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Adam Price: I accept that and look forward to the Conservative party devoting one of its Opposition days to a call for the revision of the Barnett formula. We would support such a motion, as we will support the Liberal Democrats in the Lobby tonight. This matter is far too important to be left to party politics.
The hon. Member for Chesham and Amersham mentioned the First Minister, Rhodri Morgan, and said that he supported the Barnett formula. I am sure that he does now, but in 1997 he told the Treasury Committee that the formula was "detrimental" to Wales. Moreover, he said in an interview with John Humphrys that the formula was
"putting a lot of pressure on expenditure in Wales. We now cannot keep up with the percentage increases in health and education that the Department of Health and the Department of Education and Employment are doing in England."
The Government claim that there is no evidence for the position adopted by my party and others, but there is plenty, and the amount is growing. As the hon. Member for Montgomeryshire (Lembit Öpik) said, even the formula's progenitor agrees that it is long overdue for revision. If we do not act now, we will continue to suffer.
I appeal to Labour Memberswe must move away from the Barnett formula. It is detrimental to Wales, and Northern Ireland is also beginning to suffer from the effects of the Barnett squeeze. The problem will continue to get worse, unless and until we get a proper formula that is fair to the nations of these islands and to the regions of England. It is a matter of territorial justice; for example, per capital expenditure on public services in some parts of the south-west region of England is very low. We need a root and branch reform of the allocation of finances in these islands.
: The problem with new clause 11 is that it would set up a panel of so-called experts to make recommendations about the Welsh block grant. In other words, it would create another new quango to determine how much money would be devoted to public expenditure in Wales.
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The Barnett formula has been used for some time to determine public expenditure in Wales, and has produced significant increases in that expenditure, but the quango created by the new clause would make recommendations in isolation from the rest of the UK. It would not pay heed to fairness, transparency and the particular needs of Waleslanguage that the hon. Member for Chesham and Amersham (Mrs. Gillan) described as "wishy-washy".
Essentially, the new clause would adjust public expenditure in Wales according to the views of the panel of experts, but in isolation from what was happening with public expenditure in the rest of the UK. However, funding public expenditure in Wales cannot be separated from what happens in the UK as a whole. I think that hon. Members recognise that, although the new clause does not.
No rational system of resource allocation for public expenditure could ever consider funding the needs of one part of the UK in isolation from the whole, as that would make it impossible to manage any logical process for setting budgets. The Barnett formula is operated by the Treasury, and it determines the funding allocations for Northern Ireland and Scotland as well as for Wales. However, this Bill deals only with Wales, and so is inappropriate for the new clause's proposal to abandon the Barnett formula in respect of Wales alone and replace it with a new system for allocating public expenditure there.
The Barnett formula has been criticised by various hon. Members, but it has worked well in practice. It has provided a stable and secure financial context, and allowed the National Assembly to plan public expenditure with some confidence. The National Assembly has received financial settlements without the need for lengthy annual negotiations with the Treasury. The Barnett formula is a relatively simple mechanism, whereby money is allocated to the National Assembly in a way that is open, transparent and comprehensible to the people of Wales.
The Barnett formula ensures that changes to planned public expenditure on comparable services in England are properly reflected in the budget in Wales. The formula will provide average growth of more than 4 per cent. each year in the period since the spending review of 2004. All public institutions must be realistic and work within a fixed budget. They have to concentrate on the outcomes of the use of public money, and not just on the quantum figure, important though that is.
The National Assembly Government are committed to providing quality public services, using the funding provided through the Barnett formula. As a result of that process, the Assembly budget has risen from less than £8 billion in 1999 to more than £14 billion in 200708. That means that the budget has almost doubled in that period.
I confirm that the Government have no plans to review the Barnett formula, which has served the UK very effectively. In practice, it has produced reasonably fair settlements, and we will continue to monitor its operation to ensure that it is being applied properly and rigorously. Clearly, the mechanism has some advantages in the context of devolved government, and indeed it was developed originally by Joel Barnett in the 1970s when the question of devolution was first visited.
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The Barnett formula is simple to understand, and provides the degree of stability that is essential in the consequential flow of resources to Wales. It also allows Administrations a considerable degree of freedom when it comes to making spending decisions. The Government have looked carefully at the matter, but we have concluded that there is no advantage in reopening the question of the Barnett formula at this time.
New clause 11 is well meaning, but would be unworkable in practice. It would create yet another quango, and mean that decisions about public expenditure in Wales would be made outside the context of such decisions in respect of the rest of the UK.
Lembit Öpik: The hon. Member for Chesham and Amersham (Mrs. Gillan) said that the funding calculation was too important to be decided in the dying moments of the Report stage of this Bill. We agree, which is why we tabled the new clause. We are suggesting that the experts should say how we decide the formulation. We all agree that there are flaws in the system, and the Liberal Democrats feel that the flaws are so significant that we should change the formula.
The hon. Lady also quoted the First Minister in defence of the existing formulation, but we have heard from the hon. Member for Carmarthen, East and Dinefwr (Adam Price) that the First Minister himself has criticised the formula on other occasions, when it suited him to do so. We cannot pretend that he has any consistent form on the issue.
Ranting a series of numbers at the Opposition is not a sufficient defence of the existing formulation. This is not about specific figures, but about fairness and transparency. I must point out to the Minister that it is obvious that when we talk about the principle of fairness, that has to be seen in the context of the UK. When we talk about the principle of transparency, that has to be seen alongside the principle of collective decision making, not as some isolationist approach for Wales. And when we talk about the particular needs of Wales, of course we have to think about the needs of the rest of the UK as well. For those reasons, the Minister should recognise the strength of feeling that many of us have in favour of a changeand that is why I need to press the new clause to a vote.
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