Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 21 JUNE 2000
DR J REID,
MR B WILSON
AND DR
L CLARK, QC
Chairman
40. We have allowed this discussion to go far
enough. It has always been my practice in the Chair to allow members
to ask questions as they see fit and to tell our witnesses to
answer them as they see fit, but quite frankly we are not making
much progress. It is becoming a party-political argument which
does no service to the Committee. I really do think we should
move on.
(Dr Reid) Absolutely.
Sir Robert Smith
41. I am trying to spread a bit more light into
the heat of what is being talked about in terms of (a) the Barnett
Formula and (b) additionality. On the Barnett Formula, earlier
the Secretary of State talked about a needs element, but it is
not the reality now as it progresses, it is a straight population
ratio every time there is an adjustment in an expenditure head
in the UK department which has an effect on a devolved budget
and the reality in the long term is a ratio of populations when
there is a change in expenditure.
(Dr Reid) Thank you for asking a factual question.
I would merely say that when I am asked party-political points,
it is very difficult not to respond. I am a Labour Secretary of
State, which may have come as news to some people and I am not
going to go down the road of being a separatist Secretary of State.
On the question which is asked, it is because the Barnett Formula
deals only with additionals, then it does mean that the bulk of
the money which is inherited contains within it a reflection of
the need which was originally there. Of course as time passes
a number of things happen. One of them actually is that Scotland
has become more prosperous than it was relative to other areas
in the United Kingdom previously. For instance, at the moment,
in terms of GDP, I think it is the third most prosperous region.
That may be temporary but that trend has been going up, the economy
has been going very well in Scotland as the honourable Member
will know. I suppose one balances out the other. What is certainly
true is that as the years go on and public expenditure increases,
you would expect, with a higher and higher level of public expenditure
if that continues, there to be a convergence between Scotland
and the United Kingdom.
42. Again trying to get a light at the end of
the tunnel on this European issue, whilst there obviously are
political agendas as well, at the root of the practical question
is trying to understand the consequence. Because of the internal
arrangements of the United Kingdom is the reality that European
funding makes really no difference to what is spent in Scotland
in a sense? That was the logic of the question being asked earlier.
In taking the natural assumption that there will be a growth in
the European Union in the number of countries and that the accepted
reality is that there are likely to be fewer Structural Funds
coming from Europe to the United Kingdom and to Scotland, what
was trying to be teased out was the practical question that that
does not mean a reduction in expenditure in Scotland, in the same
way as over the years when there was European money coming in,
it did not mean an increase.
(Dr Reid) I suppose what the honourable Gentleman
is saying is that if there were an overall reduction of the money
given to the United Kingdom, no money would be given to Scotland
by the European Structural Funds. It is given to the Member State,
that is effectively to the United Kingdom. If you are saying that
in coming years, if there is less money coming in to the United
Kingdom through Structural Funds or any other changes to the European
Union, that means that all areas of the United Kingdom will get
less European money, yes, it does mean that. That is a different
question from: can you tell me whether in six years' time you
will therefore slash the grant. What I have said is that Mr Welsh
appeared to me to be following a logic which would have him ending
up arguing for a reduction of the block grant because of the lack
of money coming in from Europe. Let us take an example of, say,
the assisted areas. Assisted areas represent a challenge for us
at the United Kingdom level, first of all because, compared to
the rest of Europe the United Kingdom is now more prosperous than
it was the last time we went into this exercise and therefore
is less likely to give need as a high criterion giving us a high
result. Secondly, because we are on the verge of bringing in many
more needy areas to Europe through the enlargement. Thirdly, because
within the United Kingdom Scotland is now more prosperous compared
to the other areas than it was the last time the assessment was
done in assisted areas. That involves therefore a very complex
series of negotiations between the United Kingdom and Europe where
the Prime Minister was extremely successful in getting a safety
net beneath which we would not fall and then a series of complicated
negotiations inside the United Kingdom to fairly distribute that
money. Of course, if the United Kingdom is relatively more prosperous
or alternatively there is a change in the Structural Funds, the
way of paying finance from Europe, the United Kingdom receives
less, then there will be less to distribute throughout the areas.
The implication that somehow Scotland would benefit less or be
disadvantaged more than any other area of the United Kingdom,
is what I was trying to say does not necessarily follow from this.
43. It does seem that the expenditure in Scotland
is limited by the Barnett Formula and in a sense whether it comes
from Europe or from London or from anywhere else how it is financed
is a secondary issue. The reality is that expenditure limit is
there regardless.
(Dr Reid) That is precisely the point I was trying
to make. There is a distinction between the limit which is decided
by the Barnett Formula and the sources of income which are decided
by any number of other factors, for instance how much local government
raises, the level of taxation, the level of the block grant. They
are separate things and too often they are confused.
