Scottish Politics

Second edition

by Paul Cairney

Chapter 11: Money and Power: Public Expenditure in Scotland

This chapter discusses the issue of advantage and power in relation to Scottish public finance. It outlines in detail what the Barnett formula is and why it is was adopted. It considers why the Barnett formula has endured to this day and what this tells us about power and IGR and highlights trends in Scottish Government spending and how this is scrutinised.

Key Points

  • 11.1 The long-standing Barnett formula remains to this day.
  • 11.2 It begins with Scotland ’s share of public expenditure and adjusts the annual block in line with Scotland ’s share of the UK population.
  • 11.3 A strict application of this formula suggests that Scotland ’s advantage will eventually be eroded. Yet, there is minimal evidence to suggest that the gap in spending per capita between Scotland and England has narrowed.
  • 11.4 More Treasury influence can be seen in the constraints to Scottish Government borrowing. This has produced a tendency towards public-private partnerships and housing stock transfers.
  • 11.5 Change since 2007 - including the SNP’s plan to replace Public Private Partnerships with a new model of finance - has been modest.
  • 11.6 The more significant development is the ‘age of austerity’ and the prospect of reduced budgets (the first 10 years of devolution were marked by rapidly rising budgets)
  • 11.7 The independence debate has prompted greater discussion of the prospect of ‘fiscal autonomy’

Essay Questions

  1. What is the Barnett formula and why does it remain to this day?
  2. What is fiscal autonomy? Outline the case for and against its adoption.
  3. To what extent does the Treasury influence public expenditure in Scotland ?

Self-test Questions

  1. What is the Barnett formula? The ‘Barnett squeeze’?
  2. What is incrementalism and how would an incrementalist characterise Scottish public budgeting?
  3. What does fiscal autonomy mean in the context of Scottish politics?
  4. Why do Scottish public expenditure statistics cause political controversy?
  5. In what way is the UK Treasury still an important player in Scottish politics?

Further Reading

On budgetary incrementalism see Musgrave and Peacock (1958: 16–28) and Wildavsky (1975). On Goschen and Barnett, see Mitchell (2003a; 2003b), McLean and McMillan (2003), Keating (2005a), Heald and McLeod (2002), Bell and Mitchell (2001), Christie and Swales (2006), Twigger (1998), SPICe (2000a), Ferguson et al. (2003), Bell (2001) and Midwinter (2004a; 2004b). On the fiscal autonomy debate see Scottish Affairs,41, a special edition on fiscal autonomy, Keating (2010) and Bell and Christie (2001). On the history of the politics of public expenditure, see Heald (1983), Heclo and Wildavsky (1974), Hogwood (1992) and Peacock and Wiseman (1967).

Online Sources

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