New calls to scrap Scottish subsidy

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Barnett Formula spending has cost UK taxpayers £200 billion since 1985 because it fails to take population into account, a report by the Taxpayers' Alliance revealed.

And the amount paid to Scotland has not been covered by North Sea oil revenues, the report argues, with the gap set to rise as oil production slows.

It is the latest call for the scrapping of the Barnett Formula, which is currently being considered by a House of Lords committee.

Chancellor Alistair Darling is due to present the findings of a review into the scheme in the coming months, and Tory leader David Cameron has called for it to be replaced with a needs-based formula.

Even its creator Lord Barnett, who devised it when he was Treasury chief secretary in the 1970s, said the formula was never intended as a long-term measure and had been drawn up "almost on the back of an envelope".

And the author of the report, former Treasury economist Mike Denham, said: "The Barnett Formula has a troubled history and has failed to address the extremely unfair situation of English taxpayers heavily subsiding Scotland. Everyone is struggling to make ends meet, and it is long overdue for the Government to lift this burden from taxpayers' shoulders."

The report "Unequal Shares: The definitive guide to the Barnett Formula" says public spending per head in Scotland is £1,644 higher than in England, with spending in Wales £1,042 higher and Northern Ireland £2,254 higher.

It says the formula, which automatically adjusts spending in the devolved countries when changes are made in England, has cost £200 billion since 1985-86 - £102 billion on Scotland, £57 billion on Northern Ireland and £43 billion on Wales.

And it argues that "reform is essential" as the formula "cannot possibly withstand such pressure".