Regional taxing and spending: The search for balance

The financial settlement has been described as the key to devolution. Public spending above tax in Scotland and Wales has been criticized. Public spending is above tax in seven UK regions, including four English regions. If we treat equal citizens equally, public spending will be above tax in poorer regions. There is nothing extraordinary about spending above tax, but there are important questions with regard to regional levels of expenditure. In four regions (London, South East, Scotland and Northern Ireland) public expenditure is well above the level expected for their degree of prosperity. This article provides possible explanations.