Barnett Formula

David Cornock (BBC journalist who covers Parliament and politics for BBC Wales):

Perhaps the real significance of the Cameron response is that Tories who hope or expect their leader to change the Barnett formula, which dictates slightly more than half of all public spending in Wales, may have a long wait. Worth remembering next time someone wearing a blue rosette tries to tell you that a Conservative government would divert spending from England to Wales.

I haven't heard any blue rosette-wearers around my neck of the woods telling me that they would divert money from England to Wales. Funny that.

In a previous post I noted that Unionists seemed to have ditched Britishness rhetoric in favour of appeals to Scottish wallets.

The attached Scotland Office paper is proof positive of this.

The deficit between Scottish tax receipts and the sum of UK Government expenditure on social protection payments plus the entire budget of the Scottish Parliament was around £6.2 billion on 2007-8, equivalent to around £2,700 per household.

So does that mean that the cost of union with Scotland is £300 per English household?

The Scotsman:

SCOTLAND has gained a £76 billion "devolution dividend" since the creation of the Scottish Parliament, as public spending has outstripped tax generated in the country by up to 45 per cent, a controversial new report has found....

David Davies, a Tory MP for Monmouth, and an outspoken critic of devolution said he was "not surprised" by the report. "Both Wales and Scotland are receiving more in government subsidies than they pay in taxation," he said. "If Scotland or Wales decide to leave the union, there will be a price to be paid because England will no longer want to go on subsidising either."

How does Mr Davies know that England wants to subsidise Scotland and Wales now? Does anyone ask England; does anyone ascertain English interests?

With Scotland now the most affluent country in the UK, and with the revelation that Scotland is overfunded to the tune of £4.5bn a year, perhaps it's time to ask the people of England.

Peter Bone, Conservative MP for Wellingborough, and Sven-Göran Eriksson lookalike, has warned of the dangers to the Union of English extremists.

"Everyone pays the same taxes so public expenditure should be on a fair basis," he said. "Scotland has done very well, so it shouldn’t be subsidised. There is a danger to the union if extremists in England start saying, why is Scotland getting all this money? The Barnett formula needs to be looked at again."

It seems to me that the danger to the Union comes from a political class who tolerate - and have no plans to change - a system that is clearly unfair on England. Peter Bone is part of that political class. Before he starts labelling people 'extremist' he should tell us his solution to the financial and constitutional discrimination against England.

Put up or shut up you bonehead.

David Taylor MP (North West Leicestershire, Labour) makes a valid point:

The hon. Gentleman has just said that Scotland has suffered unnecessarily because of its association with the UK, and earlier in his speech he acted as John the Baptist for the messiah from Banff and Buchan. However, does he not recognise the effect of the Barnett formula on 5 million people in Scotland and on a similar number of people in the east midlands of England—similar demographically, geographically and in all sorts of ways? Public sector spend in Scotland is 20 per cent. or more greater than that of the east midlands. That should not be allowed to continue, and when the hon. Gentleman gets independence, he will have to cut the supply of southern taxpayers' money.

What David Taylor doesn't specify is whether he is in favour of cutting the supply of "southern taxpayers' money" irrespective of whether Scotland is independent. Are we to believe that the formula is a bribe?

Yesterday, in Parliament.

Lindsay Roy (Glenrothes) (Lab): May I ask my right hon. Friend by how much the block grant for Scotland will increase in 2010-11?

Mr. Murphy: The Scottish Government will have more money next year than they have this year. That is a remarkable benefit of the economics of the United Kingdom. The fact is that the SNP Scottish Government today have double the budget that Donald Dewar had when he was First Minister. However, the SNP Scottish Government will have to tighten their belt and make some savings in the same way as every family and company in Scotland is doing.

Remarkable indeed.

There's a wee post from me concerning the SNP over at Our Kingdom.

David Cameron has given his strongest indication yet that Ken Clarke's solution will be in the next Conservative manifesto.

Mr Cameron backed the proposal drawn up by his party's democracy taskforce chaired by Ken Clarke, the former chancellor who is now shadow business secretary, to create an "English Grand Committee" at Westminster which would be closed to MPs from Scotland, Wales and Northern Ireland and which - apart from exceptional circumstances - could not be overruled by the Commons as a whole.

