Select Committee on Treasury Minutes of Evidence

Examination of witnesses (Questions 80 - 99)



  80. You do not think it has been unfair?  (Mr Macpherson) Unfair is a loaded term! I would argue that the way public service provision is allocated is fair. It is on the basis of reasonable formulae.

  Mr Cousins: I wonder, Mr Macpherson, just to follow that on directly, if you look at the Government's figures on spending per head, let us look first at England and its regions. If we look at spending per head, the last year for which we have figures, the North East of England, which has the worst educational achievement in performance on any indicator you choose, has, I think the figure is, £19 more per head spent on it than the English average. Does that seem to you to be fair?

  Chairman: "Reasonable" was the word he used.

Mr Cousins

  81. Reasonable? Let us try reasonable. Reasonable in the sense that it will deliver the Government's educational targets?  (Mr Macpherson) I would highlight that the standard spending assessment formula which clearly is critical for education spending in terms of schools at least is under review at the moment and a revised formula will be published in due course.

  82. So, the fact that the North East of England, which has the worst educational experience in the country, has education expenditure per head virtually no different from the English average . . . Well, that is under review in the SSA formula, so perhaps that will get taken care of. Could I try something else out on you, again looking at England. If we look at the Government's figures, do you agree with me that virtually all the difference between spending per head in the three northern regions of England and the English average is accounted for by social security spending which on no measure is a measure of positive input? Do you accept that?  (Mr Macpherson) I would have to make the calculations.

  83. You would, yes, and I think you would find that, in the case of the North East of England, if you look at all Government spending that can be identified apart from social security, it is £100 higher than the English average. In the case of Yorkshire, if you take out social security, it is the same as the English average and, in the North West, it is about the same as the English average.  (Mr Macpherson) It is quite interesting.

  84. This is interesting, is it not?  (Mr Macpherson) Looking at education —

  85. Are we back to education now?  (Mr Macpherson) I am sorry, I have found your line now. I notice the difference with the average but, for example, the North East gets £746 per head, the South East gets £668 per head. So that is a £78 difference which is about 10-12 per cent, something like that.

  86. Could you try the English average which is the figure I gave to you.  (Mr Macpherson) England is £719 but you also have to factor in . . . There are cost issues.

  87. I understand. I must apologise, I was £8 out, it is actually £27 higher than the English average. My mistake.  (Mr Macpherson) You are right.

  88. On any test of reasonability, back to education if you want to go there, back to total identifiable spending per head if you want to go there.  (Mr Macpherson) I think these are issues which have to be reviewed regularly, which is why at the moment there is a review taking place of local authority grant distribution formulae. I think the results of those are going to be published fairly shortly because they have to come into effect, I think, in 2003-04. Clearly issues like deprivation are important and they need to be given the right weight. As you say, this data is important.

  89. Sticking to education and looking now at expenditure between countries in the regions, taking the years for which we have figures in the last public expenditure assessment, am I right in thinking that, at the present rate, it will take about 300 years for English spending on education to reach Scottish?  (Mr Macpherson) I think that depends on two things: firstly, how the Barnett formula works itself out and I think what is known by some as the "Barnett squeeze" tends to happen more quickly when spending is growing faster. One reason why the Barnett formula had less of an effect during the course of the 1980s was that spending was not growing very fast at all.

  90. Mr Macpherson, I am with you.  (Mr Macpherson) The second reason obviously—and this is a matter for Scotland—is how it allocates its spending. It may choose to spend more on education, say, than something else.

  91. Sure, but, in its analysis of regional productivity performance, the Government have identified education particularly as being a key test skills and, against that background, 300 years to close the gap between English spending per head on education and Scotts does seem a little long.  (Mr Macpherson) I cannot comment on the 300 years because I have not done the calculation. I do not know if Mrs Dunn or Mr Parkinson wish to add anything.  (Mr Parkinson) There is no convergence factor built into the Barnett formula that will enable us to say that it will converge after 10, 20 or 30 years because it depends—

  92. Mr Macpherson was talking about the "Barnett squeeze" but there is no convergence factor.  (Mr Parkinson) . . . that will enable us to say exactly when they will converge because it depends on the rate of growth of public spending. The rate of convergence varies in terms of rapid growth and in terms of slower growth, but there is some degree of convergence built into existing plans because of the —

  93. I am sorry, there is no convergence factor but there is some degree of convergence?  (Mr Parkinson) There is no convergence factor which will enable us to say that it will converge in 10 years or 20 years or 300 years because it depends on future spending decisions as to how fast public spending will grow in England, but what we can say is that, with growth in spending, there will be a gradual convergence.

  94. That is a little disappointing actually because I was going to go on to say, because it was cheering me up, that it would only take about 25 years for the gap between the North East spending per head on education and Scotts to close compared to 300 years if you compare England and Scotland, but that is not actually something we can rely on.  (Mr Parkinson) Because it depends on future spending reviews and future growth of spending in England.  (Mr Macpherson) I think it is fair to say that if education remains the Government's number one priority and we can lock in a successful economic management so that expenditure on public services continues to grow, there will be convergence.

  95. Sure and I agree with you because the trends I have identified are looking at three years of this Government, three years in which education is a priority and three years in which public expenditure was growing and, on those trends, it would be 25 years before the gap in spending per head between the North East and Scotland is closed and 300 years before the gap between England and Scotland is closed. Is the Barnett formula under review along with all the other reviews?  (Mr Macpherson) The statement of funding policy was published in July and there are no plans to review the Barnett formula.

  96. You have identified lots of reviews but that does not include the Barnett formula?  (Mr Macpherson) The Barnett formula is updated to reflect population factors and the latest statement was set out in July.

  97. Do you think as part of the productivity raising agenda across the whole of Britain which involves skills and spending on education that the Government will be reviewing education spending per head across the devolved countries and the regions of England? Is that under review?  (Mr Macpherson) Education spending in Scotland is a matter for the Scottish Executive.

  98. So we have no guarantee that these gaps in spending per head and the rather slower pace of closing them under this Government with rising expenditure will speed up the process? It still might be 300 years or longer, or 25 years in the case of the North East or longer, and this is not under review?  (Mr Macpherson) The allocation to local Government is under review. The Barnett arrangements were confirmed in July.  (Mrs Dunn) Can I just add to that. Even if the Barnett formula were to be reviewed, it need not necessarily have that impact because I think that the key point here is that, as Mr Macpherson said, it is for the Scottish Executive to decide how much to spend on education. So, whatever you did to determine the overall quantum, it would not necessarily have any impact at all on the policy choices that were made in Scotland about how much resource to put into education. So, whatever you did about how much funding went to Scotland, you would not be able to make that shift.

  99. Sure, but of course there is no mechanism for the regions of England to make those policy choices, is there?  (Mrs Dunn) Because education policy is not devolved in that sense, it is just on England basis.

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