Barnett Formula

Alan Meale Excerpts

Tuesday 16th December 2014 Westminster Hall

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Gentleman mentioned the Barnett formula and, before he goes too far, I want to highlight its operation. About a fortnight ago, the Treasury gave out money because roads and health in England had a shout for that. Therefore, from that followed Barnett consequentials to Northern Ireland, Wales and Scotland.

However, I notice that, if there is a need in Scotland, Wales or Northern Ireland for money for health or transport, the Treasury does not dip its hands in its pockets in the same way with Barnett consequentials running in the other direction. Barnett consequentials follow on from need in England. It is surely a governance problem when the Treasury responds only to health and transport needs in England and then we get consequentials. Should not the Treasury give money and have consequentials running in the other direction when need arises?

[Sir Alan Meale (in the Chair)]

Order. May I point out to Members that we have only a short time for the debate? If interventions are to be made, can they be questions to the speaker at that time rather than statements? Hopefully everyone will have an opportunity to speak.

[Iain Stewart]

I am grateful for the hon. Gentleman’s intervention. If he bides his time a little, he will see that I will touch on some of those issues later on in my speech.

--- Later in debate ---

[Mr Gauke]

My hon. Friend raises an important point. I know that he has been very active in ensuring that the Welsh Government take advantage of the powers that may be available to them, and I know there is an issue of funding there. I hope that I did address his point by saying that the Government have agreed with the Welsh Government to review the process in the light of the tax and borrowing powers in the Wales Bill. I hope that process will satisfy him by shedding light on the issue that he raised.

I turn to the issue of the needs-based formula. I have heard it said that the Barnett formula does not take sufficient account of needs. The most basic issue here is that no one has been able to say how we would agree a needs-based assessment that would suit every part of the United Kingdom. However, far from being a static formula, the Barnett formula is regularly updated to take account of changes in population and levels of devolved responsibility.

The budgets of the devolved Administrations cover a very wide range of devolved spending programmes. It is, of course, for the devolved Administrations to decide how to allocate their overall budget to individual programmes, reflecting their own policies and their own assessment of the needs of each country. The Barnett formula allows them the freedom to do that.

However, we believe that financial accountability can be improved in Scotland, Wales and Northern Ireland as the devolution settlements evolve. The Government’s record on that speaks for itself. Both the Scotland Act 2012 and the Wales Bill currently in Parliament will devolve new tax and borrowing powers. We have also committed to implementing Lord Smith’s heads of agreement in full. As we devolve further powers, Scotland and Wales will be responsible for raising far more of their funding, so their block grants will become less important. The impact of the Barnett formula on overall levels of funding will decline.

Finally, in highlighting today’s debate in The Daily Telegraph, my hon. Friend the Member for Milton Keynes South set out that the debate would be better informed if we had

“detailed and incontestable territorial public accounts”,

which is a point he made earlier. The Government do not disagree, but this is a complex matter. The Office for National Statistics is considering the development of sub-national accounts as part of its implementation of the European system of accounts, and it is also undertaking work on the comparability of official statistics across the United Kingdom.

It is right that a formula that has set out devolved spending for over a third of a century is continually kept under review to make it fit for the needs of the current day. The three main party leaders have stated that the Barnett formula will continue, and that is therefore what will happen. However, we continue to listen to the strong views on the formula from all parts of the United Kingdom, which have been represented in this debate this afternoon. In that spirit, I thank everyone for their contributions today. I particularly thank my hon. Friend the Member for Milton Keynes South, who has brought to this debate careful, thorough and thoughtful analysis. He has succeeded in shedding some light on an important issue and has highlighted some matters that can often be lost in this important debate.

[Sir Alan Meale (in the Chair)]

Mr Stewart, would you like to add anything? We have a short period of time left.

[Iain Stewart]

I was not planning to, Sir Alan, but may I thank the Minister and other Members for their contributions? The debate has been helpful. I am particularly interested by the work of the Office for National Statistics on the development of sub-national accounts. I think that will help to inform the debate, but I am sure that this is not the last word on the subject.