Belfast Telegraph

Growing clamour over who gets what in UK grants shareout

By Liam Clarke

The recent loss of jobs to the Republic has been blamed on the difference in corporation tax and reignited the debate on varying the rate for Northern Ireland.

The question for the Assembly is whether the Treasury would exact too high a price from the subvention to Northern Ireland.

It is all part of the outworking of the Barnett formula which has governed block grants to the regions since the late 1970s.

Barnett isn't scientific, it isn't written down in law and it could be changed at the stroke of a pen, but it never has been.

The fact is that nobody has ever found a better way of allocating resources, or one that would favour England more.

Each person in England attracts £8,588 of public spending, while every Scot gets £10,212, or £1,624 more. In Wales, each person attracts £9,829. Northern Ireland comes out best with £10,706 each, or £2,118 more than the English, who aren't happy about it.

David Mowat, the Tory MP for Warrington South, has led the charge against the formula, abetted by influential Tory-leaning papers including the Daily Telegraph and the Daily Mail.

Scotland, where English taxpayers look enviously at free university education and other benefits paid for from the Scottish block grant, has been the main target because it is bigger, but we could get caught in the crossfire.

"Scotland has been indulged too long" screamed the Daily Telegraph, harnessing ancient prejudices about Scottish meanness.

The Mail called Barnett a "grossly unfair tax on the English to subsidise lavish public services in Scotland" and a "formula for the break-up of the union". It estimated that each English family paid £400 a year to subsidise the undeserving Caledonians.

But things aren't that simple. Some other measures show some English regions doing well. BBC-produced figures on Total Identifiable Expenditure, which includes central Government services and defence, found that each Londoner got £10,200 by that count.

When Barnett was first introduced it was called "the Barnett squeeze" because it allocated resources in terms of population not need, unlike its predecessor the Goshen formula.

Basically, Barnett increases our funding when spending in England increases and does so in line with our rise in population.

Its critics argue that it hasn't taken enough account of the rise in the English population and is therefore unfair.

The problem is that it's hard to find a better measure.

Barnett was devised by Labour but kept in place by Margaret Thatcher and John Major because they couldn't find another way. They knew that if they unpicked it and started looking at need they would open a can of worms.

Every English region could compete on that basis and there would be no objective standard.

For the fact is that money has to be distributed within a country or it ceases to be a country. Being a citizen means being guaranteed certain basic standards. We expect a health service, defence, a road system and so on. Without such guarantees it really would be the end of the United Kingdom.

If you wind back 100 years, southern England was subsidised by the industrial north and midlands. Now, it sell goods and services without facing any tariff barriers or formalities. The rich south of England has its food supply guaranteed by its links to less developed regions. The armed forces are overwhelmingly recruited in poorer areas and ambitious people pour in from the regions to keep the central economy going.

The Barnett formula sustains all this. Don't expect it to be changed in this parliament.

Factfile: Barnett explained

Central Government funds are allocated to Northern Ireland, Scotland and Wales under the Barnett formula, devised 33 years ago by Joel Barnett, the Treasury Secretary. It was originally intended to restrict spending in the regions but recent Treasury figures showed that per capita spending is now higher in Northern Ireland and Scotland than England. The figures provoked fury amongst Tory backbenchers and some commentators who want the subsidy, particularly to Scotland, cut.

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