For every pound Scotland earns, Westminster taxes Scotland 63%.
It’s not entirely clear what this is based on. In 2022/23 approximately three quarters of public sector revenue generated in Scotland was collected by the UK government.
Scotland is expected to function on the remaining 37% of the revenue it generates.
This isn’t true. Alongside the 24% of revenue it retains, the Scottish government receives funding from the UK government, and the UK government also spends money on public services in Scotland directly. Total public spending for Scotland in 2022/23 was higher than the public sector revenue it generated.
A post shared on Facebook claims the Barnett formula means “For every pound Scotland earned, Westminster taxed Scotland 63% in the pound.
“They then expected us to function on 37% and feel grateful”.
The Barnett formula is the name given to the mechanism used to adjust UK government funding for the devolved nations, including Scotland. It doesn’t determine how Scotland’s public sector revenue is collected or distributed.
It’s true that UK government funding for devolved matters in Scotland is less than the amount the UK government collects in Scottish revenue. But the UK government also spends money for Scotland directly, and in total public spending for Scotland (both by the Scottish government and UK government) is higher than the amount Scotland raises in revenue.
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The devolved administrations (Scotland, Wales and Northern Ireland) receive funding from the UK government through grants, the largest of which is known as the block grant.
The Barnett formula is used to calculate how this funding changes each year, by taking the previous year’s grant and adjusting it based on changes to UK government per-person spending, with the aim of giving each nation the same change in pounds-per-person funding as the change in spending in England.
So if the UK government increases spending in a devolved matter, the devolved governments should receive an increase in funding proportional to each country’s population size, and also accounting for the comparability percentage of the devolved area (the extent to which the relevant UK government department’s services are devolved). Other adjustments to the formula are made for Wales and Northern Ireland.
The Barnett formula is only applied to devolved public services (including healthcare, education and housing), and as funding for the devolved administrations is not ringfenced, can be spent however each government wishes (meaning that extra funding received by devolved administrations due to the UK government increasing education spending does not necessarily have to be spent on education in the devolved nations, for example).
Scotland’s public sector revenues are collected in a few different ways. Some revenue is raised, collected and kept for spending in Scotland (including council tax and some devolved taxes).
Scottish Income Tax, with the exception of income tax on savings and dividends, is collected by the UK Government via HMRC but then goes to the Scottish Government, while many other taxes (such as National Insurance, capital gains tax and VAT) are collected by the UK government through HMRC.
Scotland’s public sector revenue (including all North Sea oil and gas revenue) in 2022/23 was £87.5 billion, or 8.6% of the UK’s total public sector revenue.
Total devolved tax revenue in 2022/23 was estimated at £21.3 billion (24.3% of public sector revenue in Scotland).
The remaining £66.2 billion was collected via HMRC. So it is true that the majority of public sector revenue generated in Scotland does not go directly to the Scottish government.
But it’s not correct to suggest that Scotland is expected to “function” solely on the revenue it directly retains. This claim ignores the fact that the Scottish government also receives funding from the UK government in the form of the block grant, and the UK government also spends on those public services in Scotland that it manages directly.
The block grant for Scotland is currently around £41 billion a year. This is clearly lower than the amount the UK government collects in tax revenue from Scotland. However when combined with the amount Scotland retains directly of its tax revenue, it totals approximately £62.3 billion—still less than it generates in public sector revenue, but almost double the 37% the post claims Scotland is expected to “function on”.
Finally, it’s also important to consider that around 41% of Scotland’s public sector spending in 2022/23 was managed by the UK government. Once this is factored in, total public spending on Scotland (including Scottish government spending, and UK government spending on reserved areas) in 2022/23 was £106.6 billion, meaning that more money was spent overall on public services in Scotland than the country generated in revenue (this was also the case across the UK as a whole).
This article is part of our work fact checking potentially false pictures, videos and stories on Facebook. You can read more about this—and find out how to report Facebook content—here. For the purposes of that scheme, we’ve rated this claim as false because about three quarters of Scotland’s public sector revenue is collected by the UK government, but total public spending in Scotland is higher than the amount of revenue it generates.
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