Barnett Equilibria
Useful to begin analysis by distinguishing between:
- the long-run equilibrium to which rigorous adherence to the Barnett formula ultimately drives the system (equal nominal formula-driven expenditures per capita across regions) - “Barnett equilibrium” (focus on this)
- the speed of adjustment towards this long-run equilibrium (do not pursue this here)
Some characteristics of a Barnett equilibrium:
- of significance if Barnett really does determine assigned budget for the Scottish Parliament (debate in practice, but evidence not yet compelling)
- no notion of Barnett equilibrium at the outset - regarded as transitory arrangement
- not inevitable - not an unconditional forecast come what may
- conditional upon (eventual) strict adherence to the formula (with no permanent formula bypass or compensating adjustments in non-formula-driven expenditures)
- may not be desirable - just an equilibrium to which rigorous application of formula leads
- Principle of equalisation, notions of fairness and role of “needs assessment” exercises
- consensus suggests that a current needs assessment would lie between current position and Barnett equilibrium (though considerable uncertainty)
- in principle could accommodate complex “needs”-based systems, with needs endogenous
- comparison with alternatives, including variants of “fiscal autonomy”