‘In the absence of timely Block Grant Transparency releases, Barnett consequentials are hard to reproduce’ – Scottish Fiscal Commission in evidence to the Scottish Affairs Committee (January 2025)

By stewartb

What’s happening to ‘transparency’ after c.14 months of this British Labour Party government in Westminster? Any ‘change’, any ‘new direction’? None to date it seems in terms of transparency over how the Barnett formula is applied.

The Scottish Affairs Committee of the House of Commons has recently (July 16) published a report entitled ‘The financing of the Scottish Government’. (See https://committees.parliament.uk/publications/48818/documents/256455/default/ ) The issue of transparency over how Westminster’s so called ‘block grant’ to Scotland is calculated using the Barnett formula came up in evidence.

‘.. we have heard there is significant room for improvement in the transparency of the formula’s application – particularly in respect of how comparability percentages are calculated, and the timeliness of publication of the Block Grant Transparency document.’

(By the way, anyone spot any mainstream media coverage in Scotland of this Commons committee report?)

The Committee concluded: ‘The operation of the Barnett formula is not as transparent as it could or should be. In particular, there is a lack of transparency around how comparability percentages are calculated. Comparability percentages are a fundamental feature of the Barnett formula and the only multiplier which cannot be effectively scrutinised by the public. We have heard no good reason for this opacity, which limits the ability of the public and UK and Scottish Parliaments to hold their respective Governments to account.’ (my emphasis)

It recommends: ‘In all future Statements of Funding Policy, the UK Government should include details of how the comparability percentage of each department has been calculated, including a programme-by-programme breakdown of what has and has not been included in the calculation.’

The absence of a Block Grant Transparency (BGT) report since July 2023 – something I’ve referred to previously on TuS – was also raised.  The BGT report series was launched by HM Treasury in December 2017 giving a breakdown of how changes in the UK Government’s Spending Reviews, Budgets, Main Estimates, and other fiscal events feed through and affect the block grant, the devolved administrations’ funding calculated via the Barnett formula. The originally stated purpose of the BGT was to provide enhanced transparency for the UK parliament, devolved legislatures, and the public by making explicit how adjustments – such as newly announced funding or baseline changes – translate into devolved budget settlements.

David Phillips, Associate Director, Institute for Fiscal Studies (IFS) and Claire Murdoch, Head of Fiscal Sustainability and Public Funding, Scottish Fiscal Commission reportedly criticised late publication in their oral evidence to the Committee.In response to these concerns, we’re informed that the Secretary of State for Scotland indicated to the Committee that a new version of the BGT report would be published after the spending review in June 2025. What the transcript of the Secretary of State’s oral evidence records is this: ‘It will be updated and published soon after the spending review figures are known. The spending review will be in June, so fairly shortly after that.’ It’s now September and still no BGT publication!

In its report, the Committee recommends that: ‘The UK Government should publish an updated Block Grant Transparency document alongside each fiscal event which will result in changes to Scotland’s funding.’

Since the last BGT report, published in July 2023 under a Tory government, there have been numerous major fiscal events in Westminster, all of which had significance for the scale of Scotland’s block grant. There will also have been in-year budget changes made by Westminster governments between major fiscal events with further significance for the determination of Barnett consequentials.

Since the July 2023 BGT publication, UK governments have undertaken the following major fiscal events (according to ChatGPT) that warrant an update to BGT

• Autumn Statement – November 2023
• Finance Bill 2023–24 – December 2023 / enacted Feb 2024
• Spring Budget 2024 – March 2024
• Spring Statement 2025 – March 2025
• Autumn Budget 2024 – October 2024
• Spending Review 2025 – June 2025.

That’s a total of six major fiscal events since the last BGT report in July 2023. Add in multiple in-year changes to government spending for England that would (should) have consequential budgetary impacts on Scotland (and NI and Wales too). Moreover, the significance of other (annual) Westminster parliamentary ‘events’ in 2024 and 2025 – specifically ‘Main Estimates’ presented by HM Treasury in order to obtain parliamentary approval for additional resources, capital and/or cash or for authority to incur expenditure on new services (usually presented in February) and the ‘Public Expenditure Statistical Analyses to Parliament’ (usually in July) which provides outturn figures for public expenditure by department – have not been reported on publicly in the context of Block Grant Transparency.

