Authorising Government expenditure: steps to more effective scrutiny Contents

5The block grants to devolved institutions

This order shall not affect the right of every Member to vote on the consideration of estimates.

Standing Order No. 83J(11)(a)(i)

109.Funding for the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly is derived from the long standing arrangements known as the “Barnett formula”, named after a former Chief Secretary to the Treasury.79 These arrangements are designed so that when the UK Government decides to spend more or less on functions which in some parts of the UK are devolved, the devolved administrations receive an equivalent share, based on their relative populations.

110.In practice, the arrangements only apply at Spending Reviews and specified “fiscal events” (currently Budgets and Autumn Statements).

111.At Spending Reviews, HM Treasury publishes

112.At subsequent fiscal events, HM Treasury publishes details of additional, or reduced, funding for Scotland, Wales and Northern Ireland, generated by the Barnett formula as a result of UK government spending decisions.

113.In addition, at the time of Estimates, within the Estimates memoranda for the Scotland Office, Wales Office and Northern Ireland Office which are provided to the respective select committees, those departments repeat the details of the relevant devolved administrations’ original resource and capital DELs, and any subsequent changes.

114.While this provides elements of the calculations, and the outcomes, it is difficult to see at a glance which decisions on spending taken by the UK Government in Spending Reviews result in which changes in funding for Scotland, Wales and Northern Ireland; and the extent to which each decision affects that funding. For Spending Reviews, there is no single document setting out all stages of each calculation. For subsequent fiscal events, the programmes generating Barnett “consequentials” are itemised, but the Departments involved are not shown, nor are the step-by-step calculations.

EVEL and Estimates

115.The issue of whether legislation passed by this House—other that Supply and Appropriation Acts—directly affects Government expenditure was hotly contested in the debates on the introduction of EVEL procedures. As we observed in our interim report on the Government’s proposals:

It is highly uncommon for public bills—other than Consolidated Fund or Appropriation Bills—to make direct provision for levels of public expenditure. […]

However, in reality, the estimates and supply procedures of the House validate prior decisions about policy, including those which have been given effect through primary legislation. In practice, there are extremely limited opportunities for Members to have any substantive effect on departmental spending plans through the Estimates approval process (not least because of the rule of Crown initiative, which restricts Members who are not Ministers to making reductions and forbids them from proposing increases in Estimates). The House cannot reverse its previous legislative choices by tampering with the Estimates, except in the bluntest way by removing the resources to give effect to those choices.

We went on to observe that

Members representing constituencies outside England or England and Wales are therefore likely to demand to vote on legislation which they consider will have a direct (or even indirect) effect on levels of public expenditure in their local jurisdictions or constituencies.80

In our technical review of EVEL procedures, published in December 2016, we concluded that

[…] if the Government wishes to maintain the principle of EVEL, and the corresponding position that all Members may participate in the House’s decisions on Government requests for supply—as indicated by the then Leader of the House from the Despatch Box on several occasions—then there has to be a proper process for considering the effects on the calculation of the block grant arising from spending decisions made for England which are underpinned by legislation passed under EVEL procedures.81

116.When variations in block grants derive from policy changes in England underpinned by legislation decisively altered, under the EVEL process, by members representing constituencies in England only, or England and Wales, then the House as a whole ought to have opportunity to consider those variations. This would allow those Members unable to participate in the alterations under EVEL to give their view on the consequential effects of such decisions for the levels of block grant.

117.Peter Wishart MP, Shadow Scottish National Party Leader of the House, set out his dissatisfaction with the level of information presently available to the House on the operation of the Barnett formula in respect of Estimates:

The Treasury provides this information to the devolved administrations following Budgets and Autumn Statements and it is published by the Scottish Parliament in relation to Scotland. It seems bizarre that MPs, who are being asked to give formal approval to spending, are not provided with the information. If this can be done for fiscal statements, it seems only consistent with the principle of ‘clear line of sight’ that it is also provided in relation to Estimates and Supplementary Estimates. This statement should also include a statement of the change from the previous financial year, in the case of Main Estimates. More generally, the Treasury and Territorial departments should be required to ensure that there is coherence and consistency—a ‘clear line of sight—between the Estimates documentation and the Statement of Funding Policy.82

118.Despite assurances from the Leader of the House at the time EVEL standing orders were introduced, the evidence we have heard leads us to conclude that in reality, the voting rights which Members from Scotland, Wales and Northern Ireland retain in the Estimates process do not allow for effective scrutiny of the impact of policy changes on devolved budgets, and cannot be open to meaningful amendment under current Standing Orders and rules governing financial procedure. The operation of and interaction between both EVEL and Estimates procedures must be kept continually under review.

119.The amounts devolved administrations receive in block grant are largely determined by decisions taken by UK Governments, reflected in Estimates for UK Government Departments and authorised in UK legislation. But the links between spending decisions by UK Departments and the amount devolved administrations receive through the Barnett formula as block grant are not clear, which means that it is difficult for Members to see which Government decisions have influenced the levels of block grant allocated or received. We recommend, therefore, that the UK Government should, at the time of publication of each Main or Supplementary Estimate, improve the transparency of these links by publishing:

120.In the reform of debate allocation which we outline above, we consider that there is scope for debate on the Estimate of a UK Government department in cases where the changes in spending by that department have led to a change in the allocation of funds to the devolved institutions. We recommend that the Backbench Business Committee, in its allocation of debates on Estimates days, consider reserving at least one debate slot in each session for a debate on an estimate particularly affecting, or affected by, the operation of the Barnett Formula.

79 Further information on the Barnett formula is available in Commons Briefing Paper 7386, The Barnett Formula.

80 Procedure Committee, First Report of Session 2015–16, English votes for English laws Standing Orders: interim report, HC 410, paras 39–41

81 Procedure Committee, Third Report of Session 2016–17, English votes for English laws Standing Orders: report of the Committee’s technical evaluation, HC 189, para 27

82 Peter Wishart MP (EST 05) para 9

18 April 2017