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‘Flawed’ Barnett Formula gains Scotland budget reprieve of £1 billion

November 12 2014

Scotland has gained a budget reprieve of £1 billion from the Treasury because of the “flawed” Barnett Formula, according to the Institute of Fiscal Studies. The Treasury insisted the formula produces results that are “broadly fair, transparent and consistent” and said the IFS report concentrated on short-term results in one area of spending. A new report published today by the IFS claims the Scottish Government is to see its budget cut by around £600 million less than England’s as a result of spending reviews in 2010 and 2013 than under a “corrected” version of the formula. It also suggests that follows on from budget increases of £400m more as a result of spending reviews during the 2000s. The report added the Northern Irish Executive will have £200m less sliced from its budget because of the “flaw”. The IFS said the Barnett Formula, the system devised in the 1970s for distributing central funds between the nations of the UK, deals with business rates in a way which benefits Scotland and Northern Ireland to the disadvantage of England and Wales. David Phillips, a senior research economist at the Institute for Fiscal Studies and the author of the report, said: “Problems with the way the Barnett Formula treats business rates mean that Scotland and Northern Ireland have avoided hundreds of millions of pounds of cuts that they would have faced under a corrected formula cuts that England and Wales have faced.” A Treasury spokesman said: “Like all other areas of spending, the treatment of local government spending in the Barnett Formula is based on the level of devolution of services, not on individual revenue streams like business rates. “The leaders of all three main UK parties have been clear that the Barnett Formula will continue.” A Scottish Government spokesman said: “Scotland has generated more tax per head than the UK as a whole in each of the last 33 years. “Even when North Sea revenue is excluded, on a per capita basis Scotland’s national income and tax revenues are on a par with the UK. “It should also be noted that even with the current Barnett Formula, Scotland will continue to face cuts to its budget of 10% over the five years to 2015/16.”

Motoring news

Audi’s new Q cars

April 12 2017

Another week, another new Audi. Two new Audis, in fact. The German car maker has announced a couple more additions to its Q line up of SUVs. The Q4 is a coupe-SUV hybrid that will go up against the BMW X4 and Mercedes GLC Coupe. As its name suggests, it’ll be positioned between the compact Q3 and bigger Q5. At the other end of the scale is the Q8, which will go head to head against the Range Rover. It’s lower and sleeker than the Q7 Audi is also producing. In concept form, it sat only four people, although it seems likely the production version will be a five seater. There’s a 630 litre boot as well. Eagle eyed Audi followers will notice the only SUV slots left to fill are the Q1 and Q6. Watch this space...


Academics warn new powers for Scotland may be unworkable

November 20 2015

Scotland's new package of powers may not be workable and could require an entirely new method of funding devolved governments, leading academics have warned. The Institute for Fiscal Studies (IFS) says it is not possible to guarantee the new powers will cause no detriment to Scottish and UK budgets. A new joint paper, co-written by the University of Stirling and the Centre for Constitutional Change, said the Barnett formula that calculates Scotland's share of UK spending should be reformed. This would defy a key recommendation of the Smith Commission that Barnett should be retained - but failure to find an appropriate funding mechanism could cost Scotland a billion pounds a year, IFS said. First Minister Nicola Sturgeon has refused to back the Scotland Bill unless it comes with an appropriate funding formula, a stance backed by devolution architect Lord Smith of Kelvin, who said politicians should not sign off the Bill without a working fiscal framework. The House of Lords Economic Affairs Committee, in a report entitled A Fracturing Union? published on Friday, argues the process for determining the fiscal framework is flawed and that its design principles may not be workable and are not mutually compatible. IFS said it is not possible to satisfy all of the Smith Commission's "no detriment" principles. It also claimed that the precise way in which the remaining block grants are calculated and indexed over time could mean differences of over a billion pounds a year in the Scottish Government's budget in the space of a decade or so. If an unreformed Barnett formula remains in place it is impossible to design a system that simultaneously satisfies the Smith Commission's principles that there should be "no detriment as a result of the decision to devolve a power", and that post-devolution changes to a devolved tax in the rest of the UK should not affect the amount of public spending in Scotland, IFS said. David Bell, professor of economics at Stirling University and co-author of the report, said: "The options available for calculating the block grant adjustments and other elements of the fiscal framework will have major effects on the Scottish Government's budget and the fiscal risks and incentives it faces. "These issues should be part of the public and parliamentary debate, as much as the tax and welfare powers set out in the Scotland Bill itself have been." David Phillips, a senior research economist at the IFS and co-author, said: "It may now be time for a more fundamental reassessment of how the devolved governments are financed: including whether the Barnett Formula should be reformed. "Reform of Barnett may remove some of the conflicts between the Smith Commission's principles that we have identified. "The Smith Commission parked these issues to one side by committing to the current Barnett formula. Making the UK's fiscal framework sustainable for the long term may require reopening the debate."

