Famous Formulas
Daniel Finkelstein demonstrates in the opinion piece from The Times that the actually understands the logic behind the Barnett Formula, unlike most politicians I have to say.
The eponymous formula was introduced by a Labour Government in 1978 at the instigation of an English Labour MP, Joel Barnett, and was intended to slowly equalise public spending across the UK on the basis of population share.
So its real purpose was to converge, albeit slowly, the levels of spending north and south of the border although, in practice, successive Tory and Labour Government have, at times, either not applied the formula or boosted Scotland's block grant (which it receives from Westminster) to dilute the formula's intended effect.
But there's no denying what the Barnett Formula is all about and politicians who think it's the 'greatest thing since sliced bread' simply don't know what they are talking about.
Which is not unusual, of course.
This chicanery would badly damage Cameron
By Daniel Finkelstein - The Times
The prime minister must avoid the temptation of linking English devolution with the firm promise made to Scotland
I can’t be completely certain, but I think it was me who coined the phrase “English votes for English laws”. I am pretty sure actually, but usually when I am confident about something like that, the phrase turns out to be from Hamlet, or to be the catchphrase of Minnie Mouse.
I am probably safe, since the competition to claim ownership won’t be that great. It’s just like me to come up with a political slogan that produces the acronym EVEL.
The point of telling you this is not vanity, however mild or misplaced. It is so that you know where I am coming from before you read the rest of what I have to say. When power was devolved to the Scottish and Welsh parliaments in the late 1990s, I was working for William Hague as his policy chief, and we developed the idea of English votes for English laws as part of our response. I thought it was right then, and I still do.
I haven’t been saying this too loudly over the past couple of days because here in Manchester, at the Labour party conference, it is an understatement to say that English votes for English laws isn’t very popular.
It has been an odd start to the conference season, lacking the energy and edge that is usually a feature of the last gathering before a general election. I think many people are exhausted, having, to their great credit, spent the past month or more in a battle to save the Union. They are also hugely irritated by the fact that David Cameron’s tilt towards England has taken coverage away from their conference. And even more irritated at the nature of his proposal, which they regard as brazen and partisan.
As is often the case in politics, everyone is convinced that what happened yesterday is far more politically significant than what happened the day before yesterday. So I think it is worth trying to get some perspective on politics of the English issue.
The first point is that in so far as English votes for English laws is an election issue, Ed Miliband and the Labour party are on the wrong side of it. It poses too much of a political danger for Labour to see it clearly. You can put it to voters however you like, but people will never be persuaded that it is fair to allow Scottish voters to determine English-only questions when English MPs can’t determine Scottish-only questions.
I understand that Ed Miliband rewrote a chunk of his speech at the last minute, despite being slightly worried about the difficulty of memorising all the new material, genuinely angry at the danger Mr Cameron’s ideas pose to the Union. The Labour leader is absolutely not a cynical person, but it is amazing how easy it is to persuade oneself that what is in one’s own interest is in the nation’s interest. I am certainly more than capable of this, so I’m sure he is.
Yet while I think Labour is on the wrong side of the question, I took care to add “in so far as English votes for English laws is an election issue”. And I don’t think that is all that far.
People are interested in their mortgages and the state of their hospitals and schools. They are interested in immigration and welfare fraud and jobs and wages and prospects for their children. Whether there is a coalition in parliament to support the McKay commission’s proposals on Scottish MPs’ involvement in deliberation at bill committee stage of devolved matters? Mmmm, not so much.
Every poll shows that, if asked, people support the notion of English laws being determined by English representatives. Yet most of the time people aren’t being asked, and aren’t thinking about it. They are extremely sceptical about politicians, and not all that engaged in Westminster talking to itself. In case that gives anyone ideas, they are even less interested in taking the power from Westminster and giving it to the regions, whatever they may be.
Some Conservative MPs may be tempted to insist upon a link between devolving power to Scotland and doing the same to England. For a period it even seemed as if Mr Cameron himself might do this. It would be politically most unwise.
Who wants to elect a prime minister who makes a vow to a group of voters — a direct, straight, unmistakable promise — and then reneges on it the moment the ballot boxes are sealed? Everyone in England saw Mr Cameron give his promise to the Scots. Failing to make good this promise would therefore be very damaging to him in England.
