Magazine article Public Finance

What Goals, Which Referee?

Magazine article Public Finance

What Goals, Which Referee?

Article excerpt

In 1970, a World Cup football clash between Honduras and El Salvador led to a war. In 2006, history repeated itself as farce, as a war of words between Scotland and England left a bitter aftermath to England's quarter-final defeat. Some believe it could spell the end of the 'Barnett Formula' for Scottish public spending, and even the UK.

More immediately, the row has raised questions about whether Gordon Brown could become UK prime minister, because of his nationality. At least one shadow Cabinet member now views this as 'almost impossible'. A recent front-page story in the Observer claimed: 'Brown to face fresh assault on Scots roots.'

Hmm. Imagine if that had read: 'Baroness Scotland to face fresh assault on Afro-Caribbean roots'? Could being anti-Scottish become the acceptable face of racism?

The columnist Max Hastings warned on BBC's Question Time that Scots were 'nasty to the English even when we pay their bills'. In the Sunday Times, Michael Portillo called for Scotland to leave the UK, saying that it had become a 'pensioner economy living on English handouts'.

It's not just Conservatives who think Scotland is feather-bedded. Labour peer Lord Barnett - the author of the Barnett Formula in 1978 - said that Scots get too much and that his formula should be scrapped.

These complaints over spending have been linked to the West Lothian Question - about Scots MPs having a say on English affairs in the Commons. The Tory constitutional spokesman, Kenneth Clarke, says the WLQ must be addressed by excluding Scots from voting on non-Scottish Bills. He will table a Bill to this effect.

There is probably a solution to the WLQ, given goodwill and a special committee to decide on what Bills are exclusively English. It's not easy, though. This 'in and out' method was tried in the 1880s over Irish Home Rule. It didn't work then; I doubt if it will now. The spending disparity is much tougher to crack.

Crudely, Scotland has been getting about 20% more per head in identifiable public spending than England. If Scotland were to become independent tomorrow, there would be a spending gap of some £3bn to £4bn between what is raised in taxes and what is actually spent by government.

However, this is not the whole story. Non-identifiable public spending, on things such as defence and London's Jubilee Line, do not figure in the crude spending accounts. This goes disproportionately to the Southeast of England. The Scottish National Party has calculated that London is benefiting from £16bn in nonidentifiable spending, before the 2012 Olympics. …

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