44. So possibly when a European flag appears
on a bridge somewhere that bridge might well still have been built
whether the European flag money was going to come to it or not.
(Dr Reid) Of course; of course. The fact that a European
flag appears on a bridge does not mean to say that if somebody
said they were not going to put a European flag on this no-one
would ever have built the bridge from any other source. Of course
that is not the case. The fact that the European flag appears
on the bridge is an indication that this is a specific project
which has been allocated from money and deemed within the Scottish
Executive's own priorities to have come from money from Europe.
That is why it is so difficult to talk in these terms as regards
the Barnett Formula which is separate or even aggregate amounts
because it is the aggregate amount which is passed down.
45. The uncorrected transcript of this should
appear on the internet some time early next week hopefully, which
will then be available to any committees in the Scottish Parliament.
We are straying around the place because of the way the question
has developed, but in terms of fostering those links between the
Scottish Parliament and the UK Parliament, if, as a result of
our deliberations, there are missing links in the information,
then under those guidelines you will be willing to provide additional
information in a memo in time for them to have the information
they feel they need.
(Dr Reid) Of course. There has never been any question
about the sharing of information. That is the intention of the
concordats, that is the intention of the guidelines. You will
know that any institution can be misused as well and therefore
it is as well to make sure that the criteria by which such decisions
are reached are set out. They have been set out. I hope every
member has taken the opportunity to look at them. They make it
absolutely clear. The simple fact is that my primary accountability
is to this Parliament and to this Committee. That is my primary
responsibility. However, that is not to say that we are somehow
shielding information from other people. We are not.
46. In terms of making devolution work, because
it is going to happen in some other areas of administration which
are a mixture of reserved and devolved function and not clear-cut,
if a committee in the Scottish Parliament tries to get to grips
at the delivery end of a function and needs information which
comes from a reserved end and say we were not meeting all that,
in principle you would not object to giving them the evidence
or appearing if necessary to help them understand the context.
(Dr Reid) There is no principle objection. The guidelines
are agreed, they are set out there. It would not be the norm because
my primary responsibility is to the United Kingdom Parliament.
The primary responsibility of the Ministers in the Scottish Parliament
is to the Scottish Parliament. That is devolution. What cannot
happen is that this Parliament regards itself either be default
or otherwise as the masters of Ministers in the Scottish Parliament
or vice-versa. If there are people who want to create those circumstances,
then I will oppose them misusing the devolution settlement.
47. Whilst those people may be wanting to create
those circumstances, it does not mean that there is not a need
for more understanding, even if it is on a reserved matter, by
a devolved committee in the Scottish Parliament, given their experience
at the coalface of delivering the function.
(Dr Reid) Of course and there could not be. We are
now almost a year into our relationship. I have not heard of any
complaint from any Ministers in Scotland that they have not been
provided with sufficient information. We have something like 17
concordats setting out these agreements. We have guidelines. We
have so many agreements and we provide information and people
expect that. They also expect that MPs elected by the Scottish
people in this Parliament are accountable primarily to this Parliament.
Those elected to deal with devolved issues are accountable to
the Parliament in Holyrood. They also expect that we will spend
most of our time discussing those issues which are reserved to
Westminster and the Scottish people want to see the Scottish Parliament
spending their time discussing issues which are devolved to Holyrood.
We all know, we are not naive, there are people who will misuse
this. There are people who will attempt to use every debate in
Holyrood to debate reserved issues, precisely because their political
philosophy dictates that it should be not a complement to Westminster
but a substitute, and that is integral to my thinking when I look
at the guidelines here and this is also integral to the way the
guidelines have been drawn up. It is a devolution settlement not
a separatist one.
48. Given the urgency of their inquiry, if on
the uncorrected transcript they discover they still need more
information by exchange of memos, would that be a possibility?
(Dr Reid) Of course it is a possibility. If any Minister
in the Scottish Executive wished to get information to allow them
to answer questions up there, then we would do as much as we could
possibly do to give them such information. Of course we would.
Mr Welsh
49. Would that apply to committees? It is not
your relationship to the Scottish Executive but your relationship
to the Scottish committees who are requesting the information.
Would that similarly apply?
(Dr Reid) My relationship to the committees is that
I am responsible to this Committee and this House.
50. So you would not appear before Scottish
committees.
(Dr Reid) I have not said I would not appear before
them. I have said my responsibility, my primary accountability
is towards this House. I fully appreciate that you have your own
views on these matters, but I am elected by the Scottish people,
as is everybody around here, to consider matters in the Westminster
Parliament. We have gone to extraordinary lengths to set up a
system of providing information and working in partnership with
the Parliament in Scotland. I fear we are going to go down the
same road.
