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Lord Williams of Mostyn: My Lords, I do not follow the point that the noble Lord seeks to make. The majority on the Royal Commission, which he dignified by his presence, chose option B, which suggested

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87 elected Peers. However, the Government are proposing not 87, but 120—a significantly larger number of elected Peers. We have erred on the side of generosity rather than on mean heartedness.

I am talking about 120 elected Members. There will be 120 nominated and the remainder will be those who are life Peers who continue here. It is true that they come here—we all did, virtually— by one form of patronage or another, but I have not found that that historical patronage has caused people to be any less independent than one would hope.

Lord Lea of Crondall: My Lords, is my noble friend aware of the strong support on this side of the House for the White Paper? On the specific criticism from the Conservative and Liberal Democrat Benches about how the cap of 600 will work, has not that been answered by the 10-year adjustment period? Is not that the only solution? If there were no cap, the House would continue to increase in number or people would have to be dismissed instantly. Is it not the case that, for once, the Government have got it right? I should have thought that the Opposition Benches would have recognised that this piece of arithmetic is a perfectly tenable solution.

Lord Williams of Mostyn: My Lords, I am sure that my noble friend is right. When the Opposition have had the opportunity to reflect, I am sure that they will agree with what has just been said.

Earl Russell: My Lords, should some future Members enter this House as a result of voting for a closed list ranked in order by the party rather than the voter, should such Members be classified as elected Peers or nominated Peers?

Lord Williams of Mostyn: My Lords, they will be elected Peers in exactly the same way that elected Members of the Commons, who are elected on a closed list of one, are regarded as elected.

Lord Trefgarne: My Lords, I had the privilege of coming to your Lordships' House almost 40 years ago when I was 22 years of age. I do not think that there has been a time since then when reform of one kind or another was not being considered and when the hereditary system was not being subjected to one kind of scrutiny or another.

On all those occasions, it was hoped that the new House, whatever form it might take, would be more democratic, more responsive and, above all, more accountable. Sadly, the proposals that the noble and learned Lord has unveiled this afternoon meet none of those requirements. I share the deep concerns of my noble friend Lord Strathclyde.

Lord Williams of Mostyn: My Lords, those comments are not fair. They are not an accurate reflection of what is in the White Paper. Nor are they a fair reflection of the relationship between the White Paper and the Royal Commission report. I am

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confident that the thrust and theme of the White Paper is in harmony with the thrust and theme of the Royal Commission report.

Lord Sewel: My Lords, will the noble and learned Lord explain how any elected element will enhance the ability of this House to perform its functions within the context of maintaining the pre-eminence of the other place?

Lord Williams of Mostyn: My Lords, I do not see any difficulty in that at all. It is important that regions of the United Kingdom are represented here. It is important that there should be that opportunity of election. It seems to me that one will draw on a different reservoir of talent and industry from all kinds of different parts of the community that may not be represented here at the moment. The mere fact that we have a minority elected element I do not think challenges the Commons in the slightest way.

Lord Elton: My Lords, what is striking in my view during the past few years' discussion of this issue has been the enormous general ignorance of what goes on in this House among those outside it who are being invited to comment on the White Paper. Therefore, I ask the noble and learned Lord the Leader of the House to accept the suggestion of the noble Baroness the leader of the Liberal Democrat Party and arrange an early debate so that we can do our best to inform the public about what the issues are and what our experience of them has so far been. If the noble and learned Lord can find some way in which that information can be more generously distributed from this Chamber to the public than is usual, that would be an additional advantage.

Lord Williams of Mostyn: My Lords, I rather agree with what the noble Lord, Lord Elton, said. Of course, there is a respectable argument for saying that if we have a partially elected element in this House, that will generate wider public interest in what we do. We are not properly served by the media. We had extremely important debates on the events of 11th September but there was hardly a mention of them in the newspapers. I do what I can and the information centre is diligent. Unfortunately, although we are sometimes pleased with ourselves, it is not a universally held emotion.

Lord Mackie of Benshie: My Lords, does not the noble and learned Lord agree that the elected Members will be elected from large constituencies? Others will be chosen not for their personal qualities but will simply be nominated by the relevant parties. What is the difference in that kind of election between the so-called elected people and those nominated by the political parties?

Lord Williams of Mostyn: My Lords, the difference is that they will have to present themselves, their manifestos and their individual personalities to the electorate. There may have been a time, which I cannot remember, when the individual Member of Parliament

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made a difference rather than about 500 votes per constituency, but that has not been the position for a long time, certainly not since the death of the university seats.

