Editing Barnett formula (section)

==Calculation==
Its principle is that any increase or reduction in expenditure in England will automatically lead to a proportionate increase or reduction in resources for the devolved governments in Wales, Scotland and Northern Ireland. Analogous arrangements apply to categories of expense which are only controlled by some of the devolved governments. The formula is not applied to all public expenditure, but is the default option if no other decisions are made. Expenditure is allocated ''en bloc'', not by service, allowing each devolved administration to allocate these funds as it believes appropriate.

For areas of funding where the corresponding central government department funding covers England only, for example education and health, the formula for funding to Scotland, Wales and Northern Ireland consists of a baseline plus increases based on the increases in public spending in England in comparable programmes, applied in proportion to current populations:<ref name="Edmonds"/><ref>{{Cite news |url=https://www.theguardian.com/politics/2014/sep/19/what-is-barnett-formula-how-work-scotland-wales-northern-ireland |title=What is the Barnett formula and how does it work?|last=Shepherd|first=Jessica|date=19 September 2014|newspaper=The Guardian|language=en-GB|issn=0261-3077|access-date=13 October 2016}}</ref>

: Extra funding in Scotland, Wales or Northern Ireland
: =
: Extra funding in England
: ×
: Population proportion compared to England
: ×
: The extent to which the relevant English departmental programme is comparable with the services carried out by the devolved administration

For example, in 2000, the Northern Irish, Scottish and Welsh populations were taken to be 3.69%, 10.34% and 5.93% (respectively) of the population of the United Kingdom (comprising England, Scotland, Wales and Northern Ireland). For programmes in the Department of Health, the comparability factor for Scotland and Wales was 99.7%. Therefore, if £1 billion was to be added to planned health expenditure in England, then the extra amount added to the Scottish block, compared to the year before, would be £1bn x 10.34% x 99.7% = £103 million, and the amount added to the Welsh block would be £1bn x 5.93% x 99.7% = £59.1 million.<ref name="Edmonds"/>

For areas of funding where the corresponding central government department funding covers England and Wales, such as the Home Office and legal departments, the formula for funding to Scotland and Northern Ireland consists of a baseline plus increases based on the increases in public spending in England and Wales in comparable programmes, applied in proportion to current populations:

: Extra funding in Scotland or Northern Ireland
: =
: Extra funding in England and Wales
: ×
: Population proportion compared to England and Wales
: ×
: The extent to which the relevant English and Welsh departmental programme is comparable with the services carried out by the devolved administration

For areas of funding where the corresponding central government department funding covers England, Wales and Scotland, such as Work and Pensions, the formula for funding to Northern Ireland consists of a baseline plus increases based on the increases in public spending in England, Wales and Scotland in comparable programmes, applied in proportion to current populations:

: Extra funding in Northern Ireland
: =
: Extra funding in England, Wales and Scotland
: ×
: Population proportion compared to England, Wales and Scotland
: ×
: The extent to which the relevant English, Welsh and Scottish departmental programme is comparable with the services carried out by the devolved administration

When additional public expenditure is planned in England, the corresponding additions which are made to the devolved administrations' funding allocations are referred to as "Barnett consequentials". For example, the 2011 [[Autumn Statement]] allocated additional funds to aid [[aggregate supply|supply-side]] reform in the economy aimed at encouraging investment and export growth, noting that where expenditure was undertaken in England, "the devolved administrations [would] receive Barnett consequestials (sic) to invest in their key infrastructure priorities".<ref>{{Cite web |url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/228671/8231.pdf |work=H M Treasury |title=Autumn Statement 2011, paragraph 1.94, |page=32 |date=November 2011}}</ref>

===Proportional to population===
The ultimate predecessor of the formula was the 1888 [[Goschen formula]], introduced by [[George Goschen, 1st Viscount Goschen|George Goschen]] when Chancellor of the Exchequer, as part of the proposals for Irish [[Home Rule]]. This allocated 80% of funding to England and Wales, 11% to [[Scotland]] and 9% to Ireland; hence the Scottish share was 13.75% of the English/Welsh amount.

By 1970, in preparation for devolution, changes in the relative populations were examined. By then the relative populations were 85% in England and 10% in Scotland, meaning that the new Barnett formula set changes to Scottish expenditure at 10/85th of the change in England (or 11.76%), 2% lower than the change that was being received under Goschen. The population percentages have been recalculated annually since 1999, and the Scottish share of changes was in 2002 set at 10.23% of the English amount.

The original calculation was based on incorrect population estimates, and no attempt was made to adjust the baseline for these errors<ref name="telegraph.co.UK">{{Cite news|url=https://www.telegraph.co.uk/news/uknews/scotland/11108848/Scottish-Referendum-My-Barnett-Formula-needs-to-be-tackled-now-but-no-politician-will.html|title=Scottish Referendum: "My Barnett Formula needs to be tackled now – but no politician will"|date=19 September 2014|newspaper=Telegraph.co.uk|access-date=13 October 2016}}</ref> though changes in expenditure are based on more current population numbers.

Political unwillingness to manage the task of making the changes necessary to rebalance existing expenditure meant that the Barnett formula was applied only to changes. Nevertheless, the expectation was that as inflation led to repeated application of the formula, average expenditure per head on devolved services in Scotland would over the years fall nearer and nearer to the English figure (the so-called "Barnett squeeze").

Details of the funding arrangement can be found in HM Treasury's ''Statement of Funding Policy''.<ref>{{Cite web |url=https://www.gov.uk/government/organisations/hm-treasury |archive-url=https://web.archive.org/web/20060213225901/http://www.hm-treasury.gov.uk/documents/public_spending_and_services/devolve/pss_devolve_devolveUK.cfm |url-status=dead |title=HM Treasury |archive-date=13 February 2006 |website=GOV.UK}}</ref>