'Pay Scotland an extra £300m to match East End's Olympic facelift'

Published on Thursday 16 July 2009 22:01

SCOTLAND should receive an additional £300 million from the UK government as a result of the investment in the London Olympics, a senior parliamentarian said yesterday.

Lord Richard, a former Labour leader of the House of Lords, said the public money being spent regenerating the area around the Olympic park in the East End of London should be considered English expenditure – with knock-on benefits for Scotland.

Under the Barnett formula used by the UK Treasury to allocate almost 49 billion of funding each year, Scotland, Wales and Northern Ireland see their resources rise or fall in proportion to additional sums spent in England. But there has been no "Barnett consequential" for the three nations because all expenditure on the London Olympics has been classed as benefiting the UK as a whole.

Unveiling a House of Lords committee report calling for the 30-year-old Barnett formula to be scrapped, Lord Richard

accepted that, while the "spectacle" of the Olympics would benefit Britain as a whole, "the regeneration of the East End is the regeneration of the East End". He added: "I also think that some parts of it (the Olympics expenditure] would be very difficult to justify in UK terms."

This contrasted with the Crossrail high-speed train line being proposed to link Heathrow with central London and Canary Wharf, which was classed as English expenditure and resulted in a 500m "consequential" for Scotland.

The committee said the Barnett formula, named after Joel Barnett, who devised it while Labour chief secretary to the Treasury in the 1970s, should be scrapped because it was not based on need but the population of each country.

It said that Scotland and England had both received more than their fair share under the formula, while Wales and Northern Ireland had lost out.

It had been a "short-term fix" that had remained in use simply because it was easy to administer, and no government was willing to spend time introducing a new system.

However, Lord Richard was unable to provide a figure for the amount of money Scotland had received that was not justified in terms of need.

The report called for the establishment of a UK Funding Commission, akin to a system used in Australia, to ensure the allocation of funds between nations was done impartially and to remove any threat that the Treasury could manipulate payouts for political reasons.

The commission would also carry out a detailed analysis of need for each nation, based on social statistics.

Lord Richard acknowledged that the Barnett formula was likely to be scrapped if the proposals of the Calman Commission, to allow the Scottish Parliament to raise half the level of income tax, were adopted.

The Treasury said it would respond to the report at a later date.