The Barnett Formula: The Argument Against

My current poll is asking whether "We should abolish the Barnett Formula" and is presently running 80-20% in favour of doing so. I’d hoped to present the two sides of the argument but, unfortunately, although I believe the DUP are in favour of its retention they have not answered my emails regarding their reasoning why.

So, here is the argument against the retention of the Barnett Formula, as presented in an earlier speech this year by David Wildgoose of the Campaign for an English Parliament; I have the highlighted what I believe are the key points:

""Last year’s spending in England per head of population was £7,121. In Wales it was £8,139 (14% more), in Scotland £8,623 (21% more) and in Northern Ireland £9,385 (32% more).*The main driver of these differences is the Barnett formula, devised by Joel Barnett in 1978 and supposed to last only a single year. It is based upon nationality and not upon public expenditure need.

Basically, every extra pound spent in England automatically triggers an additional 10.66% payout to Scotland, a 6.02% payout to Wales and a 2.87% payout to Northern Ireland.

So, for example, this means that any capital projects taking place in England are automatically made a total of 19.55% - call it 20% - more expensive, because they instantly trigger extra Barnett Formula funding.This is why the proposed CrossRail project means a financial bonanza in Scotland, Wales and Northern Ireland. Of course, this is a one-way process. Capital projects elsewhere in the UK don’t result in a single penny of extra funding for England.

But that is not all.
When "uniform" adjustments are made across treasury departments, for example Health, the same increase when applied to an already larger per capita budget naturally results in an even larger additional payout. In theory, these adjustments can be decreases as well as increases, but of course in practise this doesn’t happen. For example, one of Gordon Brown’s last actions as Chancellor of the Exchequer was to slash the English NHS capital budget by a third. £2.1 billion taken from the English NHS whilst the Scottish, Welsh and Northern Irish budgets were left untouched. And of course, any steps taken to return that money to the English NHS will trigger automatic payouts to Scotland, Wales and Northern Ireland.

The "top-up" tuition fees in England that English MPs voted against only to be over-ruled by the votes of Scottish MPs, are also counted as additional English public expenditure, (because the extra income is spent by our universities). And so even tuition fees paid by English students trigger payouts to Scotland, Wales and Northern Ireland.

Taxes that apply to England only, but which disproportionately benefit the other Home Nations.

The proposed road pricing scheme designed to track (and charge) English vehicles throughout England was to apply to England ONLY - Transport being yet another devolved issue. Naturally the devolved governments rejected its imposition in their own countries. Just the opposite in fact. The Scottish Government has scrapped all transport tolls throughout Scotland. Whilst within England, toll bridges and tunnels on our public roads continue to charge.

This injustice applies across the whole spectrum of Government Services. Money for Flood defences in England have been cut, and further cuts have been planned right through until 2011. And yet it is England that faces the greatest flooding risks. I live in Sheffield which suffered enormous flooding last year. I went to University in Hull which was completely flooded. And I was married in Whiston Church, just below Ulley Reservoir, which came perilously close to breaching and flooding the M1 through to Rotherham Town Centre itself. And of course, in Gloucestershire 140,000 people had no running water for a week. But let it not be said that there was no funding made available by the UK government to relieve some of these hardships. Indeed No, £14 million pounds was eventually handed over. Of course, according to the Insurance Companies, the flooding caused over £1.5 billion pounds in damages. And naturally enough VAT was due on those repairs - so that would be another £225 million for the government coffers.

Now, a cynic might argue that a net gain from English flooding of over £210 million pounds just makes English flood defence cuts by a Scottish Raj government even more profitable.

"Scottish Raj"? Isn’t that a bit, well, nationalistic?
Perhaps. But you will note that the Barnett Formula itself is expressly based upon nationality, not need. It is specifically and openly all about handing over money to the nations of Scotland, Wales and Northern Ireland - money taken in taxes from England.

The argument that these are UK taxes doesn’t hold water. More money is spent in Scotland, Wales and Northern Ireland than is raised in taxes. The shortfall is made up in England and so it is English taxpayers who pay for the superior services elsewhere. It is true that rural areas are more expensive to provide services to. But most of Scotland’s population lives in the Central Belt, which can hardly be described as “rural”. Glasgow alone has 40% of the Scottish population. And whereas there is an argument to be made for Wales being a poorer area of the UK and thus needing more funding, this cannot apply to Scotland which is recognised as being the third richest of the 12 EU regions. I am a Yorkshireman, born and bred in Rotherham. Why should taxes on the low-paid in Rotherham go to support Edinburgh millionares? And as Alan Beith beside me will be able to confirm, the people of the North-East are on average 13% poorer than the people of Scotland, but despite this they receive less government spending.
Remember, the Barnett Formula is based upon Nationality, not Need.

