Barnett Formula will be ‘replaced’ says McConnell

FORMER Labour first minister Lord McConnell yesterday claimed that Holyrood’s funding formula would “wither on the vine” and eventually be replaced by a new needs-based UK-wide system.

By TOM PETERKIN Sunday, 24th August 2014, 1:05 am

Former Labour First Minister Jack McConnell eventually be replaced by a new needs-based UK-wide system. Picture: Contributed

McConnell predicted that the so-called Barnett Formula would be “diminished” in the event of a No vote because the funding arrangement would be irrevocably changed by new tax powers coming to Holyrood.

New laws in the pipeline, under the Scotland Act, will give Holyrood power over income tax of 10p in the pound. Beyond that, the pro-Union parties have said that further income tax powers will be devolved to Edinburgh in the event of a No vote.

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The Barnett Formula is used by the Treasury to determine Scotland’s block grant. Yes campaigners claim that a No vote will see the amount of money available to Scotland squeezed by Westminster cuts.

Speaking at a Better Together event in Edinburgh, McConnell said: “The idea that all the money comes from a block grant from London and is calculated using this old formula is going to gradually wither on the vine. Therefore, the time is getting very close to a position where we have a UK-wide needs assessment to decide how UK money is spent not just Scotland, Wales and Northern Ireland but within England itself.

“The biggest issue of public spending distribution in the UK is public spending distribution in England. The way in which public spending does not balance out deprivation in the north of England with prosperity in the south of England has always been the biggest disparity in the UK.

“The biggest change that would happen from means assessment in the UK would be within England and the different regions of England.”

McConnell added: “In the longer term, the important thing is to secure more flexibility in tax-making decisions in the Scottish Parliament and that is already on the way.

“There has been a very firm guarantee from all three parties at Westminster that there will be a further development of that. In that situation, the formula becomes less significant, therefore there will be more discussion about it in Scotland. Because that’s the right place to have the discussion.”

Last night, SNP MSP Aileen McLeod reacted to McConnell’s comments, saying: “We know that MPs from each of the Westminster parties are itching to cut Scotland’s budget by as much as £4 billion after a No vote and, by a majority of three to one, people in Scotland believe that Westminster would cut Scottish spending if we vote No – that is a big reason why Scotland needs to vote Yes.