THE Scottish and Welsh Governments have begun a formal dispute process with the UK Government over their claims to receive billions of pounds of extra money as a consequence of the Conservatives £1.5 billion deal for Northern Ireland with the Democratic Unionists.

Both governments argue that any additional funding for Northern Ireland must respect the established funding principles and rules applied through the operation of the Barnett Formula.

Whitehall insists that the deal with the DUP is outwith this funding mechanism and so there will be no financial consequentials for the administrations in Edinburgh and Cardiff.

The two devolved governments estimate that if the Formula were applied, then the Scottish Government would receive a further £2.9bn and the Welsh Government an extra £1.67bn. It has been pointed out that, using the same argument, England would receive an additional £59bn.

Derek Mackay, the Scottish Government’s Finance Secretary, along with his Welsh counterpart Mark Drakeford, have written to the Treasury to invoke the formal dispute resolution process through the Joint Ministerial Committee[JMC].

“The Scottish Government fundamentally disagrees with the way in which this additional funding for Northern Ireland has been allocated,” declared Mr Mackay.

“We have repeatedly made the point that all areas to which the £1billion funding package has been allocated are devolved matters and, therefore, the Barnett Formula should apply.

“Despite this, the UK Government argues that there should be no Barnett consequentials from this deal and refuses to acknowledge that Scotland, Wales and England will be short-changed by billions of pounds.

“That cannot be right and the deal goes against the principles of the UK Treasury’s own statement of funding policy.”

Mr Mackay claimed that any suggestion the new funding arrangement for Northern Ireland was similar to previous funding for City Deals in Scotland was wrong and not in any way comparable.

City deal funding, he explained, was conditional on match-funding from the devolved administrations’ own budgets and also required contributions from local authorities and other regional partners. In addition, the UK Government had promised City Deals for Northern Ireland on top of this £1 billion of additional expenditure.

The move from the Scottish and Welsh Governments comes on the eve of the expected signing of the £1bn City Deal for Edinburgh.

Mr Mackay added: “It remains 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 England that is fair and reasonable for all but in order to reach such a solution we now need to pursue the formal dispute resolution process.”

The JMC acts as a forum for settling inter-administration disputes that cannot be solved through bilateral official or ministerial channels.