20th June 2026
If you want to understand Scotland’s public finances, you need to understand the Barnett Formula. It’s one of the most important — and most misunderstood — mechanisms in UK finance. It determines how much money Scotland receives from the UK Government each year, and it shapes everything from NHS Scotland funding to local government budgets.
Despite its importance, the formula is often talked about in vague or political terms. So here is a plain‑English, Scotland‑specific explainer of what the Barnett Formula is, how it works, and why it matters.
1. What Is the Barnett Formula?
The Barnett Formula is a mechanism used by the UK Treasury to decide how much the Scottish Government’s block grant changes each year.
It does not decide the total size of Scotland’s budget.
It only decides the annual change — the increase or decrease — based on spending decisions made for England.
Think of it like this:
When the UK Government increases spending in England, Scotland gets a population‑based share of that increase.
And when spending in England is cut, Scotland’s budget is reduced by the same proportion.
2. What the Barnett Formula Does Not Do
This is where many misunderstandings come from.
The Barnett Formula does not:
Decide Scotland’s overall funding level
Reflect Scotland’s needs
Consider poverty, geography, or demographics
Adjust for higher rural or island costs
Apply to all areas of spending
It is purely a mechanical population‑based calculation.
3. How the Formula Actually Works
The formula has three parts:
A. The change in spending in England
If the UK Government increases spending on health in England by £1 billion…
B. The “comparability factor”
This reflects how much of that policy area is devolved.
For example:
Health = 100% devolved
Transport = partly devolved
Defence = 0% devolved
C. Scotland’s population share
Currently around 9.2% of England’s population.
Putting it together
If England increases health spending by £1 billion:
Comparability factor = 100%
Scotland’s population share ≈ 9.2%
So Scotland gets:
£1,000,000,000 × 100% × 9.2% = £92 million
This £92 million is added to the Scottish block grant.
4. Why Scotland Gets More Per Person Than England
You often hear that Scotland gets “more per head” than England.
This is true — but not because of the Barnett Formula.
The reason is historical:
Scotland’s baseline funding was set in the late 1970s
At that time, Scotland already had higher public spending
The Barnett Formula only adjusts the changes, not the baseline
This is known as the Barnett Squeeze — over time, Scotland’s per‑capita advantage should shrink.
In practice, it has shrunk, but not disappeared.
5. How Devolution Has Changed the Formula
Since 2016, Scotland raises more of its own revenue through:
Income tax
Land and property taxes
Some social security powers
Because of this, the block grant is now adjusted through:
Block Grant Adjustments (BGAs)
Tax reconciliation mechanisms
Scotland‑specific borrowing powers
This means the Barnett Formula is still important — but it is no longer the whole story.
6. The Main Criticisms of the Barnett Formula
1. It ignores need
Scotland has:
Higher rural costs
Higher health needs
More remote communities
Higher poverty in some areas
The formula does not account for any of this.
2. It is based on outdated population data
Population shares are updated only periodically, not annually.
3. It was meant to be temporary
It was introduced in 1978 as a short‑term fix — and is still here.
4. It creates political tension
Some in England think Scotland gets too much.
Some in Scotland think the formula is unfair and outdated.
Both can be true at the same time.
7. Why the Barnett Formula Still Matters
Despite its flaws, the Barnett Formula:
Provides stability
Avoids annual political fights over funding
Gives Scotland predictable budget changes
Is simple and transparent (compared to alternatives)
And most importantly:
It still determines the majority of Scotland’s funding each year.
Even with devolved taxes, the block grant remains Scotland’s largest single source of income.
Summary: The Barnett Formula in One Page
It adjusts Scotland’s block grant based on spending changes in England.
It uses a simple population‑based calculation.
It does not reflect Scotland’s needs or costs.
Scotland’s higher per‑capita spending comes from historical baselines, not the formula.
Devolution has added complexity, but the formula still matters.
It remains central to Scotland’s public finances — even though it was meant to be temporary.
The Barnett Formula is not perfect, but it is the backbone of Scotland’s fiscal system. Understanding it is essential for understanding Scotland’s budget, its political debates, and its long‑term financial challenges.