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Westminster Hall

Wednesday 18 June 2008

[Mr. Christopher Chope in the Chair]

Parliamentary Representation (England)

Motion made, and Question proposed, That the sitting be now adjourned.—[Mark Tami.]

9.30 am

Derek Wyatt (Sittingbourne and Sheppey) (Lab): It is a pleasure to see you in the Chair this morning, Mr. Chope. It is four years since the Standing Committee on Regional Affairs, the body that is supposed to represent English MPs, has met. We do not have a Grand Committee like the Welsh, Northern Irish or Scottish. The English do not have Secretaries of State, Assemblies or Parliaments. The English have something that has rarely met since 1997: the Standing Committee on Regional Affairs. That is the best that we can do for the largest proportion of voters and the largest number of constituency MPs. That is not appropriate.

Today, I shall make some radical proposals for the long-term reform of the British constitution and public finances. They will set me at odds with the policy of my Government and party, but I am convinced that standing still is not an option. The present arrangements are producing growing resentment all over the United Kingdom, particularly in England. I hope that my party will not trap itself by defending the status quo for ever, as that would put the future of the United Kingdom at risk.

This debate has a simple theme. My constituents are living in a half-finished house that costs them money, and they are beginning to resent it. The half-finished house in our country—the United Kingdom—has, like so many historic houses, grown up over the centuries without a master plan and according to the needs or whims of successive owners. Nearly 90 years ago, after a long and bitter dispute, we gave the neighbouring property to its sitting tenants—although some preferred to go on living with us. We spent the next 70 years or so trying to improve our house to make it a better place in which to live and trying to protect it from outside attack. We made no changes to the structure of the house and all the rooms and facilities were shared among all the residents.

However, in the past 10 years, there has been some major remodelling of the property. We converted the upstairs into a separate flat for the Scots and created another flat with inferior facilities in the west wing for the Welsh. We then persuaded the Northern Irish to live in another flat in the orangery—although many of them wanted to live with their neighbours next door. All that remodelling failed to create any special space for the English. They went on living in the property, but the Scots, the Welsh and the Northern Irish were still free to walk in and help themselves to the fridge and the drinks cabinet. They could even make rules for the English that they themselves did not have to follow. Meanwhile, the English went on paying most of the household bills.

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More and more of the English, including many of my constituents, are finding that an uncomfortable way to live. They put up with it when there was plenty of money coming into the house, but now that money is scarcer and outgoings are rising, they are beginning to question it. I propose some restructuring of the property, so that we can all live in the way that we want to without imposing on one another. I am also calling for a fair and transparent system of meeting the household bills. That will entail replacing the Barnett formula, which, as we know, was intended to be a temporary expedient that would last six months. However, the formula still regulates the financial relationships between the separate devolved entities of the United Kingdom. Our household settles its accounts through arrangements that were set up in the 1970s for reasons that no one can remember and with results that no one can understand.

Our present constitutional settlement creates anomalies and inequalities. The people of Scotland, Wales and Northern Ireland have acquired distinct powers over key public services and other matters that are denied to the English. Scottish, Welsh and Northern Irish MPs can vote for policies that apply only to the English and that they have never sought for their own constituents. Despite the recent reduction in the number of Scottish MPs, there are distinct disparities in the value of votes in general elections between different parts of the United Kingdom. The Library note on this debate points out that a Scottish elector’s vote is worth 8 per cent. more than an English one, a Northern Irish vote is worth 13 per cent. more and a Welsh vote is worth 21 per cent. more. Where is the equity in that system?

The people of Scotland, Wales and Northern Ireland have used their new powers, particularly in health and education, to make their experience and entitlements notably different from those of the English. Those are funded by a complex and opaque system of financial transfers. To the English at least, it appears that the other parts of the United Kingdom are being shielded from the full financial consequences of their decisions, for example in relation to free personal care for the elderly. In the measured words of Professor James Mitchell of Strathclyde university:

Before going further, I would like to thank Dominic Webb of the Library’s economic policy and statistics section for two papers of great clarity on the murky subject of the Barnett formula. I have also drawn on the work of David Heald of the university of Sheffield and Alasdair McLeod of the university of Aberdeen.

