The Barnett Formula - Select Committee on the Barnett Formula Contents

Further supplementary memorandum by HM Treasury

  This supplementary evidence follows a request for further data by the Committee chairman at the hearing with Treasury officials on 11 March 2009.

What drives the Barnett formula and how are comparability factors calculated?

  In arithmetic terms the Barnett formula is: change in spending of the UK Government department x comparability factor x population share.

  The change in spending is the aggregate change in the UK department's DEL. For the purposes of the operation of the Barnett formula the Treasury does not need to know the sub-components of the change in the DEL other than the split of the DEL change between cash and non cash resource DEL and capital DEL. These figures are published in spending review White Papers.

  It is also worth noting that for the operation of the Barnett formula it is not necessary for the Treasury to scrutinise the existing level of provision or baseline of the devolved administrations. The baseline level of provision ie in the year before the first year of the spending review is rolled forward over the spending review period and the Barnett consequentials are added to this baseline.

  The departmental comparability factors are published in the Statement of Funding Policy and measure the extent to which the UK department's spending is comparable to devolved spending. An illustrative example is set out below:

    — suppose the UK department has two programmes, one which covers the whole of the UK and costs £100 million and the other which covers just England and costs £50 million.The comparability factor is the weighted average of the two programmes ie (100/150 x 0) + (50/150 x1) = 0.33 or 33 per cent.

Devolved and reserved public spending in Scotland, Wales and Northern Ireland over time

  Data is published in table 9.17 of the Treasury's annual Public Expenditure Statistical Analyses on devolved and reserved public spending in Scotland, Wales and Northern Ireland. Data on past years from 2002-03 to 2006-07 (the latest available year) on a consistent basis is set out in the attached tables.

Changes is devolved spending between spending reviews

  Information on changes in devolved spending between spending reviews is set out in the Scotland and Wales Offices' annual reports. The attached tables provide further disaggregation for the period covered by the last three spending reviews. In general most of the changes in spending comprise: agreed transfers between devolved administrations and departments; technical changes reflecting changes in the way public spending is classified; drawdown of End Year Flexibility underspends; and the Barnett consequentials of Budget and PBR changes in spending.

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