Northern Ireland (Interim Arrangements) Bill

Lord Morrow Excerpts

2nd reading
Thursday 18th May 2023 Lords Chamber

[Lord Morrow (DUP)]

My Lords, we certainly agree with the Minister when he says that it is regrettable that the Northern Ireland Assembly is not up and operating—but we all know perfectly well why. My party gave much notice—in fact, I think that we gave 13 months’ notice—in this House and elsewhere that the Northern Ireland Assembly and Executive were on life support. Now the whole thing has collapsed due to these red lanes, green lanes and border controls. We are no longer strictly a part of the United Kingdom in the same sense as Scotland and Wales.

But the main point I want to make today pertains to Clause 2 in relation to advice and information on options for raising public revenue. The Government are right to be alive to the fact that Northern Ireland needs more public revenue, but the implication of this is that the way forward is through local means. That, however, is to distract attention from the key point at issue. On 2 May, the Northern Ireland Fiscal Council published a report that uses the Holtham formula to calculate what needs to be spent in Northern Ireland in order for needs to be met on the same basis as they are in England. Crucially, the Holtham formula for defining need per head of population is not a random assertion but the result of a government commission that the UK Government have already accepted for Wales, Scotland and Northern Ireland.

Using the formula, the Fiscal Council demonstrated that in order for needs to be met in Northern Ireland on the same basis as England, Northern Ireland needs to receive £124 per head. Crucially, however, the Treasury block grant transparency document shows that spending per head in Northern Ireland for the spending review period of 2022 to 2025 is £121 per head. It is, therefore, no surprise that Northern Ireland is currently in the midst of a very serious funding crisis, with Stormont departments having to make cuts right, left and centre. Today, Northern Ireland is the only part of the UK to be in receipt of below-needs block grant funding. Northern Ireland thus finds itself in a similar position to Wales in 2009-10, but, rather than just being £1 below need for one year, Northern Ireland is £3 below, and not just for this financial year but for the last financial year and for the next financial year.

If we extrapolate for the three-year funding review period, the Fiscal Council report demonstrates that we are currently underfunded to the tune of just over £1.2 billion. The critical point in all this is that after Wales went below need for funding in 2009-10, the UK Government responded in a way that established three critical precedents. First, they accepted the Holtham formula as a definition of need. Secondly, they introduced a 5% transitional needs adjustment for Wales, whose purpose it is to slow down the Barnett squeeze up until reaching the Holtham formula definition of need. This applies when funding per head has not fallen below need. Thirdly, it introduced a Barnett floor for Wales on the basis of the Holtham formula definition of need to introduce a complete needs adjustment at the point where funding per head reaches need and threatens to go below.

In making that arrangement, the UK Government have agreed that it would be wrong for funding per head ever to fall below need, and made provision to prevent this ever happening again. The Government are now duty bound to afford the people of Northern Ireland the same courtesy. As we have already fallen below need, this should result in a full needs adjustment backdated to the beginning of the spending review period. In recent weeks, the Government have sought to press the DUP back into government in various ways. I ask that they reflect very carefully about the implications of trying to use the current funding crisis as a means of doing so. The reason we had to withdraw from Stormont is that we were not prepared to settle for, and thus effectively cement in, a second-class citizenship in which we no longer have the right to stand for election to make the laws to which we are subject and in which we are forced to be presented to the rest of our home economy as if we are a foreign country. I do not think it would reflect well on the Government to do that and I do not think it would be wise.

Finally, in the normal sense of events there would be an opportunity to ask the Minister for a meeting between Committee and Report to discuss the need for a comparable Barnett floor provision for Northern Ireland to that which exists in Wales. However, there will be no time between Committee and Report, as all remaining stages are to be taken on one day, so I will take this opportunity of asking for such a meeting to discuss this ahead of the remaining stages.

Northern Ireland (Interim Arrangements) Bill

Lord Morrow Excerpts

3rd reading & Committee stage
Tuesday 23rd May 2023 Lords Chamber

Moved by

[Lord Morrow]

1: Clause 2, page 2, line 15, at end insert “such as providing advice in relation to the Northern Ireland Fiscal Council 2023 Report ‘Updated estimate of the relative need for public spending in Northern Ireland’ in the light of the precedent arising from the December 2016 ‘Agreement between the Welsh Government and the United Kingdom Government on the Welsh Government’s fiscal framework’”

[Lord Morrow (DUP)]

My Lords, Amendment 1 is in my name and that of my noble friend Lord Dodds of Duncairn.

Clause 2 of the Bill is concerned with:

“Advice and information on options for raising public revenue”.


My amendment requires that the advice should be expressly required to cover the Northern Ireland Fiscal Council report, Updated Estimate of the Relative Need for Public Spending in Northern Ireland, published on 2 May this year, and the precedent arising from the December 2016 agreement between the Welsh Government and the United Kingdom Government on the Welsh Government’s fiscal framework.

