Scotland spending 30pc more per person than England thanks to Barnett formula, IFS finds

Nicola Sturgeon’s spending on Scottish public services is 30 per cent greater than the equivalent funding in England thanks to the Barnett formula, according to a study published on Wednesday.

The impartial Institute for Fiscal Studies (IFS) found a growing cross-Border spending gap, with the SNP administration in Edinburgh having more than £1.30 per person to spend on public services for every £1 in England.

Almost all of this difference – 28.9p out of 30.6p – comes from the Scottish Government’s block grant from the UK Treasury, which is calculated using the controversial Barnett formula.

In addition, the report found Ms Sturgeon’s government will “almost certainly” receive more funding per person to tackle the Covid pandemic than is being spent in England.

However, the IFS discovered that she plans to use some of this temporary boost from the Treasury to fund permanent, “non-Covid-19” policies – many of which she has made central to her Holyrood re-election campaign.

These include free school meals for primary pupils, free bus travel for young Scots aged under 22, the report said, and “potentially” a large pay hike she unveiled for Scottish NHS workers on the eve of the election campaign.

But the IFS warned that from next year the funding for these policies will have to come from the Scottish Government’s core budgets, meaning tax hikes or spending cuts in other areas.

David Phillips, associate director at the economic think tank and the report’s author, told the Telegraph the gap between Scottish Government spending and the equivalent funding in England was at its widest for at least 15 years.

The formula was introduced in 1978 when its creator Lord Barnett was a member of the Callaghan government, and was originally intended to be used for a “year or two”.

Instead it was adopted by subsequent governments amid fears that withdrawing it could severely damage the Union. The controversial device allocates spending according to population size rather than the amount each country actually needs.

Philip Davies, a Tory MP, said the figures showed the Barnett formula was “completely unjustifiable”.

“You’ve got the Scottish government spending money as if it’s going out of fashion on all sorts of things that people in England can’t get, and and yet the English taxpayers have been expected to keep dipping their hands in their pockets to pay for it,” he said.

Sir Christopher Chope, another Tory backbencher, said: “I think this shows that the whole thing is a complete mess.”

But Kate Forbes, the SNP Finance Secretary, said the formula was “under attack by the Tories at Westminster, who have cut our capital budget by five per cent and stripped the Scottish Parliament of powers so they can engage in ‘pork-barrel’ spending through the so-called levelling up fund.” 

The IFS found that the gap had grown since 2010/11, when it was estimated to be 25 per cent at most, following smaller spending cuts in Scotland over the last decade than in England.

Among the reasons cited was the Barnett formula failing to take into account population growth since 1979 of only five per cent in Scotland compared to 21 per cent in England. This has “translated into increases in funding per person”.

Mr Phillips also highlighted a major flaw in the formula, now fixed, that meant the Scottish Government avoided a £600 million cut that would have resulted from reductions to English council budgets in the early to mid-2010s.

SNP ministers have been allowed to carry forward £874 million of Covid funding into the 2021/22 year, which Mr Phillips said was a “greater degree of flexibility than provided to UK Government departments serving England.”

When combined with a special “funding guarantee” given to the devolved administrations, he said the Scottish Government will very likely have more money per person to spend on tackling the pandemic over the two years than in England.

Maurice Golden, the Scottish Tory economy spokesman, said: “The extra money Scotland gets through the Barnett formula in the months and years ahead will be key to saving jobs, supporting businesses, growing the economy and offering high-quality workforce training.  

“There is a risk though, the SNP’s divisive and unnecessary plan to hold another independence referendum this year would place a stake through the heart of Scotland’s economic recovery.”

Daniel Johnson, Scottish Labour’s finance spokesman, said: “This calls into question the real motivation behind the SNP’s dismissal of Labour budget demands. We were told fair pay for care workers could only be met through recurring funds, not emergency Covid money.

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