Lord Acton: My Lords, can my noble and learned friend say if it will be open to everyone to apply to be independent Members? If so, will the appointments commission be limited to selecting the independents from among those who apply or will it be open to the appointments commission to select whoever it thinks most suitable either from those who apply or from anyone else it may choose?

Lord Williams of Mostyn: My Lords, to gain the prize of sitting in this House one would have to make an application. I do not think that a pantechnicon will travel around the country with its occupants stopping disconsolate people on street corners to ask them whether they want to be Members of the House of Lords.

Lord Ampthill: My Lords, this problem has been rumbling for 90 years. Does not the noble and learned Lord think that he is being a little—I hesitate to use my next word—mean in trying to bring this discussion to a conclusion by the end of January? He talks of 12 weeks but there is an intervening feast. Will he be a little generous and give longer than that?

Lord Williams of Mostyn: My Lords, one of the reasons the noble and learned Lord the Lord Chancellor and I would like to make some detectable progress is precisely because for nearly a hundred years we have done nothing at all apart from having discussions. Twelve weeks is the usual period. The Royal Commission report has been available for a long time. There is no one who does not know what is in it. To coin a rather crude phrase, it is "make your mind up" time now. We must progress with reform or at least we must focus our minds on the possibility of it.

Lord Davies of Coity: My Lords, I have not yet seen the White Paper and, therefore, my question may be premature. However, if 120 Peers are to be elected, how can we be assured of the political balance of this House?

Lord Williams of Mostyn: My Lords, the appointments commission is charged with doing that and it has the power and authority to bring that about.

Commonhold and Leasehold Reform Bill [HL]

The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move the Motion standing in my name on the Order Paper.

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Moved, That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 and 2, Schedule 1, Clauses 3 and 4, Schedule 2, Clauses 5 to 33, Schedule 3, Clauses 34 to 57, Schedule 4, Clauses 58 to 66, Schedule 5, Clauses 67 to 70, Schedule 6, Clauses 71 to 100, Schedule 7, Clauses 101 to 121, Schedule 8, Clauses 122 to 146, Schedule 9, Clauses 147 to 152, Schedule 10, Clause 153, Schedule 11, Clauses 154 to 164, Schedule 12, Clauses 165 and 166, Schedule 13, Clauses 167 to 170, Schedule 14, Clauses 171 to 173.—(The Lord Chancellor.)

On Question, Motion agreed to.

Barnett Formula

4.16 p.m.

Lord Barnett rose to call attention to the case for a review of the Barnett formula; and to move for Papers.

The noble Lord said: My Lords, it will be clear that this is a non-controversial debate. There has been much written and said about the formula. It would, therefore, be sensible to start with a clear explanation of precisely what it is. I shall then try to explain why it was invented—if that is the right term—why it has survived for more than 20 years, whether it should be changed and, if so, how?

The formula was invented—I have used that word incorrectly—in 1978. Perhaps I should say at the outset that it did not occur to me at the time that it would become a formula, or that it would last so long. The formula really is quite simple. It applies to changes, whether up or down, in the Great Britain total of what is called comparable expenditure. Such expenditure is allocated on the following basis: England, 85 per cent; Scotland, 10 per cent; and Wales, 5 per cent. On that basis it was intended to be approximately population based. I had always assumed that the arrangement would be temporary until a more sophisticated method could be devised which took account of needs. In fact, not only has

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there been no change to take account of needs, there have been only minor changes to take account of changes in population.

Scotland's share of total UK population has declined ever since the formula was introduced. The White Paper on Scotland's Parliament indicated that the formula would be updated regularly to reflect the population ratio. In response to pressure from English MPs, Alistair Darling, then Chief Secretary to the Treasury, gave a commitment that it would be revised annually. I hope that my noble friend Lord McIntosh of Haringey will be able to assure us that that has taken place.

I should like to say a few brief words on population figures. I quote from a paper by Professor Heald of Aberdeen University who has done a great deal of work in this area. He states:

    "The official population projections for Scotland are chilling, only 4,524,000 persons in 2031 which constitutes an absolute fall of 13.7 per cent from the peak population of 1974. On the basis of the projection, Scotland's share of GB population would be 7.60 per cent in 2031".

