Review of government funding formula may put Scots cash at risk

Published on Wednesday 19 May 2010 23:34

THE new government plans to review the way it shares out money, in a move that could result in Scotland losing out, Whitehall sources have revealed.

The Queen's Speech on Tuesday is now expected to include a review of the Barnett Formula, which is used to decide how much money is handed out to the devolved nations and English regions.

The move was promised in the Liberal Democrat manifesto and has had support in the past from the Tory leadership.

There has been pressure from Welsh and north of England MPs to have a needs-based formula, which would give them more money. They claim Scotland and Northern Ireland receive too much under the current system, based on population levels.

Prime Minister David Cameron has, in the past, suggested Scotland might not lose out because "it has needs" that need to be addressed.

However, the threat of a review to the formula, which is also expected to cushion Scotland from some of the excesses of the forthcoming cuts, has brought a stark warning from Labour. The party's Scottish leader, Iain Gray, said: "Many Scots feel betrayed by the Lib Dems for doing a deal with the Tories because they have so little in common, but they both want to scrap the Barnett Formula.

"That could torpedo Scotland's budget and lead to unimaginable cuts to public services here."

He added: "The Barnett Formula has served Scotland well over many years."

However, it is likely that any decision over Barnett will result only in a review, which could take years to report and its recommendations might not even be accepted.

Meanwhile, in the government's detailed coalition document, to be published tomorrow, another review will be announced that could result in an extra 180 million coming to Scotland.

Lib Dem Scottish Secretary Danny Alexander has reached an agreement with Tory Chancellor George Osborne to look at the fossil fuel levy, a fund of money the Scottish Government has not been able to touch.

Under the current rules, any money drawn from the levy for environmental projects north of the Border would result in an equivalent reduction in general Scottish funding.

Because of that, Scottish ministers have left the cash untouched.

On his recent visit to Scotland, Mr Cameron suggested during talks with First Minister Alex Salmond that something might be done about the problem.

And Whitehall sources claimed yesterday that the review would aim at resolving the issue to allow Scotland to receive the money while not losing any other sources of funding.