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16% drop in funding to Scotland and Shetland on the horizon?


Who Knows
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A 16% drop in public sector sector funding to Scotland was the recommendation of a report produced last week that called for the replacement of the Barnett formulae with a new redistributive model for allocating public sector funding across the UK.

 

As reported in the Guardian, the Local Government Association (LGA) that represents local authorities in England produced an academic report recommending the Barnette formulae is scrapped and replaced.

 

http://www.theguardian.com/society/2013/nov/21/english-councils-underfunded-local-government

 

The report was not produced by either side on the Scottish referendum campaign and comes to a similar conclusion as a report written for the Welsh Assembly in 2010.

 

The First Minister for Wales repeated his support for replacing the Barnett formulae on his trip to Edinburgh last week. However it is not just he LGA or Welsh Assembly that want to change the out dated methodology for distributing public expenditure across the UK. Prior to becoming the Secretary of State for Scotland our local representative supported the scrapping of the Barnett formulae and his opposite number in the Labour Party recently stated her support for changing the funding model. In respective of the national leaders both Nick Clegg and Ed Miliband are also on record for changing the funding model.

 

Will it happen? Well I cannot guarantee either way as not PM of the UK but momentum is with change post the 2015 General Election.

 

What though would a 16% cut mean for us living in Shetland if the 16% cut was passed on equally to both Local Government in Scotland and the NHS.

 

Well according to Shetland Island Council (SIC) medium financial plan, paragraph 3.8, the funding received from the centre totals £91,488,000 in 2013-14.

 

http://www.shetland.gov.uk/about_finances/documents/MediumTermFinancialPlan-Appendix1.pdf

 

So 16% of that would amount to a cut in funding of £14,638,080. So what would that mean in terms of addition changes/cuts to services? Probably this will lead to the end of the Council Tax freeze but as Shetland only raises locally £8,600,000 from the Council Tax that the current bills would need to rise by 170% to cover this drop in funding.

 

The NHS is based upon the principles of free at the point of care so fees to cover the reduction in funding would be a major change for a Scottish Government to introduce. Well locally on NHS Shetland website in its board papers for October on page 88 their funding is stated as £51,701,301. So a cut of 16% would be £8,272,208. What will that mean to local NHS fronline services.

 

If or when change comes it is unlikely to be introduced in just one year. However although this may not come to pass, it is one issue to consider and remember there is no such thing as the status quo as change in whatever shape it takes will be the future and therefore all paths will involve uncertainity to some degree.

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The Government is also looking at how funding for Health is distributed. It claims that those areas with an older population, deserve more of the share. This would mean that monies will be diverted from areas where the money is needed to improve health and longevity to those with longevity, generally, shifting monies South. Health inequalities are a stark reminder of how this system now works. It is now possible to dictate life expectancy from your postcode, what can make matters worse is the local issues where folk born 5 miles away can have a difference in life expectancy of over 6 years.

The if this is rolled out over Scotland, Shetland could benefit, in 2010, there were 3794 which is 16.9% of the population at the time.

Edited by shetlandpeat
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In the interest of accuracy in an interview broadcast on 19 April 2010 as part of the STV General Election coverage our MP position was basically the same as that of the LGA reported in the Guardian.

 

http://www.theguardian.com/society/2013/nov/21/english-councils-underfunded-local-government

 

However today on the BBC he has now changed his position and quotes the Official Treasury position also covered at the foot of the Guardian article which is no change until austerity is over.

 

Then if the IFS forecasts are the reality we all face that will be a 50 year guarantee then of Barnette continuing. However if this does come to pass a number of Governments will have failed in their stewardship of the UK in not having created an alternative agenda to resolve the issues.

 

You may also remember that the his position on the relevance and importance of the Secretary of State for Scotland has also recently changed from that expressed in the run up to the 2010 UK General Election.

 

One statement made during the BBC interview by our local MP that is definitely likely to be true was that if Scotland voted Yes in September 2018 then that will lead to the abolotion of the Barnett Formulae.

 

With that fact clarified what does a No vote in September 2018 guarantee about future UK public expenditure spend and investment in Shetland and Scotland?

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In the interest of accuracy in an interview broadcast on 19 April 2010 as part of the STV General Election coverage our MP position was basically the same as that of the LGA reported in the Guardian.

 

http://www.theguardian.com/society/2013/nov/21/english-councils-underfunded-local-government

 

However today on the BBC he has now changed his position and quotes the Official Treasury position also covered at the foot of the Guardian article which is no change until austerity is over.

 

But according to the PM in his speech at the Lord Mayors Banquet, austerity is permanent. It will never be over.

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On Monday lost amongst other news this week the House of Commons all party Parliamentary Committee on taxation produced a report called "Achieving Autonomy - what the independence referendum means for Scotland's fiscal future. The report can be accessed here

 

http://www.appgtaxation.org/APPTG_Achieving_Autonomy_2013.pdf

 

Amongst the recommendations are that in the event of a no vote in Scotland the Barnett Formulae must be scrapped and replaced with a new mechanism based upon the findings of the Holtham Commission.

 

This is alleged to result in the equivalent of a 16% drop in the public sector funding for Scotland. In essence the report is in full agreement with the article at the start of this discussion produced by the LGA who represent local authorities in England. In real terms this is estimated to be around £4 billion reduction in public sector expenditure whichis likely to impact on funding for both SIC and the local NHS.

 

Pressure is growing to scrap Barnett so uncertainty of the future funding within the UK exists as no guarantees are available. Barnett will end in March 2016 if Scotland votes Yes.

 

The economic implications of both the Yes or No options are covered in a separate topic stream. You can come to your own conclusion on which uncertain path may be the better road to travel.

Edited by Who Knows
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  • 3 weeks later...

Update to keep the information relevant, the Prime Minister, David Cameron, has confirmed there is no plan to make adjustment to the Barnette Formulae prior to the UK General Election in 2015.

 

However the PM also confirmed that he cannot guarantee or commit future UK Government to retain the Barnette Formulae after 2015 as the UK constitution as it stands does not allow him to commit future UK Government to retain this policy.

Edited by Who Knows
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