The Barnett Formula - Select Committee on the Barnett Formula Contents

Memorandum by the Northern Ireland Confederation for Health and Social Services


1.  Introduction

  1.1  The Northern Ireland Confederation for Health and Social Services is the voice of management in the integrated Health and Social Care system (HSC). Part of the UK-wide NHS Confederation, it is the only membership body for HSC organisations. At present, the membership includes all HSS Boards and HSC Trusts, the Central Services Agency and five of the smaller HSC bodies.

  1.2  The Confederation welcomes the opportunity to comment on the House of Lords Select Committee Inquiry on the Barnett Formula. In developing this response, the Confederation has taken the views of its members and has drawn largely on secondary sources of information.

  1.3  The Northern Ireland Confederation currently does not have the resources or capacity to respond in full or deal with all the questions outlined in the Select Committee's paper but we still felt it was important to respond and make our views on this important issue known. The evidence submitted remains within the Committee's terms of reference.

  1.4  The Confederation would be happy to provide further clarification or expansion on any of the issues covered in this submission.

2.  The Barnett Formula

  2.1  Despite its apparent temporary use, the Barnett Formula is a mechanism that has been used by the UK government to apportion public expenditure changes to Northern Ireland, Scotland and Wales since 1979. The increase (or decrease) each year in public expenditure is distributed across the three countries according to their population at the time.

  2.2  The Northern Ireland Confederation welcomes this Select Committee inquiry and is in favour of moving away from the Barnett Formula towards a system that reflects needs rather than simply population.

  2.3  The case for change has gathered momentum across the UK. In particular, there are the Calman Commission in Scotland, which will produce its final report some time during this year, and the Hothman Commission in Wales. The Northern Ireland Confederation will closely follow developments and the outcome of the work of these Commissions as well the outcome of the Northern Ireland Executive's considerations of the implications of the potential reform of Barnett.

  2.4  The alternative, reportedly favoured by both Commissions and the report Fair Shares? Barnett and the politics of public expenditure produced by the Institute for Public Policy research in July 2008, is to adopt a hybrid approach combining greater fiscal autonomy with the equity of a needs based grant.[1]

  2.5  At this stage, the Confederation is not in a position to lend its support to any of the alternatives to Barnett as we have not had the opportunity to consider the options in detail. We however are clear in our support for a review of the Barnett Formula and have consistently recommended this.[2] The Barnett Formula takes no account of the higher levels of deprivation in Northern Ireland and hence is inequitable and outdated. It is purely a population based formula and therefore places Northern Ireland at a disadvantage trapping the region within an ongoing cycle of underinvestment. It is our opinion that deprivation levels in Northern Ireland are such that for the foreseeable future, investment here needs to exceed the levels of investment that applies to the rest of the UK.

  2.6  The Northern Ireland Confederation is pleased that the debate on Barnett has been started. We recognise that finding an alternative will not be easy but we do believe that a major review of the Formula is essential to ensure equity of provision throughout the UK.

3.  Application of the Formula in practice

  3.1  Ultimately the Barnett Formula was designed to bring about equal spending per head in the four countries of the UK by slowly reducing differentials in spending between the four nations otherwise known as the "Barnett Squeeze".

  3.2  One of the main outcomes of the Formula that has attracted criticism is the higher spending per head. The distribution of a per capita amount to Scotland, Wales and Northern Ireland higher than that allocated to England has led to calls for the formula to be reviewed. The relative differences are illustrated in the table below.

  3.3  In 2007-08 identifiable public spending per head minus social protection and agriculture across the nations and regions was as follows

£ per head
% deviation from UK average

Northern Ireland
North East
North West
Yorks and Humber
West Midlands
East Midlands
South West
South East
East of England

  Source: IPPR July 2008.

  3.2  Over time, the use of Barnett will continue to reduce the percentage share of the overall public expenditure allocated to Northern Ireland. However, this population based formula is too simplistic as it does not take account of actual need. This may become a problem particularly when the convergence in the level of per capita public expenditure occurs. Issues may arise about differential expenditure needs throughout the UK eg the number of persons in the area requiring medical treatment, the number of elderly people requiring care, etc.[3] Such potential high public service demands could cause particular concern especially if combined with low incomes as is the case particularly in Northern Ireland, which has the lowest average earnings in the UK. We also have the lowest economic activity rate—71 per cent in work as compared with the UK average of 80 per cent.

