The Barnett Formula must be reviewed to save the Scotland Bill

John Swinney and Nicola Sturgeon walking together in Edinburgh outside Bute House

Photo: John Swinney and Nicola Sturgeon would reject any “unfair” deal

In 1852 Karl Marx wrote: “History repeats itself; first as a tragedy, second as a farce.” After much haggling before the vote on new powers for the Scottish Government, we have come back almost to where we started.

The Scotland Bill has hit its next bump in the road: it has traversed stumbling blocks from the UK Government, excessive demands from the Nationalists – who appeared to say anything less the independence was failure to deliver.

Now, a House of Lords (HoL) committee have called for a halt to the Scotland Bill proceeding through the UK Parliament’s Upper Chamber, due to concerns over funding.

Plus, Scottish Finance Secretary John Swinney has said he, along with the First Minister, will block any new powers that may be unfair for Scotland. Indeed, the HoL says the Barnett Formula, which is used to calculate funding for the Scottish Government from the UK, should be scrapped.

It is a vicious cycle.

Professor David Bell

Photo: Professor David Bell

New concerns over funding have been written in a joint report by the Institute for Fiscal Studies (IFS), Stirling University and the Centre for Constitutional Change (CCC).

They believe Scotland could lose £1bn a year unless there is a review of how the new powers being delivered to Scotland will be funded.

Currently, how the new powers will be funded is up in the air. The HoL Economic Affairs Committee said “nobody knows what is going on.” They also fear the devolution of income tax powers has been done with “undue haste“, as it has never been tried before. If the Barnett Formula is scrapped, as the Lords have said, how can the new powers receive adequate funding?

What can you do? The Vow given two days before the referendum last year promised the Barnett Formula would remain in place for Scotland.

Firstly, this was a ludicrous idea; the Barnett Formula is an extremely lopsided method of funding, vastly benefiting Scotland more than the other nations of the UK.

Nevertheless, that pledge is now written into the Smith Commission’s report, meaning there is little flexibility in terms of how to fund the new powers. Therefore, with the Economic Affairs Committee recommending scrapping the Formula, and the Smith Commission clearly stating it is part of the deal with Scotland, the only thing to do is to review the Scotland Bill entirely.

Back to square one; it is a catch-22 situation.

The author of the joint report, David Bell, Stirling University professor of economics, said: “The options available for calculating the block grant adjustments will have major effects on the Scottish budget and the fiscal risks and incentives they face.

“These issues should be part of the public and parliamentary debate, as much as the tax and welfare powers have been.”

Photo of the newspaper article headline of The Vow

Photo: The Vow appeared in the Daily Record 16 Sept. 2014.

We keep going in circles. The legislative process in the UK Parliament has been dragging along at a snail’s pace since 55% of the Scottish electorate voted against independence.

I do not believe this has been done intentionally by the UK Government, but I do believe the institutions are simply failing to react to a new way of thinking. The conservative (with a small c) nature of Parliament means it is difficult for any “radical” changes to be implemented.

Hopefully a deal can be worked out, but there must be a review of the Barnett Formula. It was wrong for the leaders of the three main parties in the UK to pledge to cement it into future negotiations; it was wrong for the Smith Commission to say any deal must include the Barnett Formula.

The HoL Committee said: “The Barnett Formula is not a sustainable method to calculate funding. This is particularly true in the context of further devolution of tax powers.

“It should be modernised and replaced with a needs based funding formula for distributing funds to devolved administrations. This should reflect the additional needs of Scotland, Wales and Northern Ireland.”

I have to agree with their proposal. I would add, though, that until the Barnett Formula is scrapped, the Scottish Government cannot claim it has been wholly successful in its quest for greater independence, and promoting fairness across the UK.

John Swinney, Scottish Finance Secretary

Photo: John Swinney and Nicola Sturgeon would reject any “unfair” deal

There needs to be a better deal made for Scotland. As shown, the current method of funding is not adequate for the UK, or for the new powers being given (hopefully) to the Scottish Government.

Trust and faith is waning for the Scotland Bill, and for the UK Government. It would not surprise me if people sympathise with the SNP at this time, given the number of bureaucratic hurdles they have had to overcome to push the new Bill through Government.

Of course, I would prefer full independence for Scotland. However, the Scottish electorate voted to remain part of the UK, and we must accept that. Until independence becomes a possibility again, we must do everything necessary to ensure the Scotland Bill survives.

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