So much for the facts on the formula. The next question is why it was invented. The nearest that anyone in the present Government has got to answering that is my noble friend Lord McIntosh on 3rd December 1997. In case he has forgotten, I have extracted his comment from Hansard. He said:

    "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".—[Official Report, 3/12/97; col. 1362.]

I can confirm that that is true. As far as I was concerned, the formula was not strictly rational. As I have said, it was basically decided on a population basis. However, I would not have been able to obtain Cabinet agreement at the time without being able to satisfy English departmental Cabinet Ministers that there were reasonable grounds for allocating a greater level of public expenditure to Scotland and Wales than population figures alone justified. The substantial case that convinced Ministers was the different levels of income per head in Scotland and Wales. My life as Chief Secretary at that time was therefore made just a little bit easier, although I hasten to add that that was not the case that I presented to the Cabinet, because they might not then have agreed it.

As the figures that I shall quote make clear, the situation now is very different. There is obvious unfairness in the working of the formula—although, I hasten to add, not for Wales. I see someone nodding on the other side of the Chamber.

Why has the formula survived for more than 20 years? The major—and, some might think, too simple—reason is that governments generally prefer not to make changes, as that only leads to difficult questions. If that is thought too simple, there is another, more political reason. For 18 years, Margaret Thatcher and John Major resisted making the changes that the figures clearly show should, in fairness, have been made. They were obviously worried that it would lose them votes in Scotland and Wales. The net result was that, despite not changing the formula, they lost

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every Conservative seat in Scotland and Wales. I do not pretend that that had anything to do with the formula, for or against. The new Labour Government have also resisted any changes to the formula. I look forward to hearing from my noble friend the Minister why.

The latest available figures come from the Treasury and the Office for National Statistics, so I assume that they must be true. The Chancellor of the Exchequer's document costs £15.60. I hasten to say that I got it from the Library, but at that price it surely has to be true and, I hope, accurate. The documents show that in 1999—the most recent figures available—GDP per head in Scotland was £12,512, in Wales it was just £10,449 and in the north-east of England it was £10,024. What is called "identifiable" managed government expenditure per head in 1999-2000 in Scotland was £5,271, in Wales it was £5,052 and in the north-east it was only £4,837. I shall not quote many more figures, but I hope that those are simple enough to make the position clear.

As a confirmed sceptic on statistics, I feel bound to say that the figures at least show a general factual position, if nothing more. In this context, I assume that the word "identifiable" is important in relation to expenditure. For example, Professor Heald, in an important paper, has given an indication of why the comparatively simple formula has in practice become rather complex over the past 23 years. He describes the changes since 1978 as "Son of Barnett". I do not complain about that, although I do not know what it means, except that there have been major changes. He said:

    "an introduction of cash planning in 1982, and the new planning total in 1990 have fundamentally affected the operation of the formula".

In addition, he points out that the formula applies only to block expenditure. I know that all your Lordships will know what that means. It certainly means that it is not the same as it was.

If the Minister has new figures, I am sure that the House would be glad to hear them, but for the moment these are the latest figures published. I would be pleased to hear what the Minister has to say in addition. It is clear that within any set of figures that one cares to take, be it the Barnett formula, "Son of Barnett" or "Grandson of Barnett"—although I have not got one; it would have to be "Granddaughter of Barnett"—there have been many changes that have confused an originally simple formula and made things rather difficult to comprehend.

Action taken on the basis of these figures alone would not solve the present unfairness of the allocation of resources. For example, within each area and region there are large differences. In the north-west of England, Merseyside is very different from my area of Greater Manchester—and most other parts of the region—in respect of GDP per head. Even in what is thought of as the affluent south-east, there are pockets where there is undoubtedly a need for higher levels of public expenditure. Relatively prosperous London, which is always much in the news, has the highest income per head, at approximately 130 per

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cent of the UK all-region average, yet I am sure that government expenditure there is much higher than in the north-east or the north-west. It is about the same as in Wales, where income per head is only 80 per cent of the UK average. I am sure that that will not stop the Mayor of London seeking even more.

Despite clearly doing very well in terms of income and expenditure per head, I am sure that Scotland can and will argue its case for even higher levels of expenditure. I am sure that we shall hear the arguments of sparsity of population, a colder climate, poor health records and problems of education. The case is further confused by the lumping together of capital and current expenditure. Yet even the general figures show conclusively at least one example of terrible unfairness. The latest figure for income per head in Scotland is £12,512 and government expenditure per head is £5,271, while in the north-east, with income per head at only £10,024, government expenditure per head is lower, at £4,837.

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