  3.3  Barnett does not give Northern Ireland the extra resources it needs to match the health and social care services that can be afforded in England. The Northern Ireland Confederation believes that the general standard of such services should be kept broadly in line throughout the UK. Accordingly, we need a system that makes proper allowance for the different needs of the four countries.

4.  Northern Ireland has greater need

  4.1  In August 2005, the Independent Review of Health and Social Care Services in Northern Ireland was published. The author, Professor John Appleby, concluded that it was necessary for Northern Ireland to spend approximately 7 per cent more than England in order for it to provide the same standard of care. The Appleby Report recommended an additional real-term investment of 4.3 per cent overall during the 2008-12 Comprehensive Spending Review period.

  4.2  He described the Barnett Formula as a "simplistic mechanism" that did not take into account the differences in the need or health and social care expenditure between Northern Ireland and England.[4]

  4.3  Updated figures from Department of Health, Social Services and Public Safety (DHSSPS) officials and Department of Finance (DFP) officials who considered the need identified by Appleby taking account of differences in age profile and deprivation levels and market force factors, show that the differential now stands at an estimated 14 to 15 per cent greater need in Northern Ireland compared to England.

  4.4  The latest assessment of relative need is 10 per cent higher for National Health Service-type services, and up to 36 per cent higher for social services functions. To tackle that gap and match the 3.7 per cent growth rate in England, would mean that an additional £600 million to spend would be required by 2010-11. This is nothing to do with inefficiencies and waste as no matter how efficient we become in Northern Ireland, patients and clients here will not get the same standard of care as in England.

  4.5  Consequently, there is a 25 per cent greater mental health need and funding is 25 per cent less than that in England—a clear differential. Northern Ireland spend on children is the lowest in the UK—we are 35 per cent behind England, and 44 per cent behind Scotland. The proportion of our population that is aged over 65 is growing at the fastest rate in the UK, and that means that need is growing quicker here than it is in other parts of the UK. Significant health and social care challenges remain to be addressed—much of which is a legacy of the "Troubles".

  4.6  There are many examples of the gap in services here and the rest of the UK and this is not acceptable—waiting times are longer; if we had the same adoption rates as England another 50-60 children in care each year would be adopted; if we had the same rates of death 300 fewer people would die each year; and death rates from bowel cancer are 16 per cent higher than the average in the rest of the UK. We also are faced with considerable diseconomies of scale for a discrete region in health and social care—a typical Strategic Health Authority in England has a population of 7-10 million whereas Northern Ireland has had to provide the regional services for a population of about 1.7 million.

5.  Conclusion

  5.1  The Northern Ireland Confederation considers that as the Barnett Formula takes no account of the higher levels of deprivation in Northern Ireland, it is inequitable and outdated. The Barnett Formula never claimed to address issues around need and was a basic calculation on the basis of population. A new fairer way of funding taking account of Northern Ireland's actual needs is required.

  5.2  Barnett places Northern Ireland at a disadvantage by trapping it within an ongoing cycle of underinvestment. Deprivation levels in Northern Ireland are such that investment here needs to exceed the levels of investment that applies to the rest of the UK for the foreseeable future.

  5.3  Because Scotland, Wales and Northern Ireland have little influence over the size of their bloc grants, the Northern Ireland Executive is constrained in its ability to shape the policy agenda and this undermines devolution. For example, it is difficult for a devolved administration to increase public spending at a time when the UK government is cutting spending.

  5.4  The Northern Ireland Confederation believes that the Barnett Formula has serious deficiencies and that an alternative should be found based on a more objective measure of relative need and a formula designed to produce equity in health and social care provision across the UK.

2 March 2009

1   Public Finance 21-27 November 2008 page 21. Back

2   The Northern Ireland Confederation for Health and Social services: "A Research Paper on Funding for Health and Personal Social Services in Northern Ireland" (January 2002) Back

3   Northern Ireland Assembly Research and Library services Research Paper 12/01 A background paper on the Barnett Formula (September 2001) Back

4   Independent Review of Health and Social care Services in Northern Ireland Professor John Appleby (August 2005) Back

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