Give To The Needy

The Barnett Formula has been back in the news recently - with Scottish Labour MPs (socialists one and all) threatening mutiny if Scotland's share of the UK's spending is affected - adversely of course - if income tax raising powers are transferred north of the border to the Holyrood Parliament.

Now it seems to me that these Labour MPs don't quite understand how the Barnett Formula works - even though we pay them large sums of money to go to a big palace in Westminster - to swot up on these things.

Because the Barnett Formula which some MPs say they will defend while there's still breath in their bodies - is actually achieving convergence as we speak. 

In other words, these numpties know not of what they speak - with such ferocity and certainty - and deserve to be wearing the dunce's hat or at least put on the naughty step for not paying attention - until the end of this parliamentary term.

By which time Scotland will be free - or not - as the case may be once we have the referendum on Scottish independence in 2014.

In the meantime I can't see how anyone can describe themself as a 'socialist' - if a main plank in their politic outlook is the dogged defence of historical spending patterns - because this is essentially a conservative philosophy and has nothing to do with needs based public spending.

Here's something I wrote on the subject in 2001 for the Business am newspaper and if I had things my way - I would make it essential reading for all Scottish MPs, especially those in the Labour Party.

Give to the needy!

Scotland has around 10% of the UK population though for many years the nation enjoyed more than its people based share of public spending, more than 12% according to official statistics. Scotland’s 20% higher spending was intended to create a level playing field. Additional resources were allocated for two reasons: the higher cost of providing public services in a geographically diverse area (compare Scotland with, say, London) and the greater levels of perceived need, evidenced by various health and poverty indicators.

Many UK organisations have similar arrangements for dividing up their budget cake. Targeting extra resources on key areas or problems is not unusual. But in 1978 all this changed with the introduction of the Barnett formula, devised by an English Labour MP, Joel Barnett. Westminster politicians took the view that Scotland’s higher share of public spending could not be expected to continue forever especially with its population declining compared to the rest of the UK.

So, Barnett was born with the intention of bringing Scotland’s spending back into line. Convergence would be achieved by linking future spending increases to population, and the old percentage share would wither slowly on the vine.

The underlying issues are clear, but politicians of all parties are getting their knickers in a twist over the impact of the so-called Barnett squeeze. Some say it’s a storm in a teacup and that convergence is not actually taking place. Others that Barnett will rob Scotland of £1 billion of much needed investment over the next three years. Academics are wheeled out to reinforce or rubbish the competing claims of both sides.

The Scottish Parliament is in exactly the same position as Westminster when it comes to dividing up the spending cake for public services. Local government uses a formula to distribute money between urban, rural and islands councils. A formula is the only way of deciding what share of spending Glasgow should get compared to rural Angus or the Western Isles. The key is that the distribution formula should be widely understood and reviewed regularly to take account of new developments.

Glasgow also has a declining population. City council leaders complained bitterly that the latest financial settlement from the Scottish executive did not take enough account of the Glasgow’s needs. The row rumbles on, as it should in a modern democracy, all sides pressing their case vigorously at times. Glasgow believes the current formula places too much emphasis on population and not enough on wider social needs. Glasgow’s citizens die much younger and lead more unhealthy lives than the average Scot.

Scotland’s NHS recently introduced a new scheme for distributing resources devised by Professor Sir John Arbuthnott, principal and vice chancellor of Strathclyde University. His review team was set up by Scotland’s first minister (Donald Dewar) and charged with producing a fair and equitable system for allocating funds to hospitals, community services and GP’s.

Just in time because Scotland’s health services are due to receive an extra £400 million for each of the next three years. Arbuthnott’s formula is needs based and is designed to address Scotland’s shocking inequalities in health. The scheme has been welcomed universally, no doubt because of its independence from government. Glasgow city council believes it should be adapted for use by Scottish local authorities.

Barnett on the other hand is an arbitrary formula, scribbled out on the back of an envelope for all anyone knows, completely unsuited for the task of modern government. What’s the point of Holyrood developing a sophisticated, needs-based model that targets resources effectively and is seen to be fair? Westminster is effectively standing this approach on its head by using population share as the key measure for devolved and non-devolved spending. By employing two directly contradictory methods in the Scottish and UK parliaments the government is making a rod for its back in the run up to the Holyrood elections in 2003.

Barnett matters because it is the exact opposite of modern management, an insult to the efficient use of scarce resources. As part of the UK club, the rest of Britain is entitled to ask Scotland what results it achieves with any extra money. Why are health inequalities in Scotland increasing when for decades additional funds were targeted on the problem? How does anyone tell whether more money will be better spent in future?

Barnett is an intellectually bankrupt policy that can only be defended with smoke and mirrors. Many politicians seem unaware of its real effect and speak about defending Barnett as though it’s a good thing. Changes in the NHS have shown e Scotland the way ahead; Arbuthnott, or something similar, should replace Barnett to make all areas of public spending transparent and more easily understood, including non-devolved areas of spending.

Mind you, scary how these people all have names that end in two t’s.

Mark Irvine

June 2001