AbstractAn earlier paper has put forward a methodology for measuring the‘need to spend’on education by local authorities. This paper examines the economic principles underlying the measurement of the need to spend, and finds some problems inherent in the earlier work. The measurement of spending need would nevertheless seem an essential step in the pursuit of territorial equity, particularly in the light of policy developments in the United Kingdom concerning local management of schools. The paper therefore identifies the areas where further clarification of key issues is required.