The Barnett formula for allocating public spending to UK devolved bodies should be scrapped says an influential Lords Committee. Funding should be removed from the Treasury and handed over to an independent UK Funding Commission. Scotland and England now have “markedly lower” overall needs than Wales and Northern Ireland, and a new system ought to reflect it, the peers’ report said. The heat is on Scotland where the report will make political waves in the debate over wider tax raising powers and independence. But Northern Ireland and Wales might even do better under a needs based system. Economist John Simpson points out that:
Northern Ireland spends more spend more per head than its population share – it makes up 2.8% of the UK population, but receives 3.5% of overall spending, However, when it comes to the basics of education and health – which are the very big budget items – we are only fractionally above average.
“Should we have a flat rate of spending for every person in the UK? No, because that doesn’t take account, for example, of whether there are more young or old people. In Northern Ireland, we’ve got more young people. Education is very expensive, so should we therefore have a formula which takes account of this”
Possibly, but only if education spending becomes more efficient through for example, the reform of secondary education, I suggest.
Treating England as a single entity wont wash. There are poorer English sub-regions than NI overall, as the Liverpool Daily Post and the Newcastle-based Northern Echo remind us. During the recession its hard to see any government frightening the horses with a wholesale sale review. At the Constitution Unit our view is that despite all the criticisms, the Barnett formula wont just lie down and die. It will remain in place until we have a government with the courage and determination to put something else in its place. So this report challenges all parties to come up with an alternative which is workable and fair.
The Lords report presents challenges to all the parties:
To the SNP, whose policy is total fiscal autonomy (including Scottish oil revenues). No UK government will agree to this. Are the SNP willing to compromise, if the alternative is a big cut in UK government funding for Scotland?
To the Conservatives, who want to reduce the UK governments block grant to Scotland, but are uncertain about allowing Scotland greater fiscal autonomy
To Labour, who established the Calman Commission in Scotland, but may not have the courage to implement its recommendations against Treasury advice.