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The Liaison Committee’s proposals do not make any sense to me. I appreciate the noble Lord’s problems because he is speaking from a neutral point of view. If he cannot accept my amendment, can he at least give us an assurance that he will put to the committee at an early stage the case for reconsideration and look at the matter again with a view to accepting my proposal? I beg to move.

Moved, as an amendment to the Motion, at end to insert “save for the recommendation in paragraph 7 relating to the Barnett formula, and that this House approves the proposal for the establishment of an ad hoc Select Committee to review the Barnett formula”.—(Lord Barnett.)

11.45 am

Lord Forsyth of Drumlean: My Lords, I support the noble Lord, Lord Barnett, in his request that this matter be looked at again. I can completely understand why he has moved the amendment. It must be a terrible burden to have one’s name attached to a formula of which one thoroughly disapproves. If for no other reason, the House should seek to release him from the chain he carries around with him.

I also share the noble Lord’s considerable concern at the reasons that have been given for not setting up an ad hoc Select Committee to look at the matter. I believe that this is a truly urgent matter. We are seeing the real prospect of the disintegration of the United Kingdom. Even the Conservative Members of the Scottish Parliament voted for the nationalist budget yesterday, which is extraordinary. In England, as we all know, and other parts of the United Kingdom, there is a feeling of unfairness with regard to the funding of Scotland relative to the rest of the United Kingdom. In voting for that budget, they voted for more favourable terms on care for the elderly, free prescriptions, tuition fees and a whole range of other things which apply in Scotland.

This issue does not seek to reopen the question of devolution but it is essential that devolution is looked at in the context of the funding and that all parts of the United Kingdom believe that the funding system is fair and is seen to be fair. The noble Lord, Lord Barnett, is asking that we look at this on a needs basis for funding for the whole of the United Kingdom, so that it is seen to be fair, and then the devolved Administrations can spend those resources as they choose. But so long as we continue with a scheme which is based on increasing the funding according to population while maintaining a baseline that reflected previous circumstances, and as long as we have a separatist regime in Scotland, which is determined to create conflict north and south of the border, the United Kingdom is in danger because of our failure to tackle this.

For the Liaison Committee to argue that the other place should consider this and that that would somehow be less politicised is truly bizarre. This is an important constitutional matter and if this House has a role it is surely in taking an objective view of such an important constitutional matter. If an ad hoc committee is not to be set up, the Government need to look to themselves and the forces they have set in play which have caused

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not a little damage to the United Kingdom and to the Government and their supporters. I strongly urge them to listen to the very wise words that the noble Lord has uttered this morning.

Lord Roberts of Llandudno: My Lords, Scotland and England have been referred to. If any such committee is established, I would suggest that it holds real and close consultations with the Scottish Parliament and with the National Assembly for Wales. Devolution has made a difference. Scotland can levy a precept. It can raise extra money to meet its needs. Wales does not have that ability. We rely entirely on what comes to us via the Barnett formula. If we do have consultations, we should take that into consideration.

Lord Peston: My Lords, I have no intention of taking part in a debate on the Barnett formula today, let alone on devolution. I am concerned with matters which I regard as much more fundamental. I approach this by putting some questions to the Chairman of Committees. My first question concerns the concordat drawn up between the much missed Lord Williams of Mostyn and the leaders of the opposition, notably the noble Lord, Lord Strathclyde. The purpose of the concordat was to agree some internal reforms to smooth the way your Lordships’ House operated and a central part of it was that your Lordships could, and indeed should and would, examine fiscal matters. That was part of the concordat. Moreover, the concordat was fully endorsed by your Lordships’ House. Was the Liaison Committee made aware of the concordat and its endorsement by your Lordships’ House?

My second question concerns a definitive statement on the Parliament Act that was made by the Clerk of the Parliaments at the same time and agreed by his opposite number at the other end. The import of that was that the Parliament Act did not limit your Lordships in their examination of fiscal matters at all. We could even vote on the Finance Bill, though no one would take any notice of it under the Parliament Act. What we could not do was amend the Finance Bill. Was the Liaison Committee made aware of this definitive statement by the Clerk of the Parliaments about what your Lordships could do on fiscal matters—notably what the Clerk of Parliaments said the position was?

