Scotland Bill

Lord Richard Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Steel of Aikwood]

My Lords, the noble Lord, Lord Barnett, is held in great affection and respect in this House and he has given us a very good history of his formula, for which he deserves great credit. The reason I am opposed to this amendment is not financial; it is simply the politics of the situation that we are in today. With great respect to the noble Lord, he is now out of date. Subsection (4) of his amendment says:

“The new Barnett formula should be implemented no later than 1 April 2016”—

so we have new Labour, new Barnett; it goes on.

My argument is that by 2016, if politics develops as I expect it will in Scotland, the Barnett formula will not need to be amended; it will be abolished. We decided in 1997-98 to devolve financial powers to the Scottish Parliament—powers over expenditure but no powers over raising the money to meet that expenditure. I have said right from the beginning that that process could not exist for ever. This Bill moves us slightly in the direction of allowing the Scottish Parliament more financial responsibility for raising the money that it spends.

The three political parties in Scotland have recently appointed groups to do more work on implementing what the Prime Minister himself has referred to as future steps of devolution. At their recent conferences, all the parties set up groups to do more work. It would be ideal if they were co-operating, but at least a lot of work is going on to put flesh on the words of the Prime Minister. By the time of the referendum—which should it be as late as 2014 I would regret, but at least it would be no later than 2014—we will have, I hope, a decision against independence. We will then have to turn our attention to how we put flesh on the words of the Prime Minister and transfer financial responsibility for raising the money in Scotland to the Scottish Parliament for the subjects on which it spends. If we succeed in doing that, in the years to come, the Barnett formula sadly will disappear but the noble Lord will always have his name attached to that useful instrument.

[Lord Richard]

My Lords, I apologise to my noble friend Lord Barnett for not being here at the beginning of this debate. I am afraid that I missed it on the Annunciator and I realised only after my noble friend had started speaking. I listened to what the noble Lord, Lord Steel, said. As I understand it, the object of my noble friend’s amendment is to get this House to declare quite firmly that the Barnett formula’s days are done. We went into it in great detail in the Select Committee. I do not want to refer to that in detail except to say that it was a unanimous report and that the membership of that committee included a former Chancellor of the Exchequer, two former Secretaries of State for Scotland, and two other Ministers, I think, who had served in Scottish departments. We went into it in considerable detail and all came to the conclusion that the so-called formula had been instituted by my noble friend Lord Barnett casually—I hesitate to use that word—or at least without any thought that it would subsist for generation after generation or would become enshrined with the term “formula”.

My noble friend is right. What is wrong with the so-called Barnett formula is the baseline, which is now about 40 years out of date. In those circumstances, how can one justify its continuation? We asked ourselves very firmly the question: could you have a formula which is based on needs? We came to the conclusion that you could. Indeed, we set out in some detail in the report the way in which you could arrive at a needs-based formula and the result of applying it. In those circumstances, how can the Government project an amendment which says that something that has been in existence for 40 years—it is clearly out of date and way past its sell-by date—and is designed only to preserve a situation, which, as I say, is 40 years gone? It is being done on spurious grounds when in reality we know exactly what is going on; namely, that the Government do not want to stir the pot in Scotland because they think that it may prove to be politically disadvantageous. I am sorry to say it but the pot should be stirred. After 40 or 50 years, it is time for this to be resolved.

I totally support my noble friend in what he is trying to do, which is to get this House to put a marker down that the days of the Barnett formula have gone and that we should look at a needs-based formula rather than the existing one. If my noble friend chooses to divide the House on this matter, I, for once—very rarely for me—would support him.

[Lord Lang of Monkton]

My Lords, I support the noble Lord, Lord Barnett, in his attempt to abolish the formula in his own name. Most of us would give our eye teeth to have a formula named after us. The noble Lord carries a great burden and I sympathise with him because it is a burden based on a complete misunderstanding, to which the noble Lord, Lord Richard, has just alluded. Although, over the years, Secretaries of State have taken advantage of it in the territorial departments to varying degrees, it is not something that we have done with particular pleasure because we have become increasingly conscious of the anomalies inherent in it, as those anomalies have expanded.

It has distorted the debate with colleagues, created resentment in the country and spilled over into antipathy towards Scotland, which could colour the debate and the future referendum on Scottish independence. Because it is indefensible it really should be got rid of and we need a clear statement from this House that that should happen. I disagree with the noble Lord, Lord Steel of Aikwood, whose formula for keeping it and allowing it to wither on the vine was peppered with “ifs” and “assuming thats”. I think that we need a clear statement on it.

The reason why I think that the noble Lord, Lord Barnett, has been unfairly treated in having the formula named after him is that it—the twist to the arrangements, as he called it—was not a formula at all. It was a change in the way in which the additions were made to the baseline. They used to be expressed as percentages and be applied evenly across the whole United Kingdom. As the Scottish baseline rose, those percentages delivered larger cash sums. So the ingenious scheme which the noble Lord hatched with Mr Bruce Millan, the Secretary of State for Scotland at the time, was that instead of Scotland getting a percentage transfer, it would get a cash transfer. They would get the same cash increase to baselines per year, which would represent a smaller percentage when applied to their own baseline.