Examination of Witnesses (Questions 480
- 499)
WEDNESDAY 11 MARCH 2009
Ms Helen Bailey, Ms Helene Radcliffe, Mr Mark Parkinson
and Mr Jim Gallagher
Q480 Chairman:
I am reminded that when Glasgow bid for the Commonwealth Games
in, I think, 2014 that was considered a wholly Scottish matter,
whereas the Olympics has been considered a UK matter. Is there
a sensible distinction between the two?
Ms Bailey: I think there was a decision of the
UK Government to bid for the Olympic Games on the basis that it
would have benefits across the United Kingdom and establish the
facilities that would be of benefit to the whole of the United
Kingdom. The Scottish Executive, as far as I understand it, made
the decision about bidding for the games in Glasgow and therefore
that sat within their remit and was a matter for them to decide.
Q481 Chairman:
But there will be a UK team, presumably, at Glasgow, will there?
Mr Gallagher: No, there will be a Scottish team!
Q482 Chairman:
There will be a Scottish team?
Mr Gallagher: Yes, absolutely. It is not a UK
team, it is the Commonwealth Games!
Chairman: True! We can move on to question
five, Lord Forsyth.
Q483 Lord Forsyth of Drumlean:
I wonder if I could just ask you about what is characterised as
"Formula bypass"? I know you have tried to deal with
that in your answers to the questions which we put to you, but
I am puzzled. We had an exchange earlier and we were talking about
whether convergence is happening, depending on whether you look
at the budgeted figures or the other figures and there is a debate,
but one of the reasons why convergence has not happened, certainly
under the pre-devolution regime, was that the Formula will determine
what the resources made available for health, and so on and so
forth, were and then the Scottish Office could decide to go from
one programme to another and spend as they choose. For example,
if there was a huge pay settlement in the Health Service, given
that the Scottish baseline was 25 per cent higher in terms of
expenditure per head and the Formula consequences might be around
10 per cent, there would be an enormous gap given that something
like—I do not know what the figure is now, but 70, 75 per
cent of the health budget was unpaid. Under the previous regime
we were able to talk to colleagues in the Treasury and sort that
and there would be an allocation made to take account of unusual
circumstances of that kind. As I see the system operating now,
there is no dialogue between the Scottish Executive and ministers
and no opportunity for Formula bypass, so the effect of, for example,
a large pay increase or a pay increase in the Health Service will
be to squeeze other services. Is that fair, given that pay is
negotiated nationally?
Ms Bailey: Given that health is a devolved matter,
my understanding is not that the Scottish Executive has to accept
the same pay increases for its staff as are negotiated by Westminster
Government, but that the Health Service—
Mr Gallagher: It might be helpful to explain
the constitutional background, Chairman. The Health Service is
devolved, though Scottish ministers as a matter of policy have
chosen to continue to opt into national negotiations for most,
if not all, of the employees in the Health Service and that was
the position pre-devolution as well, but Helen is right to say
that as a matter of principle Scottish ministers could conclude
now that they wish to withdraw from those national negotiations.
They have not, as a matter of fact, done so.
Q484 Lord Forsyth of Drumlean:
That may or may not be true and it would be controversial for
them to do so, but it does not actually deal with my point. My
point is that under the old pre-devolution system there was an
opportunity, because there was a dialogue between ministers, that
if there was an event—which might arise, actually, from
the difference in the size of the baseline—to make an adjustment,
and we did this. We did it on health. I can remember one particular
pay settlement where we got extra money. We did it on housing
and in other areas where there were differences in the baseline.
As far as I can see, there is now no dialogue whatsoever going
on of that kind and the Formula is being applied absolutely mathematically.
That did not happen in the past. Is that a system which is actually
workable and sustainable?
Ms Bailey: My colleagues will come in, but I
think there are opportunities for that dialogue to take place,
particularly around the spending reviews and around particular
matters. We have already had the point about the Forth bridge
for this, so there are individual dialogues for that specific
matter. The Formula does not itself preclude that. The position
is that in the absence of such a dialogue that applied to the
Formula, it is possible for a dialogue to take place but it is
normally the case that we would rely on the Formula itself.
Ms Radcliffe: Just to reinforce that, there
are still opportunities for devolved administrations to raise
specific issues with the Treasury and also it is possible, if
everybody agrees it is necessary, for additions to be granted
as well. An example of that is the increase in funding that was
given for stage one devolution in Northern Ireland.
Q485 Lord Forsyth of Drumlean:
In your answers to the question which you gave us on this matter
you say that the Barnett Formula currently applies to all changes
in comparable DEL spending of UK government departments in spending
reviews and therefore the scope for bypassing the Formula is in
that sense negligible.
Ms Bailey: Indeed, although we do go on to say
that it is possible for the Treasury to agree to additions if
appropriate, which I think is the point which is made.
Q486 Lord Forsyth of Drumlean:
Yes, but what I am saying is that the pre-devolution—and
by the way, on your answer to question one where you present Barnett
as being a happy, simple system, I can remember weeks of negotiations
when we had the annual pay round arguing with Treasury ministers
and officials and the rest. It was by no means simple and that
process enabled the differences in the devolved areas, in this
case what were then called the territorial areas, to be taken
account of. It does not seem to me that that opportunity is there.
You just simply have a mathematical formula and that must ultimately
result in some inequities, particularly if you have administrations
of different political colour?
