Barnett Formula should be scrapped – Local Government Association

English communities are being short-changed by as much as £4.1bn a year because of an “outdated” 1970s model for allocating spending across the Union, according to the body representing councils in England and Wales.

The Local Government Association is calling for the 34-year-old Barnett Formula to be replaced with a needs based model, with the repatriated money spent addressing the funding crisis engulfing adult social care.

Sir Merrick Cockell, chairman of the LGA said: “The Barnett Formula has passed its use-by date. It is an historic relic from a time when the Government stopped people taking more than £50 on a holiday abroad. What was only ever intended as a stop-gap solution has now become a major problem which is short-changing English communities and under funding their public services by £4.1 billion a year. We now need a fair and equitable distribution of public money across the Union.

“The crisis engulfing adult social care demands a shift to a needs based formula for distributing funding. Our ageing population means that there is an enormous increase in demand for council-run adult social services which must be met to ensure people retain dignity as they get older. The Government also has to take action to ensure people can plan with confidence for the financial needs of old age. A national care loans scheme would provide peace of mind to people and put financial sustainability into a system which is creaking at the edges.

“The move toward greater devolution and tax raising powers for Scotland and Wales means that this costly historical anomaly has to be addressed as a matter of urgency. It will only become more difficult to fix as the tax regime becomes more complex. The major political parties should all make the introduction of a needs-based formula a cornerstone of their pre-election manifestos and the Chancellor should look to lay the groundwork for it in his autumn statement.”

LGA said the formula is based on population breakdown, rather than need and because spending in Scotland and Wales was proportionally higher per person in 1979, the formula has cemented in place “an anomaly” in which distribution of public funding per person remains significantly higher in Scotland, Wales and Northern Ireland than it is in England.

The organisation believes the question is not when Barnett will be replaced, but what will replace it. It is working on alternative funding proposals to be published next summer. It is also calling on all major political parties to make the introduction of a needs-based alternative to the Barnett Formula a cornerstone of their pre-election manifestos.

Commenting on the LGA’s statement, Finance Secretary John Swinney said: “With councillors from all three Westminster parties joining in the call for Scotland’s funding to be cut it is clear that the only way to protect Scotland’s finances and ensure fair settlements for all is with a vote for independence and the ability to grow our economy and determine our own future.

“As official figures show Scotland has paid more in tax per head than the rest of the UK in each of the last 30 years and we contribute a higher share of UK revenues than we receive in public spending.

“Sterling is as much Scotland’s as it is England, Wales or Northern Ireland and it is simply common sense for all parts of the UK for Scotland to continue to use sterling as our currency as part of a formal monetary area.”