The Barnett formula is a mechanism used by the Treasury in the United Kingdom to automatically adjust the amounts of public expenditure allocated to Northern Ireland, Scotland and Wales to reflect changes in spending levels allocated to public services in England, Scotland and Wales, as appropriate. The formula applies to a large proportion, but not the whole, of the devolved governments' budgets − in 2013–14 it applied to about 85% of the Scottish Parliament's total budget. archived here The formula has been adjusted in recent times to take account of increased tax and welfare powers being devolved, particularly in Scotland, to take account of greater control over revenue raised from devolved taxes being allocated to public spending. By July 2025, around 50% of Scottish Government spending is generated through devolved taxation in Scotland in contrast to the main source of revenue for public spending in Scotland in 2013–2014 coming from Barnett formula allocation.
The formula is named after Joel Barnett, who devised it in 1978 while Chief Secretary to the Treasury, as a short-term solution to resolve minor Cabinet disputes in the run-up to the 1979 devolution referendums in Scotland and Wales.
The Barnett formula is said to have "no legal standing or democratic justification", and, being merely a convention, could be changed at will by the Treasury. Barnett himself later called a 2014 pledge to continue using it a "terrible mistake". In 2009, the House of Lords Select Committee on the Barnett Formula concluded that "the Barnett Formula should no longer be used to determine annual increases in the block grant for the United Kingdom's devolved administrations... A new system which allocates resources to the devolved administrations based on an explicit assessment of their relative needs should be introduced."
During the 2014 Scottish independence referendum, the Barnett formula came to widespread attention given Scotland's higher levels of public expenditure.
Calculation Its principle is that any increase or reduction in expenditure in England will automatically lead to a proportionate increase or reduction in resources for the devolved governments in Wales, Scotland and Northern Ireland. Analogous arrangements apply to categories of expense which are only controlled by some of the devolved governments. The formula is not applied to all public expenditure, but is the default option if no other decisions are made. Expenditure is allocated en bloc, not by service, allowing each devolved administration to allocate these funds as it believes appropriate.
For areas of funding where the corresponding central government department funding covers England only, for example education and health, the formula for funding to Scotland, Wales and Northern Ireland consists of a baseline plus increases based on the increases in public spending in England in comparable programmes, applied in proportion to current populations:
Extra funding in Scotland, Wales or Northern Ireland = Extra funding in England × Population proportion compared to England × The extent to which the relevant English departmental programme is comparable with the services carried out by the devolved administration
For example, in 2000, the Northern Irish, Scottish and Welsh populations were taken to be 3.69%, 10.34% and 5.93% (respectively) of the population of the United Kingdom (comprising England, Scotland, Wales and Northern Ireland). For programmes in the Department of Health, the comparability factor for Scotland and Wales was 99.7%. Therefore, if £1 billion was to be added to planned health expenditure in England, then the extra amount added to the Scottish block, compared to the year before, would be £1bn x 10.34% x 99.7% = £103 million, and the amount added to the Welsh block would be £1bn x 5.93% x 99.7% = £59.1 million.
For areas of funding where the corresponding central government department funding covers England and Wales, such as the Home Office and legal departments, the formula for funding to Scotland and Northern Ireland consists of a baseline plus increases based on the increases in public spending in England and Wales in comparable programmes, applied in proportion to current populations:
Extra funding in Scotland or Northern Ireland = Extra funding in England and Wales × Population proportion compared to England and Wales × The extent to which the relevant English and Welsh departmental programme is comparable with the services carried out by the devolved administration
For areas of funding where the corresponding central government department funding covers England, Wales and Scotland, such as Work and Pensions, the formula for funding to Northern Ireland consists of a baseline plus increases based on the increases in public spending in England, Wales and Scotland in comparable programmes, applied in proportion to current populations:
Extra funding in Northern Ireland = Extra funding in England, Wales and Scotland × Population proportion compared to England, Wales and Scotland × The extent to which the relevant English, Welsh and Scottish departmental programme is comparable with the services carried out by the devolved administration
When additional public expenditure is planned in England, the corresponding additions which are made to the devolved administrations' funding allocations are referred to as "Barnett consequentials". For example, the 2011 Autumn Statement allocated additional funds to aid supply-side reform in the economy aimed at encouraging investment and export growth, noting that where expenditure was undertaken in England, "the devolved administrations [would] receive Barnett consequestials (sic) to invest in their key infrastructure priorities".
Proportional to population The ultimate predecessor of the formula was the 1888 Goschen formula, introduced by George Goschen when Chancellor of the Exchequer, as part of the proposals for Irish Home Rule. This allocated 80% of funding to England and Wales, 11% to Scotland and 9% to Ireland; hence the Scottish share was 13.75% of the English/Welsh amount.
