NI cash plan 'should be ditched'

The Barnett Formula has lasted 30 years

The way government money is distributed to Northern Ireland, Scotland and Wales is unfair and needs to change, a House of Lords committee has said.

The committee's report said the Barnett Formula, which allocates money across the UK, should be scrapped and a new UK funding commission set up.

The committee said Scotland and England had lower needs per head of the population compared to NI and Wales.

Peers said Scotland had been given more funds "than appeared to be justified".

Successive governments have used the Barnett Formula to allocate money to Scotland, England, Wales and Northern Ireland.

The formula, named after Labour minister Joel Barnett, was meant to be a short-term fix but it has been in place for 30 years.

The present Barnett formula is 30 years out of date, the way it operates is arbitrary and it is basically unfair Lord Richard Committee chairman

The report is expected to prove controversial and peers accept it is unlikely to be acted upon before the next general election.

The committee, which has been investigating the issue since last December, included former Ulster Unionist leader Lord Trimble of Lisnagarvey, Lord Smith of Clifton and former chancellor Lord Lawson.

Lord Richard, who chaired the committee, said the Barnett Formula was intended as a short-term fix but had lasted 30 years because it was easy to administer and convenient for Treasury ministers.

The report is saying what we have always believed - if you take account of needs, Northern Ireland should get more public money Sammy Wilson NI finance minister

He said: "The present Barnett formula is 30 years out of date, the way it operates is arbitrary and it is basically unfair," he said.

The committee suggested that the UK funding commission should undertake an assessment of relative need, now and in the future, and undertake periodic reviews as well as publishing annual data about the allocation of funding between the devolved administrations.

Stormont Finance Minister Sammy Wilson welcomed the report and said it showed that Northern Ireland had received less money in recent years than it was entitled to.

He was doubtful, however, if the report's recommendations would ever be put in place.

Northern Ireland spends more per head than its population share - it makes up 2.8% of the UK population, but receives 3.5% of overall spending John Simpson Economist

"The report is saying what we have always believed - if you take account of needs, Northern Ireland should get more public money," he said.

"Because of levels of deprivation, levels of income, the amount of infrastructure work that needs to be done and also because of the legacy of the Troubles where there was massive underinvestment in infrastructure because of the money that went into security, I think the report simply bears out what we in Northern Ireland know to be the case."

Economist John Simpson, who gave evidence to the committee, said the way in which need is calculated "is the big unanswered question".

"Northern Ireland spends more per head than its population share - it makes up 2.8% of the UK population, but receives 3.5% of overall spending," he said.

"In total, we spend 20% more per head than on average in the UK - more money goes on things like policing and justice, for obvious reasons, as well as housing, and enterprise, development and training.

"However, when it comes to the basics of education and health - which are the very big budget items - we are only fractionally above average.

"Should we have a flat rate of spending for every person in the UK? No, because that doesn't take account, for example, of whether there are more young or old people."

"In Northern Ireland, we've got more young people. Education is very expensive, so should we therefore have a formula which takes account of this?"