Written by Gordon MacIntyre-Kemp
Arguably the most misunderstood part of the UK public sector budgeting mechanism is the Barnett Formula. The vast majority of people, politicians and the media seem to think that Barnett represents a subsidy to Scotland. Many Westminster MPs (mainly Conservatives) have described it as English taxpayers subsidising Scottish public spending, and the mainstream media have run headlines along those lines. There is just one little problem with that idea – it’s complete and utter nonsense.
The Barnett Formula was introduced as a funding mechanism containing a mathematical formula that aimed to reduce Scottish funding in comparison to England’s. To understand why it exists, and how it was supposed to reduce Scotland’s public spending, we need to understand the Scotland of the 1970s, when it was first introduced.
The Barnett Formula’s predecessor, the Goschen Formula, had been used between 1889-1959 before budget negotiations by secretaries of state became the norm. Scotland was an industrial powerhouse and its economy and the public sector revenues generated meant that Secretaries of State for Scotland had real negotiating power in budget discussions. READ MORE: https://www.businessforscotland.com/the-barnett-formula-myth-destroyed-it-does-not-subsidise-scotland/