Scottish referendum: Barnett formula a folly, says its creator
The man who devised the method by which central funding is distributed to the regions says he did it "on the back of an envelope" and it was time for it to end.
Lord Joel Barnett said he made up the formula when he was in the Treasury during the Callaghan Labour Government 35 years ago to stop ministers constantly pestering him for more money.
He said: "There was already a long-established convention for funding public spending in Scotland, based on the relative populations of England and Scotland almost a century before.
"I merely adjusted the figures to take account of changes in the relative populations of the four home nations and drew up the spending figures accordingly – which actually resulted in a 2% reduction in funding for Scotland over the settlement they would have been due under the previous, outdated population statistics."
He said his move was a stopgap measure. "Little did I think when I made a back of the envelope calculation about funding for Wales, Scotland and Northern Ireland more than 35 years ago that the so-called 'Barnett formula' would take on a life of its own and go on to become the unwritten – and unjust – convention by which Government spending would be allocated for decades ahead."
He said the method was now obsolete and should be replaced.
"I never thought the arrangement – there was and is no proper 'formula' that works out how much money is needed and where it should be spent – would last any longer than a year or two, certainly not after the next general election.
"It has no legal or democratic basis and I never dreamed the Thatcher and Major governments would adopt my calculation as a convenient political measure, or that it would outlast Tony Blair and Gordon Brown to dominate the current cross-party Westminster's response to the Scottish independence issue."
He added that its continued use worried him. "I have become more troubled by the so-called Barnett formula with every passing year. It is clear that what was then a short-term political fix has no place in deciding long-term spending.