Another big news day for the TaxPayers’ Alliance.  See, for example, the BBC, The Telegraph and The Sun.

The reason for today’s news coverage is a TPA report on the Barnett formula that governs the public expenditure settlement between the different parts of the UK.  Here are the main findings in the report from author, Mike Denham:

Mr Denham recommends that the formula is abolished as part of giving Scotland ‘fiscal autonomy‘.

Speaking to Conservatives in Westminster, Edinburgh and Cardiff yesterday, however, it seems that the Conservative Party is unlikely to make more than modest reforms to the formula.  These were the political reasons given:

  1. The party now enjoys a large opinion poll lead.  Polls had suggested that reform of the Barnett formula could have an electric effect on voters – similar to last year’s inheritance tax cut – but that the risk was no longer necessary.  Ridley Grove made the case on Monday that large opinion poll leads are discouraging radicalism in Tory policy.
  2. Reform could jeopardise talks with the Ulster Unionists. The focus is often on Scotland but as the graphic above shows, the biggest beneficiary of the current settlement is N Ireland.  David Cameron has high hopes for Owen Paterson’s co-operation talks with the UUP and unpicking the Barnett formula could greatly undermine the appeal of UUP-Tory candidates in their first General Election campaign.
  3. Reform could be a gift to the SNP.  Alex Salmond believes that reform of Barnett would be a massive gift to his hopes for independence.  A poll earlier this week found that – regardless of Barnett – a quarter of Scots would be more likely to vote for independence if there was a Tory government.
  4. Reform could hurt the Conservatives’ Welsh revival. Although the party may not win many more seats in NI or Scotland there is a real chance of big gains in Wales.  Conservatives in Cardiff fear that reform of Barnett could kill those chances.  As part of the Tory commitment to Wales the Shadow Welsh Secretary Cheryl Gillan has already defended the continuation of the Welsh Office.

This is not to say that there will be no reform but any ideas will be very gradual and focus on benefiting poorer communities in all parts of the UK.

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