A Scottish perspective on Barnett

Sometimes Scotland and Wales really can't be on the same side

PROFESSOR Iain McLean once wrote that the Barnett Formula and the West Lothian Question were “like two mad people in the attic: everyone can hear their creaks and groans but nobody wants to talk about them.” That simile certainly applies in Scotland but less so, for obvious reasons, in Wales.

This has long bemused me. I remember interviewing Mike German when I was a journalism student in Cardiff and being puzzled by his hostility towards the Barnett Formula. I had grown up in Scotland, where the spending status quo was much discussed but rarely criticised. Scotland, after all, did rather well out of Joel Barnett’s back-0f-an-envelope calculations. His formula, therefore, was a good thing.

In fact, the standard Nationalist – that is SNP – critique of Barnett is that it actually squeezes, rather than inflates, Scottish expenditure. They point out, not unreasonably, that if a theoretical 4% increase were needed in expenditure to cover inflation, Scotland would only get an increase of 3% of its total budget, while England would get the full 4% (proportional to population share). Taking inflation into account, this would mean a 1% budget reduction for the Scottish Government.

Not all Nationalists agree. “Barnett, far from starving Scotland to death as is often asserted,” wrote the SNP MSP Mike Russell a few years ago, “is actually fattening us to the point of dangerous obesity.” Whatever the case, Scottish grumbling must appear self-indulgent within the context of more substantial Welsh complaints.

Which brings me to the much-vaunted (particularly during the recent general election campaign) “pact” between Plaid Cymru and the SNP. Given that each party has rather different positions on the future of the Barnett Formula, Alex Salmond – the SNP leader and Scottish First Minister – had to endure some tricky questioning. Given that one party wanted to retain the formula and the other wanted it scrapped, how could a pact work and, more to the point, how could they negotiate in a coalition situation? “Of course we disagree,” was all Salmond could manage in response. “Scotland and Wales are different countries.”

Indeed they are, although that didn’t quite answer the question. The First Minister’s official spokesman, as ever, has attempted to bridge the gap. “The only acceptable alternative to the Barnett Formula is financial responsibility,” says Kevin Pringle. “Because the rest – and the Calman Commission proposals demonstrate that – would actually be worse for Scotland rather than better.” Calman, of course, would enable MSPs to set just 10p within each income tax band, not the full amount.

“We would support Plaid Cymru in their endeavours to secure a fairer funding mechanism for Wales and they support our desire to get full fiscal autonomy,” adds Pringle, “but that’s a matter for south of the border; we want to be independent from that process through having responsibility for raising all our own taxes.”

The Barnett Formula, therefore, may not be a perfect system of territorial expenditure, but it’s the best Scotland has got. Full fiscal autonomy, meanwhile, is the new Scottish political zeitgeist. In a carefully calculated interview in The Times last week, the Scottish First Minister revived “gradualist” Scottish Nationalism by setting out his stall:

“The centre of gravity in Scottish politics currently is clearly not independence… You must campaign for what is good for Scotland as well as campaigning for independence.

“It is really important, in my view, to be able to say to people how we can change the circumstances and increase revenue as well as decreasing expenditure… It is my job to come up with some answers, along with others. If you jump up and down nihilistically saying ‘dreadful dreadful, dreadful, cuts, cuts, cuts’, then I would be failing in my duty to the people.”

It is a convenient argument, although it only provides half an answer. Full fiscal autonomy would not, in itself, solve either the crisis in public spending or the perceived inequities of the Barnett Formula, it would merely provide the devolved Scottish Government with the means to do so. Salmond is, as ever, attempting to pitch a big tent, providing enough space for some progressive Scottish Tories, a few imaginative Labour MSPs and most obviously the Liberal Democrats, who essentially demanded full fiscal autonomy via the 2006 (Lord David) Steel Commission.

It is attractive, yet quixotic, stuff. Not only is the governing UK coalition, not the mention the Treasury, unlikely to back such a radical move – despite a favourably inclined Chancellor – but even if it did, full fiscal autonomy would take years, if not decades, to become a reality. By then, the financial crisis in UK plc could be a thing of the past, or it could be much worse.

It does, however, give the SNP and the Scottish Government the ever-important political “line”, a convenient rejoinder to inconvenient questions about the Barnett Formula. So that particular mad person in the attic is, for the time being, silenced. But when the devolved administration starts shaping its budget towards the end of this year, he could start making noises that are more difficult to hide.

Barnett consequentials, after all, mean that Scottish spending can go down as well as up – and down it is about to go.