Public spending and taxation

The financial relationship between the four nations of the UK is growing more complex. While devolution in 1999 created governments with responsibility for large budgets, almost all taxes continued to be set in Westminster, with funding allocated to the devolved nations through an annual grant. But the old, centralised fiscal union is changing, with Westminster granting powers to set certain taxes to Scotland, Wales and Northern Ireland.

Devolution in 1999 left the existing mechanisms for funding the UK nations largely intact. While the governments in Edinburgh, Cardiff and Belfast gained oversight of large budgets, covering key public services such as health and education, most taxes continued to be set by the UK Government, and devolved budgets continued to be calculated based on a formula first used in 1979.

This system worked relatively well for the first 10 years, while public spending was increasing in all four nations. However, since the squeeze on public spending that began in 2010, the devolved administrations have been forced to make difficult decisions under budget pressure from Westminster. This has coincided with political divergence and different parties governing in each nation, fuelling demand for the devolved administrations to be given greater autonomy over their finances. In the past few years, the devolved administrations have gained greater powers to set taxes and retain tax revenue collected within their territory. This means they will benefit financially if growth in their tax revenue outpaces growth in other parts of the UK, but will lose out if their economies fall behind.

The devolved nations have also benefited disproportionately from European Union (EU) funding schemes. Britain’s planned exit from the EU, therefore, means that the financial relationship between the devolved nations and the UK Government could change once again.

The UK is a redistributive union of four nations

The UK’s approach to public finances is geographically redistributive. Most tax revenue is pooled centrally, with funding allocations for each nation or region not generally based on where revenue was raised. This results in redistribution from England to the devolved nations.

In 1999, devolution incorporated, rather than challenged, this approach. While the governments in Edinburgh, Cardiff and Belfast took on responsibility for large budgets, the UK Government continued to set and collect taxes, allocating some of the revenue to the devolved administrations using the same formula that it had used since 1979.

Public spending and tax revenue per person, by UK and English region (2017/18 prices)

Since 1999, public spending per person has been consistently higher in the devolved nations than in England. In 2016/17, an average resident in Northern Ireland enjoyed £2,190 (24%) more in public spending than a typical English resident, while spending per person in Scotland was £1,790 (20%) higher and spending in Wales was £1,200 (13%) higher.* This difference is partly because the formula that sets devolved budgets preserves historically higher levels of spending in Scotland, Wales and Northern Ireland. But UK Government spending on benefits, which is determined by needs in each nation, is also higher per person in the devolved nations.[1]

For the first decade or so of devolution, spending consistently increased in all four UK nations. Since then, public spending in each nation has fallen as the UK Government has sought to reduce public spending in the aftermath of the 2008 financial crash. But while the overall pattern of spending has been similar across the UK over the past 20 years of devolution, the gap between spending in England and the devolved nations has narrowed – from 36% in 1999/00 to 24% in 2016/17 in Northern Ireland, from 23% to 20% in Scotland and from 18% to 13% in Wales.

While public spending per person is higher in the devolved nations, tax revenue per person is higher in England. In 2016/17, an average person in England contributed £11,650 in tax revenue. In Scotland, this was about 6% lower, at £10,800, while Northern Ireland and Wales raised £9,130 and £8,550 per person – 21% and 26% less than England – respectively.** Across English regions, however, there are also large differences in tax revenue raised per person. In particular, London generated almost twice as much tax revenue per person as the north-east of England in 2016/17. These differences in tax revenue across the UK are largely due to stronger economies and larger tax bases in the south-east of England and Scotland compared with Northern Ireland and Wales, and parts of England. The largest differences in revenue raised per person are in income tax, national insurance and corporation tax, which are closely linked to employment, pay and business activity.***

Until 2014/15, tax revenue per person was higher in Scotland than in England. This was due to tax revenue from oil production in the North Sea. However, a fall in the price of oil in 2014 and the growing costs of decommissioning old oil rigs (which the UK Government subsidises in the form of tax rebates) meant that net tax revenue from the North Sea fell by more than 99% in real terms between 2011/12 and 2015/16, from £8.74 billion (bn) to £55.3 million (m). A partial recovery in the price of oil since it hit a low point in January 2016 has meant that revenue from the North Sea has increased again, to around £1.2bn in 2017/18.[2]

Breakdown of fiscal deficits and surpluses for UK nations and English regions, 2016/17

The overall effect of the UK’s redistributive system is that resources are reallocated from England to the devolved nations.**** Specifically, resources are reallocated from London, the South East and the East of England – the only three regions to have raised more in taxes than they received in public spending in 2016/17 – to the rest of the UK.

