The Barnet formula is used to calculate how much money Scotland receives each year from the UK Treasury. It calculates devolved budgets by using the previous year’s budget, then adjusts it based on increases or decreases in comparable spending per person in England. Parts of the resulting sum are with held for non-devolved expenditure, such as foreign affairs, defence, the Treasury and the Cabinet office. Other areas of government such as the Home Office, HMRC have only a portion of their expenditure allocated by the formula.
The early operation of the 2016 Scottish Fiscal Framework and the divergence of UK and Scottish income tax rates highlights the practical issues of devolved tax policy in the context of UK fiscal centralization.
The overall effect of the new Barnett funding system is to place Scotland in a vulnerable position, where it is at much greater risk of falling into a cycle of economic decline relative to the rest of the UK.
The Barnett formula calculates the annual change in the block grant. The formula doesn’t determine the total size of the block grant just the yearly change. For devolved services, the Barnett formula aims to give each country the same pounds-per-person change in funding.
The Barnett formula is a mechanism used by the Treasury in the UK 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. The formula applies to a large proportion, but not the
The Barnett Formula will withhold from Scotland, over the five years covered by the spending review, enough money to have hired approximately 7,955 additional NHS medical professionals. That is not a bonus – it’s a smoke and mirrors mechanism that aims to reduce the Scottish Government’s spending power in real terms.