September 10, 2008 12:49 AM

The TaxPayers' Alliance (TPA) presents a new and comprehensive study of the Barnett Formula, the Government system used to calculate the distribution of public spending between the four countries of the UK, that reveals the staggering cost to taxpayers of the spending gap between England and the three better-funded devolved territories (Scotland, Wales and Northern Ireland). The full report can be found here (PDF).

In the last week, with the SNP Government in Edinburgh proposing radical tax changes and Gordon Brown pledging an investigation into the financial responsibilities of the Scottish Parliament, the issue of the funding settlement between England and the devolved territories has hit the headlines once again. The TPA's report, written by former Treasury economist Mike Denham, explores the troubled history of that funding settlement, details the burden placed on taxpayers by the Barnett Formula and puts forward the case for an end to the Formula and its replacement with true fiscal decentralisation. The report will be submitted as evidence to the Calman Commission and to the House of Lords committee currently investigating the Barnett Formula.



    • Identifiable public spending per head in England is £7,535 pa (2007-08). But in Scotland it is 22 per cent (£1,644) higher, Wales 14 per cent (£1,042) higher, and Northern Ireland an extraordinary 30 per cent (£2,254) higher.


    • Just over the last two decades (since 1985-86), higher spending in the three devolved territories has cost UK taxpayers a cumulative £200 billion (£102 billion in Scotland; £43 billion in Wales; £57 billion in Northern Ireland).


  • North Sea Oil has not funded the Scottish spending gap, despite Scottish Nationalist claims to the contrary. In only five of the last 23 years have North Sea Oil receipts exceeded the cost of higher funding paid to Scotland. Even with current high oil prices, the income from the Scottish share of North Sea Oil only just covers the spending gap, and North Sea Oil output is projected to fall by 50 per cent by 2020.


To read the full report, click here (PDF).

Mike Denham, a former Treasury economist and author of the report, said:

“The Barnett Formula has a troubled history and has failed to address the extremely unfair situation of English taxpayers heavily subsiding Scotland. Everyone is struggling to make ends meet, and it is long overdue for the Government to lift this burden from taxpayers’ shoulders. English taxpayers want an end to subsidising Scotland, and the Scottish Government wants financial control devolved to Holyrood, so now is the ideal time to consign the Barnett Formula to history.”

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