The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 440 - 459)


Ms Helen Bailey, Ms Helene Radcliffe, Mr Mark Parkinson and Mr Jim Gallagher

  Q440  Lord Lang of Monkton: Some of us were alive and some of us came into Parliament as it came into operation!

  Ms Radcliffe: I think it is quite difficult, arguably, to distinguish between intention and purpose and exactly what that might have been at that time, but I think the key point in this is that if you actually look at the way in which the Formula operates then you would expect that over time it would deliver a certain amount of convergence.

  Q441  Lord Lang of Monkton: Right. I think you are saying it is a convergent Formula. You are also saying, however, that it was not your intention. In that case, it should have been your intention that it should not be a convergent Formula, in which case why did you do nothing to amend it?

  Ms Radcliffe: No, what I am saying simply is that the way the Formula works means that over time, other things being equal, because of the way it works mathematically you might expect to see a degree of convergence.

  Q442  Lord Lang of Monkton: You have not said whether you regard that as a good thing or a bad thing.

  Ms Radcliffe: It is just the mathematical properties—

  Q443  Lord Lang of Monkton: You have no view on it?

  Ms Radcliffe: No.

  Q444  Chairman: You do know Lord Barnett's view of his Formula now, do you?

  Ms Bailey: We have seen the evidence.

  Ms Radcliffe: Yes.

  Q445  Chairman: You have seen the evidence he gave to this Committee?

  Ms Radcliffe: Yes.

  Q446  Chairman: I do not think he is elevating it to quite the same extent the Treasury is. His view was that it was a short-term measure, that it is long overdue for reform, and indeed that it should be a needs-based assessment rather than the existing one. He says that convergence really did not enter into it at the time it was draw up, and indeed he told us that nobody told him that there was a needs assessment exercise going on in the Treasury for a period of four years. So somehow or other the operation of the Barnett Formula has been enervated from what was a short-term, I imagine fairly political measure, up into tablets of stone which, according to you, are un-amendable. It is the most extraordinary position.

  Ms Bailey: Forgive me, Chairman, I do not think we have said they are un-amendable.

  Q447  Chairman: You said you have got no views as to whether they should be amended.

  Ms Bailey: We have no views as to whether they should be amended.

  Chairman: You must have.

  Q448  Baroness Hollis of Heigham: Forgive me, I was never an elevated Secretary of State but even at just a junior ministerial level within DWP our officials, directors, were expected to take on the responsibility of being guardians of particular benefits and when those benefits became misaligned from their original purpose or were producing perverse consequences they were expected, as part of their job at that level of seniority, to report back to the relevant minister, to ask the minister whether the minister would wish for a further review, and normally he would say yes. Are you saying that the role of the Treasury in this has been completely passive throughout, that it is handed down now and you have just got on with it and nobody has ever raised the question with ministers subsequently, "Oh, Minister, this is now no longer as fair as we thought it might have been. We need to review this"? That is the role of senior civil servants, to act as guardians of a particular formula or distribution and to bring it to the Minister's attention when they think it is perhaps becoming somewhat deformed. Has this never happened?

  Ms Bailey: To be honest, I am relatively recently in the Treasury. I do not know whether it has ever happened. All I can tell you is that we are doing no work of that sort at the moment.

  Mr Parkinson: The opportunity to change that, the main opportunity, was when devolution was introduced. That would have been a natural time to do it and ministers took a conscious decision that the Barnett block in the funding arrangements would be part of the Devolution Settlement and that was the basis on which the devolution referenda took place. Obviously at that stage ministers did take a conscious decision that that is what they wanted to do.

  Q449  Baroness Hollis of Heigham: It is expected to be part of their ongoing, non-passive responsibility as guardians of public money.

  Mr Parkinson: Obviously we keep spending under review and with every Spending Review ministers have an opportunity to update the Barnett Formula and ministers have the opportunity to change it more radically if they wish.

  Ms Bailey: The Spending Review is the appropriate time to do that because we are looking ahead over three years' worth of public spending and inviting ministers to consider in the round what their priorities are and where they would wish to allocate that money. So indeed that opportunity is available. What we are saying is that it has not been taken.

  Q450  Lord Lang of Monkton: But the convergence, I think we have established, is a fact of the Formula, even though it may be qualified and hard to pin down in some cases, and it is in large measure a consequence of the fact that the size of the Scottish block and some of the other blocks in the United Kingdom were larger per head of the population and therefore by applying the Barnett Formula to those larger blocks it created different results. At no time in your reviews of Government spending, whether annual, tri-annual or in what other form, have you contemplate whether or not that was fair, economically efficient or desirable in any way.

  Ms Bailey: I am sorry to reiterate something we have already said, but I think what we are saying is that every time we undertake a review of public spending—and we are coming to the end of the CSR period we are currently in and we will have an opportunity to ask the question again—we ask ministers whether they think it would be appropriate to undertake that review.

