Barnett Formula Research Articles

Deals and devolution: The role of local authority deals in undermining devolved decision making

The introduction of the devolved administrations (DAs) in the UK in 1999 was based on specific legal powers for this new scale of governance which included control of national and local priorities for expenditure within devolved matters. The legal powers conferred on these administrations included freedoms to determine expenditure within budgets which, in the case of DAs, included specific allocations linked to the Barnett Formula ensuring proportional allocations of UK state expenditure in a range of policy areas and later in the DAs, powers were provided to allow direct access to borrowing and raising funding through a range of means. In the period 1999–2014, DA powers were gradually increased, first in Scotland then in Wales and Northern Ireland. However, since 2014, in the DAs, UK Central Government has been using the provision of local and sub-regional ‘deal’ funding models, controlled by Whitehall, to gradually undermine this devolved decision making. This article discusses the role devolution and deals within the context of increasing EU principles of subsidiarity and the exercise of the UK Government’s de facto and de jure powers in response. It examines the role of deals in the DAs and their lack of accountability within the UK state.

Ambiguous no more: Time to de-mystify the Barnett Formula

This paper sets out to de-mystify the effects of the Barnett Formula – the mechanism which has delivered the bulk of the funding for Scottish domestic services over the past forty years. There has always been considerable ambiguity about the effects of the formula: with some holding that it is a mechanism which would eventually deliver converging levels of per capita spending in the different countries of the UK: while others held that it protected expenditure differentials. The paper explains why, partly because of the effects of relative population change, both views were correct at different times in the period up to 2015. In particular, at times of austerity, the formula operated to protect relative per capita spending levels in Scotland. Largely by accident, the Barnett Formula delivered some of the features expected in a properly functioning monetary union. After 2015, however, with the introduction of the post referendum fiscal settlement, the position is quite different. While Barnett still plays a part, the overall effect of the new 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 Confidence and Supply Agreement between the Conservative Party and the Democratic Unionist Party: Implications for the Barnett Formula and Intergovernmental Relations in the UK

Abstract This article assesses the implications of the 2017 Confidence and Supply Agreement between the Conservative Party and the Democratic Unionist Party (DUP) in the context of the Barnett Formula and intergovernmental relations post the devolution settlement and the Good Friday Agreement. In light of the parties’ shared objectives to strengthen and enhance the UK, the Confidence and Supply Agreement, sets out how the DUP would support the minority Conservative government in specific areas, including finance Bills and matters pertaining to the exit from the European Union. This article examines the nature and operation of this Agreement and assesses the extent to which it may be seen to have breached established conventions, rules and principles around devolved funding and the principle of political impartiality enshrined in the Good Friday Agreement. It is argued that the Confidence and Supply Agreement has contributed to the perceived shortcomings of the Barnett Formula as a robust, fair, financial methodology. The distribution of money to the devolved administrations should be modernised and based on need, accountability and transparency. It is also concluded that being locked into a parliamentary deal undermines the UK Government’s ability to be impartial between the competing interests in Northern Ireland.

Allocating Grant to the UK's Devolved Territories by Needs Assessment: Lessons from School Funding Formulae in England and Scotland

AbstractThe UK's devolved governments (DGs) receive block grants to finance almost all their expenditure. The Barnett formula used to calculate these grants is often criticised because it does not consider the DGs’ spending needs. However, the feasibility of allocating block grants by needs assessment is often questioned, given the contestability of spending needs.This paper compares the formula used within England to assess the education spending needs of local authorities there with the equivalent Scottish formula, by using each formula in turn to calculate the relative spending needs of the UK territories. The rationale is to consider how similar the two formulae are in how they estimate the territories’ relative spending needs for education, a major responsibility of the DGs.The results show that the English and Scottish education allocation formulae produce similar estimates of the territories’ relative education spending needs. This suggests that it may be more feasible to allocate education resources to the UK's devolved territories based on needs assessment than some have suggested. The results also suggest some inequity in current patterns of education spending across the UK.

