WHO GETS HOW MUCH

Planned total identifiable public expenditure 2008/09, per head in real terms (2007/08 prices) by UK country:
Northern Ireland £9766
Scotland £9313
Wales £8945
England £7782

There are nine regions in England; their per head planned spending ranges from £6835 (East) to £9437 (London). Only London exceeds the Northern Ireland, Scotland, or Wales figures. Cornwall is part of the South West region which has planned expenditure of £7225.

[Data from Table 9.4 in the UK Treasury document Public sector expenditure by country, region and function ]

These figures can be represented thus:
England 100, Wales 115, Scotland 120, and Northern Ireland 125.

Table 1.2 of the report The fiscal landscape: understanding contributions and benefits, published November 2009 by the 2020 Public services trust sets out an estimate of the percentage of total UK public spending by area and the percentage of total UK taxes received from those areas. These figures show Scotland, Wales, and Northern Ireland receiving a larger share of total UK spending than they contribute in revenue; for London and the Southeast of England that is reversed. The report is here.

Previous post: Don’t mention the formula
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DON’T MENTION THE FORMULA

See the Isle of Man updates 27 October and 30 November 2009

Among the silenda and tacenda of Cornish nationalism is the redistribution of UK taxes to public expenditure among the four countries of Britain. The allocation of public expenditure per capita benefits the three devolved countries more than England.

Barnett Formula

The vehicle for the redistribution of collected taxes is known as the Barnett Formula, which I have discussed before. This formula now seems to be on the ropes.

A House of Lords committee has been examining the formula since last December and a House of Commons committee has commented on it as part of a completed examination of the working of devolution: Lords, Barnett Formula Select Committee ; Commons, Justice Select Committee . The Commons committee have looked at asymmetric devolution and suggestions for territorial powers for England.

Most people giving evidence seem unhappy with Barnett, mainly because it is largely based on the population numbers of the countries of Britain rather than on people’s needs for public services, though there are also challenges to the degree that tax collection and, more specially, spending are centralised in Britain. The consistently larger share to Scotland, Wales, and Northern Ireland as against England (though not as against London), as measured by per head spending, is also increasingly challenged as unfair. The Commons committee has declared that “the Barnett Formula is no longer fit for purpose” and is “overdue for reform”.

The latest per head annual public spending figures (2007/08) due to the formula are: Northern Ireland £9789, Scotland £9179, Wales £8577, England £7535. (Source: Public expenditure statistical analyses (PESA) HM Treasury Table 9.2 in chapter 9).

Those higher figures are the primary cause of what is seen as the better provision of public services in Britain outside England. The Taxpayers Alliance (TPA) has estimated the money total of the “excess” spending in Northern Ireland, Scotland, and Wales from 1985/86 to 2007/08 is about £202 billion: see ( Unequal shares: the Barnett Formula (2008) . Incidentally, in the same document the TPA has also said that the North Sea oil revenues do not balance out the higher Scotland allocation: only in five of the last twenty three years has the revenue exceeded the excess allocation.

The Centre for Economic and Business Research (CEBR) makes the reasonable point in its evidence to the Lords committee that per head comparisons, while important, do not take into account the effect of differing prices and earnings in different places and their consequent effect on the differing costs of providing the same level of services in different places.

CEBR also draws attention to another and damaging aspect: the share of public expenditure as a share of an area’s GDP. Those figures also show that Northern Ireland, Scotland, and Wales have a much higher share of their GDP on public spending than England. The large share taken up by public spending probably discourages enterprise by creating a world in which the ready assumption is to look to the public rather than the private to provide services. Additionally, in areas with higher GDP, with in general higher incomes (that is, areas in southern England), public services tend to be poorly funded. In such areas the poorest, dependent on public services, are seriously adversely affected.

All in all, the Barnett Formula is discredited, irrationally based on population numbers not need, and consistently discriminating financially against people in England outside London. However, London is a nett contributor to the UK: CEBR estimates its subsidy to the rest of Britain in 2007 was about £30 billion, though falling significantly as the recession bites.

