Barnett consequentials and the Barnett guarantee
Published 8 January 2021
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The UK Government allocates funding in two ways, either to the UK as a whole, or specifically just for England when the funding is spent on a policy area where the devolved administrations are responsible (including health, education and local government).
The Barnett formula is the way the UK Government ensures that a share of additional funding - allocated only to England - is provided fairly to Scotland, Wales and Northern Ireland.
As a result of the coronavirus pandemic and following requests from the devolved administrations for more borrowing powers the UK Government announced the Barnett guarantee in July 2020.
The guarantee provides the devolved administrations with increased funding certainty, enabling them to decide how and when to provide support, rather than loans or receiving Barnett consequentials in the traditional way. It allows the devolved administrations to spend additional funding without having to wait for it to be spent in England first.
The Barnett guarantee sets out how much additional funding the UK Government will provide to each of the devolved administrations to address the pressures of the pandemic in 2020-21. It is on top of the devolved administrations’ Spring Budget 2020 funding.
The UK Government initially announced a guarantee of an additional £12.7 billion on 24 July.
The guarantee has since been uplifted three times to reflect the changing situation:
- 9 October - £14 billion
- 5 November - £16 billion
- 24 December - £16.8 billion
This has meant the devolved administrations have received the below additional upfront funding since the start of the pandemic:
Scotland - £8.6 billion
Wales - £5.2 billion
Northern Ireland – £3 billion
This is new funding resulting from the Barnett formula but it is being provided upfront rather than alongside England-only announcements.
The UK Government will continue to regularly review the guarantee and uplift it when appropriate.
To give an example of the way that the Barnett formula is applied, on 5 January 2021 the government announced £4.6 billion of funding for business grants.
Applying the Barnett formula resulted in the below additional funding for the devolved administrations contributing towards the guaranteed £16.8 billion:
- £375 million for the Scottish Government
- £227 million for the Welsh Government
- £127million for the Northern Ireland Executive