So Labour can probably afford, politically, not to support English votes for English laws even if it puts it on the wrong side of public opinion.
This is not, however, the end of the story. While technical questions about English votes may not excite people, the idea that they are being ignored while someone else is getting away with their money certainly does. The fact that Scots receive more money for public services per head than the English is by far the most politically potent part of the English question.
And oddly, I think the answer to the question may be using the Barnett formula. Now, don’t worry. I’m not going to bore you with the financial arrangements made for Scotland by Joel Barnett when he was Jim Callaghan’s chief secretary to the Treasury in the 1970s, just because I have read a 400-page document on it and finally understand it. The words began to swim in front of my eyes after about 20 pages. But, in simple terms, the Barnett formula contains a property that should help to solve the problem of Scottish spending.
Every time there is a percentage increase in spending per head on an English public service, the formula stipulates that the same cash amount should be given to Scotland per head. Because Scottish spending is larger to start off with, this cash amount represents a smaller percentage increase in Scotland than in England. Do this year after year and spending in the two nations will converge.
Why hasn’t this happened yet? Because while the Scottish population was falling the numbers were not adjusted to take account of it. In other words, the Barnett formula wasn’t applied properly. If it was, it would slowly (admittedly slowly) close the gap.
So “Implement the Barnett Formula Properly”. Perhaps this slogan isn’t quite ready for the doorstep? Give me a moment or two. I’ll come up with one of my acronyms.
The Barnett Formula has been back in the news recently - with Scottish Labour MPs (socialists one and all) threatening mutiny if Scotland's share of the UK's spending is affected - adversely of course - if income tax raising powers are transferred north of the border to the Holyrood Parliament.
Now it seems to me that these Labour MPs don't quite understand how the Barnett Formula works - even though we pay them large sums of money to go to a big palace in Westminster - to swot up on these things.
Because the Barnett Formula which some MPs say they will defend while there's still breath in their bodies - is actually achieving convergence as we speak.
In other words, these numpties know not of what they speak - with such ferocity and certainty - and deserve to be wearing the dunce's hat or at least put on the naughty step for not paying attention - until the end of this parliamentary term.
By which time Scotland will be free - or not - as the case may be once we have the referendum on Scottish independence in 2014.
In the meantime I can't see how anyone can describe themself as a 'socialist' - if a main plank in their politic outlook is the dogged defence of historical spending patterns - because this is essentially a conservative philosophy and has nothing to do with needs based public spending.
Here's something I wrote on the subject in 2001 for the Business am newspaper and if I had things my way - I would make it essential reading for all Scottish MPs, especially those in the Labour Party.
Give to the needy!
Scotland has around 10% of the UK population though for many years the nation enjoyed more than its people based share of public spending, more than 12% according to official statistics. Scotland’s 20% higher spending was intended to create a level playing field. Additional resources were allocated for two reasons: the higher cost of providing public services in a geographically diverse area (compare Scotland with, say, London) and the greater levels of perceived need, evidenced by various health and poverty indicators.
Many UK organisations have similar arrangements for dividing up their budget cake. Targeting extra resources on key areas or problems is not unusual. But in 1978 all this changed with the introduction of the Barnett formula, devised by an English Labour MP, Joel Barnett. Westminster politicians took the view that Scotland’s higher share of public spending could not be expected to continue forever especially with its population declining compared to the rest of the UK.
So, Barnett was born with the intention of bringing Scotland’s spending back into line. Convergence would be achieved by linking future spending increases to population, and the old percentage share would wither slowly on the vine.
The underlying issues are clear, but politicians of all parties are getting their knickers in a twist over the impact of the so-called Barnett squeeze. Some say it’s a storm in a teacup and that convergence is not actually taking place. Others that Barnett will rob Scotland of £1 billion of much needed investment over the next three years. Academics are wheeled out to reinforce or rubbish the competing claims of both sides.
