The Barnett Formula: Background
The Barnett formula, in principle at least, governs the assigned budget of the Scottish Parliament (formally block grant, now DEL) and funding of Welsh and NI Assemblies.
David Heald (conveniently!) provided an analysis at the last Hume Institute Seminar
- consequences for (DEL) expenditure and expenditure per capita across regions of UK (explored also by many others e.g. Ashcroft, Bell, Cuthbert and Cuthbert, Kay, McCrone, Midwinter)
- higher level of expenditure in Scotland is protected (fixed in nominal terms) by formula but expenditure per capita ultimately falls towards the English level (the “squeeze”)
-
Try to push the analysis of Barnett a little further, though here only for Scotland:
- we focus primarily on the consequences of rigorous adherence to the formula for the Scottish economy
- proceed by making “small open economy” assumption - abstracts from spillover and feedback effects
- isolate the impact of Barnett (impose ceteris paribus assumption in the model)