Barnett formula

What is the Barnett formula? 

The Barnett formula is used by the UK Treasury to calculate changes to the funding provided to the Scottish Government, Welsh Government and Northern Ireland Executive, which takes the form of an annual  ‘block grant’. It therefore determines the overall funding available for public services such as healthcare and education in the devolved nations.  

In 2024/25, the Barnett block grant amounted to £45bn in Scotland, £20bn in Wales and £18bn in Northern Ireland (before adjustments to account for tax devolution). ¹⁵ HM Treasury ‘Block Grant Transparency: October 2025, GOV.UK, 9 October 2025), retrieved 10 October 2025, https://www.gov.uk/government/publications/block-grant-transparency-october-2025  This reflects differences in population size as well as the range of devolved public services in each nation. 

How did the Barnett formula come into use? 

The formula was first introduced ahead of the 1979 general election by the then Labour Chief Secretary to the Treasury, Joel Barnett, whom the formula is named after. It was initially intended as a temporary solution for determining funding allocations between the UK’s nations, but has remained in use.  

Until 1999 it was used to determine the level of UK Government spending on public services in Scotland, Wales, and Northern Ireland, and since then it has been used to set the budgets of the devolved administrations.  

How does the Barnett formula work? 

The Barnett formula calculates changes to the block grants allocated by the Treasury to the devolved governments to fund devolved public services in Scotland, Wales and Northern Ireland.  

As originally introduced, the formula was designed to provide the devolved nations the same per capita change in funding as changes in funding for comparable public services in England.  

The Barnett formula calculates devolved budgets by using the previous year’s block grant as a starting point (or ‘baseline’), and then adjusts it based on increases or decreases in ‘comparable’ spending per person in England, meaning spending by the UK government on services in England that are devolved to one or more of the other nations. This is defined as the ‘comparability factor’.

Changes to the devolved block grants are calculated by multiplying the change in spending by UK government departments by the comparability factor and the population proportion of each nation. 

The basic formula used for Barnett calculations is therefore: 

In 2025, the population proportions relative to England were 9.52% for Scotland, 5.49% for Wales and 3.33% for Northern Ireland. ¹⁶ HM Treasury, ‘Statement of Funding Policy: Funding the Scottish Government, Welsh Government and Northern Ireland Executive’, June 2025, https://assets.publishing.service.gov.uk/media/684859e3d0ca5d7801e4e6f6/Statement_of_Funding_Policy.pdf

The formula can be applied either to changes in spending on individual services or (at spending reviews) to changes in overall departmental budgets.

At the level of individual services, the comparability percentage is always listed as either 0% (non-devolved) or 100% (devolved).

At the departmental level, comparability factors are on a spectrum ranging from 0% to 100%. A department – such as the Treasury – with a comparability factor of 0% for each of Scotland, Wales and Northern Ireland, delivers all of its services to the whole UK. By contrast, a department – such as the Department for Education – with a comparability percentage of 100% can be understood to be an England-only department, with all its functions devolved to the other nations.  

The comparability factor may vary between the three devolved nations, reflecting differences in the devolution settlements. 

To give an example, if the Treasury allocated an additional £100m to the UK department for culture, media and sport in England increased by £100m, this would result in the Scottish block grant increasing by £7.7m. This is because the original £100m is multiplied by the population proportion (9.52%) and the comparability percentage for culture, media and sport (81%). Since the devolved block grants are not ringfenced, Scotland would be free to spend this money on services other than culture, media and sport.

In Wales and Northern Ireland, further adjustments are made to the Barnett formula to reflect higher than average perceived needs in those nations.  

In the case of Wales, there is a ‘funding floor’ that ensures that spending on devolved services should never fall below 115% of the level of spending in England in per capita terms. At the time that this mechanism was introduced, actual spending in Wales was approximately 120% of that in England, but there was concern that this would be eroded in the long-run. The UK and Welsh governments therefore agreed that the needs-based factor for Wales would be set at 105% and increase to 115% in the long-run to ensure that spending does not fall below the agreed ‘funding floor’.

In 2024, a needs-based factor was also added to the Barnett formula for Northern Ireland. A needs-based factor of 124% is applied if Northern Ireland’s block grant falls below 124% relative to equivalent UK government per capita funding in England. ²¹ HM Treasury, ‘Deal reached on interim Fiscal Framework for Northern Ireland’, 21 May 2024, https://www.gov.uk/government/news/deal-reached-on-interim-fiscal-framework-for-northern-ireland  If the Northern Ireland block grant is above the 124% benchmark relative to comparable spending in England, a 105% needs-based factor will apply. In the 2025 spending review, the 124% needs-based factor was applied. ²² HM Treasury, ‘Statement of Funding Policy: Funding the Scottish Government, Welsh Government and Northern Ireland Executive’, June 2025, https://assets.publishing.service.gov.uk/media/684859e3d0ca5d7801e4e6f6/Statement_of_Funding_Policy.pdf

Northern Ireland also has a VAT abatement adjustment through which changes to the Northern Ireland’s budget determined by the Barnett formula are reduced by 2.5%.  

In Scotland, which does not receive needs-based adjustments, the Barnett formula causes spending per person to converge with levels in England over time – this is known as Barnett convergence. The Barnett formula aims to give Scotland the same per capita change in funding as changes in funding for comparable public services in England, but given that baseline spending per head in higher in Scotland, the increase in spending is smaller in percentage terms in Scotland than in England. Over time, this will erode the existing real-terms difference in funding per head between the two nations.

