How The Formula Works
Barnett consequentials are calculated to ensure that a particular change in public expenditure in one geographical area leads to a change in public expenditure in others that are proportionate to population in the different areas. It is not applied to all public expenditure but remains a default option unless other decisions are made. A decision to change expenditure in Great Britain will lead to changes in Northern Ireland; a change in England and Wales to changes in Northern Ireland and Scotland; and a change in England to changes in Northern Ireland, Scotland and Wales.
The Barnett formula applies only to certain areas of 'identifiable' public spending and excludes large items of expenditure such as defence.
Any change each year in public expenditure in England on matters devolved to one or more of the other countries of the UK leads to an increase to these other countries' areas in proportion to their relative population at that time. Expenditure is allocated en bloc, not per service (health, transport, etc.), allowing each devolved administration to allocate these funds as it believes appropriate.
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