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Funding Formula

Volume 543: debated on Wednesday 18 April 2012

3. What discussions he has had with the Chancellor of the Exchequer on the funding formula for Scotland. (102888)

The Government are aware of the concerns that have been expressed about the current system of devolution funding, whereby changes to the block grant are calculated according to the Barnett formula. Owing to the unprecedented deficit that we inherited, our immediate priority is to reduce the deficit, and we have no plans to change the present arrangements before the public finances have been stabilised.

Given that the Government have no plans to replace the current formula with a formula based on need, and given the requirement for clarity so that the people of Scotland know what proportion of the national debt they will inherit before they vote, does my hon. Friend agree that the Barnett multiplier would provide a good solution?

I believe that we need to move on from the discussion of issues of process relating to the referendum, and engage in a substantive debate on the issues that would affect Scotland if it became independent. Having, it would appear, campaigned relentlessly for independence, the SNP now seems to want to delay the question and the issues for as long as possible.

Does the Minister agree that the high price of fuel is creating major problems in Scotland, and that, at a stroke, cutting VAT, which is perhaps the unfairest tax in the country, would help Scottish families, who are suffering greatly as a result of the Budget.

Order. I hope that the answer will refer to the funding formula for Scotland, as the question should have done.

The funding formula for Scotland is calculated on the basis of a basket of taxes raised by the United Kingdom Government. Scots would be much worse off if fuel duty were 10p higher, as it would have been if Labour were in power.

Does my hon. Friend agree that it is vital to maintain the Union in the interests of both England and Scotland, but that the funding formula should be fair to both countries?

I agree absolutely with my hon. Friend’s sentiments, but as he and many other Members are aware, this Government inherited the worst deficit in peacetime history from the Labour Government, and stabilising our nation’s finances must be the focus of their efforts.

My question relates directly to the question from the hon. Member for Bexleyheath and Crayford (Mr Evennett) and the Minister’s answer to it. Does the Minister agree that the Scotland Bill will increase the amount of revenue gathered in Scotland to about a third of its spend, and will thus decrease dependency on a block grant?

I agree that the Scotland Bill represents a radical, historic and significant change to Scotland’s financing. More than a third of spending by the Scottish Parliament will result from funding from taxes that it determines and raises. That is a major step forward in terms of devolution and accountability, and should be welcomed by all Members.