Call to free up cash for North
Jul 10 2008 by Adrian Pearson, The Journal
Adrian Pearson Regional Affairs Correspondent
(0191) 201-6286
adrian.pearson@ncjmedia.co.uk
SCOTLAND should be told to raise its own funds through income tax in order to free up more cash to be spent in deprived parts of the North East, economists have said.
A report by think tank ippr north has called for a change to the Barnett formula, which sees £1,500 more going to Scotland per person for public services than England regardless of the different needs.
The average income in the North East is only 81% of the UK average while in Scotland it is 95%, a pay difference which has prompted many to question the reasoning behind the Barnett formula.
The think tank has called on the Government to allow Scottish MPs the power to raise their own funds through income tax, topped up with a needs-based grant from Westminster.
Their report said the Government spent just £4,960 per head in the North East in 2007/08, compared to £5,050 in Wales, £5,676 in Scotland and £5,684 in Northern Ireland.
Guy Lodge, senior research fellow at ippr north, said: “The Barnett formula is no longer fit for purpose. It does not result in a fair distribution of spending, and is becoming an increasing source of tension between the nations of the UK.
“There is currently popular support for the continuation of the union in all parts of the country, but failure to act now and address devolved funding could see this tension grow.
“Barnett has very few friends left. Political parties across the political divide and across the UK are voicing their concerns about the way it works. This presents a real opportunity for reform, which the UK government should now seize.”
The formula was devised by Lord Joel Barnett in 1978 to act as a temporary method of allocating funds during his time as the Treasury Secretary.
Lord Barnett has since dismissed the “unfair” formula as a threat to the unity of the UK, claiming: “If something isn’t seen to be done fairly soon, people in England will start to demand separation. That would be disastrous for the UK.”
Last night Berwick MP Sir Alan Beith welcomed the report. He said: “I have long argued that the Barnett formula needs to be reviewed, as does Lord Barnett. I’m pleased to see that the House of Lords committee will be looking into how the Barnett formula is working and considering alternative mechanisms. I hope this will mean a fairer settlement for the North East.”
The House of Lords is due to investigate the funding system this autumn.
