As we said, Northern Ireland sits at 124% , while Scotland is at 105%, and Wales is at 115%, when compared with England …

“[On] average, Wales is funded some 8 percentage points above need over the spending review (SR) period, whereas Scotland is funded, on average, some 20 percentage points above need in the same period. In contrast, based on the figures that were provided at the autumn Budget, we are funded only slightly above the level of need over the SR period by less than a single percentage point …

“We made a comparison in order to consider how much additional funding Northern Ireland would have received over the SR period had we been funded above need on a similar basis to Wales and Scotland … By taking Northern Ireland’s total spending, as reported by the Treasury at the autumn Budget, which was £18.552 billion, and dividing it by our relative need factor of 124%, the estimated monetary value of 1 percentage point of need amounts to £149 million.

“In conclusion, that analysis suggests that were we to be funded in the same way as Wales, we would get an additional £1 billion per annum. Were we to be funded like Scotland, that could amount to an additional £3 billion per annum.”

  • Fiscal Council analysis

On 16 June, the NI Fiscal Council (NIFC) published its latest Sustainability Report.

The NIFC analysis of local public finances made an assessment of the DoF calculations described above, and said its own work “suggests that these estimates are reasonable.”

However, NIFC was also quick to caution that this is not necessarily an argument in support of Northern Ireland receiving more funding from Westminster.

“[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 NI was also funded well above need until relatively recently.”

As NIFC states, Northern Ireland has generally been funded at or above its level of need. However, the Sustainability Report also notes that, based on the latest population projections, there is a risk NI will fall below its assessed level of need to around 123% of per capita spending compared with England, amounting to a shortfall of around £170m in 2026-27.

  • More details

FactCheckNI will shortly publish a broader look at the current state of NI’s public finances ahead of Stormont’s return from recess after the summer.