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21 Nov 2007 : Column 150WH—continued

2.53 pm

Mr. Dai Davies (Blaenau Gwent) (Ind): I thank the hon. Member for Manchester, Blackley (Graham Stringer) for bringing this debate into the open. It has
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been hidden for too long. I speak on behalf of a borough that is regularly listed among the 10 most deprived areas in Britain and has been so for a long time. The needs-based formula must be debated; it is no good hiding from it. The Welsh Assembly Government recently voted that that should happen, and we should take our lead from them.

In Blaenau Gwent, one of the poorest boroughs, we also have one of the highest rates of council tax in Wales, if not the highest. Once a borough is poor, it is extremely difficult to escape from that position. Settlements come down from either London or the Cardiff Government, but our uplift is also among the lowest in Wales. The spiral of deprivation, in which a borough continues to be poor, is difficult to escape. A needs-based formula might have to be based in part on population, but to hide from the debate is not the answer.

The Government introduced European objective 1 funding, which was seen as a means of lifting people out of poverty. The problem is that it cannot be used for statutory responsibility, so the funding does not help to lift boroughs out of their real problem, which is statutory funding and statutory responsibility. European funding is also project-based, not long-term, and that is another worry—it can disappear as quickly as it is given. It is important that we consider the needs of every area and region in this country, and not in isolation.

Chris Ruane (Vale of Clwyd) (Lab): If a review goes ahead and Wales gets less money under a revised Barnett formula, does the hon. Gentleman think that Blaenau Gwent will get more money or less?

Mr. Dai Davies: The feeling in Blaenau Gwent is that we could not be any worse off. In our opinion the review, if it is based on need, can mean only that we will be better off. As we are in the bottom 10, the only way is up; in that respect, we have nothing to lose. Whatever the outcome, a review must be held. It must be open and honest, and everyone must have an input. I urge all hon. Members to push for that, because the fair distribution of moneys throughout this country is vital to areas such as mine. European funding is under threat again. Convergence funding could be taken away in one or two years’ time. We are still left with no definite funding. I urge everyone to support the call for a review.

2.57 pm

Derek Wyatt (Sittingbourne and Sheppey) (Lab): I think that I secured the last debate on the Barnett formula, in 2001. I called for a cross-party group from the House of Lords and the House of Commons to review the formula and said that whatever its conclusions, it should start from the premise that it would take 10 years to implement the changes. I stand by that.

Three issues concern me. One is that only three regions in the United Kingdom actually have a positive GDP—the east of England, London and the south-east. Why is that? Why are the others negative after so much investment since the second world war? Is it something fundamentally wrong with the structure in our regions that makes them negative? Secondly,
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the formula is clearly a concern. I detect distinct nervousness in this Room in Welsh, Scottish and Northern Irish Members, and I can understand that. Thirdly, to say that there is no constitutional implication is foolish. There will be constitutional implications.

I suggest to the House—I hope that the Minister will take this seriously—that we are in government together. Our constituents are concerned about the Barnett formula. I should like to see a Joint Committee of the House of Lords and the House of Commons, and I should like it to have three purposes. One is to understand better why only three regions of the United Kingdom make any money for us. I propose that the reason is the university structure and the number of patents that are exploited. Without considering that, we will not get underneath the issue. The second purpose is to consider the funding formula, and the third the constitutional implications. A Joint Committee of both Houses, challenged to consider those three things, would come back with the most profound findings about what we must do to be a modern 21st-century country.

2.59 pm

Mr. Mark Field (Cities of London and Westminster) (Con): I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on securing this important debate. The issue has been fraught with significant controversy since 1978, when the Barnett formula was introduced, although preferential funding treatment for Scotland goes back to the end of the Victorian era and Lord Goschen. The problem became particularly strong in the aftermath of devolution, during the past eight years. However, it seems that the public at large often labour under a number of misapprehensions. [Interruption.] We all know what game the Scottish nationalists are playing. They want the whole thing shaken up; they would love nothing more than an aggressive cut in the Barnett formula, as it would allow them to play to the gallery at home. We are not going to play that game, and I hope that the same applies to Labour Members.

There is a perception that the Barnett formula is set in stone, but it is a convention that could be changed at will by the Treasury. There is also a sense that England gets an unfair deal, and that applies not only to the English regions, but in my part of London. I accept that it gets a fair amount of public expenditure. Indeed, the hon. Member for Manchester, Blackley referred to the protected £16 billion being invested in Crossrail, but as the hon. Member for Sittingbourne and Sheppey (Derek Wyatt) rightly pointed out, London is still a net donor.

Pete Wishart (Perth and North Perthshire) (SNP): When identified spending is factored into the equation, London secures more money than Scotland. What does the hon. Gentleman have to say about that? I do not ask him to accept it, but he should at least conclude that a debate is to be had about it.

