Page last updated at 16:34 GMT, Tuesday, 17 June 2008 17:34 UK

Scotland budget method 'perverse'

Scottish bank money
Scotland's Treasury money is worked out from the Barnett Formula

The process which decides the level of cash Scotland gets from the Treasury is perverse and not efficient, a public spending expert has said.

Oxford University's Professor Iain McLean told MSPs the Barnett Formula was unsustainable in the long run.

His claim that Scotland was ready to look after its own taxes was welcomed by the SNP and Liberal Democrats.

The comments came as Holyrood's finance committee heard evidence from academic figures on the budget process.

Prof McLean, a public spending expert, is currently advising the Calman Commission review on devolution.

He told the committee inquiry: "I think you have excellently designed institutions for the budget process in an independent state, or a state with substantial fiscal autonomy.

Prof McLean's evidence points to one of devolution's fundamental flaws
Joe FitzPatrick

"Of course what we have is neither of those."

Prof McLean's submission to the inquiry stated: "Barnett is unsustainable in the long-run. It is neither efficient nor equitable."

He continued: "It gives perverse incentives to the devolved administrations - their block grant is a function of a number they cannot control.

"In turn, their decisions have consequences which the UK government cannot fully control."

Stating public spending was higher per head in Scotland, Northern Ireland and London, Prof McLean, of Oxford's Nuffield College, said: "It probably derives not from greater need but from the more credible threat to the Union of the United Kingdom that they pose."

Labour MSP Elaine Murray said members of the public would never get interested as long as MSPs were forced to "shuffle the cards" dealt by Westminster.

Budget confusion

And after the committee meeting, Nationalist MSP, Joe FitzPatrick, said: "Prof McLean's evidence points to one of devolution's fundamental flaws - that we are spending money without direct responsibility for raising it."

Liberal Democrat finance spokesman, Liam McArthur, said the Barnett Formula provided stability during the early years of the Scottish Parliament, but added: "It is time to look again at how we fund our policy priorities."

The UK Government has said Scotland's share of public spending provided the same per capita spending increase as comparable government departments in England.

It added that Scotland also benefited "substantially" from the UK's continued strong economic growth and employment performance.

Edinburgh University professor, Irvine Lapsley, also told the committee there was "much to be proud" at the Scottish Parliament but Jo Armstrong, of the Centre of Public Policy for Regions, warned the budget process in Scotland was not fully understood.

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