Barnett Formula: Scotland and Wales (Hansard, 6 January 2004)

§ Lord McIntosh of Haringey
My Lords, as I told my noble friend on 27 January 2003, the Government have no plans to change the Barnett formula. The Government's funding policies for the devolved administrations were set out in the updated statement of funding policy published by the Treasury on 15 July 2002.

§ Lord Barnett
My Lords, I am naturally sorry to hear that. Has my noble friend seen the latest official figures of public expenditure in Scotland, which show that the amount of public expenditure per head is about £1,000 more than that in England? Is he not surprised by that figure, as I am not, because it is bound to be unfair when it is not based on need? In those circumstances, is there not an even greater case to consider a major review, especially as we now have a non-Scottish Chief Secretary to the Treasury in Paul Boateng who might give it a fair wind? If that is not possible, will my noble friend consider asking the Chief Secretary to at least change the name of the formula?

Noble Lords
Oh!

§ Lord Barnett
My Lords, it is a great embarrassment to have my name attached to so unfair a system, especially as, when I introduced it, it was going to last only a year. It has now lasted more than 20 years, because successive governments have failed to deal with it for fear of upsetting the Scots. That no longer applies, so will my noble friend reconsider the matter?

§ Lord McIntosh of Haringey
My Lords, the Chancellor of the Exchequer and the Chief Secretary to the Treasury are both citizens of the United Kingdom. I would be very willing never to use the phrase "Barnett formula" again, but the noble Lord did so in his Question, and I have to respond in kind. I will undertake that, unless he or anyone else prompts me to do so, I will never use the words "Barnett formula" again from this Dispatch Box.
I shall deal with the more substantive question that the noble Lord asked. Of course, Scotland has a higher expenditure per head, but we should be wary of taking expenditure per head as the only measure. Scotland's population is falling, which results not only in falling increases under the Barnett formula but also in an increase in the baseline spending per head. It is not the only consideration that should be taken into account.

Lord Campbell of Croy
My Lords, is the noble Lord aware that the magic in the formula is that difficulties in interpreting it have led to people on either side of the Scottish border reckoning that they were enjoying advantages over the other side? Does he agree that the noble Lord, Lord Barnett, should be congratulated?

§ Lord McIntosh of Haringey
My Lords, I am disinclined to allow magic into the realms of economic policy, but the noble Lord, Lord Campbell, has a point.

§ Lord Steel of Aikwood
My Lords, does the Minister recall that, during the passage of the then Scotland Bill, it was generally agreed that it made sense to launch the Scottish Parliament on the basis of the existing financial formula, but that in the long run—after, say, a couple of parliaments—it would have to be looked at again? Indeed, the basic problem is not the formula itself, but the fact that we have an institution in Scotland responsible for massive public expenditure but with no responsibility for raising any revenue at all. It is that principle that should be looked at in due course, rather than merely the formula itself.

§ Lord McIntosh of Haringey
My Lords, I was not involved in the passage of the then Scotland Bill, but it is certainly true that it was generally agreed that the continuation of the Barnett formula—I have to keep calling it that in this debate—was the simplest and most just way to proceed. The longer-term issues of the sources of expenditure in Scotland can be considered at any time, but they are not the subject of the Question.

Lord Renton
My Lords, will the increasing cost of devolution, especially in Scotland, be shown separately in future?

§ Lord McIntosh of Haringey
My Lords, the "cost of devolution", as the noble Lord calls it, is a matter for the Scottish Parliament. It produces its own accounts, which are publicly available.

§ Lord Roberts of Conwy
My Lords, do the Government propose that any regional assemblies that may be established in England should be part-financed by the Barnett formula or, as we should perhaps call it, the "Methuselah formula"?

§ Lord McIntosh of Haringey
No, my Lords. The basis of the funding of regional government will be that it will inherit the regional spending streams, but that those will of course be fulfilled within existing budgets.

§ Lord Newby
My Lords, with the referendums in the northern regions for regional assemblies later this year, it is quite clear that the whole question of the Barnett formula will become a live political issue. Is it not also clear that, within a very short time, there will quite likely be elected regional assemblies in England whose very existence is owed in part to the feeling in 83 the northern regions that the Barnett formula is inequitable? That is why regional assemblies are so necessary.

§ Lord McIntosh of Haringey
My Lords, I am not responsible for the views of those who support elected regional assemblies. People will have their own differing views about why they should want to do so. As I have already said, it is not the Government's intention that funding of the English regions should be on the basis of the Barnett formula.

§ Baroness Carnegy of Lour
My Lords, in addition to the point made by the noble Lord, Lord Steel, does the Minister agree that a problem for the Scots Parliament is that it never knows how much money it will get, because it all depends on sudden decisions by the Chancellor of the Exchequer about what he gives to England, often in a ring-fenced manner? That affects what the Scots Parliament gets, and it does not know what is coming.

§ Lord McIntosh of Haringey
My Lords, I do not think that that is true. My understanding is that the Scottish Parliament knows what resources it will have in future years, in the same way as does any department of state in this country.

§ Lord Mackie of Benshie
My Lords, would it not be fair for the United Kingdom Parliament to pay for the Holyrood building, which is costing so much, as it ordered it to start with?

§ Lord McIntosh of Haringey
My Lords, I am delighted to say that that question is well outside the scope of the original Question.

§ Lord Skelmersdale
My Lords, can we at the last gasp try one that is not? The formula is a needs-based formula, certainly in part, and the most recent needs assessment was 1977. Do I take it from the Minister's Answer that the Government have no intention to update it?

§ Lord McIntosh of Haringey
My Lords, the formula is population-based, not needs-based.

§ Lord Barnett
My Lords, I have another question for my noble friend in view of one point that he made. We are talking about a complex financial area, as I naturally agree. However, because the matter is so serious, and because, as he said, the formula is population-based rather than based on needs, will he accept that it is unfair and worthy of review?

§ Lord McIntosh of Haringey
My Lords, the great advantage of the formula, as I understand it, is that although the issues involved may be complex, the formula itself is relatively simple. That is why it has survived for 20 years or more.