TO GOVERN IS TO CHOOSE
18 December 2023
The Scottish Government has recently been pushing misleading lines on Barnett consequentials. These are the facts.
(Joel Barnett, who devised the Barnett Formula when he was Chief Secretary to the Treasury in the late 1970s)
What are Barnett Consequentials?
Barnett consequentials are the adjustments made to the Scottish Government’s block grant when the UK Government makes tax and spending decisions for rUK (usually just England) in areas which are devolved in Scotland.
The basic principle is that when the UK Government spends more in England in areas (eg health) which are devolved in Scotland, the Scottish Government’s block grant is adjusted upwards so that Scotland gets a proportionally equivalent increase. The details are a bit more complicated and nuanced, but those details are not necessary to understand this basic principle. This element of the Barnett formula is reasonably well understood.
But there is another, less understood, type of Barnett consequential. If the UK Government cuts a tax in England which is devolved in Scotland, the Scottish Government receives a Barnett consequential which is, roughly speaking, an amount of money proportionally equivalent (by population) to the cost of the tax cut in England.
The Scottish Government can then decide whether or not to replicate the tax cut in Scotland. The amount received in Barnett consequentials won’t always be exactly the cost of replicating the tax cut in Scotland, but the logic is that it should be reasonably close.
The important point is that although these are two very different ways of generating Barnett consequentials for Scotland, the money which arrives via the block grant has no strings attached. However Barnett consequentials are generated, the Scottish Government is entirely free to spend them as it chooses.
Ahead of tomorrow’s budget, the Scottish Government has recently been pushing two lines which are an attempt to mislead voters on this very important point.
First misleading line
At FMQs on 30th November 2023, the Deputy First Minister, Shona Robison, said this:1https://www.parliament.scot/chamber-and-committees/official-report/search-what-was-said-in-parliament/meeting-of-parliament-30-11-2023?meeting=15582&iob=132960#orscontributions_M1870E432P768C2539369
I said what I said at the beginning about Douglas Ross’s priorities because he has had nothing to say about a Tory Chancellor of the Exchequer’s autumn statement that has given no money whatsoever to this Government or this country for our public services for next year. I think that the public are pretty concerned about that, because it will impact on every part of the public sector across Scotland. If the Tories do not care about that, the Scottish National Party certainly does.
But on 22nd November 2023, HM Treasury published the following information:2https://www.gov.uk/government/publications/autumn-statement-2023
As a result of decisions at the Autumn Statement, the devolved administrations are receiving over £1 billion in additional funding through the Barnett formula over 2023-24 and 2024-25. The Scottish Government is receiving £545 million, the Welsh Government £305 million, and the Northern Ireland Executive £185 million.
There was clearly an inconsistency here, so These Islands asked, via a Freedom of Information request, for an explanation. This was the response:
Your query references the fact that the Scottish Government is receiving £545m of additional funding through the Barnett formula over 2023-24 and 2024-25. Of the £545m, £320m relates to 2024-25, what the Deputy First Minister has referred to as next year. The overwhelming majority of that £320m relates to tax reduction measures – specifically on business rates.
The full breakdown of the £320m is set out below, with the first three measures all relating to business rates:

The balance of consequential funding that relates to public services is £57 million. This represents 0.13% of the total Block Grant funding after the Autumn Statement of £43.1 billion. After allowing for the effect of inflation the 2024-25 Block Grant is lower in real terms than the level of UK government funding for 2022-23. These figures form the backdrop against which the Deputy First Minister made her remarks in the chamber.
This is a misleading response. The implication is that Barnett consequentials generated by business rate reductions in England can only be spent on replicating the same tax cut in Scotland. This is not true.
The Autumn Statement delivered £320 million of additional funding for Scotland via Barnett consequentials, and the Scottish Government is free to spend that money however it chooses. It can decide to replicate the tax cuts. Or it can spend all of that money on public services. There are no strings attached.
Second misleading line
On 17th December 2023, the official Scottish Government Twitter account sent the following tweet:3https://x.com/scotgov/status/1736370730051195272?s=46&t=y9v1mXDn2DQJqjCpgZcKXg

This is another attempt to mislead. The Barnett consequentials generated by spending decisions on the NHS in England are not directly tied to spending decisions on the NHS in Scotland.
The NHS is completely devolved. The Scottish Government can spend as much (or as little) as it chooses on the NHS in Scotland.
Of course it has to make similar decisions in other devolved areas. And if the sum of all those decisions amounts to spending commitments in excess of its resources, the Scottish Government has tax levers at its disposal.
The Barnett formula already delivers per-capita public spending in Scotland which was £2,217 higher than the UK average in 2022-23.4https://www.gov.scot/publications/government-expenditure-revenue-scotland-2022-23/ It is not the block grant which is preventing Scottish Government largesse. Quite the opposite.
Conclusion
Both of these misleading lines are attempting to confuse voters into believing that Barnett consequentials must be spent in Scotland in the same way they were generated in England. This is not the case.
The block grant arrives with no strings attached. The Scottish Government chooses how to spend that money. And it chooses whether to raise additional money by increasing taxes. To govern is to choose.
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