The financial relationships between the nations of the United Kingdom were created haphazardly and with the minimum of public debate. Money is transferred directly in outright grants to the devolved Administrations. Those grants are strongly influenced by the Barnett formula, which automatically allocates increases in public expenditure to Scotland, Wales and Northern Ireland on the basis of their population. Money is also transferred indirectly by the operation of the UK-wide tax and social security system and through public spending on UK-wide public services, such as defence and diplomacy. Official statistics give us some information about the first of those indirect transfers, but not the second.
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Finally, money is removed from the United Kingdom by the European Union and partially returned to each of its different regions.

Turning to the Barnett formula, it is universally agreed that no one expected it to last this long—certainly not its author Joel Barnett who is in another place. He did not even know that it had been named after him and it was not mentioned in his memoirs. We have only debated the Barnett formula twice since 1997—once when I initiated a debate in 2001 and once recently. I welcome the commitment of my right hon. Friend the Chancellor to publish a paper on the Barnett formula in the near future, as a contribution to the Calman commission on Scottish devolution. However, as an English Member, I am concerned about the commission’s terms of reference. For a start, it is a Scotland-only review and it will not look at the impact of financial transfers to Wales or Northern Ireland, still less at their impact on England. More importantly, the review aims to come up with recommendations

The review will be paid for largely by English taxpayers. It is hard to reconcile all those aims.

As many authorities have pointed out, the Barnett formula does not determine the overall size of the grants to Scotland, Wales or Northern Ireland; it is a mechanism for increasing those grants automatically. The formula therefore perpetuates favourable settlements that were made years ago. However, that was not its intention; quite the opposite. It was meant to produce convergence in public expenditure per capita in each part of the United Kingdom. That has simply not happened. There is a persistent and widening gap between different countries and regions within the United Kingdom in identifiable per capita public spending. Identifiable public expenditure means that which is directed at a specific country or region, or that which has generated a payment or benefit to its inhabitants. That therefore excludes the UK-wide items that I mentioned earlier. However, it does cover 83 per cent. of all public expenditure.

Let me unfold some of the figures. In 2007-08, identifiable per capita public expenditure for the UK was £7,790 per person. That works out at £7,535 for the English, £8,577 for the Welsh, £9,179 for the Scottish, and £9,789 for the Northern Irish. Out of all the English regions, the south-east does worst. Each of my constituents receives only £6,512 in identifiable public expenditure. My constituency has the fifth and sixth poorest wards in England. I should like an explanation of how it is that we pay the most tax and it is shifted around the regions but not spent in my constituency. That is undemocratic and unfair. To rub salt in the wound, the south-east region is also one of the most heavily taxed.

Other hon. Members can dispute the calculations—although they come from the Library—but they explain why my constituents are becoming tired of living in a half-finished house. The time has come to finish the building and complete the billing arrangements for all the people who live there. All the peoples of the United Kingdom should have the same power to shape the laws and services that shape their lives, but they should also have the same responsibility for paying for them.

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That is why I propose a new kind of Parliament. I accept that the journey will be tortuous and argumentative. Therefore, it cannot be done overnight. I propose a 10-year constitutional convention, at the end of which, I would hope, we would agree to four separate lower Parliaments representing England, Wales, Northern Ireland and Scotland. Each would have the same powers. The budgets of the four lower chambers would be settled by those Parliaments. There would not be an income tax for the United Kingdom. There would be an income tax locally; the lower Parliaments would be free to raise income in whatever way they wished to do so, for example by a sales tax.

Why do I say that? I do not have the figures, but since 1945 the Governments of this country, irrespective of party, have spent billions and billions of pounds trying to create wealth in this country. However, in the last year, the only three regions of Britain that are a plus on the Exchequer are the east of England, London and the south-east of England, so even though we have handled massive subsidies relating to the public sector and private sector investment from overseas, we have yet to find the entrepreneurial spirit in many of the regions and nations of this country. We can go on thinking that we can do that, but I remind hon. Members that in China, as one example, the growth rate in the economy this year is 10.6 per cent. That is 10.6 per cent. of what will be the largest economy in the world in 2020. If we care about what is happening in China, India, Russia and Brazil, we have to frame our constitution and the funding of that constitution with a modern way of looking at what is coming over the mountains, especially from India and China.