In 1999, the Labour Government implementing devolution did not set out to reimagine the ‘pooling and sharing’ financial relationship between the four nations. Instead, devolution transferred the existing budgets of the Scottish, Welsh and Northern Ireland Offices to the new democratically elected governments. But devolution has changed the political context of the financial relationship between England and the devolved nations. Governments in the devolved nations have the power to set their own spending priorities, for budgets that they – initially at least – had very little responsibility for raising. In addition, particularly since 2007, the governments of the four nations of the UK have been led by parties with conflicting objectives, making it more difficult to reconcile competing interests through political goodwill.

*These figures are based on ‘identifiable expenditure’ only, meaning spending where residents of a specific nation or region can be identified as the main beneficiaries. This covered 88% of UK public spending in 2016/17, and included spending on hospitals, schools and benefits, and some infrastructure spending. The remaining 12% of ‘non-identifiable expenditure’ covered areas such as defence and debt interest, where costs are incurred on behalf of the UK as a whole.

**Quoted figures for tax revenue per person are in 2017/18 prices.

***In cash terms rather than percentage terms (see Institute for Government, ‘Tax and devolution’, Institute for Government, no date, retrieved 11 April 2019, www.instituteforgovernment.org.uk/explainers/tax-and-devolution).

****Regional fiscal balance figures in this section are based on comparing total tax revenue with combined identifiable and non-identifiable expenditure for each region (see the Office for National Statistics, ‘Country and regional public sector finances net fiscal balance revisions tables’, Office for National Statistics, 1 August 2018, www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/datasets/countryandregionalpublicsectorfinancesnetfiscalbalancerevisionstables).

 

The devolved governments have mostly been funded by grants from Westminster

The devolved governments are funded primarily through an annual block grant from Westminster. These grants are set using the Barnett formula, a formula first used in 1979, when it was regarded as a temporary fix for determining funding allocations for the nations.[3] In 2016/17, the size of the block grants for Scotland, Wales and Northern Ireland amounted to £23.8bn, £14.5bn and £10.9bn respectively.[4]

The formula applies to slightly different areas of spending in each devolved nation. In all three, it covers spending on health, education, housing, local government, the environment, local transport, culture and sport. In Scotland and Northern Ireland, spending on policing, courts and prisons is also devolved, and the cost of administering the welfare system and running employment schemes is also subject to the Barnett formula in Northern Ireland (benefit payments also make up a significant component of the Northern Ireland Executive’s budget but funding for this is not subject to the Barnett formula).*

Percentage of departmental spending responsibility that is devolved to Scotland, Wales, and Northern Ireland

The Barnett formula operates by using the previous year’s devolved budgets as a starting point, and then increasing or decreasing them based on how the UK Government’s spending on devolved functions in England has changed. For instance, if the UK Government increased spending on the National Health Service (NHS) in England by £100m, the Scottish Government’s block grant would be increased by £9.8m, since Scotland’s population is 9.8% that of England. However, the Scottish Government would not be required to spend this extra money on health.**

The Barnett formula has some advantages. By using the previous year’s devolved budgets as a starting point, it ensures a degree of stability and predictability for these budgets. The simple, mechanistic approach also means that annual negotiations about budgets between the four nations can be largely avoided.

However, the formula has proved controversial. In England, there has been some dissatisfaction about the formula resulting in higher spending per person in the devolved nations. Polling by the British Social Attitudes survey found that the percentage of English respondents who felt that Scotland received more than its fair share of funding increased from 22% in 2003 to 32% in 2007 and to 41% in 2008.***

The formula’s failure to account for needs in each nation has been a source of grievance in Wales. While Wales receives more funding per person than England, the independent Holtham Commission found in 2010 that funding per person would be even higher in Wales if it were based on applying the same needs-based formulas the UK Government uses in England.[5] This led to calls, including by the Welsh Labour Party, for “reform of the Barnett Formula to ensure fairer funding for Wales”.[6] In December 2017, the Welsh and UK Governments agreed on bespoke adjustments to the Barnett formula’s application in Wales to address these concerns. When spending in England (for instance on the NHS) rises by £100 per person, spending in Wales now rises by £105 per person and, over time, spending on devolved functions in Wales will converge towards 115% of spending on comparable functions in England. This is based on the Holtham Commission’s estimate that relative needs in Wales are between 114% and 117% of relative needs in England.[7]

