“You’ve got 20% more per head because of the money that comes from England under the Barnett formula.”
Michael Forsyth, 25 January 2018
It’s correct that, per head of the population, around 20% more is spent on public services in Scotland, compared to England. But this money comes from the block grant from the UK Treasury, rather than from England specifically. An increasing proportion of the Scottish government’s budget also comes from taxes it raises.
In Scotland, just under £11,000 was spent per person in 2016/17 and in England it was just under £9,000.
This uses a measure of spending called ‘identifiable expenditure’, which is money that the government can say was definitely spent in that region or country. This includes all kinds of services, from health to transport, and covers money spent by the UK and devolved governments as well as local councils and public corporations.
It doesn’t look at the ‘non-identifiable spending’, which is spending that can’t be associated with one part of the UK in particular, like national defence.
The Scottish government says there are a number of reasons why spending in Scotland is higher.
For example, people live further apart in Scotland—the population density is lower—so services cost more to provide.
Also, the spending needs of each country aren’t the same. Some services like water and sewage are in the public sector in Scotland whereas in the rest of the UK they’re in the private sector. There’s also a greater need for health and housing services than the rest of the UK.
We’ve looked at all this in more detail here.
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The Scottish government’s budget
Scotland, along with the other devolved countries of the UK, receives a block grant from the UK government. This amounted to around £25 billion in 2016/17 after adjustments have taken place. The UK government is responsible for collecting some, but not all taxes in Scotland.
Around 8% of all taxes collected by HMRC in 2016/17 came from Scotland. That amounted to just under £44 billion. 37% of all public sector spending in Scotland was undertaken by the UK government in 2016/17. We’ve looked more at taxation and spending in Scotland here.
Any changes in the amount of this block grant from the Treasury are calculated each year using the Barnett formula.
This isn’t the only place that money for spending on Scotland comes from though. Tax powers have been increasingly devolved to the Scottish parliament, particularly since 2016, which has reduced the proportion of the Scottish budget made up by the block grant.
How does the Barnett formula work?
The Barnett formula aims to make changes to funding for services in England have the same pound-per-person effect on the money which goes to Scotland, Wales and Northern Ireland for those services.
It’s not set out in law, and in practice the Treasury decides how to apply it. It can also be bypassed if the Treasury decides certain spending is outside the formula. If the devolved governments disagree they can argue the case.
The formula itself is basically: any change to UK government department budget, multiplied by the percentage of devolved services in that area, multiplied by the percentage population in that country.