The Scottish Parliament is in exactly the same position as Westminster when it comes to dividing up the spending cake for public services. Local government uses a formula to distribute money between urban, rural and islands councils. A formula is the only way of deciding what share of spending Glasgow should get compared to rural Angus or the Western Isles. The key is that the distribution formula should be widely understood and reviewed regularly to take account of new developments.
Glasgow also has a declining population. City council leaders complained bitterly that the latest financial settlement from the Scottish executive did not take enough account of the Glasgow’s needs. The row rumbles on, as it should in a modern democracy, all sides pressing their case vigorously at times. Glasgow believes the current formula places too much emphasis on population and not enough on wider social needs. Glasgow’s citizens die much younger and lead more unhealthy lives than the average Scot.
Scotland’s NHS recently introduced a new scheme for distributing resources devised by Professor Sir John Arbuthnott, principal and vice chancellor of Strathclyde University. His review team was set up by Scotland’s first minister (Donald Dewar) and charged with producing a fair and equitable system for allocating funds to hospitals, community services and GP’s.
Just in time because Scotland’s health services are due to receive an extra £400 million for each of the next three years. Arbuthnott’s formula is needs based and is designed to address Scotland’s shocking inequalities in health. The scheme has been welcomed universally, no doubt because of its independence from government. Glasgow city council believes it should be adapted for use by Scottish local authorities.
Barnett on the other hand is an arbitrary formula, scribbled out on the back of an envelope for all anyone knows, completely unsuited for the task of modern government. What’s the point of Holyrood developing a sophisticated, needs-based model that targets resources effectively and is seen to be fair? Westminster is effectively standing this approach on its head by using population share as the key measure for devolved and non-devolved spending. By employing two directly contradictory methods in the Scottish and UK parliaments the government is making a rod for its back in the run up to the Holyrood elections in 2003.
Barnett matters because it is the exact opposite of modern management, an insult to the efficient use of scarce resources. As part of the UK club, the rest of Britain is entitled to ask Scotland what results it achieves with any extra money. Why are health inequalities in Scotland increasing when for decades additional funds were targeted on the problem? How does anyone tell whether more money will be better spent in future?
Barnett is an intellectually bankrupt policy that can only be defended with smoke and mirrors. Many politicians seem unaware of its real effect and speak about defending Barnett as though it’s a good thing. Changes in the NHS have shown e Scotland the way ahead; Arbuthnott, or something similar, should replace Barnett to make all areas of public spending transparent and more easily understood, including non-devolved areas of spending.
Mind you, scary how these people all have names that end in two t’s.
Mark Irvine
June 2001
The prime minister must avoid the temptation of linking English devolution with the firm promise made to Scotland
I can’t be completely certain, but I think it was me who coined the phrase “English votes for English laws”. I am pretty sure actually, but usually when I am confident about something like that, the phrase turns out to be from Hamlet, or to be the catchphrase of Minnie Mouse.
I am probably safe, since the competition to claim ownership won’t be that great. It’s just like me to come up with a political slogan that produces the acronym EVEL.
The point of telling you this is not vanity, however mild or misplaced. It is so that you know where I am coming from before you read the rest of what I have to say. When power was devolved to the Scottish and Welsh parliaments in the late 1990s, I was working for William Hague as his policy chief, and we developed the idea of English votes for English laws as part of our response. I thought it was right then, and I still do.
I haven’t been saying this too loudly over the past couple of days because here in Manchester, at the Labour party conference, it is an understatement to say that English votes for English laws isn’t very popular.
It has been an odd start to the conference season, lacking the energy and edge that is usually a feature of the last gathering before a general election. I think many people are exhausted, having, to their great credit, spent the past month or more in a battle to save the Union. They are also hugely irritated by the fact that David Cameron’s tilt towards England has taken coverage away from their conference. And even more irritated at the nature of his proposal, which they regard as brazen and partisan.
As is often the case in politics, everyone is convinced that what happened yesterday is far more politically significant than what happened the day before yesterday. So I think it is worth trying to get some perspective on politics of the English issue.
The first point is that in so far as English votes for English laws is an election issue, Ed Miliband and the Labour party are on the wrong side of it. It poses too much of a political danger for Labour to see it clearly. You can put it to voters however you like, but people will never be persuaded that it is fair to allow Scottish voters to determine English-only questions when English MPs can’t determine Scottish-only questions.
