One cheer for the Barnett formula – and three cheers for honouring pledges

The Barnett formula was a fix to settle by how much bloc grant for Scotland rose each year, given the extent of the rise in comparable English spending.

It currently polls very badly in England. The reason is that Scotland can spend around one fifth per head of the population more than England. This enables Scotland to offer free tuition for Scottish students at university, and better terms for care for the elderly amongst other matters. Now that Scotland is around the same income per head as England, and now SNP Ministers are constantly telling us Scotland is a rich country, many in England ask why the favoured treatment?

The Barnett formula relates to changes in annual spending. If, for example, a given public spending item was allowed £100 million more spending next year than this in England, Scotland would be allowed £10 million more for the same spending. The English increase is multiplied by the proportion of population in Scotland to England to derive the extra amount. If some of the spending item is not devolved, then the comparability percentage is also applied, so Scotland only gets an increase for that part of the budget which is devolved. If only 50% of the extra £100m budget was devolved, Scotland would get an extra £5million.

Given that Scotland therefore only gets the same per head increase as England, why does she end up with an advantage in the total? The main reason is the starting or base budgets in 1979 where Scotland already was allowed to spend more per head. This has been compounded by the relative decline of Scotland’s population to England. This means that the per capita value of the base budget has gone up compared to England.

The 3 leaders have made two promises to Scotland on these financial matters. The first is that Barnett will continue to apply. As a means of changing the future spend it can still make sense, as it means parity between England and Scotland for the increments. I would advise my fellow Englishmen and women to calm down a bit about the formula for annual changes, as it can make sense which is why it has endured for so long.

The second promise is that Scotland can raise its own Income Tax in future, and maybe some other taxes. As long as this money is taken off the bloc grant and the money that attracts the Barnett formula, this could help sort out the imbalances and tackle some English resentment at Barnett, as Barnett comes to cover a reducing balance of spending. There is a lot to be said for Scotland taking responsibility for more of its own revenue raising, and accepting that more of its spending will depend on its success in levying taxes on its own taxpayers. What matters is a fair baseline budget and settlement this time round when the new taxes for Scotland make a big change to the bloc grant.

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Speak for England

The campaign to speak for England has taken off. I am receiving large numbers of emails and web contributions in support. There is a strong feeling that England deserves and needs a fairer settlement. There is a strong surge in opinion in favour of England having a voice and the right to govern herself as Scotland does. Tomorrow I will go to Chequers to present my thoughts on how to take this forward to the Prime Minister.

There is no nasty nationalist movement in England. Most English people do not define their Englishness by expressing dislike or hatred of other countries. There is none of that unpleasant undercurrent that you hear on the fringes of Scottish nationalism that is anti English. There is none of that strident nationalism based on anti Russian sentiment which we see in Ukrainian nationalism.

We English are on the whole glad Scotland voted to stay with us, and wish the UK to be our country representing us abroad and taking the big decisions on defence, war and peace and general economic and monetary policy. We also now strongly feel that if Scotland is to have more devolved power we too need our own devolved government to balance the kingdom. We want a fair settlement over who makes the decisions, and how the money is raised and spent.

We English would like there to be a BBC England which does for our culture and debates what BBC Scotland and BBC Wales do for them. We want to hear our worries and arguments more on our media, and know that our concerns and our public services will be dealt with by English MPs answering to their constituents.

Next week we in Parliament have to take up the task of sorting out a quick and straightforward way of ensuring that in future we have English votes for English matters. I just hope Labour and Liberal Democrats realise that if they wish to be serious contenders for votes in England they too now have to join us in creating justice for England. I could not justify to the electors of Wokingham giving Scotland the power to settle its own Income tax rate, and also giving to Scottish MPs the right to vote on what Income Tax we have to pay in England when they would not have to pay it themselves.

PS The Survation poll in today’s Mail on Sunday shows 65% are against Scottish MPs voting on English issues, with only 19% in favour.

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English votes for English issues

I was glad the Prime Minister announced his support for this measure from the doorstep of 10 Downing Street yesterday morning. Mr Hague has a crucial task to pilot this through the political difficulties ahead.

