Barnett is not simply a formula for benefiting Scotland but has drawbacks too

IF RECENT correspondents to the letters page understand the way our fiscal arrangements have evolved and devolved, then they show little sign of it. (Letters, 29 April and previous).

The extra money poured into Scotland in the post-war years to thwart the Nationalists resulted in a 20 per cent per capita advantage over England on the devolved services – that is largely extant although the Barnett formula should have reduced that had the 1979-97 Conservative government not put more in than Barnett allowed. Barnett was implemented strictly only with devolution in 1999. However, in an interview in the current issue of Holyrood Magazine, David Phillips of the Institute for Fiscal Studies mentioned a figure of 30 per cent, but that probably reflects England’s population rising with no matching extra money being put in on the grounds that the gradual annual increases were de minimus.

For illustration, the 20 per cent basis best shows how Barnett works – and it is about relative central funding from Westminster and not about expenditure. If England receives £100 per head, we receive £120. If England receives enhancement of 5 per cent they receive £5, and we receive a straight 10 per cent population ratio of that, ie, £5, but on our £120, that is worth only £4, and that 1 per cent on a block grant of £25 billion represents a shortfall in our funding of £250 million, which diminishes gradually over time. Those who think my figures are suspect can easily substitute their own, but the formula is sound. When we had the Labour/Lib Dem coalition, the effects were alleviated when they tinkered with the real “tartan tax”, ie council tax, allowing it to rise by 61 per cent over eight years as they used it as a bank. Also, our 2003 £800m windfall from the 1 per cent hike in NIC for employers and employers alleviated the revenue squeeze. When the “respected” IFS criticised the apparently lower Scottish NHS spending, they took the annual enhancement that arrived here, which had already been reduced by Barnett by some £125m before leaving Westminster.

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The economy and employment are matters reserved to Westminster, so there is little within Holyrood’s powers to deal with these.

As for welfare, and helping the needy, Keith Howell is wrong to attribute blame to the SNP – power over that, too, is reserved to Westminster, as per the bedroom tax.

The constraints would apply to whatever party had power at Holyrood. Unionist parties who would increase income tax by 1p from 2017, would have the options of using the proceeds to off-set Barnett, or to prevent the “austerity” cuts, or to fund education – but they could not do all three.

Douglas R Mayer

Thomson Crescent, Currie