The Goschen Proportion/Barnett

The Herald 25 July 1992. This is an interesting piece from Arnold Kemp on the history of the Barnett formula. Jackie Kemp

WE start with a confession. The Herald has, these past few weeks, been mis-spelling the name of the formula by which Scotland's share of UK public expenditure is decided.

In our error we have at least been consistent, referring throughout to the Goshen/Barnett formula. This must have set up an irritation somewhere in my subconscious. No-one had complained or questioned us. But for no particular reason beyond a vague conviction that something was amiss, I looked it up.

My suspicions proved correct. The formula — the Goschen Proportion as it inevitably came to be called — was named after George Joachim Goschen, the Victorian statesman and banker. He introduced the formula in the 1880s when he was Chancellor of the Exchequer in Lord Salisbury’s Government.

The best account I could find of it is in a book by Olive and Sydney Checkland (Olive Checkland now lives in Cambridge but is still an honorary research fellow in history at Glasgow University: the late Sydney Checkland was professor of economic history there).

It was a curious circumstance, they wrote, that the Conservatives did more to recognise Scottish claims than the Liberal Party so favoured by the Scots. By the 1880s Scottish national sentiment had revived and the formula was one of a series of measures designed to placate it.

R. B. Cunninghame Graham and Professor J. S. Blackie were notables of this period. Graham was a romantic figure — author, South American rancher, and gold prospector. He argued that Scots had a right to waste their own taxes.

Blackie was the first chairman of the Scottish Home Rule Association. He was professor of Greek at Aberdeen and Edinburgh, and founded the chair of Celtic at Edinburgh. The Checklands wrote drily that he was ”aggressively attired in plaid and bonnet” and carried a staff. He argued that Gaelic was derived from Greek which reflected ”the tenuousness of his grip on both languages”.

From the early 1830s the Home Secretary in London had been responsible for Scotland, drawing on the advice of the Lord Advocate. A series of boards was set up — on prisons, poor law, lunacy. The Scottish Education Department was founded in 1872 and the Crofters Commission in 1886.

The Goschen Proportion, introduced in 1886 according to the Checklands and 1889 according to the Scottish Office, was among a whole a series of concessions. Electoral reforms raised the number of Scottish seats. In 1885, largely under the influence of Lord Rosebery, the office of Scottish Secretary was established, superseding the Lord Advocate save in legal matters.

This, of course, was only the beginning of administrative devolution. The Scottish Secretary had no real power. He answered in Parliament for the Scottish boards but had little control over them. Appurtenances of government, they continued to be based in Dover House (where today Scottish Office Ministers have their elegant offices, with splendid views of Horse Guards Parade).

And what of Goschen himself? The son of a banker, the grandson of a Leipzig publisher, he had the sort of career in politics that would be difficult if not impossible today. He began as a Liberal MP and made his mark at the Board of Trade and elsewhere.

But he fell out both with Chamberlain (for his radicalism) and Gladstone (over Home Rule). He was elected for Edinburgh East in 1885, and was a founder of the Liberal Unionist Party. He helped to defeat Gladstone’s Home Rule Bill in 1886. This was a watershed in Scottish politics: the Glasgow Herald and the Scotsman, both Liberal, turned Conservative amid much public uproar.

He succeeded Lord Randolph Churchill at the Treasury in Lord Salisbury’s Government and it was as Chancellor that he introduced the Goschen Proportion. He later became the first Viscount Goschen and died in 1907.

As the Scottish Office grew in powers and importance, Scottish civil servants operated with growing skill in Whitehall. Without anyone really noticing it, they began to build up Scotland’s share of spending. At ministerial level the partnership between Harold Wilson and the late Lord Ross was particularly fruitful.

In 1958 the Goschen formula was replaced by a system by which the Scottish Office bargained for a share of individual functional programmes. Officials liked this method. The late Sir Douglas Haddow, the permanent secretary at the Scottish Office, described it as ”very rewarding” since it gave his department the ability to retain unallocated funds.

Ironically, the devolution debates of the seventies brought Scotland’s favourable treatment to more general attention. In 1979 the Barnett formula (named after Joel, now Lord, Barnett) restored the principle of a fixed proportion of new spending being allocated to Scotland, England, and Wales.

But this time the terms were less favourable. Goschen prescribed that Scotland should get a share of British spending in a proportion of 11 to 80. The Barnett formula says that of every #100 of new identifiable spending England gets #85, Scotland #10, and Wales #5 in cases where there are separate Welsh programmes.

The marginal deterioration in Scotland’s relative position is evident though convergence will take a very long time. Mr Lang has made much of the financial advantages of the Union. It now falls to him to defend them.