Listening to media voices yesterday, there are still plenty of misunderstandings about this. The first is the question what happens if the majority of English MPs is a different party from the majority of Union MPs? Far from posing a problem the answer to that is the English majority chooses the Ministers, makes the laws and settles the policies in the devolved areas. In this it would be the mirror image of Scotland. They have an SNP government. There will never be a Union SNP government, as they never fight seats outside Scotland. The Union government can still govern in Westminster, even though a rival party is busily making decisions and passing laws about the devolved matters in Scotland. England needs the same arrangement.

Then there is the question how do we define an English issue which Scottish MPs can’t vote on. That too is easy. It is any issue which is defined as a devolved issue for the Scottish Parliament. We just want the same list for England.

They ask how would the Chancellor of the Exchequer still run the economy if England had devolved budgets. In the same way as he does at the moment with devolved Scottish budgets. The Union could still control overall levels of spending and borrowing, and would still control considerable tax revenue.

They ask why don’t we devolve power to cities? Because not every one lives in cities, and we all in England want a fair settlement for us in an age of Scottish devolution. We will want one English Income Tax rate when that is devolved to Scotland, not many. English MPs could of course decide to give more powers to English cities if that is popular and sensible.

Labour still hankers after the break up of England through regional governments. That EU plan was decisively rejected by the voters of the North East when they were offered regional government. I note Labour does not propose splitting Scotland and Wales into regions though that could also be proposed.

So why not agree England wants to make more of her own decisions just like Scotland? The cheapest and easiest way to start down that road is English votes for English issues. If Mr Hague cannot get agreement to that from Labour then we need to shame them into accepting that Scottish MPs voting on English business is simply no longer acceptable. If Labour wishes to win in England as it has in the past it too needs to speak for England on this matter.

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Does “devo more” mean more money for Scotland?

Now the negotiating begins in earnest to try to settle the country around a new devolution settlement. Of course that settlement has to be fair to England as well as to Scotland. Today I want to ask how the main parties think the money will be managed for Scotland.

During the campaign the Better Together parties appeared to offer more tax raising powers and more borrowing rights for Scotland. The three leaders – and Mr Brown – also clearly promised to keep the Barnett formula so Scotland can carry on spending more per head than the rest of the UK. How do these three things gel? What do they mean for English taxpayers?

Under the current dispensation Scotland can raise additional Income Tax by imposing a 3p in the pound surcharge and spend that. It has chosen not to do so. It can borrow an additional £2.2bn for additional capital spending, with permitted annual increments of £240 million.

The Liberal Democrats and Conservatives offered to Scotland control over all its Income Tax. Labour offered control over three quarters of standard rate Income tax. Presumably the grant will be reduced by the amount Income Tax raises in Scotland on the handover of the tax raising power. Presumably this will be projected forward, so if Scotland enjoys a windfall of extra Income Tax or if it changes rates to raise more Income Tax it will benefit from that. Presumably also if Scottish Income Tax falls short of expectations English taxpayers would not have to make good the shortfall in order to fulfil the Barnett pledge – or would England be required to take the risk of tax revenue shortfall? We need clarity on this important detail. From the English viewpoint we would expect Scotland to spend less if it raises less in Income Tax, and would not wish to top up the UK grant to them if their Income tax receipts fell short.

The current borrowing powers allowing up to £2.2 bn extra are in the present public spending and borrowing figures for the UK. If Scotland is to be given wider powers to borrow against its own Income tax revenue this will have a knock on effect on the rest of the UK. Will England have to borrow less if Scotland decides to borrow more? Or will the UK government automatically increase the annual UK borrowing total if Scotland does decide to borrow more?

Meanwhile, the English government will also expect similar powers. We will wish to set and control our own Income tax, and will expect a proportionate borrowing limit for our capital projects.
What are your thoughts on what would be a fair financial settlement for England and Scotland?

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My contribution to the debate on the Ukraine, Middle East, North Africa and Security

We should talk more and bomb less. I say that as someone who wants us to have strong defences. I want our country to play a leading role in the world and to be available, with the UN and allies, or if necessary on our own, to reinforce our values. I accept that there are occasions when we have to fight a just war. We were right to liberate Kuwait with our allies, and we were right to liberate the Falklands, but we need to ask ourselves some hard questions about some of the military interventions we have made under Governments of both parties in recent years.

