Report: Brown to scrap Barnett Formula

Scotland on Sunday reports that Gordon Brown is set to tear up the Barnett Formula that allocates spending between the different parts of the UK:

the Treasury has consistently resisted demands for the explosive
move. Former Prime Minister Tony Blair last month said the distorted
handouts were a small price to pay "to keep the UK together", and Brown
has so far maintained the united front against the "English backlash".

But now Treasury officials have admitted that a shake-up is on the
cards – and Scotland is unlikely to emerge from a review with its
privileged position intact. The formula could be disturbed by Treasury
attempts to find an efficient solution to the problem of ensuring the
neediest areas in the UK got the money they deserve. (Scotland on Sunday)

If this report is correct then the decline in fiscal solidarity within the UK identified by the Scottish Council of Development and Industry will have emerged with a vengeance.

Abolishing the Barnett formula may mollify English opinion, although it won’t solve the West Lothian problem,  the thorniest aspect of the ‘English question.’

However, it will undermine the social contract that underlies Brown’s vision of Britishness. At the moment, the UK’s fiscal regime is optimised for the benefit of the south-east of England. Less competitive regions are subsidised by income transfers.

If those income transfers are reduced, the case for places like Scotland and Northern Ireland to go for fiscal autonomy will be correspondingly strengthened, both in terms of the economic calculation and of the legal case under EU law.