The Political Myth of Margaret Thatcher in Scotland

The article describes and explains the phenomenon of the political myth of Margaret Thatcher – her anti–Scottish attitude and policies and its impact on the process of decomposition of the United Kingdom. The author indicates that the view of Margaret Thatcher’s dominance in Scotland is simplified, stripped of complexity, ignoring significant information conflicting with the thesis, but that also plays an important role in current politics, legitimizing secessionist demands and strengthening the identity of the Scottish community. In the contemporary Scottish debate with its unequivocal defence policy of Thatcher is outside of the discourse, proving its sanctity status. Thatcher could see this special Scottish dimension within the United Kingdom, but treated it rather as a delay in the reforms needed in the country. There are many counterarguments to the validity of the Thatcher myth. Firstly, many negative processes that took place in the 80s were not initiated by Thatcher, only accelerated. Secondly, the Tory decline in popularity in the north began before the leadership of Thatcher and has lasted long after her dismissal. The Conservative Party was permanently seen in Scotland as openly English. Thirdly, there is a lot of accuracy in the opinion that the real division is not between Scotland and England, only between southern England and the rest of the country. Widespread opinion that Thatcher was hostile to Scotland is to a large extent untruthful. She has never retreated radically from any of the Scottish privileges, such as the Barnett formula or the Scottish Development Agency.

Territorial Finance and the Future of Barnett

AbstractThis article traces the changing funding relationships between Scotland and the UK government. Beginning from the Barnett Formula, it examines how the changing support within Scotland for greater political autonomy from Westminster has influenced the mechanisms that have determined Scotland's fiscal structure. Increasing support for the SNP, and then for the Yes campaign in the September 2014 independence referendum, has led to a mixture of new powers being granted to the Scottish Parliament. The Scotland Act 2012 extends the Scottish government's control over income tax and some other small taxes. Although independence was rejected by the Scottish people in September 2014, the ‘Vow’ made by the Westminster parties immediately before the vote is leading to far‐reaching changes in the UK's fiscal structure. This will cause a very substantial change in intergovernmental relations within the UK, which the Barnett Formula may not survive.

Reform of the Barnett Formula with Needs Assessment: Can the Challenges be Overcome?

King D. and Eiser D. Reform of the Barnett Formula with needs assessment: can the challenges be overcome?, Regional Studies. Block grants to the UK's devolved administrations are allocated using the Barnett Formula. There have been calls to replace this formula with one based on spending needs assessment, but two obstacles to doing so have been raised. First, that the devolved administrations would be unable to agree on how needs should be assessed; and second, it is unclear how needs assessment might work for devolved governments that can pursue different spending policies. This paper investigates the first issue by analysing whether the Scottish and English formulae for allocating health and education funding within each country are statistically similar; and the second issue through a hypothetical policy simulation analysis.

Scotland's Economic Performance and the Fiscal Implications of Moving to Independence

Scotland's economic performance and fiscal make-up are key elements in the debate leading up to the forthcoming referendum on independence. However, in terms of understanding Scotland's economic performance, the situation is complicated by the high degree of overseas ownership, especially with regards to North Sea activity, and the importance of a natural commodity, oil. This makes the use of traditional measures of economic performance, like GDP or GDP per capita, less relevant than for most countries and suggests a greater need to use both constant price and cash GNI, neither of which are currently available. In terms of its fiscal balance, Scotland's independence would require taxes derived from its offshore (North Sea) activity to be sufficient to offset the extra monies (in per head terms) currently transferred from the rest of the UK (via the Barnett formula system) in order to pay for the current level of public services. Based on current projections, such North Sea related tax revenues would amount to less than the likely Barnett transfer, leading to a net loss in funding at the time of independence. Under such circumstances the question of whether or not Scotland could afford to initiate the building up of an ‘Oil Fund’, is largely a redundant one. However, uncertainties over both future oil and gas revenues and over the continuation of the existing Barnett system make it difficult to predict with any great certainty whether Scotland would see a longer-term net fiscal gain or loss post-independence. Apparent inconsistencies between official GNI and Scottish revenue figures also means that the existing fiscal balance position remains open to question.

