Remember how much we owe Barnett formula
20:41Friday 22 January 2016
This invaluable formula, has helped protect us from the fall in oil revenues and there’s an extra £9m for flood victims writes Brian Wilson
There were a couple of decent economic statistics for Scotland in the past week. Average pay rates are slightly higher than in England. And disposable income for Scottish households is greater than in London.
On the other hand, according to the Scottish Government’s tsarina on inequality, half of working families live in “relative poverty” and are adversely affected by those two monuments to Nationalist rule – the council tax freeze and universal free things. She is apparently allowed to say what others have been abused and derided for pointing out.
Put all this together and there are some fairly obvious conclusions. First, Scotland’s problem is one of distribution rather than persecution. Second, some modest tweaking could readily reduce the extremes of inequality. A little taxation here, a helping hand there.
Instead, things are going in the opposite direction. The brutal cuts to local government funding (going far beyond the council tax freeze) will hit the poor and leave the better-off unscathed. No taxation lever has been pulled to avert that outcome or produce a larger pot of revenue. Areas of education spending which help the disadvantaged are being slashed.
The Nationalist narrative insists that all problems of inequality should be laid at the door of the Tories (whom they cheerfully assisted to power). If only Trident and Ian Duncan Smith did not exist, great burdens would be lifted and food banks replaced with flower gardens.
It is an attractive narrative for those who rely on external villains. It is also a false one. Regardless of policy differences with any UK government, Scotland’s inequality gap is now largely determined through choices made by this or any other Scottish Government. Even with welfare cuts, the choice exists in Edinburgh – ameliorate or exacerbate.
The key to Scotland’s relative wealth and higher earnings is our old friend the Barnett Fomula. This year, it provides Scotland with around £10 billion more for devolved spending than we contribute in taxation – equivalent to one-third of the Scottish Government’s entire budget and almost equal to total NHS spending.
The latest Government Expenditure and Revenue Scotland (Gers) figures from the Scottish Government’s own statisticians will confirm this widening gap which will reflect only part of the fall in oil revenues. Just weeks before the intended date for Scottish independence, oil is not at over $110 a barrel, as contended in the mendacious White Paper but under $30.
While the arithmetic is inescapable, the consequences are largely avoidable, thanks to Barnett. Whatever is spent in the UK, we get a fixed share in Scotland. That is why we have £1,400 a head higher public expenditure; why we have a bigger public sector and thus (to a significant extent) why we have higher average wage rates.
The Barnett Formula determines Scotland’s block grant, at which point the Scottish Government can divvy up the cash as it pleases. It also delivers dollops of additional money in the course of a year, reflecting additional Whitehall spending. There is no transparency about how these “consequentials” are applied.
I find it easy defending Barnett on grounds of geography, historic needs and indeed past distribution in the other direction. In three of the past 15 years, when oil revenues were high, Scotland paid more than it got out. It can work both ways. But critically, and certainly in current circumstances, it is a safety net which benefits Scotland.
The formula was created by a Labour government before North Sea Oil produced a penny of revenue. It reflects the fact that long prior to Holyrood’s creation, Scotland had administrative devolution and those who fought its corner – Tory as well as Labour, Michael Noble as well as Willie Ross – did so well. The Barnett Formula is a hugely valuable legacy which Holyrood inherited.
Would it cost even the current Scottish Government anything to say so instead of denigrating, denying and, whenever possible, disguising its beneficial consequences? A small example was found in the recent flooding. Extra allocations by Westminster for England meant that Scotland automatically receives an additional £9 million.
As people fought against the miserable consequences of flooding, would it have cost anything to acknowledge that the support given was a joint operation – some from the Scottish Government’s own resources and the majority additional, as part of the UK effort? They knew perfectly well that Barnett would deliver.
The decision to give £500m less to local authorities while Scotland’s block grant increased by £250m (with an underspend of £350m from last year) was taken entirely in Scotland. The decisions to allocate Barnett consequentials so that NHS expenditure in Scotland has risen by less than in Tory England are taken entirely in Scotland.
If these are defensible, the Scottish Government should be forced to defend them. The repeated claims that all evil stems from Westminster austerity are simply untrue. The demonstrations against council cuts should be taking place outside the offices of Nationalist MSPs, not against beleaguered councillors who are forced to wield their axe.
Let’s also look at the fiasco of the week – the announcement that the high speed rail link between Glasgow and Edinburgh will not now go ahead. Well, of course it won’t. As I wrote when it was announced by Nicola Sturgeon (in November 2012, to largely uncritical and gullible coverage), this was an implausible scheme driven by Ms Sturgeon’s vainglorious call to arms: “We will not wait for Westminster to bring high speed rail to us.”
The result, at a cost of several billion pounds, would have been a second line, running alongside the existing one and connecting to nothing when what people actually want is a return to 1970s journey times, reliable wifi and a decent cup of coffee. It was all diversionary nonsense and is now confirmed as such.
Back in the real world, it looks as if HS2 will go ahead and – regardless of the overall merits of that decision – Scotland will benefit from reduced journey times. But there is more to it than that. The Scottish Government stands to get an extra £1.5 billion in Barnett consequentials as a result of HS2 spending in England, to utilise as they like in Scotland.
Is that not worth a mention, if only to say yet again: “Thank goodness for Barnett”?
Read more: http://www.scotsman.com/news/brian-wilson-remember-how-much-we-owe-barnett-formula-1-4009119#ixzz3yA4HktqA
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