All MPs would be allowed to vote on England-only laws at their third and final reading but the new parliamentary arrangement would prevent any party using Scottish votes to block amendments made by English MPs. - Herald

It's a piss poor solution but from a Tory standpoint, not an English standpoint, it represents an advance on their past three manifestos which contained the unworkable "English Votes on English Laws".

Why have the Tories come up with such a convoluted technical solution to the West Lothian Question?

It's not about good governance, it's just a way of mitigating the WLQ and responding to an English sense of grievance, whilst engineering an inbuilt Conservative majority at certain stages of certain bills.

The thing to bear in mind - when considering banning Scottish MPs - is that it's an unconstitutional measure. Because the Barnett Formula allocates money to Scotland as a proportion of what is spent in England, any decision affecting the English budget (Health, Transport, Education) has a knock-on effect on the Scottish budget. In this respect there is no "English-only" legislation, at least not until the Barnett Formula is scrapped.

"No taxation without representation"

The Tories are being disingenuous because Scottish MPs have a constitutional right to vote on anything that determines how their constituents' taxes are spent - in other words political federalism requires fiscal federalism.

The Barnett Formula is key because it is the Barnett system that helps provide the social glue that underpins the welfare state and the common contract that we all (as Brits) have with one another. This is why the SNP want it scrapped even though it is biased in Scotland's favour. At the moment we can pretend that we have a 'National' Health Service (even though in terms of policy and delivery we actually have four national health services) because it is funded from a common pot - we all put in and we all take out. This principle of British solidarity "British funding for British institutions" - to paraphrase our prime minister - is endangered by fiscal federalism.

Importantly Ken Clarke's solution allows Scottish MPs to vote on the principle of the bill but not the detail, thereby preserving their say in a British veto over spending plans for England, and consequently the Scottish budget. This helps to sustain the veneer of "Britishness" of institutions like the NHS.

Parliament itself is probably even more important to our sense of British identity than the NHS. According to Prof Vernon Bogdanor to be British is "to wish to be represented in the House of Commons", and there will be many who claim that this Conservative policy will create "two classes of MP" by reducing Scottish MPs' involvement in the House of Commons. This is nonsense because thanks to devolution there are already two classes of MP: those that can vote on legislation pertaining to the health and education of their constituents and those that cannot.

The real problem is that highlighted by an unnamed Labour spokesman:

A Labour spokesman said a policy of English votes for English laws would destroy the relationship between the House of Commons and the executive, and "catastrophically undermine the Union".

The Conservative solution means that it would be illogical, but not unconstitutional, for Scottish MPs to have an executive say on matters that they cannot vote on, so logic dictates that the future UK Cabinet should be disproportionately English, with non-English MP only permitted executive responsibility in reserved areas; it also has the potential to set an English bloc of MPs against the UK Government, encouraging English MPs to speak for England against the executive that governs England, and; it introduces nationalism into the Union parliament, encouraging MPs to split along national lines instead of party lines.

None of this will be a huge problem if there's a large Conservative majority, but a Labour or coalition government, or a minority or weak Conservative administration, could well find themselves beset by contradictions between UK-interest and English-interest.  For an English nationalist that's all well and good, and we can only hope and pray that it comes to pass.

How will the Conservative's enemies react to this policy?

I imagine that some English nationalists will be in favour, seeing it as a "slippery slope" to an English parliament, while others will regard it as a sop. The Labour and Lib Dem parties will be against it, but in the face of a Tory landslide they may well come to see it as a 'least damaging' solution. The SNP will be against it in public, but in private, because their MPs observe a self-denying ordinance, they'll be rubbing their hands with glee at the prospect of Scottish Labour MPs becomming side-lined and increasing irrelevant at Westminster. Previously the other parties could just ignore Tory grandstanding on the question of England, but no longer. Because the Tories are likely to form the next government we can expect an extremely heated debate on this, and also on Tory plans to abolish the RDAs and assemblies.

There will also be people inside the Conservative Party who object. There are those who object on a technical basis, people like Malcolm Rifkind who point out that this solution would have made no difference to the votes on tuition fees, foundation hospitals or fox hunting, and there will be others like David Davis, Roger Gale, John Redwood and Mark Field who will say that it doesn't go far enough.

Personally I agree with Alistair Carmichael of the Liberal Democrats:

"If [David Cameron] were sincere about trying to solve this problem, then he would look seriously at the creation of an English parliament or regional assemblies, whatever the English people themselves decide."