I am glad that the Government accept that we can go to war only if the House approves such action, which I think has always been the case, and I am glad that they recognise that that is the most serious thing we can do. We have the power, collectively, to authorise our troops to go to kill other people in a foreign country. That is a very serious thing to do, and it should be done only after full debate and, if necessary, on a vote of the House to show that it has at least majority approval—it is even better when there is consensus.

To guide the Government, whether we are approaching such a position again or not, they should ask themselves these questions. First, are they sure that diplomacy and politics have broken down completely and that there is no further scope for diplomacy and politics to carry the problem forward and try to make it better? War is not a good answer. It is what happens when politics and diplomacy fail.

Secondly, after we win a war—even if we have had a great victory, as the allies had in 1918—we need to go back to politics and diplomacy and get it right. Otherwise, we might find that we have created a worse monster that requires yet more conflict, as we are in danger of proving in the middle east. The west has the power to get rid of a regime it does not like, but it does not necessarily have the power to support and create a democratic regime in its place that has the acceptance of enough people in the country to keep it together and make it a better place. It is not a win if we get rid of a nasty dictator and replace them with warring bands who kill even more people.

We need to get the Government to ask whether diplomacy has failed and whether the situation is one in which the use of force, if successful, is likely to make the situation better. If we are going to use force, can we please have a diplomatic and political strategy for the aftermath of successful military engagement? We need to know what military success looks like, but more importantly, we need to know how military success leads to a happier country, democratic values, tolerance and toleration, and all the things we believe in. When we inject more weapons and fighting into a situation, we normally make people not more tolerant, but more intolerant. We make them not happier, but more resentful.

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England arise – England could be the winner on Thursday

Whatever the Scots decide to do there is a winner. England.

I always thought of myself as British. My country was the UK. I now also think of myself as English, and my country is England. Years of listening to devolutionists and nationalists from other parts of the UK have persuaded me to change my approach. I now feel English as well as British.  My British identity is being threatened and undermined from elsewhere in the Union. My English identity is the future.

If Scotland votes to leave, England is the winner. My fellow countrymen and women will become English as well, divorced by the Scots from our old country. We will soon see what a great future England can enjoy.

The 8% of UK output accounted for by Scotland will be replaced by just three years economic growth in the rest of the UK after they have gone. More contentiously, the 5 million people will be replaced by new people from  inwards migration in just 20 years if we carry on at past rates, though many would like us to change  that.

If Scotland votes to stay they will do so with beefed up devolution. It will be different. We will know for sure that around  half the Scots want to leave us immediately and many of the  other half want to sup with us only with a very long spoon. The very least we should insist on is the same devolution of government to England within the residual union that Scotland will enjoy.

If they do vote to stay, as many of us hope and expect, it will be on new terms. Anything that Scotland wants England should be given as well. I welcome the new spirit in Scotland for an equal partnership. That  means an English Parliament for us. That means fair burden sharing when it comes to taxes and benefits from the Union.We must make sure this time England’s voice is heard. England expects….

Scotland wants to have the government they voted for. In the Scottish Parliament for devolved matters they do. England voted Conservative in 2010 but got a Coalition government. It’s high time England also got the government it voted for, at least for all devolved matters.

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Don’t break up England just because some want to break up the UK

 

The reaction of some in the Lib Dems and Labour to the moves in Scotland to leave us or to loosen the Union ties is to seek to demolish England at the same time. In proposing this they gravely misjudge the mood of the English people.

Poll after poll shows overwhelming support for the idea that Scottish MPs should no longer vote on English matters. What part of that do Labour MPs from Scotland not understand? If they want their party to have a chance to do well in England they should withdraw from English votes, just as the Scottish Nationalists have done.

A majority of proposals for elected Mayors have been voted down by English electorates. There is no sign of  huge pent up demands for more powerful elected local government. If it is wanted that will remain possible with an English Parliament, just as it has been on offer from the UK Parliament. Mr Clegg will have to come up with a better idea than more powerful cities. And why in Mr Clegg’s world of unfair and lopsided devolution do cities deserve better than suburbs or rural areas? Why should Sheffield have more devolution than Wokingham?

The old idea of elected regional governments was even less popular than elected Mayors. In Labour’s  favourite place to try it, in the North East with traditional strong Labour support and as far away from London as possible, an overwhelming majority said No to regional government in a referendum. What part of that did people  not understand? Why do some think they can revive this idea? Do they not see that England, a Eurosceptic country, has no wish to be broken up into Euro regions.

