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A REVIEW of Scottish devolution could spell the end for the Barnett Formula, it was predicted last night.

The formula allocates increases in public spending according to population size, regardless of the relative wealth of people in Scotland, Wales and the English regions.

The Scottish Labour, Conservative and Liberal Democrat parties have set up a review of the current constitutional set-up, to be chaired by former Durham University vice-chancellor Sir Kenneth Calman.

Leaders of the three parties - which all support a continued union between England and Scotland - have said it will not consider independence.

But political observers said it is bound to look at how Scottish public services are paid for, and that would mean reviewing whether the Barnett formula - which means more public money is spent per person in Scotland than in the North-East - should be ditched.

The formula is named after the former treasury secretary Joel Barnett who introduced it in 1978.

It meant in the last financial year, Scotland received £8,623 per head, compared to £8,177 for the North-East.

This was despite income per head in Scotland being 95 per cent of the national average in 2006, compared to 81 per cent for the North-East.

Joel, now Lord Barnett, has called for it to be reviewed, but last week Prime Minister Gordon Brown appeared to defend the arrangement, saying it was based on people's needs.

Last night, Fiona Hall, Lib Dem MEP for the North-East, said she hoped the Scottish review would spell an "end to the Barnett formula as we know it".

"The Barnett formula was conceived as a short-term fix. It is an outdated mechanism with no legal or democratic justification.

"It should be reassessed and replaced with a system that is based on need," she said.

Speaking at the launch of the review, Sir Kenneth, now chancellor of Glasgow University, said: "It is a genuine opportunity to take stock of what the (devolution) settlement has achieved and the challenges it may yet have to address in the years to come."

The review panel will meet for the first time in April and aims to produce an interim report in November.

4:00am Thursday 27th March 2008

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