However discredited the present formula is, there are political difficulties in changing it. Labour in the UK is increasingly dependent on votes in Scotland and Wales; the Conservatives wish to prosper in Scotland and Wales and are reallied to the unionists in Northern Ireland; they (and the Liberal Democrats) are reluctant to do anything that could be presented as reducing help or subsidies to those places and thus losing votes in them. Of course, this assumes that a rejigged allocation based on need, for example, would reduce the flow; it might increase it as some have argued. However, allocations over large areas, even if based on need, will always contain unfairness because need very much varies within countries and regions as well as between them.

Isle of Man

The Isle of Man is another part of the Cornish nationalist silenda. Richard Murphy’s Tax Research UK blog has been arguing that the Isle of Man is subsidised by taxpayers in the UK. The post of 18 May 2009 is headed “Isle of Man costs UK at least £1.5 billion a year” and says Britain provides a “heavy subsidy” to Man. The post from Murphy of 21 May at 1113 hours gives a short and straightforward account of his argument. I think the Isle of Man and the British government have a case to answer.

ADDENDUM 27 October 2009: In October 2009 the Vat revenue sharing agreement between the UK and Isle of Man was changed on the initiative of the former. This revision, along with other consequences of the recession, will result in the Isle of Man receiving £90 million less in 2010/11 and £140 million less in 2011/12 and each year thereafter. This revision strikes me as confirming that the agreement subsidised the Isle of Man. The Tax Research UK blog says that the island will still be getting a subsidy. The Celtic League said that the Isle of Man “should rethink its links with the UK” including the option of independence in the light of the tax changes. It did not mention the claimed subsidy aspect of the UK/Isle of Man agreement.

ADDENDUM 30 November 2009: See this post (‘The Isle of Man is still being subsidised – by at least £40 million a year’) for a further update.

Cornwall

Of course, there is wailing, essentially unjustified, about the share that public services in Cornwall get relative to other parts of England, but the wailers never seem to ask about the larger redistribution among the four countries of Britain. Why is that? It is time that Cornish nationalism faced the formula.

CORNWALL PAYS

Late last year the privately run car parking at the Royal Cornwall Hospitals Trust main hospital at Treliske, Truro was reorganised. For users the chief change was an increase in charges of 23 percent for a two-hour slot (or 54 percent if one takes into account the half hour grace the previous system gave for overrun appointments). The hospital is distant for many people in Cornwall and thus expensive in fuel, and regular travel to the hospital and car parking there probably represent a serious tranche of money for many patients and their visitors, though some help is available.

This post is prompted by the news that patients in Scotland and their visitors to NHS hospitals in Scotland will park for free (except at three PFI hospitals). Details are here.

In Wales there is already such free parking and in Northern Ireland parking is free for patients with a longterm illness and their visitors.

The UK department of health said that patients in England would continue to pay because free parking was not a sensible use of money. I think they meant, well, not sensible in England at any rate.

The cancer care organisation Macmillan has explained that cancer patients, whose income it says typically drops by half after their diagnosis, pay more than £300 for hospital car parking during their regular hospital treatment. I think that to require those payments is straightforwardedly uncivilised, a tax on illness as Macmillan says, but the department of health probably think it is a sensible money charge.

NHS prescriptions are free for everyone in Wales and set to become similarly free in Scotland this year and in Northern Ireland next year. They are not free in England (apart from the elderly and for people with certain illnesses) and raise £430 million a year from patients in England.

These lead me to the distribution of public spending in Britain. These are the figures for planned per capita expenditure for 2007/2008, in £:

Northern Ireland 9789

Scotland 9179

Wales 8577

England 7535

The England figure includes Cornwall of course. These figures are from the country and regional data in Chapter 9, Table 9.2 of the Public expenditure statistical analyses 2008 , published in April 2008, here.

Decide for yourself if devolution is working fairly for the people of Cornwall and the rest of England.

My view was put in this post:

“I think that UK public expenditure should be redistributed across Britain on the basis of the need of the individuals and communities wherever they live and, where given to communities, to the smallest feasible units rather than large units though devolution has complicated that. In terms of need does it make the best sense to redistribute on a country or even regional basis if we can target more precisely than that? Given the controversy and even ill-will that the present distribution causes, along with the disputes that surround the data, it is time the government looked again at the population-based Barnett formula and at need, and looked again at the collection of the relevant data, so that we can consider what sort of redistribution we want.”