That leads me to the fourth sentence in paragraph 7 of the report. The key sentence:

the Commons should do it. That sentence is incompatible with the concordat, its endorsement by your Lordships’ House and the statement by the Clerk of the Parliaments, and must be withdrawn. I have to ask—largely I ask myself—where that sentence, “We think that in principle”, came from. My guess is that its origin—I would bet real money on this—was the Chancellor’s office in the Treasury. It would be nice not to have to guess and I wonder whether the Chairman of Committees knows where that sentence came from.

Lord Jenkin of Roding: My Lords, I can be a good deal briefer on this than previous speakers. I was very gratified by the agreement of the Liaison Committee

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to recommend that my proposal for a Joint Committee of both Houses to scrutinise and monitor the Statistics Board be so thoroughly welcomed. The committee said that it was happy to welcome it. The Leader of the House agreed to relay the views of the committee to her opposite number in another place. My question is a very short one—I understand that the noble Baroness can reply to my question in this debate. What answer has she had from the right honourable lady the Leader of the House of Commons?

Lord McNally: My Lords, the Chairman of Committees sometimes complains that he is left swinging alone when he presents the Liaison Committee report to the House. Therefore, as a member of that committee, I want to urge the noble Lord, Lord Barnett, not to press his amendment today and to urge the House to adopt the report. The two strongest arguments for following the advice of the committee that your Lordships set up to look at these matters of detail come from the contributions of the noble Lords, Lord Forsyth and Lord Peston.

The noble Lord, Lord Barnett, is a charming lobbyist and he can get a lot of support for apparently simple, straightforward and neat propositions. But the noble Lord, Lord Forsyth, illustrated perfectly well what a Pandora’s Box would be opened. My old mentor, Joe Gormley, once advised me, “Don’t build platforms for malcontents to stand on”. I suspect that this inquiry would find itself looking far and wide on this matter.

I understand and have sympathy with the noble Lord, Lord Barnett. However, as the noble Lord, Lord Forsyth, hinted, he is a political ancient mariner, for ever wandering the land with the Barnett formula around his neck, looking for the noble Lords, Lord Turnbull and Lord Armstrong, to come along and provide a Turnbull formula or an Armstrong formula so that the albatross will no longer hang there. As the noble Lord, Lord Peston, clearly indicated, in so doing we would be taking ourselves into an area which is not as clear and cut-and-dried as he suggests. Indeed, I suggest that if he made it at the other end of the Corridor, he would find a great deal of discomfort. I am not sure that in setting up an ad hoc committee we should not reopen a battle between Lords and Commons which some of us thought had been settled perhaps in 1911.

I believe that the committee thought deeply and considered many of the issues raised. It suggested that we already have an Economics Affairs Committee of this House to which the noble Lord, Lord Barnett, could go and propose it take the issue under its wing. However, as the speeches have indicated, to set up an ad hoc committee on it would be setting hares running that we might come to regret.

Lord Strathclyde: My Lords, I, too, am a member of the Liaison Committee. Unfortunately, due to a pressing alternative engagement, I was not there on that afternoon. I am not suggesting for one moment that the answer would have been any different if I had been there. I am delighted that my noble friend Lord Jenkin received the recommendation he wanted in

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what will be an important committee. I hope that in due course the Leader of the House will be able to tell us whether another place has agreed with that recommendation. It is important.

When the Liaison Committee sits, it has to keep various questions in mind. First, is it within the competency of the House to take on the task that it is being offered? Secondly, do we have the physical resources—the rooms and the Clerks—to staff it? Thirdly, do we have the Peers to sit on these committees? We can have any number of committees: as the House can see, four suggestions were made here. If we did not have the Liaison Committee, we would have all these other committees instead and we would be doing nothing else.

