Scots funding card trumps Welsh yet again

Once more brute force politics determine the priority of Scotland over Wales

Yet again on the devolution journey the priority, interests and Westminster worries about Scotland have trumped those of Wales. This is made crystal clear by two adjacent announcements in the detailed programme for government published by the Conservative Liberal Democrat coalition yesterday. These entail immediate financial concessions to the Scots but a reneging on a commitment made in the election campaign to the Welsh.

What this means, in immediate practical terms, is that the Scots will gain up to an extra £200 million a year while the Welsh will continue to lose out by £300 million, and that is a conservative estimate.

There can be no doubt that next year’s looming Scottish Parliament election and the prospects of Scottish nationalists gaining ground amidst fears about the fragility of the union are behind this blatant combination of largesse and miserliness.

The concession to Scotland comes in a release of an underspend in the country’s fossil fuel levy estimated to be worth at least £185 million a year. This was demanded by the SNP’s First Minister Alex Salmond at his party’s conference last October when he reckoned the accumulated underspend was worth at least £1 billion. Yesterday’s concession on the fossil fuel levy by the Conservatives and Liberal Democrats, significantly contained in the section of their Agreement dealing with ‘Political Reform’, states:

“We will review the control and use of accumulated and future revenues from the Fossil Fuel Levy in Scotland.”

Under Labour the Treasury had resolutely refused to budge on even considering this prospect. Earlier today Scottish Finance Secretary John Swinney told BBC Scotland that spending the fossil fuel fund – raised through a levy on the North Sea oil and gas industry and held in an account by energy regulator Ofgem in London – could safeguard 20,000 jobs. He said the money would be spent on developing Scotland’s offshore wind energy resources.

Wales, on the other hand, was given a slap in the face. The paragraph in the Agreement immediately below the concession to Scotland states:

“We recognise the concerns expressed by the Holtham Commission on the system of devolution funding. However, at this time, the priority must be to reduce the deficit and therefore any change to the system must await the stabilisation of the public finances. Depending on the outcome of the forthcoming referendum, we will establish a process a process similar to the Calman Commission for the Welsh Assembly.”

Last year the Holtham Commission calculated that the population-based Barnett formula resulted in Wales losing out by some £300 million a year compared with the amount it would receive in the block grant if a move was made to a needs-based formula. In the run-up to the election Chancellor George Osborne conceded the case saying:

“I think it is in Wales’s interest that we have that needs-based assessment, which is independently done … My view is that you want to move on it pretty quickly, as soon as a new Government is elected.”

The problem for the government is that, as expert Iain Maclean explained on this site yesterday, if that move were made, the Scottish budget would be cut since it benefits unduly from the present arrangements. Plainly such a prospect was uncomfortable for the London government in the coming year when it has to face elections for the Scottish Parliament.

Meanwhile, IF Wales votes yes in the forthcoming referendum for more legislative powers for the National Assembly, yet another Commission of inquiry will be set up to follow the Holtham Commission, to re-consider the whole issue. On that timetable we are looking well into the year 2012 before it reports. And IF, by then, there is a “stabilisation in the public finances” (don’t hold your breath) we may contemplate moving to some kind of needs-based formula for calculating the Welsh block.

By then, of course, we will be approaching the 2015 Scottish Parliament election when, again, the interests of the Union will undoubtedly be at stake. The long grass looks like it’s getting longer. Behind the smiles of Cameron and Clegg we are looking directly into the face of brute force politics.

John Osmond is the Director of the IWA.

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