In the meantime, Cornwall pays.

Added 20 January 2009:

Free cancer drug applications begin

CORNWALL AND UNEQUAL HEALTH SPENDING

Once more the financial inequalities between the countries of Britain are exposed. The office of national statistics (ONS) has issued United Kingdom health statistics 2008 and these statistics in Table 8.5, page 114 give the spending per head on health and personal social care for 2006/07:

Scotland £2313

Wales £2109

N Ireland £2096

England £1915.

Thus someone in England – and that includes Cornwall – has nearly £400 less spent on him than someone in Scotland. Concern about public spending inequalities like these will not go away. They are part of the perceived unfairness that is, I think, slowly dissolving the United Kingdom, an unfairness that the Labour government appears indifferent to.

Will the Liberal Democrat MPs for the Cornwall constituencies cry foul? I doubt it.

Will Cornish nationalists complain of inequality and injustice? I’m not holding my breath.

Will Labour and the Conservatives in Cornwall complain? I’m still not holding my breath.

Come on, surprise me.

BARNETT FORMULA TO GO?

If the Conservatives win the next general election the contentious Barnett formula will be replaced with a needs-based formula: see the story in the Scottish newspaper the Herald for 23 May 2008 here .

David Cameron said he wanted the change to be “consensual” and “non-inflammatory.”

This is a sensible approach. The Barnett formula is unfair and perhaps helps to sustain an unwise economy in Scotland; it should be replaced with a formula fairer to all the deprived parts of Britain. See here where I explain that we can be much sharper in our focus on deprivation.

The Conservatives have little to lose electorally in Scotland and it will be interesting to see how the Scottish nationalists respond and whether Labour, with much more electoral support there than the Tories and dependent on Scottish seats for a UK majority, has the courage and energy to tackle the issue. As I have remarked before, the Liberal Democrats in Cornwall, while complaining about the share of Britain’s public money for Cornwall, never mention the formula, never mention Scotland’s share of public spending.

Of course, needs-based formulas have their problems as the disputes about Cornwall’s share of public spending show but the change from the present Barnett formula would be fairer and supportable.

Previous posts on the formula are here.

WHAT’S CORNISH FOR PESA AND GERS ?

Is public spending per head in London higher than in Scotland?

I’m not sure that it is productive to compare a country with a region but let us examine the per capita public spending as set out in the annual public expenditure statistical analyses (PESA) documents published by the UK Treasury. The outturn figures for 2005/06, the latest outturn figures presently available, are Scotland
£8 179 and London £8 164. That’s London less than Scotland.

The 2006/07 planned identifiable expenditure gives figures of Scotland £8 623 and London £8 404. London again less than Scotland. The outturn figures may be different of course.

In fact in the five years since 2001/02 for which outturn figures are known, London has had a larger per capita spend than Scotland only in 2004/05.

You can read all the statistics here on the Treasury website at table 9.2. The introduction to the document has some useful technical comments about the statistics.

The table also shows clearly that per capita public expenditure in Scotland (and Wales and Northern Ireland) is higher than in England, which includes Cornwall; and that the proportion going to Scotland, after a dip in 2004/05, is not significantly declining.

Incidentally, there are no separate PESA figures for Cornwall but the south west per capita outturn figure for 2005/06 was £6 398. How odd that nationalists here complain about perceived underfunding for Cornwall but never raise the issue of per capita public spending across Britain. Why is that?

For 2006/07 the Scotland figures are probably about £5 overstated, ie the per capita figure should be about £5 less than given; previous years have a per capita overstatement of about £1. With this correction Scotland still exceeds London. The correction is noted here – scroll down to Revision to chapters 9 and 10. There will be a correction in the next PESA.

These per capita public spending figures are contended as this article in the Guardian for 3 November 2007 shows.

Perhaps here is a good place to point out that the latest available government expenditure and revenue figures for Scotland (GERS), for 2004/05, show that Scotland receives about £11.2 billion more in public spending than it contributes to the UK excluding North Sea oil; including the oil revenues, the difference drops to about £6 billion. Read it here .

