WIREDGOV

The Finance Ministers of Scotland, Wales and Northern Ireland today issued a joint declaration to the Chancellor stating their shared disappointment that HM Treasury is not applying fairly the Barnett funding formula in relation to Olympic Games spending.

Their declaration outlines their shared concern that while around £1.7 billion will be spent on regenerating East London for the Games in 2012, this is not being mirrored in Scotland, Wales and Northern Ireland, as it should be under Barnett.

Finance Secretary John Swinney said:

"Under the Barnett rules, more spending on land regeneration and transport projects in England should normally lead to increases in the budgets of the Devolved administrations. We are arguing that, under the rules, a fair share of the regeneration and transport spending within the Olympics budget should be distributed so that it can support projects in our respective countries.

"Our estimate is that, by the time the Games conclude in 2012, accepting the original estimate of £1.7 billion for transport and regeneration costs, Scotland would be due at least £165 million in 'consequentials', Wales more than £100 million; and Northern Ireland around £65 million.

The following joint declaration was sent today:

Central government funding for the Olympic Games - dispute between devolved administrations and HM TREASURY

This statement is issued jointly by the Scottish Government, the Welsh Assembly Government and the Northern Ireland Executive. It records and explains our shared disappointment that HM Treasury will not agree to apply fairly the Barnett funding formula to relevant elements of Olympic Games spending in England. As a result, our respective countries are not receiving what we believe is a proper and fair share of public spending. This is an important issue, given the commitment by all the administrations concerned, including the UK Government, to working together on an agenda of respect; and given also the large reductions in public spending that will be announced this week.

Consequently, we have decided today to refer this issue to an exceptional plenary meeting of the Joint Ministerial Committee, which we expect to be chaired by the Prime Minister. A letter setting out this request has gone today to the Cabinet Office.

The UK Government announced its proposed budgets for the 2012 Olympics in 2007. It is now estimated that around £7.5 billion of public money will be spent on major works, venues, security and supporting activity in and around the east end of London by the time that the Games take place in summer 2012. The devolved administrations strongly support the Games coming to the UK and want them to be a major success.

Some of the public money allocated to preparing for the Games is being spent on regenerating East London - including cleaning up land, building roads and bridges, and improving public transport links. This spending, originally estimated at around £1.7 billion but now apparently rising to a total of around £2.7 billion, is necessary to ensure the success of the Games. But it is also designed to help meet one of the main purposes of bringing the Games to London, which is the long term regeneration of the East London area after 2012.

The Treasury sets rules governing how changes in public spending are distributed to Scotland, Wales and Northern Ireland - called the Barnett formula. Under the Barnett rules, more spending on land regeneration and transport projects in England would normally lead to increases in the budgets of the Devolved administrations. We are arguing that, under the rules, a fair share of the regeneration and transport spending within the Olympics budget should be distributed so that it can support projects in our countries.

This argument was originally taken up with the Treasury more than three years ago. Earlier this year, the Scottish Government started a formal dispute procedure, supported by the Welsh Assembly Government and the Northern Ireland Executive. All the facts were laid out and discussed in detail. The devolved administrations agreed that there was a strong case for distributing a fair share of Olympics spending on regeneration and transport to Scotland, Wales and Northern Ireland. The Treasury disagreed, arguing that because the Olympics were a UK-level event and all of the £7.5 billion of spending was essential to providing the Games, there could be no formula share of spending for the other countries.

Our estimate is that, by the time the Games conclude in 2012, accepting the original estimate of £1.7 billion for transport and regeneration costs, Scotland would be due at least £165m in "consequentials"; Wales more than £100m; and Northern Ireland around £65m. If actual spending turns out to be £2.7 billion as currently predicted, the consequentials should be proportionately higher. These are significant sums in our countries, although small in comparison to the overall Games budget.

The UK Government and the devolved administrations have followed the new dispute resolution arrangements, agreed by the former UK Government and adhered to by the coalition Government, with meetings at both official and Ministerial level. We have agreed that the original decision about whether the Barnett formula applied to elements of the Olympics spending was not handled well in the 2007 Spending Review, and the UK Government has agreed to change and clarify the rules to help avoid similar disputes arising in future. The UK Government has also agreed that any new spending, beyond the Games budget, that is necessary to deliver the Games legacy for London will attract consequentials. But despite this there has been no movement on the central issue of the sums we believe should come to the three countries from transport and regeneration spending on the Olympics, including both spending so far and spending from now until the Games conclude in 2012.

This means that an issue on which three of the countries in the UK are agreed can make no progress because of the view taken by HM Treasury. The Treasury are therefore effectively acting as the decision-taker in the process, despite the fact that they are one of the parties to the dispute. This is only one of several examples where the Treasury has reached decisions on spending issues with important implications for the devolved administrations without our agreement, and with significant perceived unfairness as a result.

We do not believe that this is fair or sustainable. We believe that the UK Government should allocate the sums sought by the devolved administrations as part of the Comprehensive Spending Review settlement. We will be scrutinising the Chancellor's statement on 20 October to see whether there has been any movement by the Treasury towards our position, or whether our arguments have been simply set aside.