The Barnett Formula
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Thank you for downloading More or Less from the BBC. This is the version of the programme first broadcast on BBC Radio 4. Here's Tim Harford.
Hello and welcome to More or Less, your weekly guide to the numbers in the news and in life. I'm Tim Harford. This week, we'll reveal Ed Balls' political sleight of hand, ask whether Margaret Thatcher was generous towards the National Health Service, and present a striking tale of coincidence. We'll ask whether air pollution is really killing the population of the Shetland Islands each year. Not the actual residents of Shetland, but that many people. Oh, you know what I mean. We'll also look at this question.
Well, we were wondering how people know how far away the sun is and how big it is if we don't know how big it is and how far away it is. You need both to calculate, I think.
But first, the Barnett formula. We had this email from loyal listener Neil McCartney. We're told that the Barnett formula means that over £1,600 a year extra is spent on each person in Scotland. How is this figure arrived at? A good question. There's been lots of shouting about the formula, but little explanation of exactly what it is. Let's put that straight. But before we do, I need a bit of help. as if by magic, Paul Lewis of Moneybox appears.
Hello, Paul. You're looking pleased. I am pleased, Tim. After years of austerity, it looks like Moneybox is going to get an increase in its budget. That means we'll be able to carry out deeper investigations and campaign for the rights of even more Moneybox listeners.
Well, that's great news, Paul, but... What about the budget of more or less? I know Moneybox is a much bigger programme altogether, but if you're getting more money, so should we. Oh, and how would you propose to figure out what's fair? Well, what about using the Barnett formula? It's been used for nearly 40 years to figure out how much money devolved governments in Scotland, Wales and Northern Ireland should receive.
Isn't that the formula that ensures the smaller nations get more money – It sounds to me like you're trying to grab an unfair budget allocation for tiny more or less, probably by threatening to become independent.
Well, that's a common misperception, Paul. Actually, the Barnett formula applies only to additional spending, not to total spending. So, for example, Moneybox is ten times bigger than more or less. You've been given an extra £10,000, so proportionately more or less should get an extra £1,000.
OK. Oh, but hang on, that seems a bit excessive because our budget increase is to hire extra researchers, but you often get a researcher provided directly by BBC Current Affairs. You don't have to pay for that extra person.
Good point, Paul. The Barnett formula, however, allows for that. If we were responsible for hiring all our researchers, we'd get the full £1,000, the same increase as you, proportional to our smaller size. But because half of our researchers are provided centrally by the BBC at no cost to us, we can also halve the £1,000. You get the £10,000 increase, we get £500. Well, I'm very pleased to hear you'll be getting extra researchers as well. Paul, we don't need to spend the £500 on extra researchers. No, no, no, that's up to the devolved administration of more or less. In other words, me and the editor, and we've got our eyes on a really excellent lunch.
What is the Barnett Formula and how does it determine funding changes for Scotland, Wales and Northern Ireland?
Thank you to Paul Lewis. I should perhaps point out that both the budget increase and the excellent lunch mentioned in that conversation are purely imaginary. But I hope my chat with Paul does shed some light on the Barnett formula. There are probably three key things to grasp about it. First, it's not some grand bargain allocating overall spending between the nations. Instead, it's all about how spending changes from whatever has previously been agreed. Scotland, Wales and Northern Ireland have long been allocated grants from the UK Treasury. The Barnett formula governs how those grants change when spending in England changes. It uses relative population. Scotland's population for Barnett formula purposes has recently been 10.03% of England's population.
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