LAST night, the Government came close to admitting what The Northern Echo has been trumpetting for years: the Barnett formula is an unfair way of sharing out central government money and needs to be reformed.

Even the man who drew it up in 1977, Joel Barnett, has said so. Last year he said it had caused a "terrible unfairness" to the North-East of England.

And the mandarins in the NHS agree, for last year they embarked on a review of the way the NHS allocates its spending to deprived areas, and they said it would be a surprise if the North-East did not benefit from the review.

Back in the late 1970s, Lord Barnett was the Treasury Chief Secretary confronting two problems: the loss of the traditional industrial base in Scotland and Wales, and the countries' growing disenchantment with a Labour government that was backing away from devolution. His answer was to create a formula which threw money at them, so that for every £100 that was spent in English regions such as the North-East, £109 was spent in Wales and £116 in Scotland.

Scotland and Wales might then have been special cases, but now it is the North-East that comes bottom of all the economic and social indicators, from unemployment to productivity, from health to education. It is the North-East that needs some extra help.

This means that when the Treasury comes to conduct its review of the Barnett formula, it mustn't simply scrap the additional funding going to Scotland and Wales. The North-East must see a tangible benefit from the review in terms of increased money.

It will be fascinating to see what last night's news means for devolution to the English regions. The formula was constructed partly to buy off nationalist pressure in Scotland and Wales - is it now being reviewed to placate those in the North-East - including Peter Mandelson - and Yorkshire who are demanding proper regional assemblies?

That, though, is an aside. The North-East currently has many allies at the Cabinet table - including the Prime Minister, the Health Secretary and the Trade and Industry Secretary. They must be able to see that the Barnett formula is preventing their region from prospering as it might.

But the region is not asking favours of them - only fairness. And the Barnett formula is unfair.