Politicians from across the spectrum are agreed that Wales needs to “get what we’re owed” amid calls to scrap a 46-year-old formula used to calculate how much money it gets from the UK Government to run public services that has “no place on modern democracy”.

Introduced in 1979, the Barnett formula has been used to calculate the amount of money spent in Wales by the UK Government for 46 years – despite only being introduced as a temporary measure.

It impacts finances at every level of government within Wales, as some of the money received from the UK by the Welsh Government is then used to pass on to local councils, where mid and north Wales authorities languish behind in terms of funding leading to cuts to services and rising council tax for residents.

If Wales received more from the UK under a different funding model, councils such as Ceredigion, Powys, Gwynedd and Pembrokeshire – who have all called for more cash to stem service cuts and job losses – would likely receive more funding to provide key public services.

Senedd members last month unanimously called for a fairer funding formula for Wales, with Plaid Cymru leader Rhun ap Iorwerth calling for the “outdated and unfair” Barnett formula to be scrapped, warning Wales gets a “poor deal”.

In 2010, after concluding that Wales risked long term underfunding through the Barnett formula, the independent Holtham Commission on funding arrangements in Wales proposed a new needs-based approach to replace the Barnett formula which would have considered factors such as each nation’s level of income poverty, or the share of children and pensioners in the population.

A House of Lords report in 2009 also agreed there was a compelling case for a needs-based system for funding the four nations, and criticized the “failure of the Formula to take account of population changes over time” as “arbitrary and unfair”.

15 years on and the formula remains in place, albeit with certain tweaks.

Last year, First Minister Eluned Morgan confirmed that talks to scrap the Barnett Formula “have begun” with the UK Government, but nothing concrete on replacing the formula has since emerged.

The Barnett formula is used by the UK Treasury to calculate the annual block grant for Welsh government as well as for the Scottish Government and Northern Ireland executive.

It determines the overall funding available for public services such as healthcare and education in the devolved nations.

The formula was first used for Scotland in 1978 and is named after Joel (latterly Lord) Barnett, the then Chief Secretary to the Treasury.

The formula was extended to Northern Ireland in 1979 and Wales in 1980.

It was supposed to be a temporary measure, to avoid the annual negotiations that took place during the 1960s and early 1970s, but it has been used with some modification ever since.

Until 1999 it was used to determine the level of UK government spending on public services in Scotland, Wales, and Northern Ireland, and since then it has been used to set the budgets of the devolved administrations.

The Barnett formula calculates devolved budgets by using the previous year’s budget as a starting point, and then adjusting it based on increases or decreases in comparable spending per person in England.

The Barnett formula only applies to public services that are devolved, and therefore applies to slightly different areas of spending in each nation.

For example, if the UK Government increases the police budget, this would result in additional funding for the devolved administrations in Scotland and Northern Ireland, where policing is devolved, but not in Wales, where policing is not devolved.

The same is true of so-called “England and Wales” projects like the maligned HS2 high-speed railway line that lies wholly within England, but the money spent on the project – if labelled an England-only project – could have seen billions of pounds in sequential funding coming to Wales.

Earlier this month, Ceredigion Preseli MP Ben Lake – Plaid Cymru’s treasury spokesperson said that there is a “lack of transparency in the way Wales is funded through the Barnett formula” amid a row of rail funding.

The Barnett formula also caps the ability of the Welsh Government to borrow money for projects or services, at a level far lower than in Scotland.

Scotland can borrow up to £4.75 billion among resources and capital investment while, under the formula, Wales is capped at a total of £1.5 billion.

But what is the alternative?

Some would say independence would be an easy way to scrap the Barnett Formula, with the country leaving the UK and standing on its two feet instead of receiving money from the UK Government.

Around a quarter of those surveyed during polling last year said yes to Welsh independence, with the idea gaining traction throughout the country, there remains no clear pathway currently to independence.

Others, including the Welsh Government, want a new formula to be based solely on the needs of the people of Wales, and not decided arbitrarily by England spending.

In 2016, a study by the Wales Governance Centre suggested options including a funding floor within the formula to ensure Wales does not fall behind based on England spending, and an” annual uplift of additional funds for Wales through the Barnett formula that would be multiplied by a fixed needs factor.”

A needs-based funding model would see Wales receive its fair share of money regardless of population swings or spending over the border.

Later that year a floor was introduced which the Welsh Government said went “some way to delivering a fairer system” but that it would still like the formula scrapped and replaced.

In November last year, a report from the Welsh Parliament Finance Committee said that it “found time and again that the ability of the Welsh Government to make spending decisions is often hampered by structures, attitudes and processes that are outdated and not reflective of the territorial realities of the UK.”

The Committee recommended that the UK Government adopt a “needs-based funding mechanism to ensure fairer funding for Wales.”

The Welsh Government set out the need for a new principles-based approach to UK funding in its own paper, Reforming our Union: Shared governance in the UK, in June 2021.

