---

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."

That shows that the First Minister at that time supported our proposals. As has happened all too often, however, he has failed to support our position now.

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 Members—we 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.

Kevin Brennan : 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.
 
28 Feb 2006 : Column 202
 

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 Wales—language 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 2007–08. 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.
 
28 Feb 2006 : Column 203
 

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 change—and that is why I need to press the new clause to a vote.

Question put, That the clause be read a Second time:—

The House divided: Ayes 44, Noes 281.

Division No. 180 [8.29pm


AYES

Alexander, Danny
Beith, rh Mr. Alan
Brake, Tom
Brooke, Annette
Browne, Mr. Jeremy
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Davey, Mr. Edward
Featherstone, Lynne
Foster, Mr. Don
George, Andrew
Gidley, Sandra
Goldsworthy, Julia
Harris, Dr. Evan
Harvey, Nick
Heath, Mr. David
Hemming, John
Holmes, Paul
Horwood, Martin
Howarth, David
Hughes, Simon
Huhne, Chris
Hunter, Mark
Kramer, Susan
Lamb, Norman
Laws, Mr. David
Leech, Mr. John
Moore, Mr. Michael
Mulholland, Greg
Öpik, Lembit
Price, Adam
Rennie, Willie
Rogerson, Mr. Dan
Rowen, Paul
Russell, Bob
Sanders, Mr. Adrian
Swinson, Jo
Taylor, Matthew
Taylor, Dr. Richard
Teather, Sarah
Williams, Hywel
Williams, Mark
Willis, Mr. Phil
Willott, Jenny

Tellers for the Ayes:

Andrew Stunell and
Lorely Burt


NOES

Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Janet
Armstrong, rh Hilary
Atkins, Charlotte
Austin, John
Bailey, Mr. Adrian
Baird, Vera
Balls, Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Benn, rh Hilary
Berry, Roger
Betts, Mr. Clive
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Mr. Des
Bryant, Chris
Buck, Ms Karen
Burgon, Colin
Burnham, Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Gregory
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clark, Ms Katy
Clelland, Mr. David
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Frank
Cooper, Rosie
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cruddas, Jon
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curtis-Thomas, Mrs. Claire
David, Mr. Wayne
Davidson, Mr. Ian
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dismore, Mr. Andrew
Dobbin, Jim
Dobson, rh Frank
Dodds, Mr. Nigel
Donaldson, Mr. Jeffrey M.
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Engel, Natascha
Ennis, Jeff
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, Caroline
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gardiner, Barry
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hamilton, Mr. David
Hanson, Mr. David
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Henderson, Mr. Doug
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hood, Mr. Jimmy
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Iddon, Dr. Brian
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kemp, Mr. Fraser
Kennedy, rh Jane
Khabra, Mr. Piara S.
Kilfoyle, Mr. Peter
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Love, Mr. Andrew
Lucas, Ian
MacDougall, Mr. John
Mactaggart, Fiona
Mahmood, Mr. Khalid
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Marshall, Mr. David
Marshall-Andrews, Mr. Robert
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McGovern, Mr. Jim
McGuire, Mrs. Anne
McIsaac, Shona
McKenna, Rosemary
Meacher, rh Mr. Michael
Meale, Mr. Alan
Merron, Gillian
Milburn, rh Mr. Alan
Miliband, Edward
Miller, Andrew
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morden, Jessica
Mountford, Kali
Mudie, Mr. George
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Owen, Albert
Paisley, rh Rev. Ian
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Prescott, rh Mr. John
Primarolo, rh Dawn
Prosser, Gwyn
Purnell, James
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Reid, rh John
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Robinson, Mrs. Iris
Robinson, Mr. Peter
Rooney, Mr. Terry
Ruane, Chris
Russell, Christine
Ryan, Joan
Salter, Martin
Sarwar, Mr. Mohammad
Seabeck, Alison
Shaw, Jonathan
Sheridan, Jim
Short, rh Clare
Simon, Mr. Siôn
Simpson, Alan
Skinner, Mr. Dennis
Slaughter, Mr. Andrew
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Geraldine
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Spink, Bob
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Thornberry, Emily
Timms, Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Truswell, Mr. Paul
Turner, Mr. Neil
Ussher, Kitty
Vaz, Keith
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Ward, Claire
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, Mrs. Betty
Wills, Mr. Michael
Winnick, Mr. David
Winterton, Ms Rosie
Wood, Mike
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Dr. Tony
Wyatt, Derek


Tellers for the Noes:

Mr. Frank Roy and
Mr. Parmjit Dhanda


Question accordingly negatived.

 
28 Feb 2006 : Column 206
 

It being after half-past Eight o'clock, Madam Deputy Speaker put forthwith the remaining Questions required to be put at that hour, pursuant to Order [27 February].

---