Barnett Formula

Lord De Mauley Excerpts

Monday 7th June 2010 Lords Chamber

[Lord Barnett]

To ask Her Majesty’s Government what action they propose to change the Barnett formula.

[Lord De Mauley]

My Lords, the Government recognise the concerns expressed by your Lordships’ Select Committee report on the Barnett formula, the Holtham commission on Welsh funding and other commentators on the system for devolution funding. However, as set out in the coalition programme for government, at this time the priority must be to reduce the deficit, and therefore any change to the system must await the stabilisation of the public finances.

[Lord Barnett]

My Lords, the noble Lord must know that he has not answered my Question. The Select Committee to which he referred unanimously pointed out that approximately £1,600 per head more is spent in public expenditure in Scotland than in England, which has serious implications for the coming cuts. The Select Committee, which included a former Conservative Chancellor and two former Conservative Secretaries of State for Scotland, unanimously recommended that the system should be changed and based on need. What is he going to do? Is he going to do nothing at all?

[Lord De Mauley]

My Lords, I pay tribute to the noble Lord, Lord Barnett, not only for producing his eponymous formula at the end of the 1970s, when he was a much respected Chief Secretary to the Treasury, but also for his powerful arguments in recent years for change. He of course knows more than I will ever know about the Barnett formula, and he makes a valid point; and the coalition understands his concerns very clearly. However, I am sure that he will be among the first to acknowledge that, in the light of the grave financial situation that the country faces, it would be wrong for a new Government to rush to a decision on this complicated matter.

[Lord Lawson of Blaby]

My Lords, perhaps I may assist my noble friend. I entirely agree that the number one objective—the Government are right—must be to reduce the appalling size of the deficit. If he re-reads the unanimous report of the Select Committee to which he referred, he will discover that its recommendations would assist that task, not fly in the face of it. I hope he will embrace it.

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[Lord De Mauley]

My Lords, I thank my noble friend for his intervention. We recognise the force of the arguments and are carefully considering the various reports. There is as yet no consensus on exactly what a needs-based assessment would take account of. In the mean time, the coalition’s priority, as I have said, is to reduce the deficit.

[Baroness Hollis of Heigham]

My Lords, given that the Barnett formula funds on the basis of population and not need, does the Minister agree that it is profoundly unfair to overfund Scotland by the extent of some £4 billion to £5 billion a year, while requiring underfunded local authorities in the rest of the country to make further savage cuts as their contribution to reducing the deficit?

[Lord De Mauley]

My Lords, in circumstances where the public sector debt is approaching £900 billion and the PBR forecast for 2009-10 is for net additional borrowings of £156 million, or about 11 per cent of GDP, I am surprised to hear that the noble Baroness thinks that the Barnett formula is a more urgent matter.

[Lord Oakeshott of Seagrove Bay]

My Lords—

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[Lord Elystan-Morgan]

My Lords, is it not the case that the whole economic and financial landscape has changed so fundamentally over the past 30 years that a rough and ready yardstick of calculation, as it was then, now becomes something utterly inequitable; and that if there is no radical change, parts of the United Kingdom, such as the land and nation of Wales, will suffer the perpetuation of this inequity? Is it therefore a matter not of waiting for events to happen but of radically tackling a massive injustice?

[Lord De Mauley]

My Lords, the Government hear what the noble Lord and other noble Lords say. However, while we recognise the concerns expressed by, for example, the Holtham commission, as I said, the priority must at the moment be to tackle the deficit.

[Lord Oakeshott of Seagrove Bay]

My Lords—

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[Lord Oakeshott of Seagrove Bay]

Thank you, my Lords. The Labour Benches have already had two questions.

Does the Minister agree that, unlike its author, the Barnett formula is now well past its sell-by date? Does he recognise particularly the concerns expressed so thoroughly by the Holtham commission on the whole system of public sector or devolution funding? While obviously accepting that the deficit is the immediate problem, does he not also accept that moving towards fairness between all four nations of the United Kingdom is an important part of getting the deficit sorted?

[Lord De Mauley]

My Lords, I have just said that we recognise the concerns expressed by the Holtham commission, and the Government are listening to what noble Lords are saying.

[Lord Peston]

My Lords, I was under the impression that the Liberal Democrats were part of the Government. I know that we need to sort out the protocol, but they really have to get used to what they have sold their souls for. They really do.

May I ask the noble Lord, with all lack of respect to my noble friend Lord Barnett, whether it is not about time that the Barnett formula was simply allowed to die? Should we not let it rest happily in its grave until we can come back to invent a new formula?

[Lord De Mauley]

My Lords, the dulcet words of the noble Lord, Lord Davies, when he was a Minister answering almost an identical question, were along the lines that the Barnett formula is simple, robust, and it works. The coalition, on the other hand, and as the noble Lord, Lord Peston, implies, recognises that there are concerns over the allocation of funding. But, as I said, there are other priorities.