Barnett formula

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, England and Wales or Great Britain, 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.

The formula is named after Joel Barnett, who devised it in 1978 while Chief Secretary to the Treasury, as a short-term solution to minor Cabinet disputes in the runup to planned . Despite the failure of that initiative, the formula was retained to facilitate additional administrative devolution in the Conservative Governments of 1979 to 1997 under Prime Ministers Margaret Thatcher and John Major, and then in the context of the political devolution of the Labour Governments led by Tony Blair and Gordon Brown, and the coalition Government of David Cameron. The Government still declares its intention to continue to use it as the basis for funding the three devolved governments.

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. In recent years, Barnett himself has called 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."

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