The Barnett Formula will withhold from Scotland, over the five years covered by the spending review, enough money to have hired approximately 7,955 additional NHS medical professionals. That is not a bonus – it’s a smoke and mirrors mechanism that aims to reduce the Scottish Government’s spending power in real terms.
The Barnett Formula was first devised in 1978 as a temporary response to the potential devolution of powers to a Scottish parliament after the 1979 devolution referendum and thus Barnett would replace the annual budget negotiations. The referendum result saw 51.6% of voters in Scotland voting for devolution. However, fearing what would happen, a Labour MP for an English constituency successfully tabled an amendment to the referendum act that stipulated that more than 40% of the total Scottish electorate would have to vote “Yes” in the referendum for devolution to be enacted. Even though the result was 51.6% Yes, the turnout was only 64%, so as a percentage of the total electorate only 32.9% voted Yes, and so despite winning the referendum, devolution was denied to the people of Scotland at that point.
Fearing a collapse of influence in future budget negotiations, consecutive Scottish Secretaries of State argued to maintain the Barnett Formula, as they knew that, at least in the short term, it would maintain Scottish public sector spending at higher levels per head than in England. The Treasury, presumably understanding the mathematics of the formula knew that over time it would reduce real terms spending in Scotland to parity with English levels, was only too happy to agree.
The Barnett Formula has not succeeded though in reducing Scotland’s public spending. The reason it remains higher to this day is largely due to unforeseen devolution complications that undermined the Barnett Formula’s goal. That is why many Westminster politicians want to replace it, with a formula that would presumably be more effective at cutting Scotland’s budget.