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Darling must tackle Barnett as part of PBR

December 8, 2009 2:40 PM

Lib Dem parliamentary spokesman for Newcastle East Greg Stone has warned that the North East will be badly hit by rumoured tax rises and spending cuts in the Chancellor's Pre Budget Report tomorrow.

He has called for the Government to implement a review of the Barnett Formula as part of any process of reviewing public spending, amid widespread reports that the Government is planning wholesale cuts to all departments and planning to increase VAT.

The Barnett Formula was introduced in the 1970s and allocates greater spending per head to Scotland, Wales, and Northern Ireland than is received in England. This leads to economically less well off regions like the North East getting far less funding for transport, schools, hospitals and other services than is the case in Scotland, which gets to determine its own priorities thanks to devolution.

However, the Welsh Assembly has commissioned a study by Prof David Bell, a Stirling University academic with considerable expertise on public spending, to work out an alternative funding formula that would reflect regional need more closely than the outdated Barnett system.

Greg Stone said "If, as is widely rumoured, the Government is running out of cash, it should seek to review the Barnett formula and look to reduce the disparity between Scotland and the North East. At present the Chancellor's Edinburgh constituents receive 20% more per person in Government spending than Newcastle residents. Labour is reliant on Scottish MPs for support, and the North East of England has to pay the price despite being worse off in terms of economic disadvantage.

"If Barnett was replaced by a fairer system based on real regional need, the Chancellor would be able to reallocate £4.5 billion to spending in England whilst still giving Scotland and Wales a better deal to reflect local disadvantage. A fairer and more rational allocation of resources could help to stave off some of the spending cuts that Messrs Brown and Darling are expected to inflict on the North East tomorrow."