By a Newsnet reporter
The Scottish Government has reacted angrily to plans by the Westminster coalition to plunder a UK wide reserve fund in order to cut English household water bills and pay for a major sewerage scheme in London.
Using new legislation which came into force last Wednesday, UK Treasury Ministers have given the go-ahead for a new £4.1 billion project to build a new sewerage system for London and have sanctioned the release of funds in order to cut the water bills in the South West of England by £50 per household.
However because of the way the new system is funded there will be no resulting consequential payments being made to Scotland, Wales and Northern Ireland.
Under the Barnett Formula, which determines how much Treasury money is allocated to the three devolved administrations, cash spent by the UK Government on projects in England usually triggers extra “consequential” payments to the devolved administrations.
But, because the cash for the two English projects is coming from the UK Government’s reserve fund rather than through the Department for Environment, Food and Rural Affairs (Defra), the Barnett mechanism is circumvented.
The situation has caused anger both in Scotland and Wales with both administrations claiming that the mechanism is unfair.
SNP MSP Kenneth Gibson – convener of the Scottish Parliament’s Finance Committee, said:
“This stinks. Last week Ruth Davidson was quite explicit in her dislike for the Barnett Formula and threatened that a No vote and the status quo would mean funding cuts of up to £1,500 for every man, woman and child in Scotland.
“Now we see that the UK Tory government is already finding ways to deny Scotland its fair share of funding.
“Scotland is entitled to a Barnett consequential of about £400m which could be spent on public services here.
“People in Scotland will not be impressed about the prospect of subsidising water bills for those living in the Tory heartlands.”
The decision to allow English departments access to the UK Reserve funds follows changes to its administration brought in by the Tory/Lib Dem coalition months after they came to power in 2010.
According to the UK Treasury, access to the reserve is considered by UK Treasury Ministers and will only be granted in “exceptional circumstances”.
Guidelines issued by the Treasury say that access will be: “in exceptional circumstances, on a case-by-case basis and specifically where a UK department is granted access to the reserve to enable it to meet exceptional pressures on a spending programme”.
However the decision to grant access was criticised by Plaid Cymru peer Lord David Wigley who claimed that neither situation was exceptional.
“I do not agree with the UK Government’s interpretation of this spending at all.” he said, and added:
“MPs from the south west of England have been complaining about the level of water bills there for years, and the same applies to the sewerage problems facing London.
“My view is that exceptional circumstances are when something unforeseen takes place, like a flood. In both the cases cited here, the problem has been known about for years and should have been planned for.”
Lord Wigley claimed that Wales stood to lose out on £100 million of funding and that Barnett consequentials should be paid, he added:
“People in Wales will not be at all happy about the prospect of subsidising water bills for those living in the south west of England or major new sewerage works in London.”
MSP for Central Scotland John Wilson echoed the views of Lord Wigley and said that by avoiding Barnet, Scotland was losing hundreds of millions of pounds that could have boosted the economy.
Commenting Mr Wilson said:
“Once again the people of Scotland are expected to stump up for major infrastructure works in London.
“This follows a long line of public works over recent years in London which have not provided Barnett consequential for Scotland and Wales.
“Applying the Barnett formula Scotland should have benefited from £400m of funding which given the current economic situation and budget cuts, would have provided a major employment opportunity and boost for public projects in Scotland.”
Defra Minister Lord Taylor defended the plans and said: “We believe that the circumstances that [water consumers in the south west of England] face are exceptional. For years they have faced the highest water bills in the country as they have paid the costs of the £2bn invested in infrastructure post-privatisation.
“The benefits of this investment include improved water quality, reduced leakage, cleaner beaches and better bathing water, but the costs have been borne solely by South West Water customers and their bills have risen as a result. We believe that the Government should help to correct the historical inequity. We do not want another such inequity to arise.”
Lord Taylor claimed that London’s sewerage system was operating close to capacity and said that the situation was only going to get worse and added:
“Even after construction of the Lee tunnel and improvements to sewage treatment works, around 20 million tonnes of untreated wastewater will still be discharged in a typical year from combined sewer overflows into the Thames.
“This is unacceptable on environmental and health grounds, and it needs addressing.”
The news comes less than two weeks after Chancellor George Osborne refused a request from SNP Finance Secretary John Swinney for a £300 million funding boost for “shovel ready” projects in Scotland.
Mr Swinney had responded to a request from UK Prime Minister David Cameron for details of the Scottish capital projects to be provided to the Westminster Government prior to Mr Osborne’s budget statement.