The Barnett formula is used by the government to decide how much public money is allocated to Scotland, Wales and Northern Ireland.
It is named after its creator, Joel Barnett, who was Chief Secretary to the Treasury in 1979 when he devised the formula as a short-term solution to Cabinet disputes. (He has since called it a “terrible mistake”).
To calculate funding, the Barnett formula multiplies the funding added to a service in England by the relative population level in the region, plus something called the “compatibility factor”: a figure which represents the extent that the service being funded is comparable to an English equivalent.
There are some limitations: As the formula has no legal standing, the Treasury could change it at will, and the formula only applies to issues that the devolved administrations control, rather than central government (such as healthcare).
There is some controversy around aspects of the Barnett formula, such as the fact it doesn’t take into account different region’s needs or look at relative taxation levels.
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