Another feature of the Barnett formula is that, during periods of spending growth, it causes spending in the devolved nations to grow slightly more slowly in percentage terms than in England – resulting in an effect called ‘Barnett convergence’, where spending on devolved functions per person in the devolved nations converges towards spending in England over time.[8] However, this convergence has not occurred as quickly as might have been expected. This is partly because, as already noted, the formula uses the previous year’s devolved budgets as baselines, thereby preserving historic differences in spending per person. The baselines are also not adjusted in line with population change, disadvantaging England, which has experienced faster population growth than the devolved nations. In addition, the convergence is reversed during periods of austerity, with budget reductions for the devolved administrations slightly lower in percentage terms than comparable spending reductions in England.

*For further explanation of how benefits spending in Northern Ireland is set, see HM Treasury, Statement of Funding Policy: Funding the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly, HM Treasury, 2015, p. 70, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/479717/statement_of_funding_2015_print.pdf

**For further details on the Barnett formula, see Keep M, The Barnett Formula, House of Commons Library, 2018, https://researchbriefings.files.parliament.uk/documents/CBP-7386/CBP-7386.pdf

***The question was not asked in 2004, 2005 or 2006. See http://natcen.ac.uk/our-research/research/british-social-attitudes

 

Some tax powers have now been devolved

Large block grants to the devolved administrations have been necessary largely because of the imbalance between devolved spending responsibilities and tax-raising powers.

Indicative breakdown of identifiable expenditure and tax revenue by level of government

In 2016/17, spending managed or overseen by the devolved administrations amounted to 65% of all identifiable government spending in Scotland, 61% in Wales and 93% in Northern Ireland.* This includes the devolved block grants, as well as money raised by local authorities (which are overseen by the devolved administrations). In Northern Ireland, this also includes spending on benefits, which is administered by the Northern Ireland Executive.

The tax powers granted to the devolved administrations in 1999 were, on the other hand, very limited. Around 90% of the tax revenue raised in the devolved nations remained under the control of Westminster, while around 10% related to local property taxes (business rates and council tax in Scotland and Wales, domestic rates and non-domestic rates in Northern Ireland).**

This asymmetric settlement meant that the devolved administrations, while having significant freedom to choose their spending priorities, were not able to set their overall level of spending. This system – based on making minimal changes to the pre-1999 financial arrangements – worked relatively well to begin with. However, as party politics diverged, and spending began to fall, the system came under increasing criticism from across the political spectrum. The rise of the Scottish National Party (SNP) and the 2014 referendum on Scottish independence forced the big Westminster parties to agree to devolve further powers, including over taxation, in the 2012 and 2016 Scotland Acts. The Conservatives have also made the case that devolving taxes would improve the financial responsibility and democratic accountability of the devolved governments.[9]

Tax devolution (legislation and implementation dates) since 2012

In Scotland, the power to set all rates and bands of income tax above the tax-free personal allowance has been fully devolved since 2017. In 2015, the Scottish Parliament also took complete control of its stamp duty land tax and landfill tax (which have been renamed the land and buildings transaction tax and the Scottish landfill tax respectively), with air passenger duty and the aggregates levy – a tax relating to sand, gravel and rock extraction – planned for future devolution. Since April 2019, the Scottish Government also receives 50% of all VAT (value-added tax) revenue generated in Scotland, although rates are still set in Westminster and the system will continue to be run on a UK-wide basis. This means that 31% of tax revenue raised in Scotland will be overseen by the Scottish Government, and a further 10% of revenue will be assigned to the Scottish Government.

In Wales, 20% of tax revenue is now overseen by the Welsh Government. This includes partial powers to set income tax. UK income tax rates in Wales have been reduced by 10p in all bands since April 2019, and the Welsh Government now sets an additional Welsh rate of income tax (where rates of 10p in each band would mean no overall change for Welsh taxpayers). Stamp duty land tax and landfill tax have also been devolved in Wales (and renamed the land transaction tax and the landfill disposals tax respectively). A similar system for partially devolved income tax was included in the Scotland Act 2012. However, this was replaced by full devolution in the Scotland Act 2016, to fulfil promises made by UK parties during the 2014 independence referendum campaign to devolve substantial revenue-raising powers to the Scottish Parliament.

