The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 300 - 319)


Professor David Bell, Professor David King and Professor Kim Swales

  Q300  Lord Sewel: There are internal university allocations.

  Professor King: All I am saying is if we just had a very simple formula that said it is going to be based entirely on income per head and the number of pensioners, some regions of Scotland would be saying they should get more than they do at the moment.

  Q301  Lord Forsyth of Drumlean: Is it a bad thing? You have at the moment—and as a Committee we are not meant to be looking at this stuff but just to follow the argument without straying from our terms of reference—people in the north-east of England who argue that they are hard done by. I have no idea whether they are hard done by or not. There are people in the Midlands and elsewhere. If you set up a body, which is not by the way taking decisions about the overall budgets and allocation of resources, what they are doing is assessing what the relative need is, and if they produce some kind of unbelievably complicated formula which enables people in the North East or London to argue we are not getting enough or whatever, why is that a bad thing?

  Professor Swales: The idea that somehow this is an objective measure, that somehow this body has decided how public expenditure should be divided up, because those needs will then determine what proportion of a certain amount of public expenditure goes to Scotland and these other areas. If you are saying that this is being done in some objective way you are presumably saying this is in some sense a non-political way.

  Lord Forsyth of Drumlean: No, I am not. I am saying if Scotland ends up getting 11 per cent as opposed to 10 per cent of the total or Scotland gets 8 per cent and Wales gets a bit more or whatever, and England has obviously got the largest share, I thought your argument was that by setting up this body, the English regions will start trying to apply this formula to argue that their share is not sufficient. If you break that down that will turn into the Department of Health or the CLG being asked why are they not doing the same. I can see that it is inconvenient but I do not see that it is a bad thing because it makes the whole thing more transparent, does it not?

  Q302  Lord Rowe-Beddoe: I think it does because one of the great problems with this is that there is not perceived to be the transparency that there ought to be. What would you do, what Lord Forsyth has suggested there?

  Professor Bell: Since devolution happened it seems to me that the argument of the postcode lottery has become a much, much more prevalent argument, and so people compare differences in provision of services, in different parts of UK and perhaps complain about the variation, but they do not have any understanding of why these might have arisen. They might have arisen to do with efficiency of delivery as well as amounts of expenditure allocated. The trouble with a very complex formula is that it is not very transparent. It is quite difficult to understand, but it seems—and I think David agrees with me—that it is necessary to have quite a complex formula because needs are complex.

  Professor King: I am just thinking about these different regions of England saying "under the formula we would get more than we get at the moment." Of course an implication of that is that probably they will try to influence this independent needs assessment body, and that might be quite useful because until you mentioned that a minute ago I had always assumed this body is going to find the Scots, the Irish, the Welsh and the English coming along saying we think the formula should be tweaked in our benefit. We are then going to have people coming from the North East saying that there should be more for areas which are depressed and that have lost their ship-building industries, and they will come under a lot of pressure from other people which might make it easier to resist a sustained assault from one of the four constituent countries of the United Kingdom. I think it might be easier to run this body if they come under lots of pressure from lots of different people, rather than just four.

  Q303  Lord Rowe-Beddoe: That is not the situation; the position is very clear we have heard about this asymmetric settlement, that is a fact, that is what exists, so we should not be moving that debate forward, in my opinion. What we are suggesting here, is that England should determine what it is going to do with the constituent parts of England that is England's opportunity rather than problem. At the moment all we can determine is what we can do for Scotland, Wales and Northern Ireland. I do not think we should be pushing this debate into what England does.

  Professor King: I fully agree with that. What England is going to do should be entirely up to England. I am just saying that if the different regions of England start applying the formula to them and arguing that they are not getting their fair share, it is up to the English to handle that but they might in time also try to influence the formula. That is all I am saying.

  Q304  Lord Forsyth of Drumlean: If constitutionally something happens whereby they are given the opportunity to influence.

  Professor King: Supposing I am running Region X—

  Q305  Lord Sewel: Nobody is running Region X, that is the point!

  Professor King: I accept that but I am running a large authority in Region X. I could say under this formula the local authorities in this region would get, implicitly, more money than they get at the moment and I am going to put pressure on Westminster for that to happen. That is perfectly reasonable. However, I might also want to go and put pressure on this independent grants body because I could then say "if I pressurise them to change and tweak their formula, then my region would be entitled to even more money", and there would be a lot more pressure but also a lot more transparency. I am not in any way saying that is wrong. I am just saying it is one of the implications which is going to happen because there will be a lot more people working out what they would get. Just to take one example, this body when it is assessing needs might be concerned with the problems of island authorities, and it might say that Scotland has a lot more island authorities than England has, and that is one of the factors that affects Scotland's needs. However, the island authorities in Scotland might well be pushing for them to increase the allowance for island authorities and put pressure on Scotland to give them a larger share of the cake.

