Andy Burnham, frontrunner to become the next prime minister, has told BBC Wales he has no plan to reform the main system that funds the Welsh government - dashing hopes of a long-promised overhaul. The formula in question, known as the Barnett Formula, has been a source of tension between Westminster and the devolved nations for decades, and its future is now at the centre of a political battle just as Burnham prepares to take office.
The Barnett Formula is the mechanism the UK government uses to allocate funding to Scotland, Wales and Northern Ireland. It was introduced in the late 1970s by then Chief Secretary to the Treasury Joel Barnett, and it calculates funding based on population share and the level of public spending in England. In simple terms, if the UK government decides to spend more on a particular service in England - say, health or education - the devolved nations receive a corresponding 'population-based' proportion of that extra cash. This is meant to ensure that spending per person remains roughly equal across the UK.
“Explaining the Barnett Formula and the debate over devolution funding after Andy Burnham rules out reform.”
However, the formula has long been criticised, particularly in Wales. Critics argue that it fails to account for Wales' higher needs - an older, sicker population, and higher costs of delivering services in a more rural and less densely populated country. Despite receiving more funding per head than England, many in Wales say the amount is still insufficient given the scale of need. A major assessment of Wales' funding needs has been commissioned but its recommendations have yet to be implemented. Both Welsh Labour - the party Burnham leads - and Plaid Cymru have called for reform. Just a year ago, the Welsh Labour conference passed a motion demanding change, but Chancellor Rachel Reeves rejected that call two months later.
For Burnham, who is expected to make a speech on devolution and the economy next week, the issue has become a test of his commitment to the 'nations and regions' he says he wants to empower. His spokesperson told BBC Wales that he would put Wales 'at the centre' of his government and 'radically push power down and out of Westminster and Whitehall'. But the same spokesperson made clear that reforming the Barnett Formula is not part of his plans. Plaid Cymru First Minister Rhun ap Iorwerth reacted sharply, calling it 'not a great start' and saying it 'does not give me an awful lot of confidence'. He urged Burnham not to 'duck out of' dealing with funding and repeated demands for more powers over borrowing, tax, rail, policing, justice and the Crown Estate.
The implications for UK readers go beyond the devolved nations. The Barnett Formula is closely tied to debates about English regional funding too - critics say it locks in inequalities between different parts of the country. Business Secretary Peter Kyle, speaking to Channel 4 News, warned that any new prime minister must respect the current fiscal rules, which may limit the scope for large-scale reform. Meanwhile, former foreign secretary David Miliband praised Burnham's 'openness and energy', but declined to say whether he would return to government.
The key questions many people ask about the system are:
Q: What exactly is the Barnett Formula? It is the mechanism that determines how much extra funding the devolved governments of Scotland, Wales and Northern Ireland receive when the UK government increases spending in England. The amount is calculated based on each nation's population share, adjusted for the extent of devolved responsibilities.
Q: Why is the Barnett Formula controversial? Critics say it does not reflect the actual needs of each nation - particularly Wales, which has a higher proportion of older and sicker people. This means Wales may receive less funding than it would under a 'needs-based' formula. The system also has no expiry date and has been tweaked but never fundamentally reformed.
Q: What would reforming the formula mean? A reform would likely replace the Barnett Formula with a system that allocates funding based on objective measures of need - such as population age, health outcomes, and economic performance. This could give Wales and other areas a larger share, but might reduce funding for Scotland, which currently does relatively well out of the formula. Any change would be politically and financially complex.
What happens next? Burnham is due to deliver a major speech on devolution and the economy in the coming days. He has ruled out Barnett Formula reform for now, but his stance may evolve once he is in Downing Street. Plaid Cymru says it will 'hold' him to his previous words, and the Welsh Labour conference's call for change remains on the record. With a new trade deal with India coming into effect next month and the UK still adjusting to a change of prime minister, the funding debate is far from over.