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Finding the formula

Brian Taylor | 12:39 UK time, Friday, 9 July 2010

I was once told that every incoming Scottish Secretary was welcomed by the Treasury with the suggestion that there might be a review of relative spending needs across the United Kingdom.

In response, every incoming Scottish Secretary buried said request in the longest, thickest, most tangled patch of grass available.

That is because, on the face of it, a needs review would not be likely to provide benefits for Scotland. In short, Scottish public spending would be cut.

Now, there are many who would argue that such a development is desirable. Few of them, I would suggest, reside in Scotland. Fewer still occupy Dover House.

Of course, the days of unalloyed power for the Scottish Secretary, heady and uplifting as they no doubt were for the incumbents, have long gone. Post devolution, it is the job of the devolved Scottish government to allocate expenditure in Scotland.

However, the funding mechanism still remains in the hands of Westminster - and so it is sensible for Scotland to track opinion on such matters across the UK.

Today the Campaign for Fiscal Responsibility in Scotland is doing just that, commenting upon proposals from an official independent report upon funding in Wales.

The Holtham Commission wants financial powers for Wales which bear some comparison with the Calman Commission for Scotland - although the two organisations have fundamental differences, not least the point that the Welsh version was endorsed by the Welsh Assembly government. Not by its opponents.

Broadly, Holtham wants half of each income tax band devolved to Wales with the ability to vary each rate separately. As for Scotland under Calman, banding, allowances and thresholds would remain with Westminster.

Further, Holtham wants the Barnett Formula scrapped. Its replacement? A calculation based on need.

There have been sundry efforts by a range of parties to collate joint interest between Scotland and Wales, to conflate the different systems and to suggest that the two nations might find common cause. I believe this is steadily becoming a more challenging task.

Wales, collectively, loathes the Barnett Formula, believing that it robs the Welsh of funds. Despite signs of a squeeze, Scotland still gains from it.
Scotland has repeatedly resisted a needs review. Wales is now explicitly demanding one.

This presents a potential challenge for those Liberal Democrat and Conservative politicians to whom it falls to implement Calman. It is also a challenge for the governing SNP and their Labour opponents.

Ideologically, the SNP has an answer - one noted today by the CFR - which is that the solution for Scotland is full fiscal control.

That, of course, prompts different disputes within Scotland as to impact and sustainability.

However, short of such a development, it will be intriguing to watch the UK government attempt to respond to two distinct, if not competing, visions from devolved Scotland and Wales. Perhaps we might be spared the fiction that the two nations are pursuing a common path.

Re a needs assessment, two questions instantly arise. Who would conduct it? The Treasury alone? The Treasury in the lead, taking evidence from the devolved governments? An independent body?

The Treasury would frankly veto the notion of an independent assessment and would be very keen to retain control. In which case, the devolved governments would be obliged to make their pitch.

Secondly, what is meant by "need"? Does Wales need free prescriptions? Does Scotland need free personal care? Or would these be judged to be luxury goods, excluded from an assessment of fundamental need?

One begins to see why the incoming UK coalition government said that dealing with Barnett was simply too complex for now, in these troubled times.
Equally, however, there is ample and growing evidence of disquiet with the current funding set-up.
Despite the apparent eagerness of the coalition to implement Calman at the earliest opportunity, I do not believe that the questions here and in Wales will easily subside.

PS: Contributions for July and August are likely to be limited. Enjoy the silence while you can


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