Not technically a “meme” but I’m sure we’ve all seen various versions of the claim that Scotland pays for a swathe of infrastructure investment in England, primarily London, from which we gain no economic benefit. These claims make their way onto various nationalist memes, including this one posted by SNP MP Margaret Ferrier, and are encapsulated by this spectacularly incorrect article on pro-independence site Wings Over Scotland – The Pooling and Sharing.
I’d recommend that you read the article for yourself but I’ll paraphrase its argument – the UK government invests in national infrastructure through the unimaginatively titled National Infrastructure Plan (NIP). This spending doesn’t incur Barnett consequentials and Scotland pays in £12bn of the UK government’s £136bn contribution to NIP; but only one project worth around £1bn is in Scotland. Baaaaad Westminster. Nicking all our money again.
The trouble being that almost none of the above is true. In the slightest.
NOTE – I wrote a much shorter version of this post, which doesn’t include full discussion of each topic or reference all the sources. For all the detail, read on; for the shorter version, go here.
Yes, there is a UK Government infrastructure investment scheme called the National Infrastructure Plan. It does indeed detail around £136bn of public sector investment, from a total “pipeline” value of around £377bn by 2020.
However, there is no truth in Stuart’s assertion that the spending does not incur Barnett consequentials for Scotland (plus Northern Ireland and Wales while we’re at it). To be fair, it’s possible that Stuart has chosen his wording poorly here.
Readers of this site are probably well aware by now of the functions of the Barnett Formula, which allocates public spending to the four constituent parts of the UK. But there’s also UK government spending that’s exempt from Barnett rules, and which therefore does NOT generate funding for Scotland (known as ‘consequentials’), because it’s deemed to be for the benefit of the whole UK.
Such projects are contained within the National Infrastructure Plan.
For reasons we’ll come to later, I have assumed that to infer all the projects within NIP are exempt from accruing Barnett, it is possible that Stuart means only some are exempt. You can choose which for yourself or maybe Stuart can let us know what he intended to say.
The latter interpretation is more accurate although it would seem best to characterise it as “a few” being exempt, rather than “some”. It quite difficult to get information on exactly which projects in NIP are exempt from Barnett so a Freedom of Information request was submitted to HM Treasury in December 2013. The response was as shown:
To quote the pertinent paragraphs (stress is mine):
… since devolution the Barnett Formula, as set out in the various editions of the Statement of Funding policy, has been applied to all infrastructure projects…
…There are some situations where infrastructure projects benefit the UK as a whole and these do not usually attract Barnett Consequentials.
Since 1999, expenditure on High Speed 1 and the Olympics have both been deemed to be of benefit to the UK as a whole and therefore have not attracted Barnett Consequentials.
So two exempt projects. (pointed out to me by Wings that the FoI does not claim to provide an exhaustive list. A fair point so I’m happy to delete my original comment) The FoI request also makes reference to the one-off payments negotiated to the block grants for Scotland, Northern Ireland and Wales in lieu of Barnett consequentials from the OIympics. It then provides a link to the Statement of Funding Policy for further details on what is and isn’t included in Barnett.
And using one of the examples that Stuart cites, “Crossrail networks in London” are not “deemed to be benefitting the whole of UK” and therefore exempt from Barnett. They are deemed to be “England-only” spending and quite clearly do trigger Barnett consequentials. Here is a FoI response from the Scottish Government confirming that fact specifically for Crossrail.
At this point, it is perhaps wise to summarise exactly what Barnett is and isn’t as I’ve seen quite a number of claims that fundamentally misunderstand what it is that the formula dictates (if you want a longer explanation, this is useful). Essentially, the Barnett Formula is used to ascertain the value of the block grants to Scotland, Wales and Northern Ireland. Based on the variation of spend in England, the formula works out how much this should then increase, or indeed decrease, the value of the block grant.
Barnett takes the overall spend from a particular government department, compares it to the spend from the previous year and adjusts that department’s contribution to the block grant accordingly. It does not calculate the consequentials arising from a particular project or programme. When a project is exempt from Barnett, all this means in practical terms is that there is no proportional increase to the block grants because all 4 constituent countries are already deemed to be receiving benefit from the spending. And, of course, the devolved governments are free to challenge this assumption – as was done with the Olympics and as is being done In Wales for HS2.
Personally, I’m not convinced that Barnett is the best system for allocating spending across the UK and I wish there was more transparency around what accrues consequentials and what doesn’t but it’s important not to misunderstand what it does currently.
Crucially, it is not used to allocate what proportion of a particular spend is billed to the constituent countries of the UK. For that you need to look at the UK Government’s Country and Regional Analysis (CRA) or the Scottish Government’s GERS methodologies. It is entirely wrong to assume that all infrastructure spending in England receives a portion of its funding from Scotland because of Barnett.
So when Wings claims that “just over £136 billion will be taken completely or substantially from the public purse, which means that around £12bn of it will be provided by taxpayers in Scotland”, this is not based on a Barnett calculation but rather another fundamental misunderstanding of how expenditure is apportioned. A misunderstanding which is repeated in many memes, including the one I referred to earlier posted by an SNP MP.
