Professor David Bell of Stirling University has analysed the impact on Scotland of the Welsh Assembly's Holtham Commission report into a needs-based funding formula to replace the Barnett Formula.
Writing in The Scotsman Prof Bell warns that a move to a needs-based formula could lose Scotland £4.5 billion a year of Treasury funding.
"If its calculations were put into practice, it would have dramatic effects on the Scottish budget," Prof Bell says. "The size of the block grant from Westminster to Holyrood would shrink substantially. Instead of the Scottish grant being 20 per cent higher per head than in England, the margin would shrink to 5 per cent.
"At current spending levels, this would mean a cut of around £4.5bn in Scotland's annual grant from Westminster."
During the House of Lord's Select Committee on Barnett, former Conservative Secretary of State for Scotland (1995 to 1997), Lord Forsyth, revealed that in order to guard Scotland's interests he was counselled against a needs-based formula.
Can I tell you what advice I was given when I was Secretary of State. The advice I was given when I was Secretary of State is do everything you can to avoid a needs-based assessment being implemented by the Treasury because the Treasury believe that it will enable them to reduce Scotland's budget by between £2.5 and £4 billion.
Given the possible implications for Scotland, what is the likelihood of a future Conservative Government implementing a needs-based replacement of the Barnett Formula?
Can't see them wanting to touch this issue in a hurry. They could try selling the idea as being fairer to Wales rather than punishing Scotland (playing off the 'Celts' against each other) but doesn't the main obstacle to change come from the Treasury itself. The Barnett formula gives it a lot of control.
I think the main obstacle to reforming the Barnett Formula is the nationalist insurgency - they don't want to touch it because it's so politically sensitive.
Instinctively I think the Tories favour financial autonomy, but that solution raises its own questions regarding the stability of the Union.
If there was a squeeze on the Barnett formula or a replacement with a new needs based formula then the cuts would be in addition to the deep cuts the Government in Westminster is going to pass on to Scotland as it cuts everything right across the UK to try and save itself from Brown's economic incompetence. This applies to both Labour and any incoming Conservative Government.
With Salmond in power in Scotland and Cameron in Westminster the Union is going to be shaky enough for the Conservatives without handing the SNP more ammunition by cutting the Scottish budget on top of the cuts they're going to have to make anyway.
Barnett is going to be around for a long time yet.
Of course His Orangeness claims to have got a concession from the Treasury that matters will be looked at if Wales is seen to be ‘disproportionately disadvantaged’ by the Barnett Formula. I saw an interview with Gerald Holtham after Hain’s announcement. Holtham was pretty scathing in an understated sort of way. After all what exactly is the point of keeping a formula which may or may not disproportionately disadvantage a territory to which it is applied and who decides when that is happening? But I can well imagine the Tories following a similar line.
I might be missing something, but the article suggests that a 75% reduction in Scotland's block grant equates to £4.5 billion, meaning the total figure at the moment is £6 billion, which seems a little on the low side according to reports I've read in the past.
The Barnett Formula is merely a smokescreen. Jobs have been pushed into Scotland and more will follow with the distribution of government departments.
It is scandalous that the company managing student loans is based in Scotland, for example.
The HMRC's account was taken from the Bank of England and placed with RBS, ludicrously, to maintain jobs in Scotland.
I fail to see what use the present rabble masquerading as MPs in England actually are. Well, they are obviously of use to Scotland, but buggerall use to England.
Stephen
The maths you refer to is a bit trickier than may be supposed at first glance.
I assume that in this example, 100pc, the datum figure, is what the block grant would be IF spending per head in Scotland was the same as in England.
If the all important 'margin' reduces from 120pc to 105pc
then 0.15x = £4.5bn and x = £30bn (if spending the same as in England). Scotland's block grant with the 20pc margin would therefore be £36bn. A reduction of £4.5bn = £31.5 (5pc margin over £30bn).
If Scotland's £36bn was taken as datum (100pc) then the reduction would be 12.5pc, not 15pc.
Regards