Scotland: Block Grant

Debate between Lord Richard and Lord Dunlop

Monday 15th June 2015 Lords Chamber

[Lord Dunlop]

I thank my noble friend for that question. The simple overarching principle is that neither Scotland nor the rest of the United Kingdom should gain or lose financially as a direct consequence of implementing the Smith agreement. There are two aspects to this. First, at the point of devolution, the tax and spending block grant adjustments made to reflect the transfer of powers should of themselves leave funding for Scotland and the rest of the UK unchanged. Secondly, post devolution, both the UK Government and the Scottish Government should bear the risks and reap the rewards of their own policy choices. That will strengthen fiscal responsibility and accountability. How these principles work in practice must be discussed and agreed by the UK Government and the Scottish Government, but the fact that the principles are agreed by all five of Scotland’s political parties is a helpful starting point.

[Lord Richard (Lab)]

My Lords, the noble Lord said that he is anxious to get a settlement that is fair to all parts of the United Kingdom. Will he please remember Wales when he is talking about keeping block grants and being fair? The Barnett formula has proved detrimental to the economy of Wales ever since it started. Is he also aware—and if he is not, he should be by now—that a committee of this House recommended very strongly not too many years ago that the Barnett formula should be looked at again because, as the noble Lord, Lord Lang, just said, it is totally unrelated to need? It is perfectly possible to produce a fair formula that is based on need and it is high time that the Government did that.

[Lord Dunlop]

My Lords, we are very mindful of the funding needs of Wales. Obviously, Welsh funding was the subject of the Holtham review and, according to the criteria set out by Holtham, Wales is not currently underfunded. For the foreseeable future, per-head funding is unlikely to converge with that of England in the near term. The UK Government have committed to introduce a funding for Wales that will ensure fair funding for Wales.