  Q306  Lord Sewel: We have been talking about need but slipped into the difference in service provision, Professor Bell, is efficiency and there is also effectiveness. How do those criteria muddy the waters in terms of the basis of allocation?

  Professor Bell: I think that is interesting in that one of the developments that I have witnessed and made a small contribution to (because I am interested in social care) has been the development of different policies in different parts of the UK, in Wales, Northern Ireland, Scotland and England, which are much more distinctive than they were pre-devolution. There has been quite an extensive dialogue between the different parts of the UK about issues like efficiency, like effectiveness of service delivery and so on, which seem to me to be a very healthy outcome of devolution, with the ability to drive policies in different ways. Incidentally, here the asymmetric devolution issue is very important because Wales just does not have the powers to do what Scotland was able to do in respect of change.

  Q307  Lord Sewel: Hopefully one would wish to reward efficiency and penalise inefficiency, so that is a real problem.

  Professor Bell: That is a real problem with needs assessment.

  Q308  Chairman: It is bad enough as it is.

  Professor King: Is not the reward for efficiency better services though?

  Chairman: One would have to deem it so.

  Q309  Lord Forsyth of Drumlean: I am not sure I agree with you, Professor Bell, when you say it is a consequence of devolution that there was the ability to have differences in policy. We did not have a national curriculum in Scotland; we did not do all kinds of things. We did separate things, for example, in the Health Service where we had matching funding for hospices. I remember being beaten up by Virginia Bottomley for doing it because there was pressure on her to do the same. I do not think it is a consequence of devolution, but I think one of the difficulties—or perhaps you are meant to be answering the questions—do you not think one of the difficulties of not having something that everybody can point to and say this is a fair system of funding is that if you do innovate in ways which are attractive, if Herceptin is available in Scotland but not in England, or if your tuition fees are not up-front, or you do not pay prescription charges, or if you are elderly you will get care delivered by the Health Service, is that then creates enormous resentments which have a political effect which make the tweaking of the formula politically harder to achieve. You must be aware of this in the south. People like Simon Heffer and so on write articles that blow all my fuses, but there is undoubtedly a bandwagon being established, and it is very difficult to deal with that if you cannot say hang on a second, this body, which I do not think would be a ground-making body, would be a body which would assess need and make representations and would come to a conclusion about how the cake should be divided up. It would then be for Parliament and everyone else to say. Do you not think that having something that everybody can point to and say that is fair (we do not agree with every aspect of it) would take a lot of the heat out of this debate?

  Professor Bell: It depends how damaging you think this debate is, it seems potentially to be very damaging, but the objective body would take some heat out of it certainly.

  Q310  Lord Forsyth of Drumlean: If you are not a Unionist no doubt you see it as a wedge?

  Professor Bell: There would still be differences whether caused by efficiency differences or by policy choices. I am not sure I agree with you that pre-devolution there was quite the latitude to change things that there has been post-devolution. It may be just a matter of degree. For example, the ability to change the free personal care thing was the ability to legislate on charging effectively.

  Q311  Lord Forsyth of Drumlean: Which you could have done?

  Professor Bell: Prior to—?

  Lord Forsyth of Drumlean: Another quite radical example of differences is in the south they took the decision to close down all—and I have forgotten what the politically correct term is—what we used to call mental hospitals and transfer people into care in the community, where we took a decision in Scotland not to go down the same route with the same speed. That is another example of Barnett because we did not get the consequentials and we had to argue for that. There was freedom to do that. What of course was going on under the old system is that it had to be agreed collectively, so the Secretary of State, and, broadly speaking, you were given that. If you then had collective agreement you were able to argue on the funding. Where the change has occurred is that you do not have that opportunity to have a dialogue and if you have different parties there may be people who are determined to oppose it because it is not from their party. That is the negative side of it.

  Q312  Chairman: Is an independent body not one of those things where you have got to end up in a situation where everybody is equally dissatisfied with its result, nobody is grossly dissatisfied but everybody is slightly dissatisfied so everybody can say, "We do not like it but ... "? If you get to that stage it seems to me that you will make the most enormous progress.

  Professor Bell: You will not eliminate the Simon Heffers but you may tone them down.

  Q313  Chairman: You could try.