I have a great deal of sympathy with the proposal of the noble Lord, Lord Barnett. It is an immensely important subject, for the reasons he and my noble friend Lord Forsyth laid out. That leads me on to the speech made by the noble Lord, Lord Peston. The noble Lord is a distinguished former chairman of the Economic Affairs Committee so he knows and understands extremely well that that committee was set up when the late Lord Williams of Mostyn was Leader of this House explicitly in recognition of the changing role of this House. The House felt that it should start looking at financial matters from which it had been excluded for 90 years. That was wholly understood by Lord Williams and by ourselves and, as the noble Lord has said, was expressly agreed by the House.

Like the noble Lord, Lord Peston, I find the sentence with the words “in principle” in paragraph 7 rather clumsy, but I do not think it was the committee that wrote that. Presumably the Chairman of Committees will explain. I do not agree with the noble Lord, Lord McNally, that we should not examine these things. If we have an interest, if we have the competence, if we have the people and the resources, we should discuss them. I also wonder whether the noble Lord, Lord McNally, did not have the answer in his grasp. Is there a reason why the Economic Affairs Committee should itself not launch a study on this?

Lord Peston: My Lords, I read that sentence very carefully and it means that no committee in this House can look at it. It has no other meaning. If the Economic Affairs Committee were to choose that as its topic, it would fall foul of the “in principle” beginning. That is why we must ask for that sentence to be withdrawn.

Lord Strathclyde: My Lords, that is a very good point, which is why I invited the Chairman of Committees to explain what he thinks that sentence means. It certainly should not mean that the Economic Affairs Committee is not allowed to look at it.

Perhaps the noble Lord, Lord Barnett, should take on board some of the criticisms made in the committee and recast his proposal into a more easily embodied subject that the Liaison Committee could re-examine in due course, perhaps making a recommendation in his favour, subject to what other proposals are put before it.

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Lord Sheldon: My Lords, the Barnett formula was introduced at a critical period in the 1974-79 Government. My noble friend had a number of problems as Chief Secretary to the Treasury in dealing with Wales and Scotland and the expenditure that arose. He finally introduced an amount of 10 per cent to be given to Scotland and 5 per cent to Wales. This dealt with the problem in a very simple way. Otherwise there would have been a massive amount of discussion and deliberation about how much money these two parts of Britain would get.

The Economic Affairs Committee in the House of Lords looked at a number of things that we think are very sensible. It is looking at the economic impact of immigration; it looked at the impact of economic sanctions and at parts of the Finance Bill—these are major tasks, not trivial things that you just pass through the House of Commons. These are matters that people in this Chamber consider and take into account. An influence on decision-making comes from this House and it is quite right that it should. The major difference between Scotland and north-east England will cause greater problems in the years to come so we need to look at this. The position of my noble friend Lord Barnett is quite clear and should be accepted.

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, as we are in confessional mode, I confess that I, too, am a member of the Liaison Committee and I was present that afternoon. Before I respond to the specific question from the noble Lord, Lord Jenkin, I want to say something about what I found in that committee—it was my first appearance. It is as simple as this: we are confronted with four possibilities. Each person who wished a committee to be set up made their case and made it very well. I asked what they would judge success to be and how the spending of a considerable amount of money—about £180,000 for each committee—would appear. We had to decide which best fitted with the purpose of the ad hoc committee in general and, specifically, which would give the best value back to your Lordships’ House.

We discussed the question of the Economic Affairs Committee. I do not know why that committee does not look at the Barnett formula. It fits perfectly well within its remit; it certainly could do a good job; and it is very distinguished, as other noble Lords have said. That, in a sense, is one of the reasons because, when considering which committee should be set up, one is aware of other committees that could do the work that is being proposed. Noble Lords would expect us to take that into account in our deliberations. It was certainly a factor in the deliberations as I understood them and as I took them forward in my own mind.

I hope that the report will be accepted. I understand that my noble friend feels very strongly about this and I am sure that he will continue to make representations to the Treasury. After all, in many ways, it is for the Treasury to look at this matter.

In response specifically to the question, I wrote to my right honourable friend Harriet Harman on 18 January and I will read a tiny extract from my letter. It said:

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I have not had a chance to meet with my right honourable friend, for no other reason than pressure of work; she has been rather busy at the other end of the Corridor in recent days. But regular meetings are in the diary and the subject will be raised with her. On the back of that discussion, I shall raise it with other Members of another place who I know have a particular interest in whether other committees might do some of that work as well. I shall report back to the noble Lord as soon as I can.

