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State papers: London irked by Northern Ireland's block grant largesse

By Adrian Rutherford

The Prime Minister was urged to cut Northern Ireland's cash amid claims our snouts were "well and truly in the public expenditure trough".

Margaret Thatcher was warned in separate letters that "over-provision" in our block grant needed to be urgently tackled.

Civil servants said she should put the region on the "same diet" as the English.

The controversy centred on the Barnett formula, which determines how money is allocated from the Treasury to the regions.

Funding for Northern Ireland and Scotland, which has traditionally been higher than England, has long been a source of contention.

The issue was raised in 1985 in a series of letters to the PM.

One missive, sent by David Willetts, then an official in Mrs Thatcher's policy unit, was particularly blunt.

"Scotland and Northern Ireland have their snouts well and truly in the public expenditure trough," he wrote.

"The challenge is to find a politically acceptable way of putting them on the same diet as the English."

Mr Willetts, now a Conservative MP for Havant, proposes suspending the block formula.

He said Mrs Thatcher should discuss the matter with her Chancellor Nigel Lawson.

His letter cautions: "There obviously will be a row. But not doing anything also has costs".

In a second letter, Treasury official Peter Rees stressed the need to tackle Northern Ireland's "over-provision".

Mr Rees said Mrs Thatcher's government had inherited the block budgeting system from Labour, adding: "Even our predecessors never saw it as any more than a stopgap arrangement on the road to political devolution."

He adds: "The longer we let it run, the harder it becomes to challenge that perception, and the greater the risk of political repercussion when we do."

Mr Rees wanted Northern Ireland's funding to be cut by £150m over three years.

The row re-emerged earlier this year when David Cameron said he had no plans to scrap the Barnett formula.

It prompted an angry reaction from his own MPs.

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