Back in 1978, the then chief secretary to the UK Treasury, Joel (now Lord) Barnett, was having a hard time.
It was an era of appalling management of the economy by the Labour government (the “winter of discontent” had amused the nation over 1978-79); the government was in the process of preparing for the devolution referendums to be held later in the year in Scotland, Wales and Northern Ireland; and there was a dwindling supply of money.
In order to placate his cabinet colleagues, he devised a “formula” which allocated additional money to three of the four UK nations, ie excluding England.
Speaking (22 September 2014) after the Scottish referendum, Lord Barnett said: “There was already a long-established convention for funding public spending in Scotland, based on the relative populations of England and Scotland almost a century before.
“I merely adjusted the figures to take account of changes in the relative populations of the four home nations and drew up the spending figures accordingly…
“Little did I think when I made a back of the envelope calculation about funding for Wales, Scotland and Northern Ireland more than 35 years ago that the so-called ‘Barnett formula’ would take on a life of its own and go on to become the unwritten—and unjust—convention by which Government spending would be allocated for decades ahead.”
According to the Belfast Telegraph, he said the method was now obsolete and should be replaced.
“I never thought the arrangement—there was and is no proper ‘formula’ that works out how much money is needed and where it should be spent—would last any longer than a year or two, certainly not after the next general election. It has no legal or democratic basis…”
[source: Belfast telegraph]
Essentially, the Barnett formula distributes money to the constituent countries of the UK for expenditure on issues for which their devolved administrations (as opposed to UK central government) are responsible. Since England does not have a devolved assembly, it doesn’t get any extra money.
The per capita spend per country (including its ‘Barnett formula money’) was, for 2012/13:
- England £8529
- Scotland £10152
- Wales £9709
- Northern Ireland £10870
[source: The guardian]
Because the English overwhelmingly dominate the Union, scrapping the formula would lead to large reductions in the per capita spend in the other countries, but only a 4% increase in England.
Unfortunately, as Joel Barnett knew at the time, the population figures on which the “arrangement” was produced were wrong.
[source to be provided]
As Wikipedia puts it [para 4] with its characteristic impartiality (at least it did on 23 September): “in a last-minute government bid to sway voters against independence, Scotland had been promised continued high public spending to the detriment of other parts of the United Kingdom, irrespective of the fact that most of Scotland’s oil revenues are squandered in the south.”
So, let’s recap all that:
1 The Barnett formula isn’t a formula; it’s an arrangement, whatever that is
2 It has no parliamentary standing, because it was never debated; one doubts that it was even discussed in cabinet, the ministers being too preoccupied with other matters, only caring that the Treasury delivered the goods
3 Therefore it has no legal standing
4 It’s unfair because based on the wrong numbers
5 It would be fair to allocate additional expenditure to areas of the UK which are deprived, or whose development would serve the UK as a whole, or for some other good reason, but the “Barnett formula” isn’t it
6 Because of 2 and 3, it could be scrapped now; it doesn’t require a vote in parliament because its existence isn’t predicated on a previous vote: there is nothing to vote on. It would simply not be applied in the next spending round. Indeed, because of 1, it is difficult to know what would be voted on.
And the conclusion is…
The “Barnett formula” could and should be scrapped right now. Certainly before the 2015 general election.
But, the leaders of the three main parties, and also of UKIP, in truth, have a vested interest in keeping Scottish people onside because they have a vested interest in the continuity of the Union.
(As always, these are personal interests: Cameron, for example, has no taste for being remembered as the UK prime minister who presided over the destruction of the Union, particularly as it would have been the inept “No” campaign which he politically underwrote that would have been as much to blame as anything else.)
Each of these leaders (and, as ever, I use the word leader in an approximate sense) understands that the withdrawal of the Barnett formula would result in the disaffection of more former supportive Scottish voters. Of course, this is what they believe; I’m not saying it would happen. Personally, I think that Scots are intelligent enough to welcome a different formula, particularly one which was self-evidently fairer.
> blog: Referendum: clearing up the mess—1: The numbers
to be continued