Lord Higgins: My Lords, the noble Baroness has not replied to the point made by the noble Lord, Lord Peston, reinforced by my noble friend Lord Strathclyde about the use of the words “in principle” in relation to the powers of this House. Given that there is widespread concern, would she be prepared to accept a manuscript amendment to strike out that objectionable expression?

Baroness Ashton of Upholland: My Lords, it is not my report. It is the report of the Chairman of Committees and he will respond to that point.

Lord Jenkin of Roding: My Lords, will the noble Baroness bear it in mind that the new Statistics Board takes over on 1 April and that it would obviously be sensible that any new arrangements should be agreed between the two Houses before that date?

Baroness Ashton of Upholland: I will indeed, my Lords.

Lord Elystan-Morgan: My Lords, the “in principle” point is of profound importance in so far as it raises the question of whether the powers of this House are to be seriously restricted. The noble Lord, Lord Strathclyde, suggested that something had changed in the interim since the passing of the Parliament Act 1911. As I understand it, nothing has changed so far as that particular rule is concerned. Section 2 limits exactly what this House can do in relation to a certified money Bill, but it would have been possible to discuss the finances of Scotland and Wales—although of course they were not devolved in Wales in such a manner—the very day after the 1911 Bill received the Royal Assent. There would have been nothing unlawful in it; nothing restrictive on this House.

I support the points made by the noble Lord, Lord Barnett. As far as Wales and Scotland are concerned, issues of finance go almost to the function of the devolved Assemblies. It is not only a matter of money; it is a matter of constitutional status and therefore goes well beyond any consideration of money. There is

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in Wales a deep-seated feeling that the Barnett formula, although it might have been perfectly just and practicable to begin with, by now brings about substantial injustices in relation to Wales. But that is another matter. The question we come back to is whether there is any constraint upon this House in discussing finance in this way. There is none.

Lord Lawson of Blaby: My Lords, I support the suggestion of my noble friend Lord Higgins that there should be a manuscript amendment to take out this “in principle” point. All sides of the House are clearly agreed on that with the possible exception of the noble Lord, Lord McNally, who, as my noble friend Lord Strathclyde pointed out, shot himself in the foot by saying that this is a matter for the Economic Affairs Committee of this House, of which I am privileged to be a member. If it is proper for the Economic Affairs Committee to discuss it then it is proper for an ad hoc committee to discuss it. There can be no constitutional difference between the two. So I hope that, at the very least, even if the amendment of the noble Lord, Lord Barnett, is not agreed today, the Chairman of Committees will accept a manuscript amendment along the lines of that proposed by my noble friend Lord Higgins.

Lord McNally: My Lords, I hate to interrupt this Treasury old boys’ meeting, but I should be quite willing to see an “in principle” amendment. I leave it to the skill of the Lord President to find another form of words. Perhaps “in principle” is too strong a term, but I do not want to join a stampede by Treasury old boys into the field of economic policy that would produce a conflict between the Lords and Commons. I hope that we can learn that lesson.

Lord Norton of Louth: My Lords, I had not intended to intervene and I do so merely as a matter of record. We are speaking as though the Barnett formula has never been addressed by a committee of your Lordships’ House and I want to put on the record that it has. The Constitution Committee’s report, Devolution: Inter-Institutional Relations in the United Kingdom, addressed the Barnett formula.

The Chairman of Committees: My Lords, it may now be time to attempt to reply to this tricky debate, and I apologise if I am unable to answer all the questions. First, I take responsibility for the sentence in paragraph 7 which has offended so many people; I am, after all, the chairman of this committee. I do not think that we necessarily need to produce a manuscript amendment to knock it out but I will certainly take the matter up at our next meeting and see whether we need to review our report.

As the noble Lord, Lord McNally, said—I am very grateful for his support—the whole devolution debate that we have been having has emphasised how widespread this committee would have to go if it were set up.

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