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'BARNETT SQUEEZE' MAY CUT SCOTTISH PUBLIC SPENDING

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A detailed academic analysis of arrangements put in place for Scottish devolution says future Holyrood budgets will...
A detailed academic analysis of arrangements put in place for Scottish devolution says future Holyrood budgets will rise at a much lower rate than their English equivalents, rapidly eroding them to English levels.

The Scotsman (p1) reports that the study, by Neil Kay, professor of business economics at Strathclyde University, warns that a£1bn 'Barnett squeeze' will create a political battlefield of 'institutional conflict between the Scottish parliament and Westminster'.

The analysis tunrs on its head the widespread belief that the Barnett Formula will preserve under home rule Scotland's disproportionately high level of government spending per head of population.

Prof Kay's study seeks to show that until now, the higher levels of spending in Scotland have been maintained not because of Barnett but in spite of it.

His study, published by the Fraser of Allander Institute, points out that Barnett was designed to ensure Scottish spending levels converged with those in England by giving Scotland a rise in cash per head identical to England's.

Since Scottish spending starts from a higher base, this absolute rise then translates simly into a smaller percentage increase, creating a downward ratchet effect.

Prof Kay believes that changes mean that spending under the Scottish Office block from next year until 2002 will grow at 4.8% in cash terms, against 6.3% in England.

He says this translates into a 2.2% real terms rise in spending in Scotland, but a substantially bigger 3.7% real rise in spending on equivalent services in England.

'This implies a major change in Scotland's relative share of public spending over a very short period,' he writes.

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