Liverpool does not want to be placed under Manchester control in the North West. Sunderland and Newcastle have made their views known on the North East. Cornwall does not fancy being governed by either Exeter or Bristol, and Exeter and Plymouth would be suspicious of Bristol claims to be the heart of the South West. My part of the country is in  several regions that we do not recognise and do not  wish to govern us – Thames Valley, rest of the South-east and the south.

If the problem is the potential break up of the UK, the answer is not to break up England. It is time for England to have her voice and her own unity.

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You can epetition for an English Parliament

I discover there is a live petition for the English Parliament to emerge at Westminster with English votes for English issues. It is available on epetitions.direct.gov.uk/petitions/68744. Those of you who support the idea might like to sign it.

(It is not something I tabled or asked to be tabled and is not in my name. )

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Scotland and England’s marriage problems

Dramatis Personae

 

Scotland   a wife who feels she is taken for granted by an unsympathetic husband who does not understand her

England  a hen pecked husband who thinks he can now never do or say the right thing  as his wife  demands more and more freedom from their marriage

The personal monologues;

 

Scotland    “I have been trying to tell my husband for years that I am unhappy in this marriage. He only ever listens when I threaten to divorce him. This time he’s back at the last minute making promises all over again. How can I believe him? I have heard it all before yet it still the same old marriage. He does not understand me. He does not sympathise with my wishes and views. If you marry a feisty  socialist you should expect a bit of fire and passion for equality”

England: “I can’t understand what’s bugging my wife again. I gave her an expensive new Parliament a few years ago. She said that would make her happy. Now she says it’s not a good enough Parliament. Apparently some of the neighbours have got more powerful ones. We’ve never seen eye to eye over socialism. She knew that when she married me. Most couples keep off the topic of politics. Why can’t we? I have told her again I will give her Parliament more powers, so why does she keep going on about it?Why this permanent threat of divorce hanging over us?”

Scotland ” It’s just typical of him that he can’t see or wont see we do not spend enough on the family. I don’t know what he gets up to with those fancy friends of his in London. He tells me he’s not seeing some other woman, but he does spend a lot of time in the bright lights. He tells me he needs to keep our money with those bankers in London, and that we do not have enough to spend more on homes and welfare for our family. He looks rich enough to me. I think he’s being mean”

England “She doesn’t seem to accept I love her. I have been paying the bills and also keeping some savings for our old age. Now apparently that’s all wrong and I should be more generous. I am only trying to be careful so we don’t run out of cash. I can’t see what’s wrong with the decisions we’ve been making together in London. It always used to be just fine. The last thing I’m going to do is get involved with some other woman when I get so much trouble  from the one I married. I have to keep in with the moneymen in the City as they look after our investments and send us money when we need it. If we broke with them we’d be a lot poorer.”

Scotland: “One thing I am fed up about is a spare bedroom. It’s not asking too much for heaven’s sake. My mother would like to come to stay occasionally. She at least would be someone I could talk to about my feelings. He tells me we can’t afford it.”

England: “I have no problem with her mother coming if she wants to. She does anyway. We have a perfectly good sofa bed in a downstairs room. Her mother told me herself not to bother to add another bedroom as she does not want to be a regular visitor”.

Scotland: “He always says the wrong thing – or more often says nothing. He doesn’t spend a lot of time with me, and when he does he has nothing to say about us and about our relationship. I give him the chance but he always fluffs his lines or is left speechless. He prefers to spend hours watching football or playing his war games. He should know I don’t like either of those.  I do wish he would have some feelings and express them. His stiff upper lip and sense of martyrdom drives us further apart”

England “Whatever I say and do is wrong. If I ask her out for a romantic evening or week-end I am told our relationship is wrong and we can’t do that. Apparently the mood is not right.  Every time she wants to sit down and talk over the same old business of what is wrong with our relationship. I sometimes feel like saying what is wrong with our relationship is that we spend all our time talking about what is wrong with it. But I know that would just make things worse, so I keep quiet. Someone’s got to try and hold it altogether. It’s easier to watch some football than try another version of how we can sort out the devolution of tasks within our family, or how we can determine the family  budget.”

