The Iniquitous Barnett Formula made simple

The Iniquitous Barnett Formula made simple The playwright George Bernard Shaw once said, “A government which robs Peter to pay Paul can always depend on the enthusiastic support of Paul.” That is why politicians from Scotland, Wales and Northern Ireland like the Barnett Formula, for it robs the people in England of some £14 billion per year and gives it to the Scots, Welsh and Northern Irish. Goschen’s formula? Way back in 1888 George Goschen, the then Chancellor of the Exchequer of the United Kingdom of Great Britain and Ireland, concocted a formula for public spending to try and buy off home rule in Scotland and Ireland – it failed as far as the latter was concerned. The Goschen formula allocated 80% of funding to England & Wales, 11% to Scotland and 9% to Ireland – roughly, in proportion to each countries share of the United Kingdom’s then population. How did the Barnett formula come about? Back in 1978 the then Labour Government were in something of an economic shambles. The Chief Secretary of the Treasury, Joel Barnett, in order to “buy off” being pestered by the Secretaries of State for Scotland, Wales and Northern Ireland from always demanding more money drew up a “temporary” formula for public spending. It basically allocated 10% to Scotland, 5% for Wales and 4% for Northern Ireland, England therefore left with 81% - roughly in line with the proportions of the UK’s population, although it was even then slightly generous to Scotland. What is the Barnett formula now? Due in good measure to Devolution the formula is far more complicated today. The precise figures alter every year but in simple terms the formula multiplies three factors:

• The population of Scotland, Wales and Northern Ireland as a percentage of the population of England.
• The extent to which the programme delivered by each UK government department is comparable to the services carried out by each devolved administration, given as a percentage.
• The intended change in spending for the relevant UK government department.

Example: Let us assume:

• The UK Department of Health intends to spend an extra £100 million.
• The UK Treasury “estimate” that Scotland’s population is 9.99% of England’s, Wales’s is 5.78% and Northern Ireland’s 3.42%. (The 2011 census figures have been used to calculate this.)
• That 99.3% of health care has been devolved to Scotland, Wales and Northern Ireland administrations. (The percentage devolved varies dependent upon the service and upon the country.)

Therefore: Scotland: 9.99% x 99.3% x £100m = £9.92m. Wales: 5.78% x 99.3% x £100m = £5.74m. Northern Ireland: 3.42% x 99.3% x £100m = £3.40m. England is left with approximately 80.81% x £100m = £80.81m. Why is that unfair to England?  Because the UK Treasury compare the size of the populations of Scotland, Wales and Northern Ireland to that of England’s it inflates the percentage allocated to them. If they used those countries percentages of the UK population it would reduce the amount of money they receive. In 2011 England had 83.90% of the UK population, Scotland, 8.38%; Wales, 4.85%; and Northern Ireland, 2.87%. Therefore the example above using the UK population percentages would be: Scotland: 8.38% x 99.3% x £100m = £8.32m. Wales: 4.85 x 99.3% x £100m = £4.82m. Northern Ireland: 2.87% x 99.3% x £100m = £2.85m England would be left with approximately 83.90% x £100m = £83.90m Does it matter? Well, £3m in every £100 million spent adds up. Take HS2 – the UK government plans on spending £50 billion. That means that Scotland, Wales and Northern Ireland will get an extra £1.5 billion between them – or put another way – England won’t get the £1.5 billion. Why not simply scrap it?  The late Joel Barnett said on many occasions before his death that “his” formula was an embarrassment and no longer relevant. In 2010 the Conservative Party said it was reaching the end of its useful life. But then, of course, came the Scottish Independence Referendum in 2014 when party leaders, Cameron, Clegg and Miliband vowed to keep it – presumably attempting to buy “NO” votes.