RESOURCES : Barnett Formula

The document published by the House of Commons Library on 29 May 2024.

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SUMMARY

The Barnett formula is a mechanism used by the UK government to adjust the funding allocated to the devolved administrations in Scotland, Wales, and Northern Ireland. It aims to ensure that changes in spending on comparable services in England are reflected in the block grants received by these devolved nations.

The formula works by taking the annual change in a UK government department’s budget and multiplying it by two factors: the relative population of the devolved administration and the extent to which the department’s services are devolved. This calculation is performed for each department, and the resulting amounts are added to the devolved administrations’ block grants.

The Barnett formula has been a subject of debate, with some arguing that it should be replaced with a needs-based formula that takes into account factors like population density and deprivation. However, the UK government has maintained its support for the formula, citing its simplicity, transparency, and efficiency.

In recent years, there has been a devolution of tax and spending powers to Scotland, Wales, and Northern Ireland. This has led to adjustments in the block grants to reflect the increased revenue-raising powers and spending responsibilities of the devolved administrations. Despite these changes, the Barnett formula has remained largely unchanged, with the exception of the introduction of funding floors for Wales and Northern Ireland to prevent their block grant funding from falling below a certain level.