Doh! Dimwittery: Game Over For Barnett Formula?

Our friend Iain Dale has today published a stream of steaming prejudice on the subject of the The Barnett Formula. If this reflects a hotline from Conservative Central HQ rather than the mutterings of the Demon Blogger of Doughty Street we need to be scared, very scared. Even though there is no dispute over the need for a discussion and a new settlement.

Around thirty years ago Joel Barnett, now Baron Barnett, was tasked with finding a sword sharp enough to untie the tangled Gordian Knot of the regional dispersal of expenditure which had already been vexing governments for decades. He came up with a convention - no more than convention - known as the Barnett Formula.

This Formula has been maintained by Thatcher, Major, Blair and now Brown governments and considering what a blunt instrument it appears to be - at least to the gutter press and Iain Dale - it does produce liveable results.

While this automatic mechanism for distribution to the "provinces" of Scotland, Wales and Northern Ireland saved interminable rows in cabinet and in the corridors of power it was neither intended as a permanent fix nor as a legally binding arrangement even in the short term.

The monetary figures for 2006/7 in public expenditure per head were:

* England £7,121
* Scotland £8,623
* Wales £8,139
* Northern Ireland £9,385

This being after certain non-identifiable costs e.g. debt interest and defence are excluded. This little table doesn't indicate it the small figure for England is actually just 3% lower than a cross-UK average. And it doesn't tell us that the figures are converging - under Labour at least they're converging - and are expected to even out by around 2038.

The England average also hides a great deal of variation between regions and the following regional breakdown hides differences within those regions:

* North East £8,177 - 111% of UK average
* North West £7,798 - 106%
* Yorkshire and Humberside £7,188 - 98%
* East Midlands £6,491 - 88%
* West Midlands £7,065 - 96%
* Eastern £6,144 - 83%
* London £8,404 - 114%
* South East £6,304 - 86%
* South West £6,677 - 91%

Ranking these nine and the three "provinces" - though these are not strictly like with like - we get this table:

* Northern Ireland £9,385
* Scotland £8,623
* London £8,404
* North East £8,177
* Wales £8,139
* North West £7,798
* Notional Level Pegging £7,362
* Yorkshire and Humberside £7,188
* England £7,121
* West Midlands £7,065
* South West £6,677
* East Midlands £6,491
* South East £6,304
* Eastern £6,144

The Barnett Formula takes no account of the amounts raised by taxation in each of the home nations, nor the relevant 'fiscal need' (based on factors such as sparsity of population, cost of travel, unemployment rates, and health factors) in each "province".

But of course the variations within England DO take account of variations, albeit imperfectly, and the question we should probably be asking rather than: "How far from £7,362 are we? would be "How does the above list vary from the amount that might be generated by the huge multinomial equation accounting for these and other pertinent factors?

The way in which the English Regions differ from the "Provinces" is that they are receiving money based on need, and based on competitive bidding processes. Should the regions enjoy an internal Formula that sees automatic capital receipts for each region every time London scores some dosh? And how can national infrastructure and regional infrastructure be distinguished?

Questions for Dave Cameron's Tories:

1. If redistribution towards poorer sections of society would be on the way out under a Tory government does that not mean that market force based redistribution the other way would be the result, at very least in the short term?

2. If proceeds of growth are to be shared - even more so than they already are - does that not mean less money than otherwise would be the case on public services? Just as the likes of Karol Sikora predict a vast increase in need?

3. If the Barnett Formula is anathema can we expect a replacement arrangement from the Tories which impoverishes Northern and Celtic fringes and reinforces the obvious wealth of the Tory homelands?

UPDATE Thurs 09:54: London ranking in third table corrected.