The Barnett squeeze in spending review 2000

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Cuthbert, Jim and Cuthbert, Margaret (2001) The Barnett squeeze in spending review 2000. Quarterly Economic Commentary, 26 (2). pp. 27-33. ISSN 0306-7866

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Abstract

One form or other of the Barnett formula has been operational since 1978. However, while the government has published annual figures for the Scottish Block, and for its post devolution successor, the Scottish DEL, it has failed to publish the corresponding expenditure aggregate for England. This corresponding English aggregate has no administrative meaning in itself in the English context, since it consists of elements of programmes of a number of Whitehall Departments: this is why, presumably, the government has not bothered to publish this figure. But without knowledge of this aggregate, it is not possible to check directly how the corresponding aggregates in England and Scotland have evolved. Secondly, the government does not publish the detailed calculations on how Barnett is applied. Barnett did not apply at all strictly for t he first fifteen years of its existence. In particular, prior to 1993, in establishing the new end-planning year at the start of each public expenditure planning round, the previous end year figure for both Scotland and England was uprated for inflation. This meant that a substantial part of the cash increases required for inflation was taken out of the Barnett discipline. (HM Treasury (1997)). Finally, although the Barnett formula is simple to state in words, it is difficult, without going into the algebra, to uncover the subtlety of how Barnett interacts with differences in population growth between Scotland and England. This paper is primarily intended to provide an estimate of the size of the squeeze on Scottish expenditure implied by the SR 2000, over the planning period for that review. Our findings are that Scotland will experience a relative squeeze of over £ 1 billion by 2003-04, compared with the funding it would have received on English expenditure growth rates.

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