The Welsh Referendum and Territoriality In British Politics

The new reality of British politics is that they are now marked by territoriality. That was confirmed by the Welsh referendum in March 2011 and the Scottish election in May 2011 The advent of devolution in Wales and Scotland in 1999 was a great historic change and a reversal of the post-1945 centalism and unionism of the United Kingdom. The effects were concealed down to 2010 with Labour or Labour-dominated governments in Westminster, Cardiff and Edinburgh. Still, devolutionist momentum went on in Scotland while the 2006 Government of Wales Act gave more direct legislative power to the Welsh Assembly. The Conservative-led coalition of May 2010 was strongly English, but there were important implications for the Celtic nations. Three major issues for Wales emerged before the election (i) The powers of the Welsh Assembly, with the Jones-Parry report calling for a referendum on primary powers.(ii) The links with Westminster with the prospect of a reduction in Welsh and Scottish seats there. (iii) resentment over the Barnett formula under which Scotland was heavily over-funded and Wales much under-funded. The Calman Commission in 2009 called for the Scottish Parliament to be granted a Scottish rate of income tax. The Holtham Commission called for similar powers for Wales.What has happened since the general election? (i) The Welsh Referendum of March saw a 63% majority for Welsh primary legislative powers and thus greater status for the Welsh Assembly, even if it remained less powerful than the Scottish Parliament. (ii) Welsh links with Westminster were seriously reduced when the Parliamentary Voting Bill cut the number of Welsh MPs by a quarter – a drop from 40 to 30. (iii) Nothing happened on Barnett, but the government’s Scotland Bill proposed income taxing powers for the Scottish Parliament, along with other powers to tax and raise loans. This was followed in late 2011 by the appointment of the Silk Commission for Wales to investigate similar powers for the Welsh Assembly. Where is Wales how heading? The Welsh referendum showed power flowing unambiguously towards a stronger Welsh Assembly. Conversely, the 2011 Welsh Assembly elections showed a marked swing to Labour who won 30 or 60 Welsh on a traditional Labour campaign and formed a new government on its own. Whereas in Scotland, the SNP won a large majority, Plaid Cymru in Wales slipped back substantially, winning only 11 seats (down 4), a result confirmed in the local elections of May 2012. Unlike Scotland, only around 5% of electors supported independence in Wales. (On the AV vote in May 2011, Wales voted the same way as England with 66% against AV). Whether we are moving towards a federal Britain remains uncertain. But ongoing pressure in Scotland for a vote for independence will surely leave its mark on Wales – and on England, too. The UK constitution is in the course of dynamic change. One of the main drivers of it is territoriality.

The Scotland Act 2012: The Next Phase of Devolution in Scotland and its Potential Impact on Wales

The need to introduce more transparency in the way devolution is funded in Scotland and Wales is more pressing than ever, given the international financial crisis and the national policy of fiscal austerity implemented by David Cameron’s Coalition-Government. In fact, the financial relationship between Scotland and Wales and Westminster has been uncertain for several years and the Celtic nations are all the more vulnerable as their only source of revenue is the Barnett Formula. At present, the Scottish Parliament and the Welsh Assembly spend money from a block grant which they do not raise and for which they are not accountable to their electorate. Devolutionists have long argued that it is paradoxical to give wide powers of autonomy to a Welsh Assembly and a Scottish Parliament, but deprive them of direct financial resources which denies them a full status as assemblies.The government’s Scotland Act directly raises this issue for the first time. Its fairly smooth legislative progress in the Westminster Parliament has revived the desire to abolish the Barnett grant and replace it with a needs-based formula but has also raised expectations of financial autonomy for Scotland and Wales. In effect, the Scotland Act 2012 implements the proposals of the Calman Commission for Scotland. It will give the Scottish Parliament new tax- raising power as well as a new rate of income tax. Furthermore, it will enable the Scottish Government to borrow money for Scottish projects.The question of Wales is now looming on the horizon as the Welsh Assembly’s report by its Independent Commission on Funding and Finance for Wales, chaired by Gerry Holtham, called for similar powers to be granted to the Welsh Assembly. All in all, the Scotland Act 2012 is an important step forward in the process of devolution. However, it raises as many issues as it settles in both Scotland and Wales.

Wales in the age of austerity

Austerity in Wales has to be understood in the context of the more general budgetary limitations created by the out-dated Barnett formula and the current debates in Wales (and Scotland) about the ways in which devolved functions should be funded in the future. This paper identifies the key measures which successive administrations have taken in support of an essentially Keynesian, counter-cyclical approach to countering recession in Wales. It traces the outcomes of the May 2011 Assembly election and the emerging policy and legislative agenda of the minority Labour administration which that election produced. The paper ends by placing these developments within the wider austerity agenda pursued by the Westminster coalition and its deleterious impact on Wales.

Fiscal Austerity and Devolved Government in the UK

Fiscal Austerity has arrived for UK governments, with a promise of more to come. The Devolved Governments of Scotland, Wales and Northern Ireland are faced with declines in the Barnett formula determined transfer payments from Westminster, which constitute the majority of their revenues. Sharp transfer declines, coupled with little or no ability to raise own revenues pose significant policy challenges for these Devolved Governments. Are the transfer payments and related cuts relatively fair across regions? Should the Devolved Governments have some fiscal means to respond to transfer cuts? Fiscal austerity also raises basic questions about devolution and selfgovernance for Scotland, Wales and Northern Ireland.