  Q451  Lord Lang of Monkton: But in your answer to the question—and I am still on question one here—you talk about "equity of treatment in the way public spending rules apply to the devolved administrations and England". It is hardly equity of treatment when there is this inherent imbalance at the very outset. You also talk about the basis of "equal comparable spending per head increases to the Barnett Formula". That, of course, disguises the fact that you were changing to a cash terms per head percentage, which of course is a smaller percentage per head and thus creates the convergence?

  Ms Bailey: Indeed.

  Q452  Lord Lang of Monkton: Do you not think these facts should be brought out more fully and how are they justified in terms of what you call "equity" or "equal comparable spending"?

  Ms Bailey: I think what we are trying to say is that the property of the Formula and, as you say and as my colleague has already said, if all things were equal, there would be a degree of convergence in the Formula. What we are trying to achieve is the point I made right at the beginning, which is that there is an equal up-rating across the United Kingdom of spending in absolute terms, and I agree with your analysis that in percentage terms there is a difference and that leads, as you say, to a degree of convergence. That means that when we change spending in one part of the United Kingdom we change it in equivalent fashion across the United Kingdom. That is the equity of which we spoke.

  Q453  Lord Forsyth of Drumlean: If you thought spending was three years ago per head, say in Scotland or Wales—I will not say "fair" but justified at that level and if the function of the Formula is to produce convergence, which means that the spending per head will be reduced in Scotland and Wales, how can you hold these two positions at the same time? Does it not create a doubt in your mind that if we are moving towards convergence, if we started from a position where there was an extra level of expenditure and we thought that that was a good use of taxpayers' money, surely we are going off the rails if we are moving towards convergence, and therefore we need to have some means of adjusting this Formula which takes account of some basis of need? Why do you not see that as a problem?

  Ms Bailey: I think it is perhaps worth introducing into the conversation the fact that not all of the spending which takes place in the devolved administrations points to the social security spending, it is predicated by—

  Q454  Lord Forsyth of Drumlean: That is a total red herring. Let us focus on this point. If it was right to have spending on health in Scotland at 23 per cent more per head than in England and if the function of the Formula will be to move towards convergence, given that they have higher mortality and morbidity rates than the rest at what point do you say, "Actually, we need to stop this mathematical machine and actually look at whether we are getting value for money and whether we meet the needs"?

  Ms Radcliffe: There is quite a few issues there, but as you have said and as we have all agreed, in theory, given the way the Formula actually works you might expect to see a degree of convergence—

  Q455  Lord Forsyth of Drumlean: It is not a theory, it is happening.

  Ms Radcliffe: I think if you look at the PESA data there is limited evidence that it is happening, but I guess the point is, in answer to your question, that if over time ministers felt that convergence was happening too strongly it would be for them at that point to do something about it. The fact is that we have had this Formula in operation for a very, very long time and the PESA data showed, depending on what time period you are looking at, that it is actually quite difficult—

  Chairman: Longevity is their argument, with respect.

  Q456  Lord Moser: I find the whole convergence business quite confusing, including the Treasury's attitude. I think at the beginning some people said convergence was one of the aims, some people said it was almost accidental and some witnesses say, "Yes, it has happened," and some people say, "It hasn't really happened." Could I ask you a straight question on your opinions rather than on the facts? In your present Treasury view is convergence a good thing? Is this something you welcome? Is it something that worries you? Your views.

  Ms Radcliffe: I think, as we have all recognised, it is simply just a mathematical proxy of the way the Formula works that you might expect to see some convergence over time. As to the extent to which that has actually happened, if you look at the PESA data it is quite difficult to draw firm conclusions about the trend. In policy terms there is no preset view or judgment over what time path convergence might or indeed should happen.

  Q457  Lord Moser: Do you really mean that for all these years when the Treasury has been dealing with this you were sort of totally uninterested in whether they were converging or not converging? There must be a Treasury view because, as you say, it is meant to be the essence of the Formula and some people would say that if it is not happening then the Treasury should take steps to make it happen. There must be a Treasury view at least on whether you regard this as a desirable characteristic or not? It is a straightforward question.

  Ms Bailey: I hate to disappoint you, but there is simply not a Treasury view in quite the way you have suggested there should be.

  Q458  Lord Moser: I did not say it should be, but I would expect it. As a civil servant, I know the Treasury does have views occasionally! I am simply asking you to say how you regard the behaviour of the Formula.

  Ms Bailey: I think we regard the behaviour of the Formula quite neutrally, which is one of the problems in answering your questions on it, and I think it is further complicated, given some of the examples we have heard around the table, by the fact that when the devolved administrations receive the money they themselves can choose how to apportion it between the various functions they spend it on, so it may be that they receive an up-rating in the funding because there is an up-rating expenditure on one element across the UK and decide in fact to spend it on something else themselves. Now, that is increasingly with devolution a matter for them rather than a matter for us, except in the manner which you have suggested to us. We have an overall concern for value for money in the quantum of public spending.

  Q459  Chairman: I wonder if you could point out to me in the document in which you have answered our questions where there is expressed the view that the Treasury is neutral as to the operation of the Barnett Formula?

  Ms Bailey: I do not think we have written that down, but that is the implication of what we have said.

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