Is there an extra £300 million for Scotland in the Spring Budget?

CLAIM:

“Scotland, Wales and Ireland get an extra £560m from Jeremy Hunt’s Budget but SNP complain it is not enough” – headline in right-wing media outlet.

DOORSTEP ANSWER:

The “extra” cash is not the Chancellor’s but Scottish tax money – including an additional £1.5 billion from North Sea oil and gas.

WHO IS CHANCELLOR JEREMY HUNT?

Chancellor Jeremy Hunt had a textbook establishment upbringing. The eldest son of an admiral, Hunt attended a public school (Charterhouse) then studied politics at Oxford where he was president of the University Conservative Association. Afterwards he founded an educational publishing company which made him a millionaire.

Hunt entered Parliament in 2005. In 2012, the Daily Telegraph reported that he had reduced his tax bill (legally) by over £100,000 by receiving dividends in the form of property which he then leased back to the company. He became Chancellor in 2022 following Liz Truss’s disastrous mini-budget which sent interest rates soaring.

THE BARNETT FORMULA

In his Spring 2024 Budget speech, Hunt claimed that the Scottish Government would receive approximately £300m (actually £295m) in extra grants from the UK Treasury in financial year 2024-25 as a result of Barnett “consequentials”.

This is the convention whereby the devolved administrations receive a pro rata increase in funding (based on population share) of any extra public spending increase in England.

Hunt also announced that Wales and Northern Ireland will get £170m and £100m respectively.

In practice, the Barnett Formula is more complicated. Theoretically, it aims to give each UK nation the same pounds-per-person change in funding as the change in funding for “comparable” government services in England. It is the “comparable” that provides the UK Treasury with a convenient loophole to deny Barnett consequentials.

Tory and Labour chancellors have defined “comparable” in ways that denies the devolved administrations extra funding – despite the citizens of the constituent UK nations paying tax to the Treasury.

There is a second problem with the Barnett Formula. Pre-devolution, Scotland received public funding (via the old Scottish Office) largely based on need. Scottish needs necessitated a higher spend per capita than England due to local differences, e.g: larger geographical area relative to population, different health needs.

However, under Barnett, this needs-based allocation is automatically eroded. Barnett gives Scotland a pound-per-head extra for every pound allocated in England. Over time this means the average spend north and south of the Border is equalised.

REALITY OF THE SPRING BUDGET

Chancellor Hunt is correct to say that Scotland will receive around £300m extra Treasury grant for next financial year compared to what he was proposing in his Autumn Statement last November. These new Barnett consequentials arise largely from his proposal to increase NHS funding in England by £2.5bn for revenue spending, plus another £3.4bn for capital investment (e.g. new hospitals) spread over a number of years.

However, a look at the small print in the Treasury budget papers reveals some anomalies. Hunt has allocated the Barnett increase for Scotland only to revenue spending. In other words, the Treasury is happy to borrow to fund hospitals in England but has deliberately avoided applying this new UK borrowing facility to Scotland.

Under the current devolution settlement, the Scottish Government itself is free to switch revenue funds to capital spending. But Hunt has thereby created a political trap for the SNP administration.

READ MORE: Fact check: Has Michael Gove’s secret ‘State of the Union’ report been leaked online?

If the Scottish government switches some or all of the £300m new cash from revenue spending (e.g. more nurse, better drugs) to capital investment, this will squeeze an already cash-strapped NHS and impact on patients. Of course, new hospitals and schools are also much needed – but they take years to build. It is hardly likely that Hunt was unaware of this dilemma he was creating.

We should also note that what Chancellor Hunt is offering to Scotland with one hand, he is taking back with another.

With sweeping contempt, Hunt has rejected pleas from his own party leader in Scotland, Douglas Ross, not to extend the windfall tax on North Sea oil and gas profits. Hunt has extended the 35 per cent surcharge on profits for another year. That will bring the Treasury an extra £1.5bn – roughly five times the new Barnett consequential.

CONCLUSION

What are we to make of the Spring Budget overall? Compared with the Chancellor’s autumn forecasts, the overall state of the public finances remains largely unchanged. In other words: poor.

Hunt claims to be on track to stabilise debt as a fraction of national income in five years’ time, but only on the basis of a promise to increase fuel duties. And what politician is going to do that?

His future spending plans – scheduled for after any General Election – still imply substantial cuts to public services. With the economy in recession, those cuts can only do more harm. But that could well be Labour’s problem.

FACT CHECK RATING:

Full marks for creative accounting but zero help to Douglas Ross.