Is the Scottish subsidy unfair?

The Daily Mail's analysis fails to take into account North Sea oil revenues. But the Barnett Formula

Today's Daily Mail leads on what it describes as the "yawning gap" between England and Scotland: public spending. The latest Treasury figures show that state spending in Scotland averaged £10,212 per head last year - £1,624 more than in England, where public spending is £8,588 per head. So, is this subsidy (I'll come to the issue of whether it really is a subsidy) as unfair as the paper suggests?

First, it's important to note that Scotland isn't the only part of the UK that receives a public spending premium (see Table 9.4). The national average was £8,845 per head but Northern Ireland spent £10,706 and Wales spent £9,829. There are also discrepancies within England itself. State spending averaged £9,503 per capita in the North East and £9,349 in the North West but just £7,691 in the East. The West Midlands received £8,618 per capita but the South East received £7,533.

Were spending consistently allocated on the basis of need there would be no reason to object. But in the case of Scotland (and Wales and Northern Ireland), funding is allocated through the Barnett Formula, an outdated population-based measure that even its founder (Joel Barnett) has argued should be scrapped. In 2004, he said: "It was never meant to last this long, but it has gone on and on and it has become increasingly unfair to the regions of England. I didn't create this formula to give Scotland an advantage over the rest of the country when it comes to public funding." Most analyses suggest that Scotland would lose out under a needs-based formula and reform is long overdue. But this remains one fight the government shows every sign of avoiding.

Much of the Mail's righteous fury, however, is overblown. The paper takes aim at the seeming panoply of benefits enjoyed by the Scots: free university education, free personal care for the elderly and free NHS prescriptions. But these policies simply reflect the spending priorities of the SNP government. There is no good reason, for instance, why English students could not also enjoy free higher education. The government's decision to triple fees to £9,000 was a political choice, not an economic necessity.

But if Scotland really is subsidised to the hilt, how large is its fiscal black hole? And can the country afford to go it alone? The Scottish adiministration's annual Government Expenditure and Revenue exercise, which calculates how much of the UK's revenue is raised in Scotland, and how much is spent in Scotland, attempts to answer this question. The latest figures from the Holyrood statisticians show that in 2009-10, Scotland borrowed £14.9 billion (13.4 per cent of GDP), a gigantic deficit by any measure. But if we factor in the country's geographical share of North Sea oil and gas, 81 per cent of which lies in Scottish waters, the deficit falls to £9.0 billion (6.8 per cent of GDP), a sizeable black hole but one that compares favourably with the UK-wide deficit of 9.8 per cent.

This leaves open the question of how Scotland will pay its way when the oil runs out (my answer: it won't) but it's also a reminder that the subsidy debate is rather more complex than the Mail's splash suggests.

George Eaton is political editor of the New Statesman.

Photo: Martin Whitfield
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Labour MP for East Lothian Martin Whitfield: "I started an argument and ended up winning an election"

The former primary school teacher still misses home. 

Two months ago, Martin Whitfield was a primary school teacher in Prestonpans, a small town along the coast from Edinburgh. Then he got into an argument. It was a Saturday morning shortly after the snap election had been called, and he and other members of the local Labour party began discussing a rumour that the candidate would be an outsider.

“I started an argument that this was ridiculous, we couldn’t have a candidate helicoptered in,” he recalls. He pointed out that one of the main issues with the Scottish National Party incumbent, the economist and journalist George Kerevan, was that he was seen as an outsider.

“I kept arguing for an hour and a half and people started gently moving away,” he jokes. “About two days later I was still going on, and I thought enough’s enough.” 

He called Iain Gray, the Scottish Labour veteran, who interrupted him. “He said, 'Right Martin, are you going to put up or shut up?’ So I filled in the forms.

"Then I had to have a very interesting conversation with my wife.”

One successful election campaign later, he is sitting in the airy, glass-roofed atrium of Westminster’s Portcullis House. Whitfield has silver hair, glasses, and wears a Labour-red tie with his shirt. He looks every bit the approachable primary school teacher, and sometimes he forgets he isn’t anymore. 

I ask how the school reacted to his election bid, and he begins “I have”, and then corrects himself: “There is a primary four class I had the pleasure to teach.” The children wanted to know everything from where parliament was, to his views on education and independence. He took unpaid leave to campaign. 

“Actually not teaching the children was the hardest thing,” he recalls. “During the campaign I kept bumping into them when I was door-knocking.”

Whitfield was born in Newcastle, in 1965, to Labour-supporting parents. “My entire youth was spent with people who were socialists.”

His father was involved in the Theatre Workshop, founded by the left-wing director Joan Littlewood. “We were part of a community which supported each other and found value in that support in art and in theatre,” he says. “That is hugely important to me.” 

He trained as a lawyer, but grew disillusioned with the profession and retrained as a teacher instead. He and his wife eventually settled in Prestonpans, where they started a family and he “fought like mad” to work at the local school. She works as the marketing manager for the local theatre.

He believes he won his seat – one of the first to be touted as a possible Labour win – thanks to a combination of his local profile, the party’s position on independence and its manifesto, which “played brilliantly everywhere we discussed it”. 

It offered hope, he says: “As far as my doorstep discussion in East Lothian went, some people were for and against Jeremy Corbyn, some people were for and against Kezia Dugdale, but I didn’t find anyone who was against the manifesto.”

Whitfield’s new job will mean long commutes on the East Coast line, but he considers representing the constituency a “massive, massive honour”. When I ask him about East Lothian, he can’t stop talking.

“MPs do tend to say ‘my constituency’s a microcosm’, but it really is Scotland in miniature. We have a fishing industry, crabs and lobsters, the agricultural areas – the agricultural soil is second to none.” The area was also historically home to heavy industry. 

After his first week in Westminster, Whitfield caught the train back to Scotland. “That bit when I got back into East Lothian was lovely moment,” he says. “I was home.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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