UK Government/DUP deal

In a letter to the Chief Secretary to the Treasury, Finance Secretary Derek Mackay has called for an urgent meeting and highlighted that the Scottish Government will invoke the formal dispute resolution mechanism, if this situation is not satisfactorily resolved by HM Treasury.  

Mr Mackay said:

I am writing to you following yesterday’s announcement on the financial implications of the deal reached between the UK Government and the Democratic Unionist Party.

I would like to begin by making clear that the Scottish Government fundamentally disagrees with the way in which this additional funding for Northern Ireland has been allocated.  All of the areas to which this £1 billion funding package has been allocated - infrastructure development, health (including mental health), education, broadband, deprivation - are devolved matters to which Barnett should apply.  

The UK Government’s argument that there should be no Barnett consequentials for Scotland and Wales (or indeed funding for England) from the financial elements of the agreement is unacceptable and inconsistent with the terms of the Statement of Funding Policy.  Paragraph 2.15 of the Statement of Funding Policy, is very clear that the “assessment of whether a programme is unique at a UK level [and thus outside the Barnett arrangements] should be exceptional [and that] any such assessment should be evidence-based, be undertaken in a timely manner, and be considered by Treasury ministers and their counterparts in the devolved administrations to ensure all viewpoints are understood before final decisions are taken.”  This deal has not been properly considered in this way and no engagement was undertaken with Scottish (or Welsh) Ministers on the proposal and our viewpoints were not therefore considered.  The funding situation is also inconsistent with what the Scottish Government had been led to expect as a result of the Secretary of State for Scotland’s statements last week and in the media. 

I have also seen in the media that the Prime Minister has written to her Conservative MPs to explain that the DUP funding package is comparable to the way in which City Deal projects have been funded in Scotland and Wales.  Mr Mundell has also indicated that in the UK Government’s view there have been precedents set for this type of funding, including allocations following the Stormont House and Fresh Start Agreements.

The Scottish Government simply does not accept this view about exceptional direct payments, as all the items covered in this deal are part of routine funding channels and not specifically reflective of the unique circumstances of Northern Ireland.  Any suggestion that this funding arrangement is analogous to previous funding for City Deals in Scotland is also wrong and not in any way comparable, as City Deal funding is conditional on match funding from the Scottish Government’s own budgets and also requires contributions from Local Authorities and other regional partners in Scotland (again from their own budgets).  There is no match funding expectation with the £1 billion offered to Northern Ireland.  In addition, the “UK Government Financial Support for Northern Ireland” document published yesterday makes absolutely clear that on top of this £1 billion of additional expenditure, that the UK Government will also work towards “a comprehensive and ambitious set of City Deals for Northern Ireland” – from which the Scottish Government will receive no additional funding.  So there is absolutely no direct link between previous City Deals for Scotland (or Wales) and the £1 billion funding arrangement that the UK Government has reached for Northern Ireland.

This UK Government deal prioritises expenditure in Northern Ireland at the cost of all other parts of the UK and leaves Scotland almost £3 billion worse off than it would be if funding had been allocated using the well-established arrangements set out in the Statement of Funding Policy.

During our introductory telephone conversation last Wednesday you made clear that you wanted to continue the process of constructive engagement with the three devolved Finance Ministers and that you were keen to arrange an early meeting. 

As this situation is of significant importance to both the Scottish and Welsh Governments, I would request that an urgent meeting be arranged to allow both myself and the Cabinet Secretary for Finance and Local Government from the Welsh Government, to meet with you to discuss the full implications of the funding agreement that was announced yesterday.  This is in full accordance with the procedures set out in the Memorandum of Understanding (para A3.8) in relation to financial disputes.

It is my hope that we will be able to reach a satisfactory resolution to this situation which results in a funding allocation across Scotland, Wales and the rest of the UK that is fair and reasonable for all.  However, as this is an issue of such significance to the Scottish Government, if we cannot agree we will look to pursue a more formal mechanism to resolve the situation by invoking the formal dispute resolution mechanism.

The Deputy First Minister and Cabinet Secretary for Education and Skills spoke with the Secretary of State for Scotland yesterday to make clear the Scottish Government’s dissatisfaction with the deal that has been struck.  The Secretary of State has agreed to relay the points made by the Deputy First Minister to the Treasury and I would hope that this will bring additional weight to the points that I have made in this letter.

I am copying this letter to the Secretary of State for Scotland and to the Cabinet Secretary for Finance & Local Government in Wales.