Chairman: This Committee unanimously agreed
to request the Secretary of State to appear before us to answer
questions on his department and I think we should stick to that
at the moment. We did agree a structure at a private meeting.
There will be an opportunity at the end to sweep up all remaining
issues but we do need to make progress.
Mr Welsh: I assume that part of your fair ruling
is that in any unprovoked attacks from the Secretary of State
he will stick to the subject too. That would suit everybody because
he accuses other people of party politics and indulges in them
himself.
Chairman: People are perfectly capable of defending
themselves. What I am trying to defend is the best interests of
this Committee and have a constructive meeting this morning. That
is what I am trying to do, not to have a disagreement between
individual members of the Committee or witnesses.
Miss Begg
51. It strikes me that if we as a committee
can get on with holding the Scotland Office to account and the
committees of the Scottish Parliament get on with their job of
holding the Scottish Executive to account, then we will not actually
have a lot of this confusion. I should not like to denigrate this
Committee, or suggest we cannot ask the questions that would be
able to wheedle out from the Secretary of State exactly what the
position is with regard to financing both the Scottish Parliament
and the Scottish block grant. A couple of questions occurred to
me ages ago. One, if I may take you back, is that you talked about
the fact that the new Scotland Office has a much smaller staff
and as a result the officials from the Scottish Executive are
in liaison over the issues that are reserved such as any extra
spending which comes through the Barnett Formula. What kind of
access do Scottish Executive officials have to Treasury papers
in order to be able to analyse or look at in detail and find out
whether in fact the Scottish Executive is getting its fair share
through the Barnett Formula?
(Dr Reid) They have considerable access to papers
of all departments. They have the access and sharing of information
enshrined in concordats agreed between both parliaments. My officials
have a higher level of access obviously because of departmental
confidentiality within the UK Government. I envisage that as this
process of discussions on the Barnett Formula continues there
will be an increasing sharing of information and indeed the potential
for trilateral meetings with myself and Scottish Executive officials.
52. I wonder whether you would agree with me
that because the decision as to the extra spending that Scotland
acquires through the Barnett Formula is determined on the spending
in England and Wales it is incumbent on all of those of us who
are backbenchers in this Parliament to pay very close attention
to any spending commitments which are made on something which
may appear to be wholly English.
(Dr Reid) I would go even further than that. Not only
should we all take an interest in it, we have a legitimate interest
and right to vote on it. That is one of the reasons why I have
always rejected this spurious idea that Scottish MPs should have
unequal rights. Yes, we should take an interest in that because
the offshoot of that is through the Barnett Formula and determination
of the extra expenditure which goes to Scotland. Recently there
has been a fairly massive additional allocation of expenditure
to the Scottish Parliament as a result of decisions made by the
Chancellor. I think from memory it is £183 million[2]
extra on the Health Service this year, increasing to well over
£1 billion extra in four years' time. Another £80 million
has gone into education. We have a very legitimate interest as
Scottish MPs in decisions which have been made by the departments.
Mr Sarwar: I should like to ask two very brief
questions. One is about the Barnett Formula. I agree with you
that this is based on need and it is good for Scotland, it is
good for Britain. I am sure all of those who represent Scottish
constituencies will support the retention of the Barnett Formula.
You will be well aware that some of the English MPs are very keen
to change this Barnett Formula. Are you under pressure or is there
any move within the Cabinet to change this formula? I believe
that will only benefit my honourable Friend. This will not be
helpful for the Scottish people but obviously it will benefit
my friend Mr Welsh's party. I am not trying to make a party-political
point. I want to change the subject for my second question to
Govan shipyard.
Chairman
53. Order. There will be a time later on for
such points.
(Dr Reid) Without being party-political but stating
objective facts, there are several people who were anti devolution,
who now seek to open up the Barnett Formula. Wearing my Secretary
of State hat, I find it very disappointing that they get encouragement
and solace from other sections of the Scottish representatives
at Westminster, Mr Welsh and his colleagues.
Mr Tynan
54. I understand that the Finance Minister did
indicate, when he spoke to the European Committee of the Scottish
Parliament, that Scotland's record had been second to none in
the utilisation of the European Structural Funds and in fact they
have been used as an example and are assisting other countries
to see how best they could maximise that. Obviously we are benefiting
in Scotland at the present time from European Structural Funds.
The question would be, if we had a demise or a cessation of the
European Structural Funds, would there be an argument based on
the Barnett Formula, to seek an improvement in order to take up
a void which could exist because of that elimination?
(Dr Reid) Yes. This is the point I was trying to make
earlier. Basically the Barnett Formula does not provide money.
The Barnett Formula says this is the maximum you can spend. However
that is made up, whether it is European Structural Funds or whatever,
if you take one element out, since you are allowed to spend that
you can argue for other elements to make it up.