Mr. Field: We could doubtless debate statistics at both ends of the argument, but there was a tacit acceptance of the Barnett formula by the Conservative Administration between 1979 and 1997, who relied on only a small minority of votes and seats in Scotland. That is one reason why it was maintained. I disagree
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with the hon. Member for Manchester, Blackley. My view is that after 1997, and particularly after devolution in 1999, it ceased to be a question of economics. It is now a matter of raw constitutional politics.

The formula fails to provide for the proper fiscal independence of the devolved Governments in Scotland and Wales. Even with its own Parliament, Scotland has to work within a total sum over which it has absolutely no control, although it does have some discretion. That is unacceptable. I have always been more relaxed than many of my party colleagues and many people across England about the effects of devolution. I believe that localism should be properly respected. One of the interesting things about my constituency—the seven square miles of central London that I represent—is that it is actively cosmopolitan.

Mr. David Hamilton (Midlothian) (Lab): It is rich.

Mr. Field: Of course, it has pockets of great wealth. It also has pockets of great poverty. I would happily go with the hon. Gentleman to literally within 200 yd of here, down to Abbey Orchard estate, and to Pimlico and Bayswater. It is much more mixed. The point is that even in the midst of a cosmopolitan constituency, there is a great passion for localism—for the idea of local residents associations and amenity societies. One of the big challenges of politics is trying to marry the fact that although we live in a global economy and a globalised world, it is one where local issues matter.

However, the postcode lottery was implicit in what the hon. Member for Manchester, Blackley said. Scotland, of course, has preferential treatment for university fees, for the long-term care of the elderly, and more recently for prescription charges. I congratulate the right hon. Member for Banff and Buchan (Mr. Salmond) on his clever political role on prescription charges, because the postcode lottery has a particular effect in relation to the health service. The nationalised health service is one subject that most people in the United Kingdom feel strongly about, and more so than about the postcode lottery or other elements of expenditure.

Jim Sheridan (Paisley and Renfrewshire, North) (Lab): The hon. Gentleman is right about the policies of the Scottish National party, including the reduction in primary school class sizes, the cancellation of student debts, the hiring of 1,000 new police officers and free prescriptions. The only difference is that they have not been delivered—neither are they likely to be delivered—and they will blame us for it if they are not.

Mr. Field: I shall not get into such localised debates, but the hon. Gentleman has put his concerns on the record. The move by the Scottish National party’s Administration at Holyrood to drive a new wedge into the area of health spending is clever politics, for it stokes up resentment on the subject that is of most concern in relation to the postcode lottery. It is a trap into which those who truly support the Union should not fall.

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I have to say that my party’s view that we should support English votes for English laws is unworkable. It is absurd that we should have to go through a health Bill, saying that clause 13(7) can be voted on only by English Members but that clause 13(8) can be voted on by all Members. That is nonsense. Nor do I support the notion of an English Grand Committee. It will allow those who wish to do so to suggest that we are somehow trying to put the Union at risk. However, we must have transparency in matters financial. I hope that we will be galvanised by considering all the facts.

At least since devolution, I have preferred the idea of having an English Parliament with exactly the same rights as the Scottish Parliament. I am the only Conservative Member who voted in favour of getting rid of the House of Lords. I would have the Lords as a UK Parliament, with a unicameral system, and have English, Welsh, Scottish and Northern Ireland Parliaments with exactly the same powers, but allowing foreign affairs, defence and a certain amount of fiscal policy to be made by a UK Parliament.

We shall surely return to these matters many times. Make no mistake, however, that any move to recalibrate the Barnett formula would have political and, above all, constitutional implications well beyond the merely financial and fiscal elements that make up what is to many a somewhat mischievous mechanism.

3.6 pm

Hugh Bayley (City of York) (Lab): I congratulate my hon. Friend the Member for Manchester, Blackley (Graham Stringer) on securing the debate. At least for its duration we will set aside the war of the roses. I thank my many colleagues and friends from Northern Ireland, Scotland and Wales for supporting us in this debate.

I strongly support the Union. We will continue to have greater international influence as a United Kingdom than if we Balkanise Britain into a number of smaller states. However, I believe that the Union is challenged on three fronts. First, and openly, it is challenged by Scotland’s First Minister, whose target is independence. Secondly, it is challenged indirectly by a groundswell of English resentment, because we in England pay the same taxes as those in others part of the United Kingdom but get a smaller share of public expenditure per person. As a consequence we in England pay for some public services—residential care, prescriptions, university student fees—that cost less or are free in others parts of the United Kingdom.

Thirdly, the Union is challenged indirectly—I will be kind and say unintentionally—by the Conservative-led clamour for English votes for English laws. The idea that Members of the House of Commons should be divided into two categories—those from England with rights to vote on all matters, and those from Scotland, Wales and Northern Ireland who are treated as second-class MPs without full voting rights—would be a serious blow to the concept of the Union.

Mr. Davidson: Would it not be even more complicated than that? It would not be English Members and everyone else. The Scots would be able to vote on some things; the Welsh would be able to vote on different things; the Northern Irish would be able to
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vote on some things that the English did not vote on but which the Welsh may have done; and within England there would be some things that the London Members could not vote upon that other English Members could. There would be six categories of Members. Perhaps I can also ask my hon. Friend whether he supports the idea of “one Lord, one lamp post” when reforming the House of Lords.

