Lord Dean of Beswick: My Lords, is my noble friend at the Dispatch Box aware that, if one talks in simple financial terms, per capita of population £871 is paid for each person in Scotland in excess of that paid in England and that if we were to bring the 49 million people in the English regions up to that level, it would cost over £340 billion? Is my noble friend also aware that this week local authorities are being told the amount of grant they will receive? Is he further aware that, if Manchester, where I was eventually the leader of the council, was paid according to the Scottish formula, it would be drawing £348 million a year more than it is at present and that, if Leeds, where I was a Member of Parliament, was similarly treated, it would be drawing £450 million extra? Will there be equality during the devolution proceedings?
Lord McIntosh of Haringey: My Lords, the figures my noble friend gives are exactly the reason why we do not do that. I gave my noble friend the figures in respect of the subvention. The figures that he quotes relate to the general government grant to different parts of the United Kingdom rather than to the subvention, which is the difference between the grant and what is received by those different parts of the country. The impossibility of making such a calculation becomes more apparent when one considers smaller areas such as Leeds and Manchester.
Lord McIntosh of Haringey: My Lords, I was afraid that someone would tempt my noble friend Lord Barnett to intervene. I see that he intends to. The noble Lord, Lord Campbell of Croy, is right in saying that the Barnett formula was preceded by the Goschen formula in the 1880s. If I may say so, the Barnett formula is widely misunderstood. It refers only to changes in expenditure and is calculated strictly on a population basis rather than a needs basis.
Lord Barnett: My Lords, naturally I am flattered that the Barnett formula has lasted 20 years under a whole series of Chancellors, including the noble Lord, Lord Lawson. However, is it not a fact that the figures clearly indicate that expenditure per head in Scotland and in parts of England--not Wales, which is still suffering badly--is still so far out of line that there is a case for a Barnett formula Mark 2? Did my noble friend notice what the Prime Minister said recently--that, in the public expenditure review, nothing has been ruled in and nothing has been ruled out? Does that include the Barnett formula?
Lord McIntosh of Haringey: My Lords, I read very carefully my noble friend's evidence to the Select Committee on the Treasury in another place on 13th November. I notice that my noble friend refers to a "Barnett formula Mark 2" rather than to a new formula because he has become very attached to his name over the years. Of course, there is no commitment for all time to any particular formula. The advantage of the Barnett formula over the years has not been that it is based on strict rationality but that it avoids argument each year when the allocation of resources is determined.
Lord Mackie of Benshie: My Lords, does the noble Lord find extraordinary the amount of jealousy that devolution in Scotland engenders among noble Lords from other areas? It is a fact that the calculation has been made on the basis of need in those vast areas and on the lack of enterprise in Scotland compared with the spending in England. It would be interesting to hear from the noble Lord how much the Government spend in the London area as compared with Scotland. Does the noble Lord agree that, when we have a new formula (whether Barnett, Goschen or a mixture of the two), after five years there will be no question but that Scotland will have increased its prosperity to such an extent that there will be no need for any formula at all?
Lord McIntosh of Haringey: My Lords, I have much more sympathy than the noble Lord, Lord Mackie, for those in the English regions mentioned by my noble friend Lord Dean of Beswick who feel that they have had a hard deal over the years. I must correct the noble
Can the Minister further confirm that the review will not be about the Barnett formula and increases in expenditure by UK departments but about the base line? Can the Minister assure the House that in considering the Scottish base line proper account will be taken of Scottish need?
Lord McIntosh of Haringey: My Lords, the noble Lord is quite right in saying that the comprehensive spending review is about the base line. It is concerned with zero budgeting and achieves its strength exactly from that. However, as the noble Lord rightly says, the Barnett formula is based on changes, not increases, in public spending. The reason why my noble friend gave the answer he did in June was that, as the noble Lord, Lord Mackay, well knows, the Scottish and Welsh White Papers both make clear that for the purposes of devolution the Barnett formula is to be retained.
Lord McIntosh of Haringey: My Lords, I am not certain that either noble Lord is right. I do not believe that Wales suffers badly in terms of expenditure per head. I have no basis on which to calculate the subvention; that is, the difference between expenditure and receipts.
Lord Peyton of Yeovil: My Lords, if the Minister can shed the inhibition contained in his original Answer and let his mind range over the available evidence, can he resist the conclusion that the present situation is highly prejudicial to the north of England?
Lord Northbourne: My Lords, I am grateful to the noble Baroness for her reply. Does the noble Baroness agree that children's first experience of school is an important factor in their subsequent progress and success in school? In reviewing the situation, and in the new arrangements to be introduced in March, will the Government consider the introduction of regulations to ensure that all local authorities are obliged to comply with the staff/pupil ratios which are already applied by law to the private and voluntary sectors?
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