Other sports

Ukip’s Scottish manifesto calls for ‘eventual scrapping’ of Barnett formula

May 4 2015

Ukip will call for a constitutional convention to create a United Kingdom that is "fair to all" at its Scottish manifesto launch today. The anti-European pro-UK party will call for the Barnett formula, which calculates Scotland's share of UK spending, to be phased out as Scotland's tax-raising powers rise. David Coburn MEP, Ukip's only elected member in Scotland, will launch the manifesto in Falkirk alongside senior Scottish party members. A Ukip spokesman said the manifesto pledges will include: "A full constitutional convention involving representatives of all four home nations to decide a fair to all Future Union framework. "A commitment that Scottish Ukip elected representatives will not vote on English only laws. "The Barnett formula to decrease as any future tax raising by Holyrood increases towards eventual scrapping. "Ukip elected representatives at all levels will work to repeal the Named Person Scheme. "There will also be statements on defence, policing, energy, land reform, devolution and libertarianism versus authoritarianism."


Boris Johnson compares Yes vote to ‘middle-aged couple’ getting divorced

November 26 2013

Boris Johnson has been branded “offensive and inaccurate” after he waded into the row over Scottish independence. The London Mayor suggested Scotland is subsidised by England and likened a Yes vote to a “middle-aged couple” getting a divorce. When asked what he thought of independence, Mr Johnson said: “Well we wouldn’t have to help pay for Scotland via Barnett formula.” In the newspaper article, he said: “Divorce will diminish us both. It will be unutterably wretched and painful, and it will eliminate the most successful political union in history.” SNP Treasury spokesman and Dundee East MP, Stewart Hosie, said: “Boris Johnson has once again made clear the consequences of a No vote with his offensive and inaccurate remarks.” He added: “The moves afoot to scrap Barnett in the event of a No vote show that this dismal future on offer to Scotland would see our budget cut by billions of pounds, disadvantaging Scotland even further under the Westminster system underlining the urgency of achieving a Yes vote.”


PM says £4 billion spending cut for Scotland is ‘not on the horizon’

December 19 2013

David Cameron has pledged that a suggested £4 billion spending cut for Scotland is “not on the horizon”. The Prime Minister was responding to a letter from First Minister Alex Salmond, who pressed No 10 on a House of Commons backbench members’ report. It recommended the Barnett formula, which calculates how much Scotland gets as a share of the UK budget, “must be replaced as a priority” in the event of a No vote next September and spending north of the border cut. However, in his letter, Mr Cameron said: “The Autumn Statement illustrates a very clear benefit of the UK instead of Scotland having to cut public spending in response to the more than £3 billion decline in the oil and gas receipts forecast for the next three years, the Scottish Government will instead see its budget rise by more than £300 million over the same period. “Our priority remains reducing the deficit and ensuring a secure economic future for the whole of the UK. “Despite the difficult decisions we have had to take, the Autumn Statement means that cumulatively since the Spending Review of 2010, the UK Government will have increased the Scottish Government’s budget by more than £2 billion,” he added. “Your request for guarantees in perpetuity about the future is quite astonishing; I can no more bind future UK Governments than you can bind future Scottish Governments. “What I can say is that reform of the Barnett formula is not on the horizon. Indeed, the only immediate threat to Scotland’s funding is a vote for independence.” Mr Salmond had also sent a copy of “Scotland’s Future”, the Scottish Government’s White Paper on independence, to Downing Street alongside his letter. Deputy First Minister Nicola Sturgeon last night claimed the Prime Minister had “let the cat out of the bag” with regards to Scotland’s future funding. She said: “He has admitted he is unable to give any guarantees on what will happen to Scotland’s budget in the event of a No vote despite demanding absolute guarantees on every aspect of a future independent Scotland. “His comments on what is ‘on the horizon’ for the Barnett formula give the game away completely because it is what is just over the horizon that people should be concerned about, and the PM himself is on record as saying Barnett is ‘coming to the end of its life’.”

