19 June 2008
The Barnett Formula, which determines the funding of the devolved administrations in the UK, is unsustainable in the long run as it is neither efficient nor equitable, a team of public spending experts have warned.
In a paper submitted to the Scottish Parliament's finance committee, Iain McLean, Guy Lodge and Katie Schmuecker say the formula gives 'perverse incentives' to the administrations in Scotland, Wales and Northern Ireland.
The paper, considered by the committee on June 17, says the three administrations manage public expenditure but none manage public revenue, except in a small way.
As a result, 'none of the decision makers face a budget constraint'. The devolved administrations have no incentive to broaden their tax bases because they do not see the proceeds – though they have an incentive to switch their block grants from capital spending to current spending.
'The block grant is a function of a number they cannot control because it depends on spending in England on each devolved service,' the paper states. 'Spending in England is tightly controlled by the Treasury's biennial spending reviews, to which the devolved administrations have no input except over their own blocks.'
Giving evidence to the committee, McLean, professor of politics at Nuffield College, Oxford, said: 'The Treasury's financial control systems make it very hard for the Parliament to be accountable to the people of Scotland.'
PFjun2008
