An annual lump-sum transfer from the UK Government to the Scottish Government. The large “block” of money can be spent in any way the Scottish Government sees fit.
- The Block Grant has been the Scottish Government’s core source of funding since Scotland’s first major devolution of powers in 1999; when the Scottish Government and Scottish Parliament was first established. It is the primary method used by the UK to fund the devolved administrations of Scotland, Wales and Northern Ireland.
- It is essentially an annual lump-sum transfer from the UK Government to the Scottish Government. This transfer of money makes up the majority of the funding for the budget. The large “block” of money can be spent in any way the Scottish Government sees fit.
- It is worth noting that the UK’s budget is made up from taxes from all of the UK’s nations, including Scotland. So, the lump sum payment is not just a transfer from England to Scotland – to understand the relationship between Scotland and the UK’s finances, see the Fraser of Allander’s guide to Government Expenditure and Revenues Scotland.
- The block grant is composed of two parts.
- The first is the baseline block grant, equivalent to the total block grant from the previous year. The baseline block grant in 2018-19 was £30.9 billion.
- The second component is called the Barnett Consequential, which is the change to the total block grant from the previous year. The Barnett Consequential allocates to the Scottish budget a population share of the change in ‘comparable’ UK Government spending in England. Barnet Consequentials added on another £3.5 billion to the baseline block grant.
Figure 2: Calculation of the block grant
How is the Block Grant calculated?
The block grant is calculated each year using the Barnett Formula. The Barnett Formula determines the change in the block grant from the previous year. This Barnett Consequential is added to the baseline block grant of the previous year
The Barnett Formula allocates the Scottish budget a population share of changes in UK Government spending on ‘comparable’ services in England. ‘Comparability’ is a measure of the degree to which a particular public service is devolved to Scotland. This Barnett consequential is calculated by multiplying the change in comparable UK Government spending in England by Scotland’s population as a proportion of England’s (about 10%).
Comparable spending is measured by the comparability factor. The comparability factor is a measure of the extent to which a given spending line is devolved in Scotland. Each department has its own comparability factor. Education is completely devolved, so has a comparability factor of 100%, whereas others (like transport) have lower comparability factors. Comparability factors are set out in HM Treasury’s Statement of funding policy (2015).
To show how the Barnett Formula works, if the UK Government increases spending on Education in England by £100m, the Barnett Consequential would be £100m x 9.71% (population share of Scotland) x 100% (comparability factor), which would result in an additional £10m for the block grant. The Scottish Government is free to spend this additional £10m on whatever they see fit.
Figure 3: Barnett formula calculation
