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, 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.^[1]

The formula is named after Joel Barnett, who devised it in 1978^[2] while Chief Secretary to the Treasury, as a short-term solution to resolve minor Cabinet disputes in the runup to the 1979 devolution referendums in Scotland and Wales.

The Barnett formula is said to have "no legal standing or democratic justification",^[3] 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".^[4] 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."^[5]

During the 2014 Scottish independence referendum, the Barnett formula came to widespread attention given Scotland's higher levels of public expenditure.^[2]