I think that UK public expenditure should be redistributed across Britain on the basis of the need of the individuals and communities wherever they live and, where given to communities, to the smallest feasible units rather than large units though devolution has complicated that. In terms of need does it make the best sense to redistribute on a country or even regional basis if we can target more precisely than that? Given the controversy and even ill-will that the present distribution causes, along with the disputes that surround the data, it is time the government looked again at the population-based Barnett formula and at need, and looked again at the collection of the relevant data, so that we can consider what sort of redistribution we want.

FORMULA UNFAIRNESS

People in Scotland are getting for free a range of public services that people in England are charged for. In England prescription charges are presently £6.85 an item and only off-peak buses are free for people over sixty. In Scotland there are free eye check ups, free dental check ups, and the arrangements for free bus travel for the elderly are more generous. Tuition fees are paid by students at university in England but Scottish students at university in Scotland do not pay them (though there is in Scotland a one-off flatrate graduate fee of about £2300 payable on graduation). In Scotland there are generally shorter NHS waiting list times and smaller school classes; some drugs are available on the NHS that are not available in England; the arrangements for personal and nursing care are more generous.

The Scottish government has just started a six month pilot of free school meals in some areas for pupils aged five to eight and hopes to extend it all over Scotland. It has also announced that prescription charges will be abolished for everyone within the lifetime of the present Scottish parliament and aims to abolish the university graduate fee.

I don’t live in Scotland and it is up to people there and their government to decide what happens in Scotland.

However, these improvements are possible because the Barnett formula gives a much higher percapita amount of UK identifiable government spending on public services in Scotland than in England. The formula, leading to the higher spending in Scotland and the free or more generous services, is increasingly seen as unfair to England. For 2005/06 the percapita public spending in England (including Cornwall) was £6762 and in Scotland £8265 (and in Northern Ireland £9088, and Wales £7666). This formula is unfair and untenable. It should be scrapped and a new arrangement made for spending UK taxes in the four constituent countries.

For Labour, with a majority of the Scotland seats in the UK parliament and dependent on Scotland for its UK majority, this is an issue they will not tackle; nor will they tackle the related issue of MPs for Scotland constituencies voting for England-only issues in the House of Commons. The Conservatives sometimes rumble about Barnett unfairness but seem undecided whether to commit to tackle it. It is noticeable that the Liberal Democrat MPs for Cornwall complain about what they see as unfair public spending in Cornwall, point to the UK government, but do not mention the Barnett formula.

Slowly people in England are realising the unfairness of the present formula and the present House of Commons voting arrangements and eventually parties will not be able to ignore them.

The Times on 11 October 2007 quoted figures from the Centre for Economic Business Research that showed state spending by the constituent UK countries as a proportion of economic activity was lowest in England and significantly higher in the other three countries.

An earlier post on the Barnett formula is here.

A SIMPLE PRINCIPLE IN CORNWALL

Andrew George, the Liberal Democrat MP for St Ives, Cornwall says in the Western Morning News for 26 July 2007: “The simple principle should be established that decisions which affect one community and no other should be taken in that community and not by others outside it.” He was responding to the news that the government has accepted Cornwall county council’s proposals for a unitary council.

On the face of it, most people would agree with this localism. Local people should decide local issues not people far away who are do not know at first hand the issue and do not have to live daily with the decision. Even the European Union believes, it says, in subsidiarity, the idea that a decision should be taken at the lowest possible level of relevance and competence. There’s even a saw about the principle: The wearer knows best where the shoe pinches.

There are, however, serious difficulties with the simple principle. Let me look at a few.

(1) It is difficult to identify items which affect only “one community and no other.” Issues and decisions tend to leak all over the place. One of the arguments against English votes for English affairs is that of interdependence and consequential effect. As Cornwall, even a devolved Cornwall, would not be self-financing, all local decisions in Cornwall depend upon money from other communities, a point made by some exasperated people in England about the spending decisions of the Barnett-financed devolved parliaments and assemblies in Scotland and Wales.

Who pays the bills for local decisions? Not the locality, most cannot afford it. In a way all decisions affect everyone because everyone pays. (Actually not every adult pays; some people receive but do not give.)

