A Parliamentary committee has criticised the public spending deal which deprives the North-East of about £1bn, compared with Scotland.

However, the attack on the Barnett Formula by the Lords Constitution Committee says it is the devolved administrations in Scotland and Wales that may lose out.

In their report, peers say the agreement, which has been in place since the late 1970s, means that "rate of growth in the financial resources available to the devolved administrations has slowed and will continue to slow".

They say the so-called "Barnett squeeze" does not mean funding to Scotland and Wales will be cut, but "it will grow at a decreasing rate in comparison with the rate at which public spending for England grows".

The report adds: ''This takes no account of the different needs in different parts of the UK, or of the different costs of providing public services in the different parts of the UK."

The committee's inquiry concentrated on the financial effects of recent devolution of power to Scotland and Wales, but backs an independent and impartial review of the Barnett Formula.

While the peers' con-clusions may ring alarm bells for campaigners for the North-East to get a bigger share of public spending, the committee recommends that the Barnett review "should include people who reflect the views of all parts of the United Kingdom, including the English regions".