1970s Stop-Gap Measure Still Makes Us Better off; John Adams Explains Why the Barnett Formula for Regional Spending Still Works in Wales's Favour

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Byline: John Adams

THE latest figures for spending in the United Kingdom demonstrate that there are still much higher levels of spending in Scotland, Wales and Northern Ireland than in England. Furthermore, the gap does not yet seem to be closing.

During the devolution process of the 1970s the Barnett formula was devised to allocate increases in public spending between the different nations of the United Kingdom. Named after the then Chief Secretary to the Treasury Joel Barnett, the formula was intended to end the annual negotiations between the Treasury and the devolved administrations. In this goal, it succeeded.

Intended as a stop-gap measure, the Barnett formula was to be replaced by a formula which reflected the different needs of the different countries of the UK. As devolution never became a reality in the 1970s, the Barnett formula remained. It was expected that the formula also would bring, over time, the levels of spending in Scotland, Wales and England more closely into line. It did not achieve this.

One reason cited to explain this failure is that the population of Scotland was falling relative to the rest of the UK, and that the formula calculations did not reflect this. While at the Treasury in the early 1990s Michael Portillo decided to update the formula to take account of any population changes, and four years ago Labour decided to make this an annual event. This appears to be having little effect.

The latest figures for 2000-2001 seem toconfirm that this situation is not changing. The headline figures show that spending in Scotland is some 18pc above the UK average (23pc above England). Spending in Wales is 13pc higher, and in Northern Ireland the figure is 36pc.

If social security is taken out of the calculations the differences are starker. The remaining spending is a better indicator of provision for front-line services. Once this calculation is made, spending in Scotland would be 23pc above the UK average. In Wales spending would be 11pc higher, and in Northern Ireland 46pc.

It is true that, as they start from initially higher levels, the increases in spending in Scotland and Wales in the period 1999-2000 to 2000-20001 are less than in England. Total identifiable spending increased in England by 5.8pc, but in Scotland the figure was 5.5pc and in Wales 4.7pc. Northern Ireland saw a 8.3pc increase. However, the differences in spending levels between the three countries has remained fairly constant over time. The five financial years from 1996 to 2001 show that each country remains within a band of one or two percentage points.

Interestingly, the figures for spending within England between the nine English regions seem much more volatile. …