The Barnett Formula isn’t just fuelling resentment in England, it is also funding separation in Scotland, Wales and Northern Ireland. Because unequal, assymetric devolution that deliberately ignores England is all about Separation.
Let me repeat that.
Unequal, assymmetric Devolution is all about Separation.

Scotland, Wales and Northern Ireland have separate industrial, agricultural and fisheries policies, to which they provide separate financial assistance. Their farmers receive separate (and better) Hill Farm subsidies. Moreover, they are also able to represent their own interests directly in Europe and elsewhere. Indeed, the Scottish Government plans to add to the already existing separate Scottish embassies in Brussels, Washington and Beijing by opening new ones, initially in Germany, France and Canada.

The Scottish Government’s Brussels office is based at a (separate) Scotland House, along with Scotland’s enterprise agencies, and has a role in keeping an eye on moves at the EU which might affect Scottish interests. Like Wales and Northern Ireland, they are able to represent their own national interests directly in Europe. In contrast, specifically English matters tend to be downgraded in importance, being seen as a secondary matter of lower concern when compared with more overriding UK-wide issues. Significantly, the individual negotiations made by the devolved governments are made with the full backing of the UK government - they are able to negotiate and make binding agreements with respect to the whole of the UK with the full force of UK backing but in the direct interests of their own peoples alone.
And when Europe has imposed restrictions because of Foot-and-Mouth and the like, they have been able to use their direct representation in Europe to argue (and achieve) separate treatment from that which applied to England.

These strong bargaining powers and separate control of their own affairs have meant they have been able to ensure their farmers and so on are paid promptly.
In comparison, excessive DEFRA delays have made English farmers bankrupt and added to the pressures that have already given the farming industry the highest suicide rate of any section of society. In fact, DEFRA delays were so bad they even asked (but were not allowed) to divert the money (English farmers’ money!) to other uses. And in any event, the fines levied because of the delays come out of DEFRA’s budget, ultimately penalising England yet again.

England cannot even speak up for itself on matters that are internal to the UK. Maritime borders have been moved to the advantage of Scotland. Not only that, Scottish law now also seeks to impose its will within England also. The River Tweed is a traditional border between England and Scotland on the North East coast. But the Scottish Government has claimed (and been granted!) jurisdiction over the whole of the River Tweed and all its tributaries including those, such as the River Till, that are wholly within England. And now we have the MSP Christine Grahame calling for Berwick, English since 1482, to be handed over to Scotland. And needless to say, this would doubtless necessitate further maritime border alterations in Scotland’s favour.

In 1998 Joel Barnett was reported as saying that he was "flattered that the Barnett Formula had lasted 20 years" and that he hoped "it would last much longer". [House of Commons Library Research Paper 98/8] Ten years later he is desperate for a review of the formula, and describes it as "grossly unfair". But it always was, so what has changed in the meanwhile? Perhaps the fact that the English are waking up to their 2nd-class status within the Union, and that the Barnett Formula is one of the major issues driving a wedge between the nations that make up the UK. It seems that although many people like the idea of a monument to their name, a prominent role in helping break up the UK isn’t so popular. And that isn’t my hyperbole. Joel (now Lord) Barnett is now one of the Formula’s harshest critics and has failed just recently in an attempt to set up a House of Lords committee to review it. In The Scotsman in January 2004 he wrote "It was never meant to last this long, but it has gone on and on and it has become increasingly unfair to England. I didn’t create this formula to give Scotland an advantage over the rest of the country when it comes to public funding.". And more recently, in his own words: "There is an urgency about this because if something isn’t seen to be done fairly soon, people in England will start to demand separation. That would be disastrous for the UK".

Separation. There’s that word again. Because that is what the Barnett Formula is actually promoting.""

*The latest public spending per head figures (for 2007-8)

England: 7,535
N.Ireland: 9,789
Scotland: 9,179
Wales: 8,577

I’d like to say a big "thank-you" to David for giving me permission to reprint this speech which he delivered at a Fringe Meeting during the Liberal Democrats’ Spring Conference in Liverpool, Saturday March 8th, 2008.