I’m assuming here that Stuart is assigning a population share of the whole £136bn (£12bn / £136bn = 8.8%, although ScotGov uses 8.3% as the population indicator for Scotland within UK, which would change share to £11.3bn), somewhat ignoring the fact that £62.9bn of this partially funded by the private sector – although to be fair to Stuart, it seems impossible to tell what the split is within that sum. Regardless, the assignation of a population share to the entire £136bn is why I assumed above that the Wings article claims all NIP projects are exempt from Barnett – making two errors in assuming that the entire spend is exempt and that this also means we incur a per capita share of the spend.
Both are plainly wrong.
Every effort is made to assign the spending to the region which benefits from the investment, defined as “identifiable spending” in both GERS and the CRA reports. Only when the spend is deemed to be “on behalf of the United Kingdom as a whole” does the spend become “non-identifiable”.
Note in the first sentence that this includes “current and capital spending”.
Using the example of transport expenditure – covering Stuart’s examples of “London Underground, a bridge in Liverpool, the Lower Thames Crossing in London, the Thameslink and Crossrail networks in London, various roads (most notably including the A14 from Warwickshire to Suffolk,,, and of course HS2” – GERS clearly designates spending to Scotland on an “in” basis, i.e. we only pay for railway or road expenditure for infrastructure that is actually in Scotland.
There are a few exceptions to this, notably on HS2 but even here the expenditure isn’t assigned on a population basis but rather on “economic benefit”.
You can agree or disagree with the conclusions of the “Economic Case for HS2” (and I’d lean towards disagree) but it’s as clear as day that there is not a flat population-share, or fictional Barnett allocation, of expenditure assigned to Scotland for infrastructure spend in England.
Of course, there are some elements of public spending which cannot be assigned to a particular region and are therefore deemed to be “non-identifiable”. The Scottish Government assigns Scotland a proportion of the cost of this expenditure according to the principles shown in the box below.
The Scottish Government also provides a comprehensive breakdown indicating how much of our public expenditure is attributed to this “non-identifiable” spending, I haven’t yet been able to find a corresponding page for the 2013-14 figures but these from 2012-13 would have been available at the time the Wings article was written.
Using the latest available figures, Scotland spent £9.4bn on non-identifiable spending from a total spend of £65.2bn. £8.2bn of this is spent on “general public services” including defence and debt interest (assigned on per capita basis). Remembering that Wings would have you believe that Scotland is being assigned £12bn for NIP spending, or around £2bn a year, it seems curious that the total non-identifiable spending on “economic affairs”, which would include infrastructure investment, is £1.2bn per annum – and just £23m for transport, where a third of NIP spending and approximately 90% of the public funding within NIP is realised.
That’s £23m rather than 90% of the £2bn per year Wings is claiming we spend on English transport infrastructure.
So no, all NIP projects are not exempt from Barnett and, no, Scotland does not pay for a population share of any programmes in England.
But what about NIP spending in Scotland? Wings claims that there’s but one solitary Scottish project in NIP – a £1bn investment in carbon capture and storage Peterhead. This is also wrong.
Not about the CCS facility, that is indeed in NIP and listed as one of the top 40 priorities (the document Wings links too) but the full NIP report for 2013, which would have been available when Stuart wrote the article, also makes clear reference to a 220km electricity transmission line upgrade from Beauly to Denny, a £1bn Western High Voltage Direct Current subsea link for exporting renewable energy from Scotland, £1,2bn to replace the Intercity 225 trains on the London-Edinburgh East Coast Main Line, a £50m replacement for the Caledonian Sleeper, makes reference to the decommissioning tax relief for oil and gas fields (although it’s not clear to me why this is in the NIP report), a £50m Offshore Renewable Energy Catapult in Glasgow and new trains for Manchester to Scotland services, electrification of the Manchester to Scotland line.
The 2014 report is even better at identifying the infrastructure investment in Scotland adding Digital Scotland, the Beatrice Offshore Wind Farm, Super-Connected City programs for Aberdeen, Edinburgh and Glasgow, Strathy North and Grifffin onshore windfarms and investment in Glasgow Airport to the list:
If these projects still seem insignificant or too few to you, then consider that the UK Government is typically only responsible for investment in infrastructure for areas of reserved responsibility. As the report itself details very clearly, for devolved responsibilities it is the Scottish Government which is “responsible for prioritising and delivering infrastructure investment, supported by the funding they receive from the government through their ‘block grant’ allocation[s]”.
Block grant allocations which, we’ve already established, are ordinarily boosted by Barnett consequentials from NIP spending in England. If you want to see the Scottish Government’s Infrastructure Investment Plan it is here.
Looking back at the original article and the claims it was making, we can establish a few facts:
Still, one out of five isn’t bad.
Readers can make their own mind up whether this was an innocent mistake and misunderstanding of the facts or something less palatable. Perhaps forgiveable from a single-minded blogger with no responsibility to the public, but remember that meme tweeted by Margaret Ferrier? It relies on the “misunderstandings” above to claim that Scotland pays £420m to London Crossrail. We pay nothing. Nada. Zip. In fact, because of Barnett we gain consequentials from Crossrail. Should an elected representative be so mis-informed? Or so gullible?