Pissing about with technical Westminster solutions to the question of England, whether it's 'English votes' or 'Regional Ministers' will not answer the English question. Only the people of England can answer the English Question and we deserve the opportunity to have the decisive say about how we are governed. England deserves a distinctly English voice, not only in parliament but in government also.

Time for a National Conversation.

I was researching Malcolm Rifkind's previous on the subject of devolution when I came across an astonishing outburst from Neil Kinnock. During a Commons debate he first refers to the SNP as fascists, and then, in response to an SNP MP's statement that they have no desire to interfere in domestic English legislation, he blurts out:

"But the Scots take English money."

I wonder if he still holds those views to this day.

David Cameron speaking in Scotland last year:

"So, to Alex Salmond, I say this. I know you've got a plan. I know you think a Conservative government at Westminster will ignore what Scotland wants and needs, and that you will use such claims to promote your separatist agenda.

"Well, think again. We've got the vision. We've got the ideas And we've got the ambition. And to the people of Scotland, I make this guarantee. Whatever the outcome in Scotland of the next General Election, a Conservative Government will govern the whole of the United Kingdom, including Scotland, with respect. Whoever is Scotland's First Minister, I would be a Prime Minister who acts on the voice of the Scottish people, and will work tirelessly for consent and consensus so we strengthen the Union.

It will be interesting to see how David Cameron squares Conservative ideals with the fact that "within four years, Scotland will have more public money spent on shoring up its beleaguered economy than any other country in the world, with the exception of Cuba".

The Conservatives understand that the economic reality demands cuts to public services in England, but they also know that the Scots will vote with their wallets:

David Cameron announced earlier this week that, if elected, he would institute £5 billion of spending cuts across government departments to help cope with the economic downturn.

Scotland's share of this would normally be about 10 per cent, or £500 million of cuts.

But a Scottish Tory spokesman said last night that the plans had been drawn up in such a way that Scotland would only have to find £28 million of cuts – far short of its £500 million population share.

With the Scots now receiving £1,644 (22%) more per head than the English, up from £828 in 1999, it will be fascinating to watch how the Barnett Formula debate plays out in a predominantly English Conservative Party. Lord Barnett appears to think so too:

Successive governments have failed to deal with the issue for fear of upsetting the Scots. When David Cameron made his first trip to Scotland as Tory leader he assured the Scots that he would keep the formula.

It is perhaps for this reason that in the Conservative's new appeal to austerity the saltire blue of the Union flag is almost invisible.

Speaking in Harrogate in December David Cameron had this to say on the Barnett Formula:

Q: As an English taxpayer I'm increasingly resentful of funding public services in Scotland and Wales that are superior to the ones we enjoy in England. How would a Conservative government readdress this balance?

David Cameron: Well this is one of the tests of "are you a lightweight or are you a leader?" And I'm going to disappoint you. And you know what, there is not some pot of gold that's called "the greedy Scottish taxpayer taking all our money and taking all our public services and running off with all our women". It's just not true. So I give it to you straight: Yes, the Barnett Formula is out of date, and it's a strange formula that every time some money is spent, Scotland gets a certain amount. It's a very strange formula, and even Barnett, even the man who invented it - he's still alive and well and in the House of Lords - even he thinks it needs to change. And we should change it. And we should replace it with a needs-based formula, so that the money goes to those areas of our United Kingdom where the needs are greatest and where poverty and social exclusion is greatest. And if that happened Scotland would get a lot of money because there are a lot of needs and a lot of social exclusion. So yes, we should change the system, I think it would be a fairer system, but it would not be a big pot of gold. It would not mean that we could suddenly splash the cash all over England.

