Examination of Witnesses (Questions 260
- 279)
FRIDAY 27 FEBRUARY 2009
Professor David Bell, Professor David King and Professor
Kim Swales
Q260 Chairman:
That is all Mr Swinney spoke about!
Professor King: I am thinking about your question.
Suppose it was decided that England would abolish the Health Service
and have an insurance-based system, presumably they would say
we want to cut income tax or value added tax because our public
expenditure needs for health spending would be much lower, so
they would cut those tax rates but there is no mechanism for them
to cut those tax rates in England and not in Scotland. I am not
quite sure what would happen in that case because the Scottish
people would be saying we are paying much lower taxes, that is
very nice, thank you very much because Westminster has cut these
tax rates but we still want to have health as a public service.
I think it would be very difficult to see how that would work.
Q261 Chairman:
You could decide to spend it on something else without reducing
taxation.
Professor King: Yes, okay, but I am trying to
make it difficult!
Q262 Lord Forsyth of Drumlean:
I was rather hoping you might answer the question! We are where
we are.
Professor King: I think you reach the stage
of saying you are going to run into problems if you have too much
decentralisation without any decentralised revenue-raising arrangements.
I know that is not part of your remit, but what could happen if
Scotland were largely fiscally autonomous is they could say the
English can cut their income tax and value added tax and have
an insurance-based system; we are going to have higher income
tax and higher VAT and a public system. If you are going to say
that the tax arrangements have to be the same in each country,
even though the spending arrangements could be totally different,
then you hit insoluble problems.
Q263 Lord Forsyth of Drumlean:
We are looking at the system as it is now where you have a Scottish
Parliament and where the funding is on the basis of Barnett. I
am putting to you a difficulty that arises from having a straight
numeric formula and I am saying is the way round that difficulty
to move to a needs-base system? Nobody is going to abolish the
Health Service in England and I accept at the extremes there may
be difficulties, but at the moment, broadly speaking, give or
take one or two examples like care for the elderly, the systems
are parallel. You started by saying that you were really an expert
on needs. What is the argument that says that what the Scottish
Parliament does for local government, which is to fund it on a
needs-based system which I remember with great affection all the
complexities, and the arguments with COSLA, and of course it will
be controversial, but what is the argument against doing that
in order to deal with the funding of the Scottish Executive, and
is it possible to achieve such a thing? If it is not possible
to achieve such a thing we can write it off, but what is the argument
against doing it? It may not be perfect but would it not be better
than what we have got now?
Professor King: To give a similar example I
think it would be possible but there would never be complete agreement
on the formulae. To go back to your earlier questions about an
objective assessment of needs, there could be disagreements and
when you consider the differences between the English and Scottish
formulae these differences could be quite marked, but I think
it would be possible to do it. Just going back to your Health
Service question, the difference between using it for local government
and using it in replacement of Barnett is that in local government
the Scottish Parliament says to local authorities, "You are
responsible for these services," and Westminster says to
local authorities, "You are responsible for those services,"
but Holyrood at the margin would say, "We decide what services
we as a Parliament in Scotland are going to be responsible for",
and you would get difficulties. You mention at the margin free
care for the elderly but if over time the differences between
what Holyrood and Westminster felt ought to come within the public
sector became quite different, I think you would have problems.
Q264 Lord Forsyth of Drumlean:
We are not there.
Professor King: We are not there but that is
because we started with complete equality, the opposite of Barnett,
and differences could grow over time. I am just saying you could
have problems if those differences grew and there was absolutely
no revenue-raising capacity decentralised to help the different
parts offset these.
Q265 Lord Forsyth of Drumlean:
Is this not endemic in government? I think I set up this system
that led to Arbuthnott, which is the way of funding health boards,
and before that we had something else, I cannot remember what
it was called, and there were endless arguments with Glasgow Health
Board arguing that this did not take account of deprivation in
the inner cities and that the weighting was wrong. Vast parts
of my life have been spent in tedious meetings arguing about this
and that is inevitable; that is politics, that is what the thing
is about. It was adjusted here and it was adjusted there and of
course the politicians get involved and there is politics in this
as well. I used the word objective, perhaps I should have said
apolitical, something that avoided the, "Oh gosh, we have
got to do more in this area because we have got five marginal
seats" type of behaviour, which I am told does happen from
time to time. The practicality was that you had to have some system.
If we had allocated funding to Glasgow and Highland in the Health
Service on the basis of some kind of population formula it would
have been absolutely mad. So why does that not apply?
Professor King: I am just thinking with your
Glasgow Health Board supposing they said, "In Glasgow we
are not going to have any NHS dentists, it will be entirely private,"
would you still have been keen on giving them large systems of
money because of the population deprivation where in your judgment
they needed more money for dental services than, say, Lothian?
Q266 Lord Forsyth of Drumlean:
The view I would have taken is if we have a formula which everybody
agrees is fair how they run their health board, provided it is
not going to result in huge deficiencies in the service, is up
to them.
Professor King: So if they had wanted to spend
less on dentists and more on—
Q267 Lord Forsyth of Drumlean:
Absolutely. To give you a controversial example, if they wanted
to spend less on direct provision of care and more on preventative
care because they argued that that was what they should be doing,
that would be up to them, and others may do a different thing.