This convergence effect applied to the block grants of all three devolved nations until the more recent introduction of the funding floor mechanism in Wales and Northern Ireland. Since 1999, however, the convergence effect has not been observed as quickly as might have been expected. This is partly because the Barnett formula only adjusts the change in spending for changes in the population, not the existing baseline block grant. For example, if Scotland's population falls by 5%, only the additional funding (Barnett consequential) gets reduced – not the main block grant carried over from the previous year. This feature has counteracted Barnett convergence in Scotland and Wales, which have experienced lower population growth than England since the Barnett formula was introduced. 

What are the advantages and disadvantages of the Barnett formula?  

An advantage of the formula is that it helps depoliticise the process of setting devolved budgets, removing the need for annual negotiations between Westminster and the devolved administrations. It also ensures relative stability and predictability for devolved budgets, as each year’s budget uses the previous year’s budget as a starting point. In addition, the lack of ringfencing within the block grants means that devolved administrations have the autonomy to choose their own spending priorities (although separate grants are given for resource and capital spending).  

Aspects of how the formula operates, however, remain open to interpretation. For example, the UK and devolved governments have disagreed in the past on whether spending on regeneration projects linked to the 2012 Olympics should be classified as England-only spending – which would result in additional funding for the devolved nations – or UK-wide spending – resulting in no additional devolved funding.  

Controversy has also arisen over the classification of the HS2 rail link between London and Birmingham as an ‘England and Wales’ project which meant that while Scotland and Northern Ireland have received funding uplifts through the Barnett formula, Wales has not, because rail infrastructure is not a fully devolved function. The Welsh government has estimated that it would have received an additional £431m between 2016-17 and 2025-26 if HS2 had been classified as an England-only project. ²³ Letter from the Cabinet Secretary for Finance and Welsh Language on HS2 Funding, 4 February 2025 https://business.senedd.wales/documents/s158049/Letter%20from%20the%20Cabinet%20Secretary%20for%20Finance%20and%20Welsh%20Language%20HS2%20Funding%20…  

Currently, the UK Treasury exercises full discretion over this process. The Barnett formula is non-statutory, which means the Treasury can also choose to bypass it entirely, as it did for the £1bn funding package for Northern Ireland that was negotiated as part of the Conservative-DUP supply and confidence agreement after the 2017 general election. The Scottish and Welsh governments objected to the fact that they would not also receive more funding as a result, however there was no formal mechanism to challenge this decision.  

From the perspective of England, an additional disadvantage of the current funding system is that public spending is substantially higher in per capita terms in Scotland, Wales and Northern Ireland. This is less a direct product of the formula – which only applies to changes in spending – and more a reflection of historic differences in levels of spending, which are carried forward from year to year. The formula is also slow at responding to changes in relative population size, which further disadvantages spending per capita in England, where the population has grown most quickly.vi

At the 2025 spending review, the Treasury confirmed that the Scottish Government and Welsh Government will continue to receive ”over 20% more funding per head than the equivalent UK Government spending”, and the Northern Ireland Executive would continue to receive “over 24% more” per person than equivalent UK Government spending in the rest of the UK. ²⁴ HM Treasury, ‘Spending Review 2025’, CP 1336, June 2025, https://www.gov.uk/government/publications/spending-review-2025-document

How does the Barnett formula account for tax devolution?

Tax devolution since 2015 means that revenues from certain taxes, such as stamp duty and income tax, now accrue directly to the devolved budgets in Scotland and Wales rather than to the UK Treasury. To account for this transfer of revenue, the UK and devolved governments have agreed that the Barnett block grants should be reduced using a mechanism called block grant adjustments.

These adjustments operate by deducting an amount from the block grant that corresponds to what the UK government could have expected to raise had the taxes not been devolved. The reduced devolved block grants are then topped up by revenues from devolved taxes. This approach retains the Barnett formula as the foundation for calculating devolved budgets, while allowing devolved administrations to influence the size of their overall budget by either varying tax rates or by pursuing policies that generate growth in their tax base. 

The UK, Scottish and Welsh governments proposed several different approaches for calculating block grant adjustment during tax devolution negotiations in 2016. Eventually, slightly different methods were adopted in Scotland and Wales. In Scotland, the block grant adjustments reflect changes in relative population size, while in Wales block grant adjustments for income tax have been adjusted to account for the fact that Wales has a higher proportion of low earners and would therefore be disproportionately affected by a UK Government decision to increase the tax-free personal allowance.  

How did the Barnett formula operate during the coronavirus crisis?

The UK Government increased its spending substantially in response to the coronavirus crisis. Some of this additional spending – including on the NHS, public transport and business support schemes – covered England only, resulting in £9bn of additional Barnett funding for the devolved administrations by July 2020.

However, because spending decisions were being taken at short notice in Westminster, and often subject to later revision, the devolved administrations faced uncertainty about their funding. This resulted in the Treasury adopting a new approach for allocating devolved funding in 2020/21. Instead of allocating additional money to the devolved administrations only after new spending was announced for England, the devolved administrations were each given a guaranteed minimum of additional spending to help them respond to the crisis.

Additional spending on UK-wide schemes, such as the Coronavirus Job Retention Scheme (the furlough scheme) did not result in additional devolved funding as the devolved nations benefited from UK government spending on these schemes.