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A row has broken out between the transport minister Humza Yousaf and the UK Government over funding arrangements for Scotland’s railways.

The Treasury announced around £3.6bn for the rail network in Scotland, describing the new package of funding as a “generous settlement”.

However, Humza Yousaf was less positive about the announcement, and argued that the money amounted to a £600m shortfall.

In a statement, he accused the UK government of ignoring the established calculation for rail funding in Scotland.

The UK Government has departed from our agreed funding formula leaving Scotland’s railways £600m short. Humza Yousaf

Ferret Fact Service has assessed this claim and found it to be Mostly True.

Evidence

Funding for Scotland’s railway network is provided via grants from the UK government, as well as through revenue from passengers and via the Barnett formula, which distributes wealth to the devolved nations based on changes to UK spending.

The settlement announced by the UK government on 13 October 2017 is for £3.6bn over the course of the next funding period, which runs from 2019-20. The transport secretary suggests that this is a ‘real terms’ cut of around £600m and that £4.2bn is required to continue funding at the same level, after inflation. Conversely, HM Treasury said the new funding figure was in fact a £600m increase on what was provided in the previous period.

Yousaf told newspapers that the £4.2bn “represents £1.9bn for required renewal activity as per advice from the independent Office of the Rail Regulator and £2.3bn for enhancement activity.”

This is in line with usage of the railways in Scotland, which has significantly increased over the last decade.

Spending in Scotland during the 2014-2019 period is expected to be up to £3.6bn not including inflation, according to Yousaf.

Transport Scotland, which is the government agency covering rail issues in Scotland, said the shortfall was compared to the 2014-19 figure and added costs due to debt repayment and inflation. However, the analysis which led to this figure has not been published, so it is unclear what a ‘real terms’ cut means in this context.

Central to Yousaf’s claim is that the UK government has not fulfilled the “agreed funding formula”.

This refers to the proportion of money going to Scotland in each five-year period, which was initially calculated using the relative size of Scotland’s rail network compared to the UK. This was found to be 11.17 per cent. This was put forward by the Office for Road and Rail (ORR), the independent rail body, as part of the original settlement when spending power on rail networks was devolved in 2005.

In 2014, when Network Rail was reclassified as a public sector body, previous arrangements for allocating funding were replaced by UK government grant funding. This means Westminster has more control over the funding allocated to Scotland’s rail network.

It appears that the formula based on the size and usage of the network (11.17 per cent) which was agreed at the devolution settlement has been replaced with a broader grant which takes into account population proportion and current devolution settlement. It is announced after consultation with the rail regulator.

The £3.6m which has been handed to Scotland is under the 11.17 per cent of UK Network Rail funding which the old formula would have resulted in.

It is correct to say that this formula had been the one used to calculate funding, and it was certainly agreed by all parties during the devolution settlement in 2005. However, it is not clear whether this has been used as the only methodology for deciding on Scotland’s rail funding settlement.

HM Treasury denied using the 11.17 per cent proportion as the basis for the UK Network Rail grant. The figure has not been reproduced subsequently, according to the ORR.

It is important to note also that the original ORR calculation also does not account for changes to devolution since 2005, notably Scotland’s new tax-raising powers.

Therefore the amount that the Scottish Government can spend on the rail network is not entirely reliant on the Network Rail financial settlement. There are also additional infrastructural projects which are funded outwith the grant, and the historic Network Rail debt which has been taken on by the UK government.

The UK government says Scotland benefits from additional funding through the Barnett Formula and raised the potential Barnett consequentials of spending on the High Speed 2 rail link (HS2).

Ferret Fact Service verdict: Mostly True

Humza Yousaf’s claim that the UK has departed from the original formula for funding Scotland’s railways is accurate. However the formula is not the only way that funding can be allocated to Scotland’s railways. The UK government argues the Transport Minister has not taken account of additional sources of funding, such as enhanced tax powers or extra money being provided directly from London to the Scottish Government through the Barnett formula.

Ferret Fact Service (FFS) is a non-partisan fact checker, working to the International Fact-Checking Network fact-checkers’ code of principles. All the sources used in our checks are publicly available and the FFS fact-checking methodology can be viewed here. Want to suggest a fact check? Email us at factcheck@theferret.scot or join our community forum.

In response to an evidence request, Transport Scotland provided documentation on the original agreement.

Photo thanks to tormentor4555, CC BY-SA 2.0

This fact check also appeared in the Daily Record on 19 October 2017.

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