I suppose we are talking about not absolute independence but the degree of independence and the degree to which that the decision impacts upon the daily life a particular community rather than others.

Whether and where to build a car park or lavatory and what fees to charge are suitable for local decision; their impact is overwhelmingly upon the local community (and its visitors) hardly at all on people many miles away. The cost is relatively modest.

However, building a school involves significant money in land and building costs and subsequent running costs and well-educated children matter to us all. Others will therefore have an interest.

(2) I think that by and large local people or local councils do not take as broad and long a view as people, like central government, who are immersed in complex interdependent decisions and who usually work on broadly benthamite principles. Local decisions are about the immediate practical issues and effects not universal principles, all trees and no wood.

Despite the chatter about community the localist emphasis is often on me rather than us. Local decisions are not likely to be so liberal as centralised decisions: read this depressing account of the response of the locality to the most deserving and respectable of people. Ask would any affordable housing for first-time buyers get built in Cornwall if people in the locality made the decision and there was no national insistence? What then are the prospects for any provision for the vulnerable and the socially difficult: how many rehabilative hostels would get permission if it depended solely upon locals and not national guidance? Where would one build the less desirable but wholly necessary facilities of life such as sewage works, incinerators, and factories if every local population everywhere had a veto?

(3) An aspect of (2) is what we have come to call the post code lottery: different quality of services in different areas, even some areas lacking the services provided in others, all on the irrational basis of human geography. Nothing about need, only the dictate of the most assertive and demanding of local opinions and local elbows. The sharp elbow model of redistribution, a model which in many places gives very little to a whole galaxy of people – single mothers, aspirant first time house buyers looking for affordable housing, and people living untidy lives.

If locals in Cornwall decided what priority of health money and treatment should be given to people, would not those with locally out-of-favour illnesses get little? In Cornwall with a larger than average proportion of pensioners how would HIV and alcoholism and drug addiction fare against arthritis and mobility problems? The national service sets national rules which try to ensure a reasonably fair shot for everyone.

(4) Of course by localism politicians often mean not the affected immediate locality and its inhabitants taking decisions but a broader community: the district or the county or even region rather than the hamlet. In Cornwall it might turn out to be people of Wadebridge and Bodmin deciding what happens in Penzance and Camborne, or vice versa, though this is an outcome Andrew George opposes.

(5) Localism also tends in practice to mean not decisions by the people but by their claimed representatives. And this in turn means a well-organised group can unduly influence council decisions; the ideal picture is of a community coming together to decide what it wants and in what order. In reality localism can be government by the noisy and those sharp elbows, the prejudices and preferences of local people who are assertive and articulate, rather than by the people though that applies to national government too.

A simple principle? No, it isn’t.

Additamentum 1 August 2007 Permission for the service forces accommodation at Ashtead was unanimously given by councillors today.

See also this later post: If you can’t do it right, make it shiny

BARNETT FORMULA

Taxpayers in England (including Cornwall) in effect subsidise public spending in Northern Ireland, Scotland, and Wales through the Barnett Formula. Annual per head public spending in GBP (£) in 2005-2006 was:

N Ireland 9088
Scotland 8265
Wales 7666
England 6762– this includes Cornwall.

Issues like health and education have been devolved to the Scottish parliament – it decides them for Scotland. One of the consequences is that MPs from Scotland can, and mostly do, vote in the British parliament on issues such as health and education which affect only people in England and which do not affect their constituents in Scotland. MPs from England cannot vote on issues which have been devolved to the Scottish parliament.

This strikes many people as unfair and they want to see English votes for English matters – well, only MPs from England voting on England-only matters. Of course a party might have a majority in the British parliament and be the government but not have a majority among English MPs. Tricky.

The present financial and constitutional arrangements are unfair to people in England (including Cornwall) and should be changed. Labour, with a majority among Scotland MPs and keen to put party advantage before fairness, will change nothing.

A start could be made among Liberal Democrats and others: their MPs from Scotland could immediately voluntarily stop voting on England-only matters. And challenge the Barnett Formula.

Also see here a later post on the Barnett formula.