MPs at Westminster have launched an inquiry into the Scottish Government’s funding.
On Thursday, the Scottish Affairs Committee said it would be investigating the Barnett formula, which sees Scotland allocated funding according to spending decisions south of the Border.
MPs on the committee are also set to look at how in-year changes to the Scottish Budget are forced by UK Government decisions and “fiscal events”.
The inquiry will further “explore the effectiveness of the wider financing of the Scottish Government, including the fiscal framework, Block Grant Adjustments and the process for Barnett formula bypass”. The inquiry is not due to examine budgetary choices made by the Scottish Government. That is a devolved role for the Holyrood parliament.
The Scottish Affairs Committee is supposed to focus on the work of the Scotland Office and other UK Government bodies – but the incoming Labour Government has signalled that it intends to break from convention and use it to increase pressure on SNP ministers as well.
Patricia Ferguson, the Scottish Labour MP who is chair of the Scottish Affairs Committee, said: “The committee’s inquiry is a timely opportunity to examine the current funding model for the Scottish Government, and wider model of fiscal devolution.
“Our inquiry will explore how Scotland’s funding arrangements, particularly the Barnett formula, came to be, and how it determines the level of funding made available to the Scottish Government.
“As part of this, we'll also look closely at the current Fiscal Framework.”
The committee has invited written submissions through its website by January 5. Submissions should look at issues including:
- How effective is the Barnett formula in calculating the amount of money made available to Scotland for providing essential public services?
- What was the original design intention behind the Barnett Formula, and to what extent has it fulfilled this purpose?
- What potential reforms to the Barnett formula could improve its effectiveness?
- How transparent is the UK Government’s decision making regarding the application of the Barnett Formula? What impact could putting the Barnett formula on a statutory footing, or otherwise formalising it, have on its effectiveness?
- Following its review in 2023, to what extent does the current Fiscal Framework effectively govern the mechanisms for Block Grant Adjustments and fiscal flexibilities of the Scottish Government?
- To what extent could changes to Scottish Government borrowing powers enable more effective fiscal management, and mitigate against the impact of inflation and economic shocks in Scotland? Does the current methodology for calculating Block Grant Adjustments effectively reflect the associated transfer of tax revenues or welfare spending?
- Within the existing devolution settlement, what steps could the UK Government take to offer Scotland more financial certainty?
- Is there an appropriate level of coordination between the UK and Scottish Governments regarding in-year fiscal changes?
- To what extent can HM Treasury’s decisions regarding the block grant be challenged by the Scottish Government?
- Are there any comparative perspectives that should be considered when assessing the effectiveness of fiscal devolution in Scotland? What learnings can be drawn from Wales and Northern Ireland’s funding settlement arrangements?
- Are there any learnings from international perspectives that should be considered?
