England is paying well over the odds for its northern neighbour. Let no one fear the slippery slope to independence: we'd all benefit
The "yes-yes" devolution campaign formally kicks off this week to persuade the Scottish people to bring to fruition the contents of Donald Dewar's impressive white paper Scotland's Parliament. Dewar's devolution scheme is vastly better than the one that consumed the energies, and eventually the life, of the last Labour government. It has, however, not surprisingly reopened the four big unresolved elements that frame all debate on devolution: finance, representation, allocation of powers between Edinburgh and London, and that famous slippery slope to independence.
Let no one doubt the reality of the slippery slope. It is a real prospect because the financial arrangements for devolution are unsatisfactory, and because there is no answer to the West Lothian question or to some of its cousins. Yet there is no need to fear it: if the white paper turns out to be the first step on the road to independence, that may well be good for the Scots (although it will not be the bonanza for Scotland claimed by the SNP). It will certainly be good for the English.
The postwar allocation of public spending to Scotland has been dominated by two phenomena: the Barnett formula and the Johnston gambit. As these have conspired to favour Scotland's allocation of finances in an unjustifiable way, and as the Barnett formula is retained in the devolution white paper, we should be clear what both things are.
Tom Johnston was a forceful Labour MP who was secretary of state for Scotland during the second world war. Peter Mandelson's grandfather, Herbert Morrison, described him as: ". . .one of the most able men in the technique of getting his own way at cabinet committees . . . He would impress on the committee that there was a strong nationalist movement in Scotland and it could be a potential danger if it grew through lack of attention to Scottish interests."
Every secretary of state since then, regardless of party, has used the Johnston gambit. Some have been more successful than others - Michael Forsyth, for instance, used to boast about Scotland's public-spending advantage in government papers which he hoped nobody at the Treasury would read. The effect has been to keep Scottish public spending per head higher than it "needs" to be.
It is the matter of Scotland's spending "needs" that the Barnett formula (named after the chief secretary to the Treasury from 1974-79, Joel Barnett) was devised to address at the time of the last devolution attempt. As part of the preparation for the Scotland Act 1978, the Treasury conducted a comparative assessment of Scottish and non-Scottish needs for the services it was then proposed to devolve. Because the results were not produced until December 1979 (by which time that act had already been repealed by the new Tory government) they attracted little attention. But they are crucial both for Scotland and for the rest of the UK.
For a UK base of 100, Scotland's "needs" for spending on devolved services in 1979 were assessed at 116. Actual spending was 122, or 5 per cent above what was needed to meet "needs".
The concept of needs, like truth, is a difficult one. Needs cannot be objective, and can always be construed in a way that benefits one or other party in bargaining. The Constitution Unit's document Scotland's Parliament gives this rather fine example: "The indicators of need . . . include weighted road lane lengths for different types of road, with extra amounts allowed for roads built on peat if they are 600mm or less in depth and carry 20 or more commercial vehicles a day." Not many roads in England are built on peat, 600mm or less in depth and carry 20 or more commercial vehicles a day.
The Barnett formula, the Constitution Unit explains, "allocated increases or decreases in public expenditure to Scotland, Wales and England in the ratio 10:5:85, the rounded share of GB population for the three nations concerned in 1976 . …