The Better Government Initiative‘s latest report – “Financing Scotland: Is there a workable financial settlement for Scottish devolution?” – points out that the airy assurances given in the heat of the referendum debate, that financial devolution could go ahead while retaining the Barnett formula, may not prove so easy to deliver in practice.
The settlement recommended by the Smith Commission and welcomed by the PM will mean that more services (employment and training provision for example) will be devolved and so will fall within the scope of Barnett. Some welfare spending will be devolved for the first time. Scotland will be given the revenue from income tax in Scotland and a share of VAT revenues, and powers to change income tax rates and thresholds.
Where does all this leave Barnett? Suddenly an obscure but very simple formula has been caught up in a welter of complicated adjustments and indexations. Can it take the strain?