Some might suggest that all relevant things can and should be taken into account and it is not necessary to specify these two documents. However, they are of such central importance to the situation in which Northern Ireland finds itself that it would be a dereliction of duty not to put them front and centre of advice and information on options for raising public finance. I will consider both, starting with the agreement with the Welsh Government.

In 2007, the new Welsh Government’s programme for government identified the need to address the problems relating to the Barnett squeeze on the funding available for services for UK citizens living in Wales. To understand this, it is important to remember that before 1979, when the Barnett formula was introduced, the union was treated as a unit and funding allocations were made within that unit on a basis that was alive to need. The reason for considering a change in the funding formula at that time was devolution, which the then Government hoped would be delivered by referendum that year.

The initial proposal was that the funding formula should be needs-based. Treating England as 100, the Treasury claimed that on the basis of need, Northern Ireland should be rated at 131, Scotland at 116 and Wales at 109. However, a decision was made to delay the introduction of this new system and to use instead a simple interim model that allocated monies to Scotland, Wales and Northern Ireland based on their relative populations as a proportion of that of England. This temporary formula came to be known as the Barnett formula. Here we are 44 years later, and it remains in place, notwithstanding the 2009 report of the House of Lords Select Committee on the Barnett Formula, which called for its replacement with a needs-based formula, and a number of robust exhortations to the same end from your Lordships’ Constitution Committee.

When the Barnett formula was first applied, it was to a pre-existing level of spend that had been cognisant of need and thus with more money per head going to Northern Ireland, Scotland and Wales than to England. However, the challenge remains that all subsequent increments in funding from the introduction of the Barnett formula have not been based on need in Wales, Scotland and Northern Ireland, but have simply been the appropriate and proportionate fair share of what had been spent in England. Mindful of the populations of Wales, Scotland and Northern Ireland, that means that although incomes keep increasing, funding does not increase as much as it would if monies were allocated from the centre on the basis of need—as if the UK operated on a UK-wide rather than just an England-wide notion of need.

The spending differential between Northern Ireland, Scotland and Wales, on the one hand, and England, on the other, has reduced, and in the absence of correction, there would ultimately come a time of convergence, when spend per head in Wales, Scotland and Northern Ireland would be far below need. This downward pressure towards convergence is called the “Barnett squeeze”.

--- Later in debate ---

[Lord Morrow (DUP)]

My Lords, I thank everyone who has contributed to the debate. If there is one striking note, it is that I did not hear anyone say they oppose what we are trying to do, so I will take that as a positive and welcome it. Some, of course, have said, “If we had an Executive” or if we had this or that, but I have always found in life that you are better off moving from where you are, rather than where you would like to be. That is the only way we are going to move forward. If, one day, there is an Executive—I can say with some degree of confidence that it is not going to be tomorrow—they will no doubt deal with those issues.

I was struck by one thing the Minister said when he summed up. He said that we extended additional powers for borrowing some £300 million. In my experience, any time I borrowed money I always had to repay it and sometimes, the pain of repaying it was nearly as great as the pain of asking for it. Incidentally, I never had to borrow £300 million; that just would not have happened. The Members who spoke highlighted different issues; for example, that our health service is where it is, and that we have monumental waiting lists. However, we had those when we had the Executive. There are three of us here—the noble Baroness, Lady Foster, my noble friend Lord Dodds and I—who have at different times served in that Executive. I nearly forgot—how could I?—the noble Baroness, Lady Ritchie, also served in it. We are not antagonistic to devolution. We know there are merits in it but, for goodness’ sake, can those who see our salvation entirely in a restored Executive please take on board that that will not happen at present because we do not have a level playing field? When we get to that stage, we will all be enthusiastic and break down the gates of Stormont to get in, but that is not where we are, so I ask noble Lords to take cognisance of that.

What happens when devolution is not functioning? Is it not the responsibility of government to step in and accept responsibility, as a government, and keep things moving forward? That, surely, has to be right. I do not doubt for a moment the Minister’s sincerity— no one has—but we say to the Government, “You have responsibility; let’s get on with it.” The noble Lord, Lord Murphy, quickly corrected himself and reminded us that none of us here is elected, but the other place is elected. Is that not their responsibility, or do they just throw up their hands and say, “Oh well, we can’t do anything here”? They cannot do that. Let no one underestimate the difficulties there will always be in keeping devolution afloat. Those will always be there, but the Government have a responsibility to ensure that when things break down back home, they do not shirk their responsibility to do some of the heavy lifting here to encourage the people of Northern Ireland and ensure that they do not suffer.

My Lords, I will stop there. I beg leave to withdraw my amendment, which was intended more as a probing amendment.

Amendment 1 withdrawn.