Scotland ” I am worried that he is going to upset our family doctor. He’s always going on about problems with our health service when I think it’s wonderful.”

England ” Scotland seems to think I want to get rid of the family doctor and take out private health insurance. I have absolutely no wish to do that but it doesn’t matter how many times I say so.”

Scotland ” I just can’t stand it. He shows no feelings for me, or for our family or for all in need. He doesn’t do enough around the house. He just assumes meals get cooked and shirts washed by  magic. I just wish he would get in touch with his feminine side and show some normal human sympathy”

England: ” She says I don’t do enough of the chores, yet when I try to cook a meal I get shouted at for the way I use the kitchen. She should see how much time all the gardening, DIY and running errands takes. She says she wants me to get in touch with my feminine side. I am not sure I have one. I thought the whole point of our marriage was she liked manly attributes – my broad shoulders, my decent wallet, my bravery when faced with danger. Would she really prefer it if I turned out to be more feminine?”

To be continued -   will they manage to find true romance as they once enjoyed? Can they find an answer to the eternal problems of who does which chores, and who pays which bills? Will they find a way of being friends and being able to talk to each other again? Will Scotland withdraw the divorce petition? Please let me know your thoughts.

 

 

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Business intervenes in Scottish referendum

 

I  am surprised at how many businesses have decided to intervene in a highly contentious referendum campaign when they have no need to do so.  These large businesses need to remember that they have many shareholders and customers who disagree with the stance they are taking, as well as many who agree. It may all prove to be counter productive for them and  for the campaign they say they are trying to help.

I have no objection to the banks making clear what they would have to do if Scotland votes to become independent. They need to consider their position and then make a formal statement to the Stock Exchange. They were rightly being asked about the impact on their ability  to borrow and lend if they no longer were regulated by the Bank of England and no longer had access to Bank of England lender of last resort cash. They needed to clarify the new position were Scotland to vote for out. They have decided to move their HQs to London to continue to qualify for the Bank of England umbrella. This will help keep their cost of capital down and allow them to maintain current lending programmes.

Alex Salmond brought this on himself by refusing to support setting up his own currency or applying to join the Euro. With no Central Bank any Scottish commercial bank will be in a weaker position than banks who do have access to a Central Bank. I do not know how these banks handled their individual announcements but of course they need to follow the correct company governance procedures and the correct disclosure procedures to the Stock Exchange where they are quoted businesses.

I find the dash of many retailers to tell us things might be a  bit dearer in Scotland if they vote for independence odd. Why upset  half your customers in Scotland by intervening like this? Why upset many of your existing English customers, who are now told by some shops  they are cross subsidising the Scottish customers under the present Union arrangements? There is no Stock Exchange imperative to make this disclosure now. Retailers regularly cross subsidise some towns and cities out of profits made in other towns and cities without having to give a detailed break down city by city.  It looks as if they simply wanted to play politics, and they may find out there is a cost to them. Customers both sides of the border might wish to switch to a retailer that has not jumped in with such claims. If a future independent Scotland should  emerge the trend of prices will depend on many things, including how much competition remains in the local market and how business friendly policy is generally.

The defence contractors, like the banks, had a duty to warn their shareholders through proper Stock Exchange announcements that their Scottish defence  businesses are at risk in the event of independence. It is very unlikely the rest of the UK will be offering  work to Scottish yards and contractors if Scotland leaves.

The final predictable interventions of doom  are the ones from large overseas investment banks. They clearly are on the side  of the EU. They are against  an independent Scotland  in case such a move led to an independent Catalonia and other knock ons in Euroland. One of them being interviewed on the Today programme hinted at this, by talking about the Euro and German support for southern countries in the zone, when asked questions about Scotland.  It was difficult to follow their logic of a major recession based on Scottish banks not having access to Bank of England money, when the self same banks have already announced they would rearrange themselves to continue to be regulated by the Bank of England and have facilities from the Bank if needed.

I suspect Scottish voters will answer the more fundamental question – do they want to be part of a new Scottish state or do they wish to be part of the long standing UK? For every voter who might be influenced favourably by businesses playing politics there might be at least one who resents their interventions. Both sides are trying to play the business card, so the businesses end up firing at each other.

 

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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