The choice of which taxes to devolve to Scotland and Wales reflects several constraints. The easiest taxes to devolve are those relating to land or property, given that revenue is very easy to attribute geographically, and these fixed assets cannot easily be moved in search of jurisdictions with lower tax. Of the larger taxes, income tax was judged to be the best option for devolution, partly because of its high visibility to taxpayers, but also because of difficulties that would have arisen from devolving other taxes. The UK-wide system for national insurance would have been particularly complicated to break up due to the link between the National Insurance Fund and benefit payments (which are not devolved in Scotland and Wales). Meanwhile, devolving control of VAT rates would not have been compatible with EU law, and would also have created new costs for businesses operating across the UK’s four nations, and corporation tax was ruled out as an option for devolution in Scotland and Wales as it could have resulted in unwelcome tax competition within Great Britain.[10]

Tax devolution has also required the UK and devolved governments to reach an agreement on how the devolved block grants should be reduced to account for the Scottish and Welsh Governments’ new tax revenue. While the UK and devolved governments agreed in principle that tax devolution should not make the devolved governments worse off – that is, that the redistribution already embedded into the system should be preserved – they differed in their interpretations of this. The agreements eventually reached, after months of fraught negotiations, retain the Barnett formula as the foundation for calculating devolved budgets, but add new (and slightly different) complexities to its application in both nations.[11] The devolved administrations will now receive smaller block grants, but retain the revenue from the taxes under their control. This means that they stand to benefit if they are able to stimulate growth in their economies that makes their tax base grow more quickly than in England. However, if economic growth in Scotland or Wales falls behind growth in the other nations of the UK, then they will have less money available to spend on public services.

In Northern Ireland, tax devolution has taken place for different reasons, mainly relating to competition with low taxes in the Republic of Ireland. Air passenger duty for long-haul flights was devolved and abolished in 2013, to make Northern Ireland more attractive as a destination for transatlantic flights.[12] In 2015, Westminster also legislated to devolve corporation tax to Northern Ireland, but this measure has not yet been enacted due to the suspension of the Northern Ireland Assembly since January 2017.

*Identifiable expenditure means spending where residents of a specific nation or region can be identified as the main beneficiaries.

**The Scottish Parliament was also given the power to vary the rates of income tax set by Westminster by up to 3% (although this power was never used).

 

The devolved governments have prioritised spending in different areas

In 2010, the Coalition Government set out to reduce public spending in order to reduce the fiscal deficit, which was almost 10% of GDP in 2009/10. The operation of the Barnett formula meant that cuts in government spending on public services and investments in England were replicated in the devolved budgets.* The devolved block grants, however, are not ringfenced, so the devolved administrations were not required to make cuts in the same areas as the UK Government.

Changes in resource spending on public services by UK nation (real terms, per person)

Our analysis indicates that, since 2010/11, the devolved administrations and the UK Government have made different choices on which services to prioritise. In England, health budgets have been prioritised, and spending per head is now around 8% higher in real terms compared with 2010/11. This compares to an increase of 4% in Scotland and Wales and 2% in Northern Ireland (although spending per head is still higher in the devolved nations). While the UK, Scottish and Northern Ireland Governments chose to protect health spending in real terms during the initial period of austerity, the Welsh Government did not and spending fell by 3% in real terms between 2010/11 and 2012/13, before recovering in recent years.