I thought that was the whole idea of a Scottish Executive. Whether
it is a system of resources or whatever, we are just looking purely
at the operation of the formula and we need some help as to how
we can make it not perfect but better. The evidence we had from
Mr Swinney was that we should leave be and leave it as it is because
it is working perfectly well. I see a car crash looking at these
numbers.
Professor Swales: Is not one problem here the
asymmetric devolution problem? If it were the case that all the
English regions were devolved so what you were doing was talking
about a formula that allocated between all the regions of the
UK, I think this would be a very difficult but much more straightforward
process. What we have is one big region—England—which
does not even want to be a region really, it wants to be the UK,
it does not want its own Parliament, but whose views are going
to dominate the allocation to these other three regions which
have decided to devolve, who are voting for a different system
than the English system. I think that is why some of these problems
are more extreme. These regions have actually taken a decision
to be different from the rest of England. I am not saying it is
insoluble or that this is not the best way to go, but that is
an additional problem, I think, which would be less problematic
if we had—
Q268 Chairman:
There must be such a thing as objective needs surely? Coming back
to dentists, it would seem to me if you were working out a formula
as to how much money Glasgow was going to get in the health sphere
you would make provision for dentists and if they do not spend
it on dentists that would be a matter for them.
Professor Bell: It is some kind of minimal set
because some people will always want to buy their own, to do better
than what the public sector is willing to provide.
Q269 Lord Sewel:
We have established a very nice context of concern and difficulty.
Let us assume that there may well be some sort of change, and
let us start from the initial building block. The initial building
block is what criteria should be identified as being important
in assessing what would be an appropriate funding system, what
criteria should it fulfil, and to what extent does Barnett fulfil
it, and to what extent can you devise a system that more closely
meets the desirable criteria? What are they? That is your starter
for 10!
Professor Bell: I think you have to have some
broad consensus. Maybe we started in 1997 with broad UK agreement
about what should constitute what we would call "merit goods",
which are goods supplied to the public by the public sector because
we feel it is appropriate or government feels it is appropriate,
which might cover things like education and healthcare and so
on. You could then identify a set of indicators associated with
these. Then the standard argument would be what resource do you
need to be put in place so that the provision at least of these
services would be equalised across different parts of the country,
which is the old standardised spending assessment argument. That
is the one that effectively underlies the local government settlement
in England, with adjustments for costs as well, implicitly, local
government in Scotland, health in England, health in Scotland,
so these mechanisms which are effectively needs assessments are
running along in the background to all the political debate over
Barnett that is taking place and are going along without a great
deal of political controversy. Certainly there are disputes at
the time but these mechanisms are not holding up the process of
government to any great extent and the provision or supply of
these services is not being put at risk because there are huge
political arguments about the funding of the services.
Q270 Lord Sewel:
Sorry, I do not quite understand what you are saying. What you
are saying is that when you get to the level below the allocation
to Scotland you have actually got mini needs assessments going
on?
Professor Bell: Yes, sure, and the same is true
in England.
Q271 Lord Sewel:
So the obvious question is then why should you not have a needs
assessment at the top level?
Professor Bell: It is not impossible. Other
countries do it; Australia classically does it. I think it is
the design of the mechanism that is crucial and how political
it becomes. In Australia they have effectively taken it out of
politics.
Q272 Chairman:
We heard about that but what form of mechanism based on needs
should it actually be? How would you do it?
Professor King: To make it apolitical I think
you do need a body which is outside government. Notwithstanding
anything I might have said or anything I might have said that
could have been interpreted, I personally would support a needs-based
allocation of funds between the four countries rather than Barnett.
I would support that. I just think one has to be cautious in assuming
that whoever designs the formula is going to get widespread support
from everybody that they have got the formula correct. It is always
going to be a matter of controversy, but clearly Barnett is a
matter of controversy otherwise we would not be here today. I
am in favour of this but I think it would need to be done by some
impartial body.
Q273 Chairman:
Do you know how the Australians produce their Commission?
Professor King: How they actually appoint them.
Q274 Chairman:
They are appointed by the federal government?
Professor King: The Commonwealth government,
yes I think so.
Q275 Lord Sewel:
Are they required to consult?
Professor King: I have actually been to one
of their meetings in which they listen to representatives from
the different states arguing that the formula should be changed
for such-and-such a reason. They debate this and they ask the
other states, who always object to that reason because they will
get a smaller share. I think it is a mechanism which if we were
going to do a needs assessment in this country we would need to
have a very close look at.
Q276 Chairman:
What sort of people are on it?
Professor King: There are some academics which
of course makes it more complicated!
Q277 Chairman:
Some but not all.
Professor King: And some people from the different
states. I think they have one or two non-Australians on it.
Q278 Chairman:
Do they have the political parties represented or do they keep
them out of it?
Professor King: I am not sure about that, no.
I think if we were to do that in this country it would be a big
advantage to have one or two people maybe from Australia and other
countries that have done this just to give a slightly impartial
air to it.
Professor Bell: And the relationship between
that body and the Treasury I think would be very important, for
the devolved bodies to have any confidence in it.
Q279 Chairman:
Do you know what mandate this Commission has in Australia?
Professor King: The Commonwealth government
decides it is going to allocate X billion Australian dollars between
the states and this body has to decide how much of that is going
to go to the different states, and they do that with a whole system
called disabilities.
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