Examination of Witnesses (Questions 440
- 459)
WEDNESDAY 11 MARCH 2009
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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