The Barnett Formula: What it is and why it is important

Joel Barnett created the formula in 1978. Picture: Getty
Joel Barnett created the formula in 1978. Picture: Getty
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THE UK Government uses the Barnett Formula to allocate funding for Scotland, Wales and Northern Ireland.

How will a deal with the DUP affect the formula?

The Barnett Formula. (source: Parliament.uk)

The Barnett Formula. (source: Parliament.uk)

Over the next two years, an extra £1 billion has been allocated for Northern Ireland for infrastructure, health and education. Some had claimed that if funding for Northern Ireland increased, then funding for Scotland and Wales must also increase.

But given that the formula is only a convention and that Treasury can decide whether certain spending sits outside of the formula, Barnett has been “abandoned” in the Conservatives deal with the DUP to form a minority Government, says politics professor Jonathan Tonge.

“More money for Northern Ireland should be matched by more cash per head or the other devolved nations. This is not the case.

“The money is also going to Northern Ireland, for which the fabled magic money tree has been found,” he told the i online.

What does the formula calculate?

The formula is used to work out the level of public spending for each of the devolved administrations.

It calculates the annual increase, or indeed decrease, in the allocations. The formula only determines the yearly change in funding, not the whole amount of the grant.

The Barnett Formula aims to be fair mechanism by giving each of the devolved administrations the same pounds-per-person change in funding.

When is the formula used?

If spending levels allocated to a Government department change, the formula is a mechanism for automatically changing the spending allocated to Northern Ireland, Scotland and Wales. It does this by taking into account the population proportion and the extent to which powers have been devolved to the administrations (so if all services are devolved, then the department’s comparability percentage will be 100 per cent).

The formula is not used to calculate all the funding the administrations get each year (for example, funding for specific projects will not call for application of the formula), however the nations do get a large portion of their funding through the Barnett mechanism.

Is the formula well-received?

The formula, which is more of a convention rather than a legal obligation, is quite controversial. It was only intended to be a temporary solution to settle arguments over spending.

Much of the criticism is down to the disparity in allocations between the nations, which is usually down to the Formula taking into account population.

For example, in 2012-13, spending per head in England was £8,529, in Scotland it was £10,152, it was £9,709 in Wales and £10,876 in Northern Ireland.

What has Scotland and Wales said about Northern Ireland’s extra £1 billion?

Ian Blackford, the SNP’s Westminster leader, said that the party would fight to ensure that Scotland got “its fair share” and Scottish Labour leader Kezia Dugdale said all nations of the UK needed extra funding to end austerity. However Ruth Davidson, the Scottish Tory leader, said “it’s absurd for the SNP to criticise UK Government spending on top of Barnett in Northern Ireland when the exact same thing happens in Scotland.”

Welsh First Minister Carwyn Jones said the agreement between the Tories and the DUP was a “straight bung”.

Damian Green, the first secretary of state, said the money for Northern Ireland was a “block grant that is not part of the usual [Barnett] formula”.

“We found the extra money to spend in all parts of the United Kingdom because we run a strong economy,” he added.

In 2009, a select committee on the Barnett Formula called for:

“A new system which allocates resources to the devolved administrations based on an explicit assessment of their relative needs should be introduced. Those devolved administrations which have greater needs should receive more funding, per head of population, than those with lesser needs. Such a system must above all be simple, clear and comprehensible. It must also be dynamic: able to be kept up to date in order to respond to changing needs across the United Kingdom.”