Alun Cairns

I wonder, has Alun Cairns signed this e-petition by Kev?

Alun Cairns (Vale of Glamorgan, Conservative)

The Scottish Government are the most resolute defenders of the Barnett formula, arguably against the interests of the other nations of the United Kingdom. Does the Secretary of State therefore think that if the people of Scotland vote yes in a referendum on independence, the Barnett formula should apply to the nation’s debt?

Michael Moore (Secretary of State, Scotland; Berwickshire, Roxburgh and Selkirk, Liberal Democrat)

I do not envisage that Scotland will become independent from the United Kingdom. I think we are stronger together and weaker apart. The hon. Gentleman touches on the fundamental issue of sorting out what the basis of that independence might look like, and the Scottish National party has so far singularly failed to answer questions on that.

Yesterday Plaid Cymru MP Jonathan Edwards asked David Cameron whether "reform of the Barnett formula, as advocated by the independent Holtham commission, will be a cornerstone of any wider changes to how the Welsh Government are funded?"

This was Cameron's reply:

We are looking at a Calman-like process for Wales; we think that is right, and we will make some announcements and proposals. Let me just say that because the spending reductions in Wales are less than the spending reductions in England, we will find at the end of this Parliament that the difference in spending per head in Wales will be even greater than it is today, so I do not accept the contention that somehow people in Wales are being unfairly targeted with cuts; they are not. They are getting a better deal than some other parts of the United Kingdom.

Alun Cairns MP recently summarised the Barnett Formula:

At the moment, Wales receives £113, which will drop to £112, for every £100 that is spent in England; Scotland receives £120; and Northern Ireland receives £124. Holtham concludes that Wales needs £115, which is marginally more than it is currently being awarded; Scotland needs £105, which is a significant reduction from its £120 now; and the figure for Northern Ireland is not far from what it already receives. That is the first needs-based assessment that has taken place. If that is not accepted in general terms, it is certainly an exceptionally useful starting point of where the needs lie.

So yes, Wales does do better than other areas of the UK. But it would be more correct (and more honest) to say that Wales does better than England.

Hat-tip: Western Mail

From the Adam Smith Institute's three minute guide to the Scotland Bill:

It is frustrating that the coalition government does not have anything to say about England. The fiscal autonomy proposals made here would go some way towards eliminating the asymmetries of UK’s devolution settlement, and eliminate the Barnett Formula’s glaring unfairness towards English taxpayers. But the West Lothian question would remain unanswered. Therefore a commission should be established to consider establishing an English Parliament with the same policy responsibilities and fiscal powers as the Scottish one.

The official reason that the Coalition Government gives for not reforming the Barnatt Formula, despite promises that they would do, is that "any change to the system must await the stabilisation of the public finances". In plain English this means that the Government is nervous about the political ramifications of handing Scotland a ‘Barnett cut’ on top of reductions to the Scottish block grant that flow automatically from cuts in spending in England.

Alun Cairns MP helpfully summarises the financial implications of Barnett reform:

At the moment, Wales receives £113, which will drop to £112, for every £100 that is spent in England; Scotland receives £120; and Northern Ireland receives £124. Holtham concludes that Wales needs £115, which is marginally more than it is currently being awarded; Scotland needs £105, which is a significant reduction from its £120 now; and the figure for Northern Ireland is not far from what it already receives. That is the first needs-based assessment that has taken place. If that is not accepted in general terms, it is certainly an exceptionally useful starting point of where the needs lie.

And David Mowat MP raises concerns about the Scotland Bill:

I am concerned that the Scotland Bill, as it is currently configured, will institutionalise the Barnett formula for ever by creating a link between income tax levels in Scotland and current levels of Barnett settlement. In other words, that extra £4 billion will be linked for ever to income tax levels in Scotland. What that means in broad terms is that in order for the Scottish income tax base to make up the £4 billion that Scotland receives over and above a needs basis, additional Scottish income tax of between 12p and 15p in the pound would be required. That will never happen.

It's difficult to understand Mowatt's complaint, but I think it amounts to this:

• The UK Government deducts 10% from each UK income tax rate for Scottish residents, and then allows the Scottish Parliament to specify their own flat-rate tax to be added to each band. The Scottish Parliament would get the revenue raised by this flat rate income tax, while seeing their block grant from Westminster reduced. The block 'Barnett' grant from the UK Government would be reduced to reflect the loss to the UK exchequer from the reduction in the UK tax rate charged to Scottish taxpayers. But as Scotland already receives 12.5% more than it should - according to Holtham - the UK Government can, at a later date, 'reform' Barnett and be seen to be slashing Scotland's grant whilst still allowing Scotland to keep its income tax receipts. Because Scotland was over-funded before the Government slashed its spending, Scotland is left better funded by central government than it ought to be if the Government had reformed Barnett prior to implementation of the Scotland Bill's tax proposals.

And Scotland will need to be over-funded, because the flaws in the Scotland Bill (outlined by Jim and Margaret Cuthbert) mean that Scotland's revenues from income tax will decline over time.

The Scotland Bill is a disaster waiting to happen - a disaster for Scotland, a disaster for England and a disaster for Britain. It's a typical British constitutional fudge. Why not just let Scotland raise all of its own devolved bugdet?

UPDATE: David Mowat MP: The Scotland Bill should be amended to scrap the Barnett Formula, which remains manifestly unfair to the English taxpayer