Readers' letters

Barnett Formula does subsidise Scotland

January 16 2017

Sir, - Yet again, Ken Clark (January 12) tries to prove that Broughty Ferry is in a different part of the universe from that in which the rest of us live. His conspiracy theories and unfortunate references to Goebbels and Nazi propaganda in matters associated with his extreme dislike of the UK and the Conservative Party overlook the habits of the SNP to gag any public utterances by its elected politicians that are in any way non- compliant with party ideology and policy. It is also fact that because of Scotland’s long-standing suspicion of commercial meritocracy, driven by an inward looking socialist philosophy focused upon redistribution of earned or inherited wealth, the Barnett Formula provides a useful pot of money that is totally devolved to Holyrood to spend as it sees fit. If the SNP chooses to spend the pot unwisely on things such as the named person scheme, free prescriptions for all and baby boxes for all infants, then it is hardly surprising that people such as Patrick Harvie are slowly waking up to the reality of being governed so incompetently by a party that cannot convince the more thoughtful among us that it has any clear idea of where it is going or how it will get there. To try to paint fellow correspondent Martin Redfern as some sort of closet English agitator says more about Mr Clark than it does about Mr Redfern. Derek Farmer. Knightsward Farm, Anstruther. Large slice of national cake Sir, - Once again Ken Clark rises to the surface to eviscerate all who challenge his idea of a tartan Valhalla. To compare anyone to the Nazi Joseph Goebbels is particularly vile, especially to those of us who lived through those terrible times. The Barnett Formula does indeed state that the Scots receive a larger share of the national pie than any other British region per head of population. That is a fact, whatever angle Mr Clark cares to spin. Then hypocrisy raises its ugly head with the statement “independence debate centres on good government”.Where has that been hiding then? I seem to recall in previous correspondence that Mr Clark claimed he was no nationalist zealot but was indeed part English. So as a part English Scotsman or indeed a part Scottish Englishman, perhaps he may be in a good position to inform us what privileges an English person enjoys that the Scots are denied. Jas Davie. 33 Aberdour Place, Barnhill, Dundee. Celebrate the good things Sir, - You couldn’t have printed two more contrasting letters (January 12) on the Scottish Government’s scheme to introduce baby boxes. Derek Farmer of Anstruther accused the SNP of introducing a cynical ploy, and as usual with his letters, went into overdrive with no point to his letter other than criticism of the Scottish Government. His tone fits well with the party he supports. To claim that this scheme likened Scotland to a Third World country is totally absurd. It is little wonder Theresa May referred to her party as the nasty party. On the other hand, there was an excellent letter from Margaret Gibb of Anstruther in which she related her personal experiences on how a cot death affects the family. She made the case in support of baby boxes without bringing in politics and point scoring. I could not put it any better than Margaret Gibb did. It is time we celebrated the good things that are happening in our country. George Douglas. Scotscraig Place, Kirkcaldy. Profligacy with English money Sir, - Northern Ireland’s toxic version of the Renewable Heat Incentive, now collapsing in a storm of political controversy, was modelled on the RHI applying elsewhere in the UK. It was introduced in 2012 to encourage the uptake of renewable sources of heat, (for example, biomass boilers) but poor ministerial control allowed excessive costs reckoned to be £500 million. Overly generous and extended levels of support led to exceptionally high uptake and wasteful use of energy since the more one used, the greater the subsidy – a true moral hazard. But Northern Ireland’s explosion of anger resulted from political manoeuvring – the silence in the rest of the UK relies on a cross-party consensus that green energy is beyond criticism. In fact, Westminster has allowed excessive planning consents for renewable generators with a potential for subsidy overspending running into billions per year for decades. Holyrood has been even more profligate because the renewable generators it allows are not paid from its own budget but by all UK electricity consumers, the vast majority of whom are English. Dr John Cameron. 10 Howard Place, St Andrews. Who will pay off deficit? Sir, - Scottish Government finance secretary Derek MacKay’s responses to the Holyrood finance committee questions on his plans for the period 2017 to 2018 reveal much about the SNP’s tactics on the nation’s finances. When it comes to new powers for Scotland, the SNP plans to make full use of borrowing powers, yet it will make practically no use of new tax-raising powers. Meanwhile, the SNP will happily prioritise spending that helps to bolster the SNP Government’s popularity, particularly through giving things free to people who can well afford to pay for them. Yet as our local authorities have made clear for quite some time, cuts to funding of our councils will continue the squeeze on spending for critical local services, many of which serve some of the most disadvantaged people in our society. The SNP Government can borrow money and spend it to suit itself, safe in the knowledge that the rest of the United Kingdom will fill the fiscal funding gap, currently running to the tune of £9 billion. Yet First Minister Nicola Sturgeon keeps forgetting to mention who will pick up the tab on these missing billions if she gets her way in trying to break away from the UK over Brexit. One thing is for sure, it will not be the European Union. Keith Howell. White Moss, West Linton.


