Independent body 'should resolve disputes over devolved funding'

19 Jan 11
Disputes between the devolved nations and Whitehall over funding issues should be resolved independently and not by the Treasury, the author of the review into Welsh funding and finance has said.

By David Scott in Edinburgh

19 January 2011

Disputes between the devolved nations and Whitehall over funding issues should be resolved independently and not by the Treasury, the author of the review into Welsh funding and finance has said.

Gerald Holtham, an economist and visiting professor at Cardiff University, gave evidence to the Scotland Bill committee at Holyrood yesterday. He suggested that a more formalised mechanism should be set up for dealing with disputes.

He told MSPs there was still a perception in the Whitehall bureaucracy that the devolved authorities were just like government departments.

‘That mindset is still there and, as part of changing that mindset, it would be good to have a slightly more formalised mechanism for dispute resolution,’ he said, adding that it would be better to ‘get in early in the process rather than just having an end-of-pipe resolution’.

Aspects of the Barnett Formula funding allocation and other funding issues ‘would ideally be determined outside the Treasury, whether it’s by the OBR [Office for Budget Responsibility] or some other body that is at least notionally independent – I think that would be a great step forward.’

He also suggested that there should be a separate bank account for the Scottish Parliament and funds paid into it.

‘Once they’re in it, the Treasury can’t have them back – I think there are institutional changes needed that would reinforce this,’ he said.

Last year, Holtham chaired a review that called for greater tax-raising and borrowing powers for Wales.

The Scotland Bill committee also heard from Professor Francois Vaillancourt of the University of Montreal. He said the Bill – which will give the country limited control over income tax and borrowing – would strengthen devolution in Scotland, improve governance and result in stronger links between spending and revenue.

However, he warned that the Bill’s income tax proposals were not sufficiently flexible as they did not allow variation between bands. An across-the-board increase would hit higher earners particularly hard and could result in Scots crossing the border to England.

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