That paper said that “spending power for the devolved governments should be determined, having regard to proposed levels of spending for England, by reference to a set of agreed objective indicators of relative need, so that spending power is fair across the different governments and an equivalent level and quality of public goods can be delivered in all parts of the UK.”

It says the current system “does not take into account the relative needs of each nation.”

Wales’s Barnett formula now includes a needs-based factor to ensure its relative block grant funding per head doesn’t fall below 115 per cent of England’s.

“The Welsh Government believes that the Barnett formula should be replaced and a new relative needs-based system implemented, within a comprehensive and consistent fiscal framework to which all Governments in the UK agree,” that paper said.

“The devolved governments should be resourced by a combination of needs-based grant from the UK Government, resources raised through devolved and local taxation, and capital borrowing.

“The agreements underpinning fiscal relationships between the UK Government and the devolved governments should be based on common principles of partnership, transparency, and recognition of the interconnected nature of the UK and devolved administration fiscal landscape.

“The Welsh Government recognises that different circumstances and political preferences in different parts of the UK has led to an asymmetry in fiscal devolution.

“However, asymmetry does not have to mean an ad hoc, unsystematic approach to fiscal devolution and there is a risk that the growing lack of coherence will lead to instability if not addressed.”

Partial devolution of income tax in 2019 and landfill and stamp duty in 2018 to Wales allowed the Welsh Government to raise its own money for the first time – but those factors were included when applying the Barnett Formula.

A House of Commons research briefing this month explains that “there have been calls for the Barnett formula to take greater account of need, or to be replaced with a needs-based formula. “Those arguing for such a change say the cost of providing public services is influenced by a range of factors other than just relative population size including, but not limited to, characteristics of the population, deprivation and population density.”

Lords Committees in 2009 and 2015 also recommended replacing the Barnett formula with a needs-based formula.

Mr ap Iorwerth told the Senedd last month that “the inadequacy of the Barnett formula has been apparent ever since its inception, which, of course, way predates the devolution era.”

The Plaid Cymru leader pointed out Wales faced a £72m shortfall from Westminster to cover the increased cost of national insurance in the public sector due to the “flawed” formula.

Mr ap Iorwerth argued Wales is owed around £5bn from rail projects across the border being classified as “England and Wales”, denying the Welsh Government consequential funding.

Sam Rowlands, for the Conservatives, called for a review of the fiscal framework – a 2016 agreement between the Welsh and UK Governments on funding and tax powers.

He said: “In simple terms, the Welsh Government receives £1.20 from the UK Government for every £1 spent on public services in England.”

Mr Rowlands said Scotland has had two such reviews since 2015, increasing a cap on borrowing powers which now rises in line with inflation unlike in Wales.

“Our friends in Northern Ireland have benefited from recent reviews too,” he said.

“Their most recent review, published in 2024, provides a Barnett needs assessment of a 24 per cent increase against Wales' 20 per cent.

“So, it doesn't seem right to me.”

Labour’s Mike Hedges said the Barnett formula “was never designed with Wales in mind.”

Rhys ab Owen, an independent, warned that the Barnett formula works on an annual basis, making it difficult to plan for the longer term.

Calling for a needs-based formula, he said: “Funding is linked to specific changes in public spending in England and is fundamentally responsive to English… rather than Welsh need.”

Pointing out that Scotland and Northern Ireland can borrow £3bn compared with £1bn in Wales, Mr ab Owen said: “County councils, in proportion to the population they represent, also have more borrowing powers than the Welsh Government.”

Mark Drakeford said the scrapping of the formula had been “the long-standing policy of successive Welsh Governments”.

Warning that the formula is often bypassed, Wales’ finance secretary told the Senedd: “Funding is not allocated fairly and systematically across the devolved countries.”

Plaid Cymru finance spokesperson, Heledd Fychan MS, said that “a funding formula from the 1970s has no place in Wales’ modern democracy.”

“The continual underfunding of Wales should have been consigned to the history books long ago, but Labour’s continued inaction on this matter is letting Wales down.

“Whether it’s consequential funding from rail projects in England which means Wales loses out on billions, whether it’s the insufficient National Insurance reimbursement which means Wales’ public sector loses out, or the unfair Barnett formula which leaves Wales shortchanged, Wales is left behind.”

We will give the final word to Lord Barnett himself, who wrote in the Daily Mail in 2014 that he "never thought the arrangement would last any longer than a year or two", and described the public spending per head differences as "grossly unfair".

“I have become more troubled by the so-called ‘Barnett Formula’ with every passing year, “ he wrote.

“It is clear that what was then a short-term political fix has no place in deciding long-term government spending.

“I have been pressing the case for wholesale reform of the system for many years.

“I believe the Barnett Formula should be scrapped as soon as is practicable and replaced by a statutory body charged with distributing government spending in a way that the most money goes to areas that need it most.”