It would be an obvious truth to state that a lot of very significant changes to UK government’s spending have occurred since July 2023! With all these changes, plus a change of government and the passage of time, will the next Block Grant Transparency report – whenever it appears – make transparent ALL changes of significance for the Scottish Government’s budget dating back to mid 2023? It should! Arguably, the incoming Labour government should have ensured that HM Treasury published a BGT report as soon as it took office: this would have caught up with fiscal events in the final years of Tory government and provided a baseline upon which iLabour’s subsequent changes in spending and its significance for the block grant could be built in a transparent manner

Is any of this important?

It seems the Scottish Fiscal Commission (SFC) believes so! The SFC describes its role thus: ‘.. the independent fiscal institution for Scotland. We produce Scotland’s official, independent economic and fiscal forecasts to accompany the Scottish Government’s Budget cycle’.

In written evidence to the Scottish Affairs Committee’s inquiry into the financing of the Scottish Government (referred to earlier), the SFC states (given at length, for interest – with my emphasis):

‘Spending plans for departments are set in Spending Reviews. However, the UK Government often announces changes to tax and spending plans at its fiscal events, such as changes to business rates or extra spending for the NHS in England. When measures are paid from new or previously unallocated funding, there are increases in the devolved administrations’ Block Grants. When this happens, UK fiscal event documents include a headline figure for changes in devolved administrations’ budgets.

‘Detail on how the change in the Block Grant has come about is found in the BGT dataset. However, it is not published regularly, and there is no update schedule for the dataset. While there have been twelve UK fiscal events since the first edition of the BGT in December 2017, the dataset has only been updated six times. The latest published version is from July 2023 and since then there have been significant changes in the Scottish Government’s funding.’

And then this remarkable admission from an organisation with the status and role the SFC: ’In the absence of timely BGT releases, Barnett consequentials are hard to reproduce. The UK Government publish a Policy Decisions spreadsheet alongside each UK fiscal event. However, it does not set out detail on spending measures if these are funded from unallocated reserves set aside at the time of the Spending Review.’

‘We note that between BGT releases HMT does update the data as part of the Supply Estimates process. However, getting the data relies on the Scottish Affairs Committee uploading documents on its website. While this is normally done promptly, depending on the parliamentary cycle there may be a significant lag between Supply Estimates being published and the Scottish Affairs Committee making available the additional information.’

‘As a result, consequentials sometimes must be roughly estimated by comparing tables of departmental expenditure limits between fiscal events. Having the BGT dataset publicly updated regularly in the public domain would enable us to more easily assess the Scottish Government’s confirmed and assumed Barnett funding.’

And it seems that the SFC has been ignored by HM Treasury under Labour for some time: ’In our August 2024 Statement of Data Needs we recommended that HMT should update the Block Grant Transparency dataset alongside each UK fiscal event. Our recommendation was also that if HMT does not publish the Block Grant Transparency dataset alongside each fiscal event, the Scottish Government should publish timely details of Barnett consequentials received. This information should be published in a consistent format each time.’

So it’s not just any interested voter who’s being impacted negatively by this lack of Westminster government transparency!

All this is also important given what João Sousa of the Fraser of Allander Institute acknowledges in oral evidence to the Scottish Affairs Committee regarding the application of the Barnett formula: ‘The Treasury is definitely the ultimate arbiter. It publishes the statement of funding policy, and what it says essentially goes.’

‘There is definitely a strong case that other parties should be consulted, but at least if there is a reasonable case to raise a dispute, there should be some sort of mechanism for that to be raised. At the moment, that does not exist. It all relies on political pressure. Some sort of independent, jointly nominated panel that might arbitrate on this would be a reasonable solution to ensure that the Scottish and UK Governments can come to an agreement about any disputes that might occur in the future.’

David Phillips of the Institute for Fiscal Studies added in his oral evidence: ’.. at the moment, not only the operation of the Barnett formula – when it applies or not – but its existence, effectively, is in the gift of the Treasury.’

‘Now, it is in the fiscal framework agreements with the Scottish and, I believe, other devolved Governments that it exists, but those intergovernmental agreements are not enforceable in court.’

Note: the current time gap since the last BGT report is now the longest ever since the series began in 2017!