Compared with England, the devolved administrations, particularly Scotland, have prioritised spending on education. Overall spending on education – including higher education – has fallen in real terms by 9% in Scotland, 16% in Wales and Northern Ireland, and 20% in England between 2010/11 and 2016/17. This is partly because the devolved governments have chosen to continue to provide a higher level of financial support for university students compared with the UK Government. Cuts to public order and safety – covering the police, courts and prisons – have also been less severe in Scotland compared with England and Wales (these policy areas are not devolved in Wales so spending is set in Westminster), while local government spending also appears to have fallen by less in Wales and Scotland compared with England.**

As well as making different choices about spending, the devolved administrations have diverged from Westminster in the way they deliver public services. In many cases, this has happened because they have opted not to replicate reforms in Westminster to introduce more market forces and competition into public service delivery. While the UK Government introduced foundation trusts (which have greater autonomy from central government control) to the NHS in England in 2004, the Scottish and Welsh Governments have opted instead to remove the purchaser/ provider split in their health systems.[13] The Coalition Government’s reforms to schools – including the introduction of free schools and the expansion of academies – have also not been replicated in the devolved nations. While directly elected police and crime commissioners have been introduced in England and Wales, the Scottish Government has instead merged its eight former regional police forces into one.

Recently, there has been growing controversy about diverging outcomes for public services in the devolved nations compared with England, particularly for the NHS in Wales. During Prime Minister’s Questions, Theresa May has frequently compared NHS performance in Wales unfavourably with performance in England, highlighting how, in 2016/17, 3.4% of patients in Wales waited more than 12 hours at Accident & Emergency (A&E) compared with 1.3% in England.[14] In 2015, England also scored higher than the devolved nations in international rankings of educational attainment, which are based on tests taken by 15-year-olds every three years. England outperformed the other three nations of the UK on reading and science, while for maths, Northern Ireland and England were the joint highest. Scotland, which had the highest scores for maths and reading in 2006, 2009 and 2012, fell below England and Northern Ireland, and Wales scored the lowest on all three subjects.[15] There are also cases where devolved public services appear to be performing better than those run by the UK Government. For example, prison violence in Scotland is significantly lower than in England and Wales.[16]

It is difficult to isolate specific causes for differences in performance, due to the variety of factors that can affect outcomes for public services. Demographic differences between the four nations of the UK, which affect demand for public services, could be having an impact. For example, in Wales, 25% of the adult population are over the age of 65, compared with 22% in England, but this is not captured by the Barnett formula, which does not account for needs.[17] However, devolved administrations have also made different choices about how they spend their block grants, for example in Wales on health spending or in Scotland on justice spending. Outcomes could also differ due to the way services are being run – either because different delivery models are used (for example, local authority-run schools versus academies and free schools) or simply because services are being administered more effectively in some places compared with others.

*Reductions in UK Government spending on benefits since 2010 have not had the same effect on devolved budgets as reductions in spending on public services and investments, which are subject to the Barnett formula. The UK Government controls the welfare system in Great Britain, and while decisions it has taken will have affected residents in the devolved nations, this will not have had a direct effect on the budgets of the devolved administrations.

**Based on figures in HM Treasury, Public Expenditure Statistical Analyses, 2015 to 2018,  www.gov.uk/government/collections/public-expenditure-statistical-analyses-pesa. We have excluded local government spending on education, public order and safety, health and Housing Benefit.

 

Tax policies are diverging across the four nations of the UK

The Scottish and Welsh Governments have started to use their new tax powers, leading to growing differences between the tax systems across the UK.

Policy divergence for income tax and property transaction tax (stamp duty) in the UK, 2018/19

Scotland’s income tax system has gradually diverged from that of the rest of the UK since April 2017, when the Scottish Government’s current income tax powers were devolved.* Low earners pay a little less income tax in Scotland, due to Scotland’s ‘starter rate’ of 19% on the first £2,049 of annual earnings above the personal allowance threshold (set in Westminster). But anyone earning over around £27,000 a year pays more tax in Scotland, and the differential widens for anyone earning over £43,430 a year, where a higher rate of 41% kicks in. In the rest of the UK, the higher rate of 40% only applies to earnings above £50,000 a year, meaning that someone earning exactly £50,000 would pay around £1,500 more in Scotland.

