HUNDREDS of millions of pounds could be slashed from government spending in Northern Ireland, Scotland and Wales under plans for a change in public spending rules proposed by the Chief Secretary to the Treasury, Jonathan Aitken. The move goes hand in hand with pressure for a "peace dividend" in defence savings in Northern Ireland if the IRA ceasefire holds.
Treasury ministers are also keen to review government spending within the province in view of the anticipated influx of aid and investment from the United States.
Mr Aitken, who was promoted into the Cabinet in June, wants to get rid of the formula which allocates money automatically to each government department as a proportion of spending in England. He put forward a series of arguments for reduced spending at a bilateral meeeting with the Secretary of State for Northern Ireland two days ago.
However, the Scottish Office would inevitably be the biggest loser from a change in the formula. Treasury ministers believe that pounds 1bn could be cut from the budget of Ian Lang, Secretary of State for Scotland.
Under present arrangements 96.5 per cent of Mr Lang's spending comes out of the Scottish "block expenditure". That is allocated to the Scottish Office on the basis of 10.66 per cent of comparable English programmes. Similarly Wales receives 6.02 per cent and Northern Ireland 2.87 per cent - not including security funding which comes out of the Ministry of Defence budget. …