The creation of the National Assembly for Wales and the Scottish Parliament in 1999 was accompanied with an aspiration that these new institutions would allow Scotland and Wales to develop their own policies, better suited to local needs than those designed in Westminster or Whitehall. This thesis explores policy-making in the first terms of the devolved institutions in Scotland and Wales, focusing on where the policies developed by these institutions diverged from those pursued at Westminster. Policy divergence is examined by studying the development of the financing long-term care for the elderly policies. The aim of this thesis is to identify why policy divergence occurred in the long-term care case, considering the impact of actors (or agents) and the institutional setting in which they operate, as suggested by Scharpf's model of actor-centred institutionalism. As actor-centred institutionalism suggested, both actors and institutions played a major role in shaping policy responses. In the Scottish case a range of actors cooperated and lobbied together for the introduction of free personal care, spurred on by the First Minister, who created an opportunity for those in favour of free personal care to pressurise his government to introduce the policy. In contrast, in Wales, actors were divided and never built up the same momentum to ensure the introduction of a more generous long-term care package. The institutional setting in which these actors operated was a major factor in shaping their policy preferences and the strategies they adopted to achieve them. This thesis considers the impact on policy-making of the devolved institution's electoral system, financial and legislative powers, design of the institutions, and the place of these institutions in a UK setting. The different institutional structures in Scotland and Wales provided different incentives and resources for actors, encouraged different styles of policy-making from Westminster and affected the way in which issues were framed. Examining the roles of actors and institutions in the formation of distinctive policies highlighted that in the real world these two elements are mutually dependent and cannot be separated. As a result it is impossible, and pointless, to determine whether actors or institutions were most influential on the development of distinctive policies. Instead this thesis explores how the difference between the configurations of actors and institutions in Scotland and Wales contributed to the creation of policies which were distinctive both from each other and the UK Government.