Barnett formula will not constrain Scottish budget, Midwinter argues

7 Jul 05
Claims by academics that the Barnett funding formula will lead to a squeeze on Scotland's budget have been rejected by a leading commentator on public finance.

08 July 2005

Claims by academics that the Barnett funding formula will lead to a squeeze on Scotland's budget have been rejected by a leading commentator on public finance.

Professor Arthur Midwinter, a member of the Institute of Public Sector Accounting Research at the University of Edinburgh, said there were no empirical data to support the idea that the formula had led to a convergence of spending per head across the UK, or would result in a squeeze on Scotland.

He said theoretical arguments on a hypothetical spending squeeze were best kept in the world of economics seminars rather than attracting misleading headlines. 'They are an irrelevant distraction from the real problems of resource allocation,' he said.

Speaking at a seminar in Edinburgh on devolution and constitutional change, he challenged the conclusions of a report issued earlier this year by five academics from the University of Strathclyde.

They warned that more than 120,000 jobs would be lost because of the long-term effect of the Barnett formula, which calculates Scotland's share of increases in spending allocations for Whitehall departments.

The authors of the report – Dr Karen Turner, Professor Peter McGregor, Professor Kim Swales and researchers Linda Ferguson and David Learmonth – argued that spending would be squeezed because of the effects of a change in the formula made in 1997 to update it each year to take account of changes in Scotland's population.

Midwinter, who is also an adviser to the Scottish Parliament's finance committee, claimed that convergence on spending was not a policy objective of the UK government. Any of the devolved administrations – Scotland, Wales and Northern Ireland – could reopen the formula if they believed it was not providing resources relative to need.

Midwinter said that only in Northern Ireland, where there had been significant population growth, was there evidence of spending per head converging on the UK average.

Midwinter said there was a popular misconception that Barnett disadvantaged the English regions when in fact they were unaffected by it, as their spending allocations reflected decisions in Whitehall.

He said he believed the retreat from regional government in England increased the likelihood of the formula being retained.

PFjul2005

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