I understand that Ed Miliband rewrote a chunk of his speech at the last minute, despite being slightly worried about the difficulty of memorising all the new material, genuinely angry at the danger Mr Cameron’s ideas pose to the Union. The Labour leader is absolutely not a cynical person, but it is amazing how easy it is to persuade oneself that what is in one’s own interest is in the nation’s interest. I am certainly more than capable of this, so I’m sure he is.
Yet while I think Labour is on the wrong side of the question, I took care to add “in so far as English votes for English laws is an election issue”. And I don’t think that is all that far.
People are interested in their mortgages and the state of their hospitals and schools. They are interested in immigration and welfare fraud and jobs and wages and prospects for their children. Whether there is a coalition in parliament to support the McKay commission’s proposals on Scottish MPs’ involvement in deliberation at bill committee stage of devolved matters? Mmmm, not so much.
Every poll shows that, if asked, people support the notion of English laws being determined by English representatives. Yet most of the time people aren’t being asked, and aren’t thinking about it. They are extremely sceptical about politicians, and not all that engaged in Westminster talking to itself. In case that gives anyone ideas, they are even less interested in taking the power from Westminster and giving it to the regions, whatever they may be.
Some Conservative MPs may be tempted to insist upon a link between devolving power to Scotland and doing the same to England. For a period it even seemed as if Mr Cameron himself might do this. It would be politically most unwise.
Who wants to elect a prime minister who makes a vow to a group of voters — a direct, straight, unmistakable promise — and then reneges on it the moment the ballot boxes are sealed? Everyone in England saw Mr Cameron give his promise to the Scots. Failing to make good this promise would therefore be very damaging to him in England.
So Labour can probably afford, politically, not to support English votes for English laws even if it puts it on the wrong side of public opinion.
This is not, however, the end of the story. While technical questions about English votes may not excite people, the idea that they are being ignored while someone else is getting away with their money certainly does. The fact that Scots receive more money for public services per head than the English is by far the most politically potent part of the English question.
And oddly, I think the answer to the question may be using the Barnett formula. Now, don’t worry. I’m not going to bore you with the financial arrangements made for Scotland by Joel Barnett when he was Jim Callaghan’s chief secretary to the Treasury in the 1970s, just because I have read a 400-page document on it and finally understand it. The words began to swim in front of my eyes after about 20 pages. But, in simple terms, the Barnett formula contains a property that should help to solve the problem of Scottish spending.
Every time there is a percentage increase in spending per head on an English public service, the formula stipulates that the same cash amount should be given to Scotland per head. Because Scottish spending is larger to start off with, this cash amount represents a smaller percentage increase in Scotland than in England. Do this year after year and spending in the two nations will converge.
Why hasn’t this happened yet? Because while the Scottish population was falling the numbers were not adjusted to take account of it. In other words, the Barnett formula wasn’t applied properly. If it was, it would slowly (admittedly slowly) close the gap.
So “Implement the Barnett Formula Properly”. Perhaps this slogan isn’t quite ready for the doorstep? Give me a moment or two. I’ll come up with one of my acronyms.
Give To The Needy (7 August 2013)
The Barnett Formula has been back in the news recently - with Scottish Labour MPs (socialists one and all) threatening mutiny if Scotland's share of the UK's spending is affected - adversely of course - if income tax raising powers are transferred north of the border to the Holyrood Parliament.
Now it seems to me that these Labour MPs don't quite understand how the Barnett Formula works - even though we pay them large sums of money to go to a big palace in Westminster - to swot up on these things.
Because the Barnett Formula which some MPs say they will defend while there's still breath in their bodies - is actually achieving convergence as we speak.
In other words, these numpties know not of what they speak - with such ferocity and certainty - and deserve to be wearing the dunce's hat or at least put on the naughty step for not paying attention - until the end of this parliamentary term.
By which time Scotland will be free - or not - as the case may be once we have the referendum on Scottish independence in 2014.