  Professor King: There is another practical lesson. When I spent a year on secondment at the Department of the Environment, apart from introducing the poll tax Mrs Thatcher wanted the needs assessment formula simplified and argued that there were too many indicators in it. You have a group of people in a room acting like this. "How do we get rid of indicators, what happens if we take that one out, it does not make much difference, right we will get rid of that one. What happens if we take this one out?" It makes a lot of difference to three authorities, right, but could we help those three authorities if we attached more weight to this one? Without being unduly cynical, there was clearly an aim to reduce the number of indicators because that was what was being asked of us but simultaneously to change the allocation as little as possible. I suspect that this independent body would find some objective needs but within the margins of error they would try to change as little as possible from the current allocation.

  Q314  Chairman: That is probably a good thing.

  Professor King: It might be a good thing but this is just another aspect of the objectivity which would be at the margin, summed up as "let us try not to rock the boat too much".

  Lord Forsyth of Drumlean: I am sure it was not the case with Mrs Thatcher! Generally speaking, where politicians wish to change the basis of the formula it is because they wish to see the money going to areas which are politically sensitive as far as they are concerned. That has been going on for years in local government, as you know.

  Chairman: That is a bit too cynical! There are fairness arguments.

  Q315  Lord Forsyth of Drumlean: No, but I am saying there is a tendency for politicians to want to change the formula because they feel, perhaps entirely rightly, that not enough is going to areas of the country where they may have very strong political representation and where they are under pressure from their colleagues.

  Professor King: Or marginal constituencies.

  Lord Forsyth of Drumlean: Indeed.

  Chairman: I suspect that when we get to Cardiff what you will be told in Cardiff is that there is a basic unfairness in the way this has operated because the Welsh should have had more from the beginning. It is not a question of trying to get resources down into the politically sensitive areas.

  Lord Rowe-Beddoe: They have done a very bad job of putting across public relations, it is totally misunderstood.

  Chairman: People like Michael Forsyth ran rings round the Welsh Secretaries.

  Q316  Lord Forsyth of Drumlean: That is the other aspect of the way it worked, is that when William Hague was Secretary of State, he and I would unofficially talk to each other to find out what lines the Treasury was taking to attack us and we would support each other and we operated as a pair.

  Professor King: I would add that there certainly were occasions when it was suggested that the formula could be tweaked to help areas X, Y and Z, and although that is widely argued to happen, and I do not dispute that it does happen, there is a limit on that because how can you alter it to help areas X, Y and Z which you want to help when, if you give them more money you are going to hurt other areas, and do you want to hurt all other areas. It was always difficult to help the areas that you particularly wanted to help without either hurting some areas you did not particularly want to hurt and without helping some other areas you did not particularly want to help. Especially in England where there are lot more local authorities, it is harder to do that than it might have been in Scotland.

  Q317  Lord Sewel: I want to ask a really very practical problem, if there is a move towards needs-based assessment, do we have the data?

  Professor Bell: Well, I could quote health as an example and there are sets of indicators that you can get on disease from the Census on need. The complaint is that they are always out-of-date. In terms of health status, yes, there probably are data available. In terms of cost delivery, which may not be of particular interest to this body because they will concentrate on need per se, systems are quite different. The Department of Health and what is called the ISD Information System Division in Edinburgh produce completely different sets of health statistics for Scotland and England, and presumably the same is true in Wales. Local authorities similarly produce their own statistics and the ONS is not responsible for local authority statistics and health statistics in the same way, for example, that it is responsible for employment or unemployment statistics, so the areas of the public sector that we would really be looking at are not areas that are necessarily fully covered, although there would be indicators of need that probably could be broadly comparable, but not in great detail.

  Q318  Lord Sewel: Are there any particular areas of difficulty?

  Professor Bell: I would say social care is an example because the systems are different.

  Professor King: There is a problem that you have issues where you might want to give more money to areas which have a lot of children with mental problems or learning difficulties, but who tells you how many such children there are? You cannot ask the local authorities because they say, "90 per cent of our children have these problems, we need a lot of money." Some of the things you want to take account of, you cannot actually get direct statistics on those and you have to use some proxy by saying there are more children with learning difficulties in areas with a lot of unemployment, or something like that, so sometimes the data you want are data you cannot get and you can only estimate those things.

  Q319  Lord Forsyth of Drumlean: I thought the Government was setting up a national database with every child in England?

  Professor King: It could be but there are other issues such as older people needing care at home, who is going to decide who needs care at home? If it is up to the recipient countries they will decide all their older people need care at home.

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