Tories can now reform Barnett Formula

The papers today have been full of stories about how Scotland needs the Union more than ever; how it owes the Union (and particularly English taxpayers) a debt of loyalty after RBS and HBOS have been bailed-out; and how the SNP's dreams of independence have gone.

It is difficult to disagree with any of this.

Ironically, Alex Salmond had been holding Iceland up as a model for an independent Scotland, saying Scotland could be part of a north Atlantic "arc of prosperity."

However, what this all means is that the Barnett Formula which allocates UK funding to Scotland - in other words an unfair net transfer from the English to the Scots - is ripe for reform.

Lord Barnett, the former Labour minister who devised the formula in the 1970s, has said that it was only supposed to be a temporary measure. Fast-forward several decades and we still have it.

Why? Because Labour does not have the will nor inclination to change it. If they changed the formula the SNP would cry foul and Labour MPs would no doubt lose their seats. Throw into the mix that Brown and Darling are Scottish, the chances of Labour ever changing a formula that is manifestly unfair to the English I would say are non-existent.

BUT... the Tories could do it when they return to power! They only have one MP in Scotland and are unlikely to return there in great numbers. Before the financial crisis the Conservatives would have been wary of changing the Barnett Formula in case it pushed the Scots towards Salmond and his independence agenda. Being the pro-Union party this would have been a disaster.

But now the Scots have to take it. They can't risk going it alone. RBS and HBOS have been given guarantees of £100 billion which is equal to Scotland's annual economic output. Scotalnd would not have been able to rescue its financial services industry and would have gone the way of Iceland - bankrupt!

They do say every cloud has a silver lining...