- Committee finds that the Barnett formula, whilst imperfect,
is fit for purpose
- MPs find that the formula would work better in practice if
there was more transparency on how it is applied by the UK
Government
- The report recommends changes to the broader framework of
Scotland's financing, including consideration of the cap on the
Scotland Reserve and borrowing limits reform
Today's report from the Scottish Affairs Committee
(SAC) concludes that the Barnett formula is fit for
purpose and that there is not a clear need to reform it
significantly.
However, whilst the committee supports the continued use of the
formula, it does acknowledge that the Barnett formula is
imperfect and recommends a series of measures to the UK
Government to improve its operation.
The Committee finds that the application of the Barnett formula
is not as transparent as it could or should be, with the report
highlighting a lack of clarity on how comparability percentages
are calculated. The committee heard no good reason for this
opacity, which limits the ability of the public, UK and Scottish
Parliaments to hold their respective governments to
account.
To remedy this, the UK Government should publish details of its
calculations in future funding policy statements. Transparency
could be further improved with the release of an updated Block
Grant Transparency document alongside every major fiscal
event.
The committee also voices concerns about the impact UK Government
spending decisions can have on the Scottish Government's budget,
often with little warning. The report emphasises the importance
of regular communication between the two governments on UK
spending and urges the UK Government to assess and consider the
impact of UK budgetary changes on the block grant whilst making
decisions. The details of this impact assessment should be
released alongside any spending decisions.
There is also a clear need for the Scottish Government to have
greater fiscal flexibility, with the committee warning that there
is no real benefit to the current system capping the amount
stored in the Scotland Reserve. To avoid the real possibility
that Scotland would have to surrender any of its funds, the UK
Government should consider removing this cap.
Similarly, the Scottish Government's fiscal flexibility is
further constrained by its limited borrowing powers. It can only
borrow to cover forecast errors, meaning it has a limited ability
to manage fiscal shocks - to remedy this, the report recommends
that the UK Government should reform the Scottish Government's
capital borrowing powers to offer higher limits.
The report also states that the committee considers the Scottish
Government's call for full fiscal autonomy an ‘unrealistic
prospect', adding that there is not a compelling case that it
would automatically result in higher levels of funding for
Scotland.
Chair of the Scottish Affairs Committee, MP,
said:
“The Barnett Formula has been the subject of continued debate
since its introduction, nearly fifty years ago. Throughout our
inquiry we've scrutinised it from every angle and ultimately
found that the formula is fit for purpose and support its
continued use to determine Scotland's funding
levels.
“The formula is in no way perfect, but the committee heard no
convincing evidence that there is any need for the formula to be
reformed significantly, or that there is a workable
alternative.
“To ensure that the Barnett formula works as well as it can
for Scotland, today's report sets out ways to improve the way it
operates in practice, by improving transparency about its
application and making changes to Scotland's broader financial
framework.”
/ENDS
Notes to editors:
- The embargoed copy of the report is attached to this
email
- The summary of the report is on page 1. The full list of the
report's conclusions and recommendations is listed on pages
43-7
- Find details of the committee's inquiry here