I am British and proud to be British; I sign into hotel rooms as British. I want to retain the United Kingdom, so the solution for me constitutionally is to place over the four lower chambers an overarching Parliament, whether it is called a senate or a house of representatives, that will bind in the four countries of the United Kingdom. I would abolish the House of Lords. How each chamber voted and what it did would be a matter for the lower houses, but the upper house might deal with issues such as the environment and foreign policy. It would be for the constitutional convention to resolve that.

It would be a long and contentious process to agree the powers and responsibilities. That is why I propose a consensus-building mechanism in the form of the convention, with representatives of all the parties and each nation and region of the United Kingdom. Its deliberations would be in public and published and would be open to online participation by voters.

During its 10-year life, the convention would also take the opportunity to define a relationship between all the chambers and the European Parliament. There is a major problem with the MEPs and the 27 countries. Only in Finland are the MEPs charged with coming back to talk in the Chamber in Helsinki. I think that that is a very good idea. I would like to see MEPs not charging down to Strasbourg every fourth week, but being told to come to their national Parliaments to give an account of what they are doing, so that what happens in Europe matters to us in the national Parliament. There is a grave error in the constitutional way in which Europe works currently.

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I would expect the convention, at the end of the 10 years, to come up with a set of proposals for each of the chambers. How they vote and so on is a matter for them. All those proposals should be put to the peoples of the United Kingdom in a referendum. I hope and believe that, at the end of the 10 years, the convention would make our government and finances clear, more 21st century than 19th, with a separation of powers and responsibilities, and revenues understood and endorsed by our citizens in an open and transparent process. In each chamber, every representative and every voter would have equal power. In the UK as a whole, all taxpayers would know where their money was. There would be no hidden transfers, and all taxpayers would have control over the spending of their taxes.

It has been argued that a federal system cannot work in the United Kingdom because England is so dominant in terms of population and economic strength. I disagree with that argument. Whatever system we have, the English will always be bigger—look at the size of the country, the population and the economy. However, we can have a clear separation of powers to allow each nation to create a sphere of influence of its own, escaping the dominance of the English nation at the price of relinquishing any subvention from the English nation. I believe that only a separation of powers will allow the survival of British politics and parties on non-national lines. The real danger is in keeping the status quo.

Of course I accept that my proposals are contentious, but we simply cannot carry on as we are. The present constitutional and financial relationships cannot endure. They are arbitrary and opaque, and allow everyone in the United Kingdom to believe that the system is unfair to them. The resulting mutual resentments will lead, I believe, to the break-up of the country in confusion and acrimony. Unless we introduce a constitutional convention, that will happen.

9.46 am

Mr. Andrew Turner (Isle of Wight) (Con): It was interesting to listen to the introduction by the hon. Member for Sittingbourne and Sheppey (Derek Wyatt). He raised some important points that I did not intend to cover, and which I still do not intend to cover because he covered them so well. I am not as certain as he is about the Barnett formula, but I welcome anyone trying to tackle the issue and he is certainly doing that. Perhaps the English would not be worried about paying a little more, as long as they were left to deal with their own money. It is the fact that we both pay money to other countries and spend that money that worries people, particularly in England. However, I will deal now with the issues that I consider most important.

Residents of the Isle of Wight are of a particularly independent frame of mind, but they are certainly not alone in being concerned about the unfairness of the present constitutional framework. Years ago, the West Lothian question was pondered by many, with little hope of the circle ever being squared. Since then, we have seen the installation of a Scottish Parliament, ending the debate about whether Scottish-orientated legislation should be made at Westminster. Now, with the Scottish Parliament established, Stormont set up and Wales coveting complete devolution, where does England fit in? What about the West Wight question?

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Retaining a Parliament for United Kingdom-wide legislation is essential. There needs to be one centre of law making for the United Kingdom. We are still, undoubtedly, a united kingdom bound together by centuries of common history, language and culture. That is reflected in how certain matters are administered, and our common heritage should not be forgotten. The devolved Administrations have proved popular. With that in mind, why should we not have a separate institution to deal with English-only matters?