55. So it would be beneficial if the present
formula were in existence if the European Structural Funds were
removed.
(Dr Reid) Absolutely. Maybe I failed to get this across.
This is precisely what I am trying to say and there are people
who are quite frankly misrepresenting this. The final comment
I would make on this is that the people of Scotland are not walking
about their daily lives discussing endlessly the mechanics of
the Barnett Formula and they are not interested in anybody who
is wanting to use that either way for their own political ends.
What the people of Scotland want to know is whether they are getting
a fair deal out of membership of the United Kingdom. They recognise
that if they are getting an 18 to 19 per cent increase over the
rest of the United Kingdom, then this formula has delivered a
fair deal for Scotland. That is why I want to keep it, will fight
to keep it, and if others want to open it up, whether they are
English MPs who feel it gives us too many advantages or Scottish
MPs who for their own reasons want to open it up, they ill serve
the Scottish people.
Chairman
56. One thing which is not going to help is
if I allow the Committee to open this up any more. I have deliberately
allowed this to run for over an hour because it was arguably the
meat of this morning's meeting. It is an extremely complex and
complicated and emotive issue, as we have seen. If any member
has not read the guidelines, I am sure they will read them after
the meeting.
(Dr Reid) I hope so.
Chairman: There are several other important
issues to the people of Scotland which we want to discuss. We
shall move back to the Departmental Report and the objectives
for the department.
Sir Robert Smith
57. In the Departmental Report you list four
objectives: to represent effectively Scottish interests across
the range of reserved matters and to develop effective working
relations with the Whitehall departments; to maintain a strategy
for the effective operation of the devolution settlement; to promote
links between the Scottish Parliament and the UK Parliament; and
to complete implementation of the Scotland Act and to act promptly
and effectively when necessary under the Act. To what extent have
the objectives outlined in the Departmental Report been met?
(Dr Reid) I think that most of them have been met
faster and more smoothly than anyone could have anticipated. If
someone had said a year ago that we would have settled down the
devolution settlement in 12 months and seen off those who were
opposed to devolution because they wanted everything centralised,
or those who were opposed to devolution because they wanted everything
separate, then I think that most people would have said they were
wildly over-optimistic. I think the partnership is working well
at all levels, including at the level of the Civil Service and
the exchange of information. I would say that we are well on our
way to meeting those objectives. Nothing is guaranteed and the
price of defending the devolution settlement is constant vigilance
against the enemies of devolution.
58. It talks about the effective working relationships
between the Scottish interests in Whitehall and the Scottish Executive.
Is it part of your role to promote the direct bilateral relationships
between reserved and devolved departments?
(Dr Reid) Yes, of course. That is what Brian and I
try to do. We try to represent the Scottish interests within reserved
areas and there are some very important subjects coming up around
this time, not least the textile industry which Brian Wilson has
specific responsibility for. We try to do that on industrial policy,
on employment policy, Treasury matters. We try to make sure the
Scottish interest is represented in all these great issues which
are decided at the United Kingdom level. However, my primary task
is to get the departments to work together smoothly so that as
they begin to talk bilaterally, I and Mr Wilson can withdraw from
that settlement and the better that is working, the more successful
it is, the better pleased I shall be and the more we shall have
met our objectives. I certainly feel at the moment, from talking
to advisers to civil servants to Ministers, that tremendous progress
has been made in the last period. There are those who do not want
progress to be made, I accept that; they want the two parliaments
to be at loggerheads. However, I do not think that has happened.
59. When we get to the Minister of State we
shall get into more detail on that issue and cashmere and so on.
One of those concrete examples where it broke down was the relationship
between MAFF and the Scottish Executive over the mixup on GMCs.
Do you think the lessons have been learned there?
(Dr Reid) I hope they have? I do not think there was
any malevolence at all there. May I say that of all the departments,
ironically, my personal view is that probably the relations between
British Ministers at MAFF and Ross Finnie have been excellent.
I say that because they have been tested. There have been several
tricky problems which have come up on beef bans and other matters
and the two sets of Ministers have dealt with them in a very professional
fashion which met the needs of both sets of Ministers. Inevitably
there will be times when, either through faulty oversight or lack
of foresight or sometimes with the best will in the world by British
departments thinking we now have our own Parliament in Scotland,
let us not interfere there, things will go awry. The key thing
is to try to learn from those and I certainly hope that the lesson
is learned. The only other point I would make from that is that
I think it is true to say that this was not an exclusively Scottish
thing. I think MAFF feel that perhaps they could have alerted
other people in the British Government to it quicker than they
did as well. We should not feel somehow that Scotland was badly
done to here, because it was a Scottish/English divide. It was
not. It was an oversight for which the Minister held his hands
up, said sorry and we shall learn from it.
2 Note by witness: The figure is in fact £173
million. Back
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