Page last updated at 23:40 GMT, Saturday, 23 May 2009 00:40 UK

Barnett formula 'lacks any logic'

Sterling bank notes
The Scottish Government rejects claims the country is subsidised by England

A committee of MPs has criticised the way Scotland is allocated funds by Westminster.

The Commons' Justice Committee said the controversial Barnett formula "lacks any basis in equity or logic".

It called for a UK-wide review of the formula, and for alternatives to be suggested by the UK Government.

The formula has been branded "unfair" by those who believe it unfairly "subsidises" devolved administrations at the expense of English taxpayers.

The committee compiled the report while carrying out a wide-ranging investigation into a decade of devolution. It said the population-based formula, which has been used for more than 30 years, was controversial across the whole of the UK.

The report stated: "The Barnett formula is overdue for reform and lacks any basis in equity or logic. It creates controversy in all of the constituent parts of the UK.

The role of Secretary of State for Scotland has clearly decreased, and the question of the continued separate existence of that office must be raised
Justice Committee report

"There is controversy in England that the Barnett formula allows for higher levels of public spending in Scotland from the UK Exchequer and does not deal with different needs in different parts of England."

Much of the report deals with a need for "fundamental change" in the way England is governed.

Sir Alan Beith MP, chairman of the committee, said devolution had radically changed the way Scotland, Wales and Northern Ireland were administered - but had left England "stuck in a pre-devolution time warp".

"The funding formula is also a relic from earlier times, taking no account of the current need of the various nations and regions of the United Kingdom," he said.

The committee also questioned the future of the post of Secretary of State for Scotland, which is currently held by East Renfrewshire MP Jim Murphy.

'Social union'

The report said: "Many have questioned whether it is justified for those parts of the United Kingdom which have devolved government, and only those parts, to have individual secretaries of state in the cabinet.

"As relationships between the administrations mature, the role of Secretary of State for Scotland has clearly decreased, and the question of the continued separate existence of that office must be raised."

"It is clear that the role of the territorial secretaries of state has changed beyond recognition and that it is not likely to remain central to the functioning of devolved government or to seem consistent with the logic of devolution."

The Scottish Government has argued for full fiscal autonomy, and said the flow of resources was from Scotland to the London Treasury rather than the other way round.

Mike Russell, the SNP minister for the constitution, called for the role of Scottish Secretary to be replaced by a system that would see the devolved administrations have a direct relationship with 10, Downing Street through the Cabinet Office.

He said: "The best relationship between Scotland and England is an equal partnership - a social union of independent nations - with the Queen as our shared head of state. In effect, united kingdoms rather than the United Kingdom."

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