Austerity Britain

GR, I can see merit in each country raising its own taxes and passing on a contribution to the central coffers. Although each administration could raise or lower their taxes, presumably they would also be set a nominal target that matches their block allocation under the current system. So we still haven't got away from the difficulty of deciding how much money each administration should get.

Deciding the allocations on a population basis makes a lot of sense to me. Allocating according to need, not so much. Should schools in deprived areas cost more to run than those in wealthy areas? The main adjustment for deprivation comes through Social Security which is a reserved matter and isn't relevant to the block allocations. Administrations may need extra funds for particular devolved obligations - for example security in Northern Ireland - but I wouldn't apply a multiplier across the board.

Apologies, I meant to say that Scotland receives a population-based share of English spending increases in devolved areas rather than reserved areas.

The idea that the only factor that makes Scottish public policy under devolution distinctive is that it has involved spending lots of money has become a bit of a caricature of late. I think that is a somewhat simplistic view. But it has undoubtedly been a major thread.

I agree with what FFScotland says in many respects. Contrary to the suggestion made by rostbeef, the Barnett formula was in fact designed to bring public expenditure in Scotland down to the UK average, albeit over a rather longer timescale than Commentariat advocates. Scotland receives a proportion of the England or England and Wales expenditure increases in reserved areas in line with its share of UK population. There may well have been some 'formula bypass' over the years, but it has been stuck to pretty rigidly over the last decade or so. Given the significant real terms increases in UK public expenditure during the previous Labour administration, the differential has narrowed significantly.

It is still there, however, and I am sympathetic to calls for a UK-wide needs assessment. That would likely see the nations/regions with the highest public spending per head - Northern Ireland, London and Scotland - see reductions, while there would be increases in resources for Wales and some of the English regions.

However, looking at Scotland alone, this would be very much a second best. Far better, in my view, would be the 'full fiscal autonomy' approach, which would see the Scottish Executive/Government receiving all income from taxation north of the border, remitting an agreed amount to the UK Government for reserved matters. That would make Holyrood governments of all political hues think rather more carefully about whether simply flinging more money at a problem is necessarily the most effective policy response.

It would be interesting to know what state the public finances in Scotland were in just before the crisis. Although free personal care was coming in, my mum tells me there were a bunch of new charges brought in for home help services - things like a home help doing the shopping don't count as personal care and so they started to charge. At the same time, some public health programs in schools were getting cut. And this all predates the fiscal tightening.
I suspect that the fiscal tightening comes at a good time for the SNP. I think they would have needed to make cuts anyway due to their own lavish spending in recent years. But now they can blame it all on Westminster.

Confusingly expenditure within UK regions and budget figures for devolved governments are completely different things. You can't use the expenditure per head figures to discuss the fairness of the block allocations to each administration or the Barnett Formula generally.

A certain number of activities - eg defence, most social protection, business practice - are deemed reserved matters. Everything else, for Scotland at least, is a devolved matter. The Scottish Government gets a block grant from the UK that reflects its population share of "identifiable" UK spending on devolved matters. The block grant is slightly generous due to a kind of fiscal drag - Scotland's share of the population has fallen over the past years and there is still some residual benefit from a more generous arrangment prior to 1970.

"Identifiable" spending is spending that UK departments reckon are spent in each region for the benefit of identifiable residents. It ignores who does the spending but in Scotland's case about 40% is spent by the UK Government, 40% by the Scottish Government and 20% by Local Authorities. It's the UK Government's 40% share where the biggest difference between Scotland and the rest of the UK occurs. But a lot of this is non-discretionary eg Social Security, agricultural subsidies (relatively underpopulated Scotland has more agricultural land per head). Water treatment is a public expenditure in Scotland, but not England where it's privatised. Residents are charged for it, but this doesn't show up in expenditure figures.

Sorry for the long post. I agree with Bagehot's general comments. Governments in Scotland have been somewhat irresponsible.

Definitely time to consider becoming a federal based union. The UK would probably come out more united for it as well.

Scotland will end up feeling the pain that the same leftest cause they are following has caused the rest of the country. The sooner that the devolved regions wake up to this the better. Big state is not the answer, a move back to a level mixed economy would be far more sustainable, but you cannot blame England this time.

The interesting thing is how over-funded Scotland is relative to need (need based on poverty, demography etc). If the same formulae were applied to funding the devolved administrations as are used to allocate funds to English regions and localities, Scotland would get about £105 for every £100/head spent in England. It actually gets £121 per £100. For Wales, which is poorer, it should be getting £115 based on need, but actually gets £112 - short-changed.

If the funding regime was rebalanced to reflect need and align with the way money is redistributed in England, Scotland would lose about £4 billion from its £30 billion budget - and that's just to get to the a fair starting point for the cuts needed to rescue the public finances. Wales' funding would go up by about £400 million on its £15 billion budget. Northern Ireland isn't so easy to compare.

The Treasury has the option to make multi-£billion savings over the spending review by addressing devolved funding. An abrupt realignment would be damaging, but it could commit to rebalance funding in line with need over 5 five years. Scotland will soon have powers to vary more of its tax base, so it could make a genuine political choice to spend more and tax more, or it could cut down its spending to face the same choices that most of England has to live with.

Scotland is still coddled - courtesy of the (discredited, inappropriate & unfair) "Barnett Formula" it will still receive from English taxpayers £3 billion a year more than its due.
It also still has more seats at Westminster than merited by its population - let alone by devolution.

Whilst Wales remains short-changed £1 billion a year.

Caledonia, not Hibernia. Hibernia has its own problems...

So basically we're saying that the governments can't afford their pet projects and election promises....

But of course that's someone else's fault.

Who would have thunk it.

Listening could be the most expensive government program of them all. That's where I'll cut, if elected.