By 1970, in preparation for devolution, changes in the relative populations were examined. By then the relative populations were 85% in England and 10% in Scotland, meaning that the new Barnett formula set changes to Scottish expenditure at 10/85th of the change in England (or 11.76%), 2% lower than the change that was being received under Goschen. The population percentages have been recalculated annually since 1999, and the Scottish share of changes was in 2002 set at 10.23% of the English amount.
The original calculation was based on incorrect population estimates, and no attempt was made to adjust the baseline for these errors though changes in expenditure are based on more current population numbers.
Political unwillingness to manage the task of making the changes necessary to rebalance existing expenditure meant that the Barnett formula was applied only to changes. Nevertheless, the expectation was that as inflation led to repeated application of the formula, average expenditure per head on devolved services in Scotland would over the years fall nearer and nearer to the English figure (the so-called "Barnett squeeze").
Details of the funding arrangement can be found in HM Treasury's Statement of Funding Policy.
Public expenditure by nation Estimates of government spend by region are given in HM Treasury's annual publication Public Expenditure Statistical Analyses (PESA).PESA 2010–present, archived here These estimates of the spend per person have consistently shown highest levels of spending in Northern Ireland, followed by Scotland, then Wales, and finally England. For example:
Year Definition £ per head (Brackets: % of UK average) UK average England Scotland Wales Northern Ireland 1985–86 Total identifiable expenditure by country 2,109 2,019 (95.7) 2,562 (121.5) 2,231 (105.8) 3,108 (147.4) 1993–94 3,769 3,621 (96.1) 4,485 (119.0) 4,258 (113.0) 5,059 (134.2) 2000–01 4,709 4,529 (96.2) 5,558 (118.0) 5,302 (112.6) 6,424 (136.4) 2005–06 Total identifiable expenditure on services by country 7,049 6,835 (97.0) 8,179 (116.0) 7,784 (110.4) 8,713 (123.6) 2012–13 Total identifiable expenditure on services by country 8,788 8,529 (97.1) 10,152 (115.5) 9,709 (110.5) 10,876 (123.8) 2015–16 Total identifiable expenditure on services by country 9,076 8,816 (97.1) 10,536 (116.1) 9,996 (110.1) 10,983 (121.0) 2018-19 Total identifiable expenditure on services by country 9,584 9,296 (97.0) 11,242 (117.3) 10,656 (111.2) 11,590 (120.9)
The persistence of per capita public expenditure being lower in England than the other regions continues to attract calls for the formula to be renegotiated.
As these variations were not ever a consciously decided policy of the Treasury or Parliament, this inequality has been cited as a reason for reform. Moreover, the erosion of these differences over time has been very slow and uneven. The change in Scottish identifiable expenditure as a percentage of English expenditure from 2001/02 to 2012/13 was 121.3% to 119.0%. Previous estimates that these differences would disappear in 30 years now appear unlikely.
The average UK total identifiable expenditure on services is approximately £8,788. Instant abolition of the Barnett formula, and adjustment of the four countries' spend to this average would result in a large decrease for each person in Scotland, Wales and Northern Ireland, but an increase of about 3% per person for England.
Although not subject to the Barnett formula, there are also significant variations in identifiable spending between the regions of England, in 2012/13 ranging from £7,638 in the South East (87% of the UK average), to £9,435 in London (107%).
Based on need As noted below, no account is made of the amounts raised by taxation in each of the home nations, nor the relevant fiscal need (based on factors such as sparsity of population, cost of travel, unemployment rates, health, age distribution of the population, road lengths, recorded crimes, and numbers of sub-standard dwellings) in each area. The Barnett formula never claimed to address these issues and was a basic calculation on the basis of proportions of the population.HM Treasury, evidence to the Treasury Committee, The Barnett Formula, second report HC 341 1997–98 p.12Scottish Parliament Research Note RN 00/31 – The Barnett Formula
A needs assessment study was undertaken by the Treasury in 1979 in preparation for planned devolution, to assess the relative needs just with respect to the policy areas which were to be devolved (i.e. excluding non-devolved government spending such as social security). This study was updated in 1993. Both studies found the highest need for devolved services in Northern Ireland, followed by Scotland, then Wales, and finally England. In 1979, Northern Ireland and Scotland received more to spend on services which would have been devolved than the needs assessment suggested they should, and Wales less. By 1993, all three countries had increased the gap between the needs assessment and actual spend. However, this does not necessarily reflect the total need and spend, including non-devolved services.