Barnett formula: MPs want more clarity on UK nations' funding

The Barnett formula helps to determine how big a slice of the UK's public spending budget each nation gets

How funding is allocated to each UK region needs to be more transparent, according to a report from the Public Accounts Committee (PAC).

It has published a report on how funding is calculated for Northern Ireland, Scotland and Wales.

It said funding arrangements are not explained in a way that is readily understandable to taxpayers.

Spending per head on public services varies significantly across England, Scotland, Wales and Northern Ireland.

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Last year spending per head in Northern Ireland was highest at £11,190 per head, followed by Scotland at £10,881 per head and Wales at £10,307 per head.

England was lowest at £9,080 per head.

The Treasury allocates a block grant to each region and then uses the Barnett formula to calculate changes to funding when there are changes to UK government spending that affect devolved services.

What is the Barnett formula?

Since the late 1970s, the Barnett formula has been used to determine annual changes in the block grant to each nation of the UK.

When there is a change in funding for devolved services in England, for example health or education, the Barnett formula aims to give each country the same pounds-per-person change in funding.

But the formula is not set out in law, and in practice the Treasury decides how to apply it.

The UK government also provides other grants to devolved administrations outside of the block grant, which are not covered by Barnett.

These grants are for less predictable demand driven spending, and are negotiated between the UK government and devolved administrations.

In 2015, Northern Ireland was allocated £11bn under the Barnett formula; Wales was allocated £15bn and Scotland was allocated about £30bn.

But government can allocate additional funding outside of this arrangement, for example City Deals and the funding arrangement between the Conservative government and the DUP as part of the confidence and supply agreement.

The PAC report said there is a lack of transparency about how these decisions are made and that a lack of detailed information makes it difficult for Parliament to properly examine them.

It recommends the Treasury publishes more detailed and transparent information to ensure funding decisions are prioritised according to the needs of citizens across the UK.

The report said the Treasury does not know whether the block grant reflects the needs of UK citizens as a large part of the funding is simply rolled forward, so it does not reflect any changes in population.

It also found Treasury's decisions affect devolved administration's ability to plan and manage their finances, as they are not always given sufficient time to review and challenge these decisions.

The PAC said it is concerned by the uncertainty caused by postponing the Spending Review and the lack of a decision on how it will replace existing EU funding.

It is calling on the Treasury to write to the committee with details of its proposals.