Call to ditch Barnett formula as resentment grows

Apr 2 2008 by Tomos Livingstone, Western Mail

THE contentious formula that divides Government spending between the nations needs to be changed before English resentment of it gets out of control, the man who devised it 30 years ago said last night.

Lord Barnett, Chief Secretary to the Treasury (as Joel Barnett) in the late 1970s, said politicians were “raving mad” to have retained the system for so long.

The formula, devised to put a lid on Whitehall squabbling, allocates money to Wales and Scotland based purely on population. Scotland gets very high spending per head as a result, while there are frequent complaints that Wales and parts of England are short-changed.

The Treasury and the Assembly Government nevertheless argue the formula is easy to understand and any reform may leave Wales with less cash, not more.

But Lord Barnett said English voters were coming to realise their spending levels were considerably lower than those in Wales and Scotland, and wanted change.

He told MPs on the Justice Committee, “It’s very worrying. There is an indication of it in the media now, people all over England are getting very worried.

“If you ask people anywhere if they want another £1,500 per head spent on them, they will say yes.

“I am worried about it, I think there is a serious problem. That’s why I think there is a need for a review on the formula urgently.”

Since he drew up the formula Lord Barnett has become a vociferous campaigner for it to be changed.

“I didn’t expect it to last long at all,” he said. “If I had stayed there, in that job, I would have changed it to a system based on need. That is what I’ve been pressing for.”

Estimates vary on how much Wales stands to gain from a move to a needs-based system, but Plaid Cymru have estimated it would be around £200m a year.

In 2006-07 the Government spent £7,121 per head in England, while the figure for Scotland was £8,623 and Wales £8,139.

The spending disparities are a growing political issue. Prime Minister Gordon Brown, a Scot, spends much of his time talking up the benefits of the Union in an attempt to counter the twin threats of the SNP and discontented voters in the south of England.

Lord Barnett wants a committee established at Westminster to examine how to change the current system; the Assembly is setting up its own inquiry while a review of the whole devolution settlement is going on in Scotland.

He told MPs, “I wouldn’t ask a commission based in Scotland to do it for the results to be objective and independent. I would be astonished if that came to the sort of revision I would like to see.

“It doesn’t just affect Scotland. I don’t want to see the break-up of the United Kingdom, I want to see the United Kingdom continue.”

A formal review would expose the failings in the current arrangements, he said. “I think there would be widespread [support] but not among the political parties. I was astonished to find that David Cameron had assured people he would keep the formula. I think he must have been raving mad.

“Nobody is prepared to accept the conclusion that I have personally come to. When we have the review maybe it will convince people.”

He joked he had never intended his short-term funding settlement to become a “formula”.

He said, “It wasn’t a formula then when I devised the system of allocating expenditure. It later became a formula.

“I left it in 1979 for the reason that the voters decided I should leave it; it was carried on by Margaret Thatcher and John Major for 18 years and at some point the word ‘formula’ was added. I don’t remember when.”