Unlike some, I am not in the business of squabbling over which legislature should have the most power. I merely propose the notion that it may be time to mirror our neighbours’ constitutional arrangements for the benefit of England and for the continued existence of the United Kingdom. The belief is now widespread throughout England that the arrangements should be balanced more fairly. The votes of Scottish Members can be marshalled to overturn the views of English Members of this House, as they were on university top-up fees, when Scottish constituents will not be affected. However, Scottish MPs are not properly answerable to their electors on English matters. I believe, along with many others, that it is time to address that fundamental question.

Mr. Philip Hollobone (Kettering) (Con): I am grateful to my hon. Friend for giving way. Is not the problem worse than he describes? A Scottish Westminster MP can vote in this place on hospital provision for my hon. Friend’s constituents on the Isle of Wight, but not on hospital provision in his or her constituency in Scotland, because it is a devolved matter for the Scottish Parliament. Scottish Westminster MPs can interfere in English affairs, but are not able to interfere in many matters in their own constituencies.

Mr. Turner: My hon. Friend is absolutely correct. What is wrong is not that the Scottish here are unable to vote on Scottish matters, but that the Scottish here are voting on what is happening on the Isle of Wight and on other English matters.

The wheels of political evolution will not stop turning. Public concern is increasing and the question of an English Parliament continues to climb further up the agenda. What are we going to do when it reaches the top?

9.52 am

David Howarth (Cambridge) (LD): It is a great pleasure to serve under your chairmanship, Mr. Chope.

I congratulate the hon. Member for Sittingbourne and Sheppey (Derek Wyatt) not only on obtaining this debate but on his thoughtful and considered contribution. I agree with his central point, that we are dealing with a half-built house—a constitutional settlement that is unfinished. Devolution for Scotland was a political necessity, as it was for Wales, but the structure of the constitution left after devolution was not thought through. That is why I entirely agree with what I take to be the hon. Gentleman’s central proposal, which is that a constitutional convention should take place over an extended period to produce a new constitutional settlement that is fairer and clearer for all the people of the United Kingdom.

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I agree with what the hon. Gentleman said about MEPs and their place in our political life. Their separation from us is one reason for the apparent lack of democracy and democratic legitimacy faced by the European Union. However, although I am not sure how the constitutional convention would end, I am pretty sure that the hon. Gentleman’s proposal would be a major runner in the process. I also agree with him that the Barnett formula needs to be reviewed.

There is some public feeling about the West Lothian—or West Wight—question. There is a constitutional anomaly, as the hon. Member for Kettering (Mr. Hollobone) said. However, I do not believe that it bothers people much, as evidence from public opinion polls shows. There is an old saying in Hollywood: if someone says to you, “It’s not the money, it’s the principle,” then it is the money. That is the point that needs to be grasped.

It is true that if the Barnett formula were to be properly reviewed, if we rethought its needs basis and considered again precisely where the money should go, it would not necessarily have the dramatic effect that those who call for a review sometimes seem to hope for. In any case, the figures on which the arguments are based are not entirely straightforward. The hon. Member for Sittingbourne and Sheppey said that the figures usually cited are based on about 80 per cent. of public expenditure and do not include such things as defence. That is based on the theory that defence, as a service, is for the entire national community. However, that is not quite true when it comes to expenditure, because defence expenditure is rather more specific in particular areas than is the service.

If one considers expenditure by region, it can be seen that London does rather well, even without defence. It comes well up the table on expenditure per head, higher even than Wales. That makes me wonder whether there is a relationship between demand for devolution and how much money can be got from the Government. Many, many years ago, I wrote my first academic article: I studied regional expenditure and policy in the 1970s, and the only useful conclusion that I could draw was that the best predictor of regional expenditure was votes for third parties in the 1974 election. I wonder whether the political structure has now changed slightly, such that, to the extent that there is a demand for regional devolution, one can get money out of central Government. The south-east and the eastern area of the country is my area, and I am a Liberal Democrat in favour of regional devolution, but to be frank there is little demand for it there. Those are the areas that get the least money.

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