Examination of Witnesses (Questions 200
- 219)
FRIDAY 27 FEBRUARY 2009
Mr John Swinney
Q200 Lord Forsyth of Drumlean:
I understand that and I take that point and I see the difficulty,
but you said a few minutes ago that you would prefer a system
which was based on you getting your relative share relative to
population rather than one based on need. You also said earlier
on when you were describing your approach to the housing benefit
dispute with the Treasury, that it was your job to get the best
deal for Scotland. Do you think that if you had a formula based
on need that you would get less than based on population?
Mr Swinney: It depends what subjective judgments
are made on what definition of need happened to be because one
person's view of need can be dramatically different to another
person's view of what need happens to be.
Q201 Lord Forsyth of Drumlean:
We are not talking about one person's, we are talking about having
some kind of objective measure of need. You said you would prefer
the existing arrangement to one based on need. I am astonished
by that because your overall position as an Executive and as a
party has been that Scotland does not get its fair share of resources,
and therefore if you believe that surely having some kind of objective
assessment of need would be to the advantage of Scotland, and
yet you have rejected that. Leaving aside how you actually determine
need, as a matter of principle you appear to have said that you
would prefer to have something that gave us a relative share relative
to population rather than something which was an objective assessment
of need. That is a pretty fundamental position to take.
Mr Swinney: There are two points in there. One
is that you are advancing an argument, Lord Forsyth, which says
that there is an objective way of calculating need and I think,
in all honesty, the Committee has to reflect on the fact that
it is not possible to do. Need is a very, very subjective assessment.
The second point—
Q202 Chairman:
It is not. I do not agree with that, I really do not agree.
Mr Swinney: Of course it is, Chairman.
Q203 Chairman:
Different people have different views about what their needs are
but they can all be pulled together; it can be done.
Mr Swinney: I think you answered your point
in your own remark there: all sorts of people have got all sorts
of different views about need; of course they have.
Q204 Chairman:
But you do it with local authorities and they have all got their
own views as to what they need and somebody pulls it together.
Mr Swinney: And we go through that process and
we agree that with the Convention of Scottish Local Authorities.
My point about the existing financial arrangements of the United
Kingdom is two-fold in this respect. Firstly, the whole exercise
of need, in my view, is an assessment which is very, very subjective.
Secondly, the current arrangements are such that they would not
give me a great deal of confidence as to how the current arrangements
would arrive at that to be in the best interests of Scotland.
Q205 Lord Sewel:
Density might be a better may of looking at things and that is
moving towards need. It is possible to look at Scotland and say
what is the mortality rate, what is the morbidity rate, what is
the sparsity of population, what are the needs of transport, all
the things that you do by agreement—I accept the point about
agreement—with local authorities. And it would be possible
to do that and you would have certainty about your position, you
would not have any of this business of that is in, this is out,
or we do not like you this year so we are not going to do that.
I find it very difficult to understand why you can be against
that in principle. There may be practical reasons why it is difficult
to achieve but why are you rejecting it on principle?
Mr Swinney: Because it fits into what I have
argued to the Committee this morning which is that if we are moving
from the Barnett Formula, which we know and we understand at the
present time, although we have issues of concern about how it
is currently being applied, let us move to a more robust form
of financing, which is the argument about fiscal autonomy.
Q206 Lord Sewel:
Is the problem, almost rephrasing Lord Forsyth's question, that
you are fundamentally against need as a basis of allocating expenditure
or is it that you do not have confidence basically in the Treasury
doing it for you?
Mr Swinney: What I am saying to you is that
I do not think we can view the calculation of need as purely and
simply an objective technical exercise because I just do not think
it is that, it is entirely a subjective process.
Q207 Lord Sewel:
Sorry, did you say entirely a subjective process?
Mr Swinney: It is not entirely subjective.
Q208 Lord Sewel:
You can run a series of regressions to identify expenditure drivers.
Mr Swinney: Entirely exaggerates the position;
it is substantially a subjective exercise.
Chairman: I do not think Lord Sewel would
accept that.
Q209 Lord Sewel:
I do not accept that.
Mr Swinney: Then there is a question of how
that would be deployed and how it would be applied, and we have
significant concerns about the arrangements of the United Kingdom
being able to do that.
Q210 Lord Sewel:
You have clearly looked at the Commonwealth Grants Commission
in Australia. What was your view of that?
Mr Swinney: It certainly has undertaken what
appears to be a fairly robust piece of analysis. It is one that
obviously we would look at in further detail, but I come back
to the whole question of the exercise having that significant
and substantial element of subjectivity about it.
Lord Sewel: At least we have gone down
and now the subjectivity is down to the level of "significant"
rather than "complete" or whatever it was.