Hugh Bayley: I strongly agree with my hon. Friend’s earlier remarks.

The biggest difficulty would be to determine which issues can be voted on by each of the many electoral factions that would be produced by the Conservative proposal. More seriously, it would be an attack on the British tradition of Cabinet government. Under our system, the leader of a majority party in the House of Commons appoints a Cabinet, which is bound by collective responsibility and which remains in office while it retains the support and confidence of a majority of our House. The proposition for English votes for English laws would, in the words of Peter Riddell, writing in The Times earlier this month, “destroy the coherence” of Cabinet government.

The Barnett formula was created in the mid-1970s as a short-term fix, to prevent the annual feuding between the Treasury and the three territorial Secretaries of State. It may have made sense then, but it is no longer appropriate. As we heard from my hon. Friend the Member for Manchester, Blackley, it has been disowned by Joel Barnett himself. It has also been disowned by Lord Sewell, the Scottish Office Minister who took the Scotland Act 1998 through Parliament. Writing in a Smith Institute pamphlet recently, he said:

I first became aware of the difficulties and inappropriateness of the Barnett formula in the winter of 1997-98, when I was the Parliamentary Private Secretary to my right hon. Friend the Member for Holborn and St. Pancras (Frank Dobson), who was then the Secretary of State for Health. The incoming Labour Government were determined to avoid the winter pressures—the winter beds crisis—that we had witnessed in the previous few winters under the Conservatives. As hon. Members will remember, we were tied to the John Major Government’s spending plans for our first two years in government, but my right hon. Friend managed to negotiate an additional £269 million for England to avoid a winter beds crisis in that first winter under the Labour Government. There was no prospect of a beds crisis in Scotland, Wales or Northern Ireland, because they had had none previously and had the resources to avoid one that winter. Nevertheless, they received £17 million, £10 million and £18 million respectively in additional health expenditure under the Barnett formula. Just recently, the Prime Minister announced £16 billion for the Crossrail project in London, but that will deliver another £500 million of expenditure for Scotland. That is not an efficient use of public money.

The consequence of Barnett 30 years on is that people living in Yorkshire receive £1,400 less per year on average than people living in Scotland. However, the percentage of people living in poverty is greater in Yorkshire than in Scotland, at 22 per cent., as opposed
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to 20 per cent., according to the latest households below average income survey. In 2005—the latest year for which we have figures—gross disposal income per head was also lower in Yorkshire than in Scotland, at £12,200 per head, as opposed to £12,600.

Jim Sheridan: On deprivation, my hon. Friend will also be aware that seven of our 10 most deprived areas are in Scotland.

Hugh Bayley: I accept that there is poverty in Scotland and that there are additional costs from rurality in the highlands of Scotland, but there is also poverty in Yorkshire and the Humber, and there is rurality in my part of North Yorkshire.

We should use the same criteria to assess need and the same basis for apportioning public expenditure in all parts of the United Kingdom; if we do not, we will undermine the basis of the Union. I therefore support the proposal by my hon. Friend the Member for Manchester, Blackley that there should be a transparent needs-based review of the Barnett formula.

3.12 pm

Adam Price (Carmarthen, East and Dinefwr) (PC): I congratulate the hon. Member for Manchester, Blackley (Graham Stringer) on raising this vital issue and on the careful and measured way in which he developed his case. There is a growing consensus that we need a review of the way in which we raise and distribute resources in these islands, and that consensus embraces the nationalist parties in the three nations, some of the Unionist parties and the Alliance party in Northern Ireland, dissident Labour MPs, MSPs and AMs and the Liberal Democrats, although we are not quite sure about the Conservatives.

The hon. Gentleman put his finger on why there is a consensus about the fact that it is high time for a review: Barnett is a headcount formula, and injustice was almost written into it from the very start because it did not take need into consideration. Nuffield college, for example, has estimated that the absence of a needs-based formula may have led to a shortfall of £1 billion in Wales. The last time the Treasury conducted the needs-based assessment across the UK for which the hon. Gentleman is calling was 1976, and it is surely high time, after 30 years, for it to conduct a review. We do, however, have one needs-based formula in the UK: the Big Lottery Fund. Using a semi-official needs-based formula, it allocates 6.5 per cent. of the fund to Wales, rather than the 4. 9 per cent. that we get under Barnett.

The injustice is, however, getting worse, because Barnett is a convergent formula over time. In 2000, for example, Wales was 9 per cent. above the UK average for health expenditure per head, with a figure of 109 per cent., but we are now down to 104 per cent., and the figure is falling further, even though we have a similar sickness profile to the north-east of England. The north-east rightly deserves more money because of the legacy of heavy industry, but it has now overtaken Wales, and we currently have no mechanism to reflect the chronic ill health in our community.

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