Although the Welsh Government gained partial powers over income tax in April 2019, it has initially decided not to diverge from the policy set in Westminster. In January 2019, shortly after leaving office, the former First Minister of Wales Carwyn Jones explained that “the scope for using income tax as an economic tool [by varying rates] was going to be very limited”, adding that “the reason why income tax was important to us was we wanted to borrow”, which requires having a revenue stream.[18]

There has been more divergence in Scotland and Wales for stamp duty land tax, which was fully devolved to Scotland in 2015 and to Wales in 2018. Scotland and Wales have both introduced higher tax-free thresholds, at £145,000 and £180,000 respectively, compared with £125,000 in England and Northern Ireland (where stamp duty is not devolved, so rates set in Westminster continue to apply). Scotland and Wales also charge higher rates on more expensive properties. The overall effect is a more progressive system in Scotland and Wales; however, England has a more generous discount for first-time buyers than Scotland, while there is no discount at all in Wales. Average house prices are also significantly lower in Scotland (£149,000 in January 2019) and Wales (£160,000) compared with England (£245,000), so a greater proportion of transactions falls under the tax-free threshold.[19]

Tax policy divergence in Northern Ireland has so far been limited to the abolition of air passenger duty for long-haul flights. However, before the recent collapse of power- sharing in Stormont, members of the Northern Ireland Executive had indicated that it planned to cut corporation tax below the rates set in Westminster.[20]

Fiscal devolution is beginning to enable interesting examples of policy innovation and divergence across the four nations of the UK. The process is in its early stages, but as further powers are devolved and the new devolved tax systems bed in, we can expect to see greater variation and experimentation, as well as complexity, in the UK’s tax systems.

*This marks the time when powers were devolved in full, rather than in part beforehand.

 

New arrangements will be needed to replace EU funding schemes

The devolved nations have benefited disproportionately from existing EU funding schemes. In total, UK farmers receive around £3bn a year in agricultural subsidies from the EU, as part of the common agricultural policy (CAP). The UK also receives around £300m a year for rural development, as part of the same scheme. While most of this funding goes to England, the benefit per person is much higher in the devolved nations, at £167 per person per year in Northern Ireland, £104 in Scotland and £103 in Wales, compared with £40 in England.

The EU’s structural funds, worth about £1.3bn a year in the UK, are designed to support economic development and are targeted at economically disadvantaged regions. Again, this results in the devolved nations, particularly Wales, receiving more per person than England. Every year, Wales receives around £95 per person in structural funds, compared with £34 in Northern Ireland, £20 in Scotland and £16 in England. Northern Ireland, along with the Republic of Ireland, also benefits from special funding programmes to support the peace process, which the EU has promised will continue after Brexit.[21]

EU agricultural (CAP) and structural funds per person per year by nation, 2014 to 2020

Britain’s planned exit from the EU means that the future of funding schemes, including the common agricultural policy and structural funds, is uncertain. In the short term, the UK Government has offered some guarantees, promising to maintain current agricultural funding (regardless of Brexit outcomes) until the end of the current Parliament.[22] It has also committed to continue supporting ongoing projects that are currently funded by EU structural funds, as long as they provide good value for money and align with domestic priorities.[23]

The UK Government has also made vaguer commitments to replace these funding schemes in the long term. However, details on how these schemes will be replaced, including on what role the devolved administrations will be, are sparse. While the 2018 White Paper for the Agriculture Bill offers some insight on how future agricultural funding could work in England, and notes that “each devolved administration [will design] a new agriculture policy” subject to some constraints, it does not outline how much money will be spent in total in the future.[24] The 2017 Conservative manifesto also promised to set up a Shared Prosperity Fund to replace EU structural funds, but the Government has not provided details on how this will operate, saying only that there will be a consultation.[25] The Scottish Government has said that this fund “must respect devolution” and be administered by the devolved governments; however, Scottish Conservatives have suggested that the funding should flow directly from the UK Government to local authorities – including those in the devolved nations – to improve the visibility of UK Government funding in the devolved nations.[26]

Deciding how to replace EU funding will ultimately involve revisiting familiar questions regarding financial arrangements for the devolved nations. How much autonomy should devolved administrations have? How much redistribution should be embedded into the system? What is the best way of accounting for differing needs? And how much value should be placed on having a system that is administratively simple to operate? Over the past 20 years of devolution, successive governments have failed to apply a consistent set of guiding principles when it comes to answering such questions. For example, redistribution within the system has been protected, but this often fails to account for differences in needs. The imperfect yet administratively simple Barnett formula has also been retained, but bespoke adjustments to the formula and different approaches to tax devolution in each nation make the overall system more complex. This lack of a coherent set of principles could make it more difficult for the UK and devolved governments to reach a consensus on how EU funding should be replaced after Brexit. In the next chapter, we consider how Westminster and Whitehall engage with the devolved institutions, and the strain Brexit has placed on their relationship.