VIDEO: Kezia Dugdale warns of ‘devastating’ £7.6 billion cuts at FMQs

March 19 2015

Falling oil revenues mean Scotland would face a "devastating" £7.6 billion of cuts if it had to raise all the cash it spends, Labour has claimed. The party's Scottish deputy leader Kezia Dugdale had previously claimed the country would be some £6.5 billion worse off if there was a change to the way funds are allocated throughout the United Kingdom. But after the Office for Budget Responsibility (OBR) yesterday revised down the amount of money it predicted North Sea oil revenues would raise, she said the impact was even greater. Public cash is currently distributed across the UK using the Barnett formula, but the SNP wants Scotland to have full fiscal autonomy - meaning it would have to raise enough in taxes and borrowing to cover all its spending. Ms Sturgeon told Holyrood the Scottish Government would publish a new bulletin setting out its latest forecasts for oil revenues "as soon as possible". But Ms Dugdale said plans for full fiscal autonomy had been based on significantly higher oil prices of 110 US dollars (£74) a barrel. The Labour MSP challenged Ms Sturgeon on the issue, telling her: "The new OBR figures show something quite extraordinary, they show even the SNP's most pessimistic scenario for oil and gas revenues are £10 billion more than the OBR's latest forecast. "And on the SNP's preferred scenario the difference is almost £30 billion, that's nearly the whole Scottish Government budget." She added: "Last week I said scrapping Barnett would cost Scotland £6.5 billion in spending cuts. I was wrong. The oil projections from the OBR confirm the costs would now be £7.6 billion. "That's a Barnett bombshell, It would mean billions of pounds worth of cuts." Ms Dugdale called on the SNP leader to "just do the decent thing and admit the SNP's plan to scrap Barnett would be devastating for Scotland". Ms Sturgeon told her that when the Scottish Government had forecast oil prices of 110 US dollars a barrel, the OBR was predicting 100 US dollars (£67), while the UK Government Department of Energy and Climate Change was "projecting an oil price of upwards of 120 US dollars (£80) a barrel". She said: "I think it's fair to say everybody's projections about oil were wrong."


Queen’s Speech: Prime Minister says Scotland Bill will give Holyrood world’s strongest devolved powers

May 27 2015

New devolution legislation will make Holyrood the most powerful devolved assembly anywhere in the world, David Cameron has said. The Prime Minister included in the Queen's Speech a Scotland Bill extending devolution in the wake of the "vow" made by Westminster leaders in the run-up to last year's independence referendum. In her address the Queen confirmed: "My government will bring forward legislation to secure a strong and lasting constitutional settlement devolving wide-ranging powers to Scotland." Mr Cameron hailed the overall package of legislation as "the bold first step of a One Nation Government" for working people across Britain. He claimed that the Scotland Bill, expected to be published on Thursday, would make Holyrood "the most powerful devolved parliament in the world". But his legislative package also includes measures aimed at giving English MPs the final say on legislation affecting only England at Westminster. "Governing with respect means respecting the wishes of the English too," the Prime Minister said. "That's why we will address the fundamental unfairness devolution causes in England by introducing English votes for English laws." The Conservative Government says the Scotland Bill will "deliver in full" the package of new powers for Holyrood which was agreed by the Smith Commission - a cross-party body set up in the aftermath of the referendum to look at further devolution.First Minister Nicola Sturgeon said: “The Scotland Bill must deliver the Smith proposals in full, but that must not be portrayed by the UK Government as some kind of concession delivering Smith would only be fulfilling the pledge they have already signed up to and the promise they have made to the people of Scotland.“In addition, we believe the massively changed political circumstances in Scotland provides a mandate for substantial further powers beyond those recommended by the Smith process, and we will continue to make a strong case to the UK Government for those powers to be delivered." Holyrood will be responsible for raising about 40% of Scotland's taxes, according to the UK Government, with powers to set the thresholds and rates of income tax included in the Bill, with all the money this brings in staying north of the border. The legislation also gives Holyrood some money from VAT revenues and devolves responsibility for air passenger duty and the Aggregates Levy to the Scottish Parliament. MSPs will also get around £2.5 billion worth of new powers over welfare, the UK Government said, with the legislation allowing ministers north of the border to vary the frequency of the new Universal Credit, and also giving them the power to determine the rules for a range of benefits for carers, disabled people and the elderly. The Barnett formula, which is currently used to determine public spending in the different parts of the UK will be retained, but the amount Scotland gets in the block grant will be reduced to account for Holyrood being given new tax-raising powers. Labour’s shadow Scottish secretary Ian Murray said: “The tabling of the Scotland Bill is a significant moment. We will work to ensure the ‘vow’ made during the referendum is delivered in full, and that means keeping the Barnett Formula alongside more powers to make the Scottish Parliament one of the most powerful devolved parliaments in the world. “The test now for the Tories is if they can deliver the devolution Scotland wants without leaving Scotland worse off.” Mr Murray, who is now the only Labour MP north of the border, said: “Scottish Labour are clear - the Scottish Parliament should have final say over welfare, the powers to defend the vulnerable against Tory austerity whilst retaining the Barnett Formula. “The SNP ran a general election campaign on the basis of full fiscal autonomy and abolishing the Barnett Formula. If they intend to amend the Scotland Bill to reflect that it is now incumbent on them to produce credible costings for their plans.” The Liberal Democrats' Scottish leader, MSP Willie Rennie MSP, urged the UK Government to ignore pleas from the SNP to create an “unstable form of devolution which could tip Scotland into independence.” He said:“The SNP are playing their usual schemes in redefining their mandate. During the election the Smith Commission was barely mentioned. Now they say that a vote for the SNP was a vote for their version of more powers. “This comes despite a democratic referendum barely months before where the majority of Scots voted for a stronger Scotland in the UK. “The five party Smith Commission was undertaken in good faith. I urge the UK Government to ignore the pleas from the SNP to create an unstable form of devolution which could tip Scotland into independence. “Liberal Democrats will be arguing for the Smith Agreement to be delivered in full and for the SNP to kick off its own process of devolving more powers to local communities. "That is the stable settlement Scotland needs. It would mean the Scottish Government can move its focus towards creating opportunity for all.”


