The "extremely unfair" system which gives every Scot a £1,600 annual subsidy from English taxpayers should be scrapped as part of a wider devolution of tax-raising powers, a campaign group said today.
According to the Taxpayers' Alliance, the Barnett Formula spending has cost UK taxpayers £200bn since 1985 because it fails to take population into account.
And the amount paid to Scotland has not been covered by North Sea oil revenues, the report argues, with the gap set to rise as oil production slows.
It is the latest call for the scrapping of the Barnett Formula, which is currently being considered by a House of Lords committee.
Chancellor Alistair Darling is due to present the findings of a review into the scheme in the coming months, and Tory leader David Cameron has called for it to be replaced with a needs-based formula.
Even its creator Lord Barnett, who devised it when he was Treasury chief secretary in the 1970s, said the formula was never intended as a long-term measure and had been drawn up "almost on the back of an envelope".
And the author of today's report, former Treasury economist Mike Denham, said: "The Barnett Formula has a troubled history and has failed to address the extremely unfair situation of English taxpayers heavily subsiding Scotland.
"Everyone is struggling to make ends meet, and it is long overdue for the government to lift this burden from taxpayers' shoulders.
"English taxpayers want an end to subsidising Scotland, and the Scottish government wants financial control devolved to Holyrood, so now is the ideal time to consign the Barnett Formula to history."
The report "Unequal Shares: The definitive guide to the Barnett Formula" says public spending per head in Scotland is £1,644 higher than in England, with spending in Wales £1,042 higher and Northern Ireland £2,254 higher.
It says the formula, which automatically adjusts spending in the devolved countries when changes are made in England, has cost £200bn since 1985-86 - £102bn on Scotland, £57bn on Northern Ireland and £43bn on Wales.
And it argues that "reform is essential" as the formula "cannot possibly withstand such pressure".
"In an era of devolved government, such spending gaps are impossible to justify to English taxpayers," the report says.
"They ask why they should subsidise higher Scottish, Welsh and Irish spending. Why shouldn't those areas pay for their extra benefit themselves through higher local taxes?
"There is particular anger about the Scottish advantage because, whereas Northern Ireland's position is arguably justified on the basis of peace and reconstruction, there is no such case in Scotland."
Pointing to a 30-year history that has seen very little in the way of political will to reform Barnett, the report calls for wholesale changes to the way taxes are raised.