In the meantime I can't see how anyone can describe themself as a 'socialist' - if a main plank in their politic outlook is the dogged defence of historical spending patterns - because this is essentially a conservative philosophy and has nothing to do with needs based public spending.
Here's something I wrote on the subject in 2001 for the Business am newspaper and if I had things my way - I would make it essential reading for all Scottish MPs, especially those in the Labour Party.
Give to the needy!
Scotland has around 10% of the UK population though for many years the nation enjoyed more than its people based share of public spending, more than 12% according to official statistics. Scotland’s 20% higher spending was intended to create a level playing field. Additional resources were allocated for two reasons: the higher cost of providing public services in a geographically diverse area (compare Scotland with, say, London) and the greater levels of perceived need, evidenced by various health and poverty indicators.
Many UK organisations have similar arrangements for dividing up their budget cake. Targeting extra resources on key areas or problems is not unusual. But in 1978 all this changed with the introduction of the Barnett formula, devised by an English Labour MP, Joel Barnett. Westminster politicians took the view that Scotland’s higher share of public spending could not be expected to continue forever especially with its population declining compared to the rest of the UK.
So, Barnett was born with the intention of bringing Scotland’s spending back into line. Convergence would be achieved by linking future spending increases to population, and the old percentage share would wither slowly on the vine.
The underlying issues are clear, but politicians of all parties are getting their knickers in a twist over the impact of the so-called Barnett squeeze. Some say it’s a storm in a teacup and that convergence is not actually taking place. Others that Barnett will rob Scotland of £1 billion of much needed investment over the next three years. Academics are wheeled out to reinforce or rubbish the competing claims of both sides.
The Scottish Parliament is in exactly the same position as Westminster when it comes to dividing up the spending cake for public services. Local government uses a formula to distribute money between urban, rural and islands councils. A formula is the only way of deciding what share of spending Glasgow should get compared to rural Angus or the Western Isles. The key is that the distribution formula should be widely understood and reviewed regularly to take account of new developments.
Glasgow also has a declining population. City council leaders complained bitterly that the latest financial settlement from the Scottish executive did not take enough account of the Glasgow’s needs. The row rumbles on, as it should in a modern democracy, all sides pressing their case vigorously at times. Glasgow believes the current formula places too much emphasis on population and not enough on wider social needs. Glasgow’s citizens die much younger and lead more unhealthy lives than the average Scot.
Scotland’s NHS recently introduced a new scheme for distributing resources devised by Professor Sir John Arbuthnott, principal and vice chancellor of Strathclyde University. His review team was set up by Scotland’s first minister (Donald Dewar) and charged with producing a fair and equitable system for allocating funds to hospitals, community services and GP’s.
Just in time because Scotland’s health services are due to receive an extra £400 million for each of the next three years. Arbuthnott’s formula is needs based and is designed to address Scotland’s shocking inequalities in health. The scheme has been welcomed universally, no doubt because of its independence from government. Glasgow city council believes it should be adapted for use by Scottish local authorities.
Barnett on the other hand is an arbitrary formula, scribbled out on the back of an envelope for all anyone knows, completely unsuited for the task of modern government. What’s the point of Holyrood developing a sophisticated, needs-based model that targets resources effectively and is seen to be fair? Westminster is effectively standing this approach on its head by using population share as the key measure for devolved and non-devolved spending. By employing two directly contradictory methods in the Scottish and UK parliaments the government is making a rod for its back in the run up to the Holyrood elections in 2003.
Barnett matters because it is the exact opposite of modern management, an insult to the efficient use of scarce resources. As part of the UK club, the rest of Britain is entitled to ask Scotland what results it achieves with any extra money. Why are health inequalities in Scotland increasing when for decades additional funds were targeted on the problem? How does anyone tell whether more money will be better spent in future?
Barnett is an intellectually bankrupt policy that can only be defended with smoke and mirrors. Many politicians seem unaware of its real effect and speak about defending Barnett as though it’s a good thing. Changes in the NHS have shown e Scotland the way ahead; Arbuthnott, or something similar, should replace Barnett to make all areas of public spending transparent and more easily understood, including non-devolved areas of spending.
Mind you, scary how these people all have names that end in two t’s.
Mark Irvine
June 2001