English Identities and Interests and the Governance of Britain

Are the identity and interests of the English nation still sufficiently protected by the British state? (the English question). And can the British state still secure sufficient loyalty from all its citizens? (the Britishness question). The omission of England from the programme of devolution implemented by Labour governments since 1999 has not led to a strong demand in England for its inclusion. One reason for this is that most English identities do not need an English parliament for their further articulation. There is an ease of fit between English identity and Britishness as recently reformulated by Gordon Brown and his colleagues. This does not, however, dispose of the English question. England still needs a stronger political voice to protect its interests. The Barnett formula divides annual increases in public spending for a wide range of services between the four parts of the United Kingdom in a way that is unfavourable to England. The British government is unwilling to reform or replace it and, polls suggest, this is widely resented in England. The West Lothian question refers to the anomaly whereby Scottish MPs continue to vote at Westminster on matters pertaining only to England when English MPs cannot vote on equivalent matters pertaining only to Scotland because responsibility for them has been devolved to the Scottish parliament. This, polls suggest, is also widely resented in England, but the British government is disinclined to do anything about it. The only work in hand addressing the Barnett formula and backed by the major British parties (but not the Scottish National Party) is that of the (Calman) Commission on Scottish Devolution set up by the Scottish parliament. Its first report does not anticipate radical change. The only proposal by one of the major parties to answer the West Lothian question is that of the Conservatives’ Democracy Task Force for a version of English Votes on English Laws (EVoEL) that meets many of the objections to earlier versions of EVoEL.

The Barnett Allocation Mechanism: Formula Plus Influence?

Christie A. and Swales J. K. The Barnett allocation mechanism: formula plus influence?, Regional Studies. This paper seeks to explain why the operation of the Barnett formula has failed to generate convergence in the per capita public expenditure levels in the four countries of the United Kingdom. Using Scotland as an example, this paper argues that a ‘formula plus influence’ allocation mechanism has been in place. This offers improved flexibility, greater political integration, and increased information flows than would be available through either a straight bargaining or a formula process. While devolution has not changed the Barnett formula, it has altered the environment in which it operates and that this may well destabilize an otherwise secure system. Christie A. et Swales J. K. La méthode d'affectation Barnett: formule plus influence?, Regional Studies. Cet article cherche à expliquer pourquoi l'application de la formule Barnett n'a pas réussi la convergence des dépenses publiques par tête dans les quatre pays du R-U. En se servant de l'Ecosse comme étude de cas, l'article affirme qu'une méthode d'affectation ‘formule plus influence’ a été en vigueur. Cela fournit une flexibilité augmentée, une intégration politique plus importante et des flux d'information accrus qui n'auraient été disponibles par moyen de simples négociations ou d'une simple formule. Tandis que la régionalisation n'a eu aucun impact sur la formule Barnett, elle a changé le milieu auquel il se voit appliquer, et cela pourrait bien déstabiliser un système par ailleurs solide. Formule Barnett Régionalisation Décentralisation fiscale Ecosse Finances publiques Christie A. and Swales J. K. Der Barnett-Zuweisungsmechanismus: Formel plus Einfluss?, Regional Studies. In diesem Beitrag wird eine Erklärung für die Frage gesucht, warum sich mit der Barnett-Formel in den vier Ländern des Vereinigten Königreichs keine Konvergenz hinsichtlich der Höhe der öffentlichen Pro-Kopf-Ausgaben erzielen lässt. Anhand des Beispiels Schottland wird argumentiert, dass bei der Zuweisung ein Mechanismus von der Art ‘Formel plus Einfluss’ zum Einsatz kam. Dies führt im Vergleich zu einem einfachen Verhandlungs- oder Formelprozess zu einer Verbesserung der Flexibilität, der politischen Integration und des Informationsflusses. Die Dezentralisierung hat die Barnett-Formel nicht verändert, wohl aber die Umgebung, in der sie zum Einsatz kommt, was durchaus zur Destabilisierung eines ansonsten sicheren Systems führen kann. Barnett-Formel Dezentralisierung Fiskale Dezentralisierung Schottland Staatsfinanzen Christie A. y Swales J. K. El mecanismo de la asignación Barnett: ¿fórmula más influencia?, Regional Studies. El objetivo de este artículo es explicar el porqué la operación de la fórmula Barnett no ha generado una convergencia en los niveles de gastos públicos per cápita en las cuatro regiones del Reino Unido. Usando Escocia como ejemplo, en este ensayo argumentamos que se ha introducido un mecanismo de asignación tipo ‘fórmula más influencia’. Esto ofrece una mejor flexibilidad, mayor integración política y más flujos de información comparado con un proceso a través de negociaciones directas o de fórmulas. Aunque la transferencia de competencias no ha cambiado la fórmula Barnett, sí que ha alterado el entorno en el que funciona y esto bien podría desestabilizar un sistema que normalmente es seguro. Fórmula Barnett Transferencia de competencias Descentralización fiscal Escocia Finanzas públicas

