Barnett formula

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A formula for the allocation of tax revenues from the UK government to be spent by the devolved governments of Scotland, Wales, and Northern Ireland. The formula pre‐dates political devolution; for its first twenty years it was used to assign block grant to the executive departments that ran the devolved administrations of the three territories. It takes its name from Joel Barnett, Chief Secretary to the Treasury 1974–9. In 1978, when the formula was devised, Scotland was receiving far more spending per head than the poorer regions of England and Wales, not because it was poorer than them but because it posed the credible threat to the UK of a Scottish nationalist secession. Barnett and his officials had two aims. The first was to prevent rounding up, which had occurred when Scottish officials negotiated with the Treasury one service at a time, and always made a special claim for that service. By substituting a block, which it was up to the territories to assign, for grants for one service at a time, Barnett succeeded. The second aim (not acknowledged at first) was to whittle away the Scottish advantage by having spending per head converge in the four territories of the UK. This aim was always flawed, because Scotland, Wales, and Northern Ireland do need more spending per head than England to obtain an equivalent level of service. The formula ought to have ceased to operate when spending per head had been brought into line with needs per head. Because of extensive rent‐seeking in the territories, there was in fact no convergence in Scotland until 1999. There was convergence in Wales, which was inappropriate because spending was probably below needs. This led to a revolt in which the London‐approved leader of the Welsh executive was toppled in 2000. Barnett is clearly unstable but no agreed substitute has been found.

Subjects: Politics.

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