Controversy
The Barnett formula is widely recognised as being controversial, but there is no consensus on how to change it.
- It takes no account of different needs or different costs in different areas.
- It does not affect existing levels of public expenditure, even if relative population shares change.
- Since existing levels of public expenditure are not allocated in proportion to population, a particular expenditure decision will lead to different percentage changes in different areas.
- It takes no account of different amounts of tax paid in respect of different areas or of changes in these amounts.
- It does not apply to divisions of expenditure between the different regions of England.
- Neither the Barnett formula nor needs-based spending is incentive-compatible, so neither plan would give the territories any fiscal incentive to become more productive.
Read more about this topic: Barnett Formula
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