A Federal Scotland within a Federal UK

2007 saw the three-hundredth anniversary of the Act of Union. But the event was marked by little celebration across the United Kingdom. This lack of observation in part reflects the degree of uncertainty surrounding the status of the UK. In Scotland in particular, the entry into government of the Scottish National Party has served to call into question arrangements for an asymmetrically devolved UK, and even cast doubt upon the UK's long term future. The media and political attention afforded in England to such issues as the Barnett Formula and the so-called 'West Lothian Question' has served to reinforce this perception.

A Principles‐based Approach to the Barnett Formula1

This essay argues that the Barnett formula—which determines the block grant paid annually by the UK government to each of the Devolved Administrations of Scotland, Wales and Northern Ireland—be reformulated, guided by the following principles: fiscal equity, accountability, transparency, and flexibility. The rationale for change is that the current fiscal arrangements make little policy sense and may not be sustainable in a changing political and economic context. The formation of a grants commission to help develop data, calculate disparities, and provide public advice to the Chancellor of the Exchequer is also advocated.

Devolution, equity and the English question*

ABSTRACT. Following devolution to Scotland, Wales and Northern Ireland, does England need a stronger political voice and/or constitutional changes to safeguard its identity and interests? (the ‘English question’). Polling and other evidence suggests that it does, albeit more to redress inequities associated with voting in parliament (the ‘West Lothian question’) and the distribution of public spending (the ‘Barnett formula’) than to safeguard its identity. Although campaigners for English devolution have had little impact, and alternative institutional responses to the English question are all problematic, it would be imprudent of the major parties to do nothing. The least difficult course would be adoption of English votes on English matters and reform or replacement of the Barnett formula.

The Primacy of Politics: Intergovernmental Fiscal Relations in the UK and Australia

Interest in Barnett formula reform is on the rise again, particularly because of changes in the parties in power in the devolved governments of Scotland and Wales, and the tighter public spending heralded by the recent Comprehensive Spending Review. This article looks at whether, and to what extent, the introduction of an alternative fiscal allocation system would remove the primacy of politics from the UK's resultant intergovernmental fiscal relations, through examination of the Australian experience, especially the role of Special Purpose Payments.

The Impact of the Barnett Formula on the Scottish Economy: Endogenous Population and Variable Formula Proportions

The Barnett formula is the official basis upon which increments to public funds are allocated to the devolved regions of the UK for those parts of the budget that are administered locally. There is considerable controversy surrounding the implications of its strict application for the relevant regions. The existing literature focuses primarily on the equity of the spatial changes to government per capita expenditure that would accompany such a change. In contrast, in this paper we attempt to quantify the system-wide economic consequences—the real, relative resource squeeze that accompanies the financial relative squeeze—on one devolved region, Scotland. The analysis uses a multisectoral regional computable general equilibrium modelling approach. We highlight the importance of population endogeneity, particularly since the population proportions used in the formula are now regularly updated.

The environmental spending needs of Scotland's local authorities

Scottish citizens benefit from 19 per cent more public spending per head than English citizens. The ‘Barnett formula’ is slowly reducing the gap, but very little is known about the countries' relative needs and hence about how far the present gap is defensible: the aim of this paper is to throw some light on the countries' relative needs. We begin with the complex formulae that the Westminster government uses to assess the spending needs of English local authorities, and we use these English formulae to assess the needs of Scottish local authorities for three major blocks of local services. These formulae suggest that Scotland needs 6.4 per cent more per head than England for environmental, protective and cultural services, 8.1 per cent more for highway maintenance, and between 24.3 per cent and 35.3 per cent more for fire services. We also combine these results with those of two other papers concerned with local education and social services to show that these English formulae put Scotland's per capita needs for local government services as a whole at about 6 per cent above England's. However, we then compare the relative needs of Scottish local authorities as assessed by the English formulae with their relative needs as assessed by the Scottish needs formulae that are currently used by Holyrood, and we find major differences. This suggests either that at least one country uses seriously flawed formulae to assess needs, or that the two countries have different conceptions of need.