‘Vow’ no guarantee that Barnett Formula will last, says constitutional expert

September 9 2015

English votes for English laws will probably require an end to the Barnett Formula which allocates Scotland's share of UK spending, a constitutional expert has advised. Prime Minister David Cameron pledged "a continuation of the Barnett allocation" in his devolution "vow" in the Daily Record in the final days of the independence referendum campaign last year. Immediately after Scotland voted No, Mr Cameron said the referendum question had been answered and now "the question of English votes for English laws (Evel) requires a decisive answer". But Charlie Jeffery, senior vice-principal at Edinburgh University, told Westminster's Scottish Affairs Committee that the two pledges may be incompatible. Mr Jeffery also clashed with Sir William McKay, chairman of the Commission on the Consequences of Devolution for the House of Commons, over a suggestion that devolution should lead to a reduction in Scottish MPs. SNP MP Pete Wishart, in his first engagement as chairman of the Scottish Affairs Committee, said the "elegant solution" of reducing Scottish MPs to zero - independence - was rejected in September. Mr Jeffery said: "If one were to think seriously and in the round about an institutional representation of England in the UK political system, then you have probably got to get rid of the Barnett Formula. "Pretty much every inquiry that has been launched by whatever legislature around the UK in the last 15 years has suggested that the Barnett Formula is problematic." He added that Barnett's methodology of using Westminster spending decisions to calculate how much Scotland should get to spend on its own devolved choices is unique in the world. "There are two things that you can infer from uniqueness," he said. "Either it is a brilliant invention that nobody else has ever come up with, or it is not necessarily something that is entirely fit for purpose." Mr Wishart said: "We've got it protected by a vow." Mr Jeffery said: "I wonder about the constitutional status of the vow." In an attempt to move the conversation on, Mr Wishart interrupted: "We will maybe leave that one alone." Mr Jeffery continued: "It was only written down on the front page of a Scottish daily newspaper. It's a strange form of constitutional document." Conservative MP John Stevenson, whose Carlisle constituency lies on the Scottish border, suggested a "logical" response to the difficulties of Evel may be a reduction in Scottish MPs. Sir William said: "I think it might well be more logical, but its political acceptability would be another matter." Mr Stevenson said: "The one I have just put forward to you, do you personally see that as a better solution?" Sir William responded: "I would if it's accompanied by the breadth of expansion of devolutionary authority to the devolved legislatures." Mr Jeffery said: "I'd see that as problematic and I would illustrate with the example that at some point we will come towards a decision on whether or not to renew Trident, which is an issue of UK national defence which is a matter for Westminster. "But it is an issue with particular resonance in Scotland through both location, but also through a rather different political debate in Scotland around that issue. "I think it would be particularly extraordinarily challenging to say that Scots voters would have less say on such a decision than voters in the rest of the UK if their representation at Westminster is reduced. "I think that is an example that undermines the logic of the idea." Mr Wishart said: "There was also a proposal put to Scotland last year that would reduce the Scottish membership of this House to zero, which would mean that we would take care of our own affairs, which is also an elegant solution which was rejected by the Scottish people."