Q211 Lord Rowe-Beddoe:
Mr Swinney we are where we are at the moment, and I have listened
and understand your dissatisfaction but, having said that, it
is also clear that for the next however many years the Barnett
Formula will be the way in which the Scottish Executive is funded
to undertake its duties. If you could just stay with that for
a moment and perhaps you could help us by giving us an opinion
as to whether you consider one of the avowed intentions, in fact
the avowed intention of the arithmetic of the Barnett Formula
was to deliver convergence on English public spending over time.
It does not appear to have occurred and you have an explanation
as to why this may not be so.
Mr Swinney: The issue of convergence has been
examined very extensively and I think one of the significant pieces
of work on this was undertaken by Professor David Bell from Stirling
University. I am sure the Committee is familiar with his work.
Essentially the Barnett Formula would suggest that with increases
in public expenditure there is the likelihood of convergence,
and that was essentially designed to be the case, and at different
stages the population factors have been updated to ensure that
they remain current with experience. Over time the objective of
the formula has been to deliver that convergence. One of the difficulties
in assessing whether that is the case is to ensure that we have
all of the full and appropriate data to be able to make a judgment
about whether that has actually happened.
Q212 Lord Rowe-Beddoe:
That leads on to the question about data. Do you think that in
fact the data that is available on a territorial basis is both
adequate and transparent?
Mr Swinney: I think there are some significant
issues about that. In the course of 2006 two economists in Scotland,
Dr Jim Cuthbert and Dr Margaret Cuthbert (Jim Cuthbert was the
Chief Statistician at the Scottish Office for many years) undertook
some work which examined the information that was contained in
the PESA publication which gathers a large proportion of the data
for disaggregating PESA Country and Regional Analysis data, which
goes down to a lot of that information at a very detailed level.
I do not have the details to hand about that, they highlighted
a number of judgments that were applied in the presentation of
the statistical information essentially where errors were being
made about the allocations of expenditure as to where it was actually
carried out, and that led to a large amount of discussion between
officials in both the Treasury and the Scottish Government about
how that information and data could be improved to relate to that
point.
Q213 Lord Rowe-Beddoe:
Has anything occurred since the last 20 months that you have been
elected here in the Scottish Executive that gives you any alarm
or concern that the data is not adequate in your understanding
of what is happening across the United Kingdom as a whole?
Mr Swinney: I think a lot of these issues relate
to the vexed subject of defining what is identifiable and non-identifiable
public expenditure. Identifiable public expenditure, by its nature,
is identifiable public expenditure. What we have to be clear about
is that that information is robust and that it is fulfilling its
purpose. What the Cuthberts' analysis found was that some of the
drivers of what we would consider to be identifiable public expenditure
territorially was actually not correct, so those issues have been
raised around about the PESA Country and Regional Analysis because
that is obviously a big driver of identifiable public expenditure.
Non-identifiable public expenditure is a very subjective process
as to where that is actually spent and how it is spent, and that
obviously is a major factor in the calculation in that respect.
Q214 Chairman:
Can I come back to need for a second. We know that the Treasury
produced in 1979 an assessment of the relative needs of the component
parts of the United Kingdom. Have you seen that document?
Mr Swinney: I have not personally seen that.
Q215 Chairman:
It is now available and I was wondering whether you had any comment
to make on whether it is a good assessment of need?
Mr Swinney: I have not seen it.
Q216 Chairman:
You have not seen the 1986 relative assessment of need?
Mr Swinney: I have not either.
Q217 Chairman:
You have not had a more recent one than 1986, just to make sure
you have not seen anything we have not seen, that is all.
Mr Swinney: I cannot say I have, unfortunately.
Chairman: Because there were three assessments
of need by the Treasury after a great deal of work, and they are
not perfect, but it seems to us, at any rate, they are a reasonable
shy of producing the views on the relative needs of the component
parts of the UK and that it can be done, and can even be done
by the Treasury, but I am not advocating that.
Q218 Lord Forsyth of Drumlean:
May I just ask what advice have you been given by your officials
on the impact of a needs-based assessment of funding on Scotland?
Mr Swinney: I would characterise the advice
as informing the contributions that I have made to the Committee
today about the challenges that are associated with needs-based
assessment.
Q219 Lord Forsyth of Drumlean:
Can I tell you what advice I was given when I was Secretary of
State. The advice I was given when I was Secretary of State is
do everything you can to avoid a needs-based assessment being
implemented by the Treasury because the Treasury believe that
it will enable them to reduce Scotland's budget by between £2.5
and £4 billion. The officials did not think the Treasury's
assessment was correct but I just wonder whether you had been
given the same advice.
Mr Swinney: What I have said to you, Lord Forsyth,
is that the advice I have had from my officials informs the contributions
that I have made to the Committee.
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