Professor David Bell of Stirling University has analysed the impact on Scotland of the Welsh Assembly's Holtham Commission report into a needs-based funding formula to replace the Barnett Formula.

Writing in The Scotsman Prof Bell warns that a move to a needs-based formula could lose Scotland £4.5 billion a year of Treasury funding.

"If its calculations were put into practice, it would have dramatic effects on the Scottish budget," Prof Bell says. "The size of the block grant from Westminster to Holyrood would shrink substantially. Instead of the Scottish grant being 20 per cent higher per head than in England, the margin would shrink to 5 per cent.

"At current spending levels, this would mean a cut of around £4.5bn in Scotland's annual grant from Westminster."

During the House of Lord's Select Committee on Barnett, former Conservative Secretary of State for Scotland (1995 to 1997), Lord Forsyth, revealed that in order to guard Scotland's interests he was counselled against a needs-based formula.

Can I tell you what advice I was given when I was Secretary of State. The advice I was given when I was Secretary of State is do everything you can to avoid a needs-based assessment being implemented by the Treasury because the Treasury believe that it will enable them to reduce Scotland's budget by between £2.5 and £4 billion.

Given the possible implications for Scotland, what is the likelihood of a future Conservative Government implementing a needs-based replacement of the Barnett Formula?

According to the Spectator's Frazer Nelson, "if gossip in the bars of the Commons is any indicator, Tory support for the Union is draining". Frazer questions whether the Tories have the motivation or energy to fight an SNP that is determined to undermine the Union.

Lord Forsyth has suggested that David Cameron could pull the rug from under Alex Salmond's feet by offering Scotland the referendum on independence that Gordon Brown refuses them. In this way the Scots can ratify the Union before Alex Salmond has the chance to exploit the backlash against public spending cuts by a Tory government.

If we win, the first thing David Cameron should do is spirit a bill through parliament to get on with it. Otherwise we will have these bogus games where the nationalists claim Scots would be better off independent and anything difficult is blamed on being in the UK and not having their own powers. Anyone looking at the seriousness of the problems we are in can see that there are some very difficult decisions ahead and the last thing we want here is to have some smart aleck trying to turn it all into constitutional grievances. We should get on with it and put it to the people. If people want to get out of the United Kingdom so be it. Otherwise let’s get on with dealing with the enormous problems.

There has been an inexorable decline in Conservative fortunes in Scotland since 1955 when they won half the popular vote and half the parliamentary seats. Their decision to campaign against devolution and their refusal to participate in the Scottish Constitutional Convention contributed to their failure to win a single Scottish seat in 1997. No longer able to claim to be a true 'Party of the Union' there is now, according to Prof Andrew Gamble, "an influential strand of opinion within the party [that] has begun to question whether holding fast to the Union is any longer in the Conservative interest" [Parliamentary Brief; 15 July, 2008].

In 2010 it is unlikely that the Conservatives will have improved much on their present tally of one Scottish MP. Conscious of the Conservative's Englishness, David Cameron has promised to govern Scots with respect and pledged to do everything "in my power to ensure that the SNP will not be able to split up the UK". But Cameron may need more than just words, because in Scotland Tory promises butter no turnips. The Conservatives need to demonstrate their respect for Scotland.

There may be a Conservative and Unionist advantage to be gained from taking the timing of the referendum on Scottish independence out of the SNP's hands. There may also be advantage to be gained in limiting the referendum question to a straight Yes or No on independence and leaving out any poll on further devolved powers.

If the Conservatives included a promise to hold a referendum on Scottish independence in their manifesto for the next general election, do you think this would:

Lord Forsyth's speech at the 30th Anniversary Dinner for Margaret Thatcher (Glasgow, 3rd May 2009)

EXTRACT

There is one Union which has your unwavering commitment and support. The Union between Scotland and England, the union which binds the United Kingdom. We are Conservatives and we are Unionists.

Writing about Scotland's Tories you said ‘Life is not easy for Scottish Tories; unlike English Conservatives they are used to being a minority party, with the Scottish media heavily slanted against them'. But these circumstances gave Scottish Conservatives a degree of enthusiasm and a fighting spirit which I admired, and which always guaranteed a warm hearted and receptive audience. Some leading Tories though a small minority hankered after a kind of devolved government but the rest of us were deeply suspicious of what that might mean for the future of the Union’.

Some on the left argue that the Thatcher revolution enabled Labour to create the Scottish Parliament. Of course the opposite is true . It was Labour’s defeat in the referendum on the Scotland Bill that lead to Margaret tabling a motion of no confidence in the Callaghan Government. We won it with the support of the SNP, which precipitated the 1979 election. Labour changed their minds on devolution cynically believing it would entrench their power in Scotland. George Robertson’s famous boast that ‘Devolution would kill nationalism stone dead' rivals Gordon Brown’s ‘no more boom and bust' in the stakes for catastrophic errors of political judgment. Labour having created the Parliament allowed their best and brightest to skulk off to Westminster and watched as their long held hegemony in Scotland evaporated.

We Conservatives are democrats and practical people. We respect the decision of the electorate who voted for a Scottish Parliament. We opposed the principle because we believed it would damage Scotland’s interests and threaten the Union. We could not see an answer to Tam Dayell’s West Lothian Question. We wondered how an executive could be held to account for expenditure it did not have to raise in taxes and if it did was that not independence. We agonised at the impact of Scotland losing its place and voice at the centre of the United Kingdom Government. We worried that a divisive, nationalist administration might abuse the powers of government to create conflict and try to destroy the Union. As Conservatives we believe it is irresponsible to bring forward reforms that have not been thought through.

That it is reckless to embark on a journey with no sense of the end direction. Today, we have a Scottish Parliament but all of the central problems remain unresolved. But my friends they cannot remain unresolved forever. Contrary to some people’s beliefs it was easy to get a hearing from the Prime Minister if there was a problem in Scotland. George Younger persuaded her to abolish domestic rates because of the savage impact of a revaluation in Scotland and soaring council spending. Our opponents claim the Scots were guinea pigs for the Poll Tax but the truth was it was imposed on England following a public outcry at the unfairness of the system for funding local government in Scotland. The rating system took little account of ability to pay and the burden had become unbearable for pensioners on fixed incomes living in the family home. It was grossly unfair just like the Council Tax today and you Margaret despite the obvious political hazards were determined to put it right.

The Poll Tax was undoubtedly badly implemented mainly because of Treasury opposition. It was set too high and had insufficient exemptions but the principle that everyone who receives council services should make some contribution to their cost according to ability to pay was the right one. Today the problem of local government finance remains unresolved.

Margaret, Your resolute defence of the Union never wavered.