Baker’s Bulletin - Binning the Barnett Formula would be bad for Scotland

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With the recent troubles in the oil and gas industry, where the price of oil is less than half of what the Scottish Government predicted it would be last year, it is clear that action is needed to mitigate the effects of the price fall.

It is also clear that these problems will be a real threat to jobs, here in the North-east, with BP already announcing job losses. That is why Scottish Labour have been calling for action since last year, when the price of oil started declining sharply.

Of course, the issues surrounding the tax regime is a matter for the UK Government and I’m happy that the Scottish Government have backed Scottish Labour’s call for the Treasury to take action, with changes to the regime as Ed Balls highlighted on his recent visit to Aberdeen.

Jim Murphy also made calls to establish a resilience fund to protect local economies, like ours, threatened by a jobs crisis, as well as using business rates to support local businesses on the high street, feeling the knock-on effects.

But, while Scottish Labour have been setting out clear plans to protect jobs, the Scottish and UK Governments have been pointing fingers at each other. The SNP in particular were slow to react to the falling price. Why? Because it was politically embarrassing for them.

This is because they are still arguing for the scrapping of the Barnett Formula, which would cost Scotland close to £4 billion. The SNP want to campaign in May’s General Election on a platform of binning Barnett and relying on declining oil and gas revenues to fund our public services.

At a time when it is clear that the Barnett formula protects public spending, and ensures that in Scotland we receive an extra £1200 per head in public spending, there is no sense in scrapping the formula in favour of the instability of volatile oil prices, and the big spending cuts that would be needed.

So, if the Barnett Formula was to be scrapped, Scotland would be faced with a straight choice. Attempt to protect jobs linked to the oil industry, or protect the funding for our schools, hospitals and pensions. That is why binning Barnett would be bad for Scotland.