It would be easy to pretend that it did.... why not bash the Scots? I'd get a great reception about the place, but I don't think it's true so I don't want to do it. And I tell you something else, I am a passionate believer in our United Kingdom. I did one of these meetings the other day in East Belfast. I looked round.... I must have been the first person to give a public meeting in Northern Ireland with a target behind his head! Why did I do it? Because I really believe that we're better off as England, Scotland, Wales and Northern Ireland. We're better off together, bigger, better, stronger together. We punch more of our weight in the world, we share so much together, that it would be tragic to break up our United Kingdom. And I think there is pressure and worry between Scotland and England, you see it in the election of Alex Salmond in Scotland, the Scottish nationalist, whose a classic sort of grievance politician. He wants nothing more than for me to go on about the Scots and how they're taking all the money, and I'm not going to give him the pleasure. The Union, the United Kingdom, for me, is a bit like a family. And we've got to try and keep the family together, and what is it that families fall out about? Money. We do fall out about money don't we? I don't want us to fall out about money, so when I go to Scotland I say the same thing: The Barnett Formula is out of date, we've got to change it, but it will be a needs-based formula, and so this isn't going to be some horrific raid on Scottish taxpayers. Yes let's make sure that the Union is fair. It's not right that they decide now health and housing and education in Scotland and come and decide those things in England: that's not right, we can sort that out. But let's not fall out over these things, let's keep the United Kingdom together. Maybe it would be easier to be Prime Minister of England than Prime Minister of the United Kingdom - we don't have many seats in Scotland. But I want to be Prime Minister of the United Kingdom because I think that the United Kingdom is a fabulous construct that we can really make relevant to the 21stC just as it has been for these last few centuries.

Chris Vine has received another reply from the Ministry of Justice on the West Lothian Question. Previously Chris had suggested that using the Barnett Formula as justification for Scottish MPs voting on English issues was a make weight argument, because he believed the government would still want Scottish MPs to vote on English matters 'even if the Barnett formula were to be replaced by a system of assigned revenues with needs based top-up'.

The Ministry of Justice did not deny it:

The argument that the Barnett consequentials of 'English only' legislation may effect other constituent nations of the United Kingdom and so ought to be voted on by all Members of Parliament is not a make-weight. Funding is provided by general taxation, drawn from the across the United Kingdom. It is a matter of both general, and specific importance. Both in relation to the principles upon which it is spent, and the specific instance or policy which it is being spent to further. That the expenditure of public money should have effect in one area as a direct consequence of expenditure in another (in this case Scotland and England) is, in a Union Parliament reason enough to enable all Members to vote on that expenditure. But the core principle at stake is simply that all Members of Parliament are equal on the floor of the House, and have and ought to have equal voting rights.

Chris concludes, I think correctly, that the MoJ 'have planted their standard on a mound of sand' by advocating a system of bad governance whereby Scottish MPs may 'take decisions on detailed education or health matters in England, not on the merits of the decisions for those subject to them, but on the ground that they may result indirectly in too much or too little expenditure in Scotland'.

This revelation would appear to be more of a justification of Ken Clarke's solution (where the detail of the bill is decided by English MPs) than the Very Simple Solution advocated by Chris.

I have a Very Simple Solution (TM), which is to borrow from the precedent of the House of Lords, namely to confer the power to delay legislation for a session.

I think an arrangement could be devised that if at third reading a particular Bill or separate part of a Bill were not to receive the approval of the majority of members for the countries to which the laws are to apply, then it could only be passed by enactment of the same Bill or part in the following session. That would allow the government to govern, whilst also respecting the position of those in England or Wales and their representatives. This approach may possibly also need to be applied to the Commons Consideration of Lords Amendments stage of Bills originating in the Commons, by taking a further "in principle" vote at that stage, but that is a matter of finesse.

It's been my view for a while that the Barnett Formula is the only real justification for Scottish MPs voting on English matters. Not a moral justification, but a constitutional justification because spending in England determines Scotland's block grant. The West Lothian Question and Barnett Formula are intricately tied. It's essential for Gordon Brown to resist calls for financial federalism because the logical extension of such a move is political federalism. If the devolved administrations fund their devolved portfolios from taxes raised directly then a proportion of the money available to the Treasury to be spent in England becomes manifestly English, and should logically be the responsibility of English MPs.

Equally, part of, say, Scotland's funding becomes manifestly Scottish, which theoretically diminishes Westminster's sovereign right to dictate how it is spent

Essentially the Barnett Formula is a centralising formula that binds Scotland, Wales and Northern Ireland to England's spending plans (or rather Westminster's), so preventing policy divergence by dint of the fact that the financial apron strings have not been cut. Devolution should have been on the basis that the devolved administrations can deviate from the centre, but only if they are prepared to pay for it through tax hikes. This would have been a basis for better more responsible devolved government, it would have represented real devolution. He who pays the piper calls the tune.