Further evidence that English local government is bearing a disproportionate share of spending comes this week from the Institute for Fiscal Studies whose reports on the public finances must increasingly be spoiling George Osborne's breakfasts. Last week the IFS pointed out that the Barnett formula has been unfairly benefiting Scotland by £600m (in the 2010 and 2013 spending reviews) because of the way English business rates are calculated in the Treasury accounts. Business rates are seen as part-funding the Department for Communities and Local Government's (DCLG) local government budget rather than other departments like health or education. Cuts to the DCLG are therefore excluded when calculating block grants to Scotland (and Northern Ireland) but because the English local government budget has been harder hit than devolved health and education, Scotland and Northern Ireland's block grants are cut less than those in England by £600m and £200m respectively. As the Government is so far committed to maintaining the Barnett formula this anomaly carries through when more tax and spending powers are devolved to Holyrood and, in particular, when the next spending review is announced. A total of £800m so far is therefore owed to English public services, particularly local government.
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