Mr Gallagher: I wonder if I might be of some
help on that? Long Lang asked earlier on, was the absence of the
scope for negotiation a virtue or a vice in the application of
the Barnett Formula, and of course what we have described as negotiation
pre-devolution inside one government, ministers of the same party
subject to the same collective responsibility. Post-devolution
one of the advantages of a formulaic approach, whether it is this
formula or another, is that it does not put ministers of one political
colour, perhaps, in the devolved administration in the position
of having to negotiate line by line their budget with a government
which may well be of a different political colour. That is not,
as Helen says, to say that it is completely impossible for some
accommodation to be reached, even in relation to Scotland. I can
think of one example where post-devolution some accommodation
was reached in relation to funding and that was in relation to
the Scottish Court in the Netherlands, which tried Mr Megrahi,
which you will remember.
Q487 Lord Forsyth of Drumlean:
What you describe as an advantage, I can see how it might be an
administrative advantage, but from the point of view of people
who are depending on the Health Service in Wales, Scotland or
elsewhere, I do not see it as being an advantage, I see it as
their resources actually being determined by a mathematical formula
with no opportunity to say, "Don't you understand, we have
this particular issue here and we have this particular need?"
and the result will be that services will be squeezed. One response
to that would be that if you had a system which was based on needs
as opposed to mathematical formula, you would compensate for that?
Mr Gallagher: Another answer to that, I am afraid,
is that of course it is not necessarily the case that a dialogue
would produce more money. A dialogue might produce less money,
so if you were thinking of the needs of particular users of the
Health Service in Scotland the production of the budget by negotiation
around the Formula might produce either more or less.
Q488 Lord Forsyth of Drumlean:
But it would be transparent and it would be based on some objective
criteria, not just some numbers?
Mr Gallagher: One advantage of the Barnett Formula,
with respect, is that by comparison, for example, with the local
government finance formula that we talked about earlier on it
is a model of transparency!
Q489 Lord Rooker:
On the issue of the devolved finance ministers, we understand,
although I do not quite understand the background, that they meet
regularly with the Chief Secretary a couple of times a year or
so. When did that start and what is the purpose of the meetings?
Ms Bailey: The purpose of the meetings is to
discuss financial matters of common interest and UK wide concerns,
so the economic and fiscal situation of the whole of the UK can
be discussed and we are due to have a meeting tomorrow at which
I am sure ministers will wish to exchange views about the current
economic situation.
Q490 Lord Rooker:
When did the regularity of the meetings start?
Ms Bailey: I think it started immediately post-devolution.
Mr Parkinson: It was not quite immediately post-devolution,
but it was about 2001. Fairly early on it was thought a good idea
for finance ministers to meet collectively to discuss this, as
Helen says.
Q491 Lord Rooker:
Did it always cover the UK from the start in 2000-01?
Mr Parkinson: Yes, it used to happen every six
months from about that time onwards.
Q492 Lord Rooker:
With all four?
Mr Parkinson: With all four.
Q493 Lord Rooker:
I am going to have to check my diaries, but I have to say that
with the many jobs I have done between June 2005 and May 2006
I was the Northern Ireland Finance Minister and I do not recall
attending or being invited to attend any meetings with the Treasury.
Now, I was directly the minister, that is why I asked you when
it started did it apply to all of the UK?
Ms Bailey: We can, if you like, check our records
and check which meetings we have had within that time. If you
were not invited, let me extend an apology on behalf of the Treasury
retrospectively.
Q494 Lord Lang of Monkton:
It would be interesting to know whether any decisions of any substance
were taken at any of those meetings or whether it was just an
exchange of views.
Mr Parkinson: It depends on the circumstances.
As it happens, we have not had a meeting for some time. It will
be the first one for some time. If we are doing spending reviews
they can be of operational significance in the sense that there
are issues to determine. At other times during the public expenditure
cycle it is more a question of discussing issues of common interest,
and obviously the economy is the top priority at the moment and
so ministers will be talking about the economy tomorrow. So it
is a mixture of operational issues and an exchange of views.
Q495 Lord Lang of Monkton:
Have any issues been decided or policy change that relate to the
Barnett Formula and the operation of it?
Mr Parkinson: In the run up to the Spending
Review the Olympics was discussed, for example. You will not be
surprised to hear that, but that is the sort of thing which is
discussed.
Q496 Lord Rooker:
Who represents England at this meeting?
Ms Bailey: The Chief Secretary of the Treasury
on behalf of the UK Government.
Mr Parkinson: It is a meeting with the devolved
administrations, it is not—
Q497 Lord Rooker:
So nobody represents England because she is there as the UK minister?
Mr Parkinson: It is a devolved finance ministers'
meeting.
Lord Rooker: The answer is nobody represents
England. She is there as the UK Finance Minister, which is a similar
arrangement we have with Brussels, we devolve matters, and Defra
is the England farming minister but I represented the UK. In other
words, nobody is there actually representing England? There is
Scotland, Wales, Northern Ireland and the Chief Secretaries of
the Treasury. That is the position, is it not, nobody is representing
England?
Chairman: I am sure it was Northern Ireland.
Q498 Lord Rowe-Beddoe:
Something you have demonstrated that you do not particularly want
to talk about is the question of a needs assessment-based distribution
of funds to the devolved administrations, but if you were to talk
about it do you think it would take a great deal of time to come
to some sort of conclusion? Let us assume that you are brave enough
to say that you would like to look at something which might be
substituted for what we have.
Ms Bailey: We have already said—and I
appreciate you do not find this hugely helpful—that you
would need some determination of how we assess needs and what
needs were prioritised. There are many different ways of doing
this. Broadly you could start from the top-down UK Government
looking down at GDP, and so on, or you could start from the bottom
up and assess community by community what the differential needs
were. Depending which method you chose, it would be more or less
time consuming. You could do, in theory, a quick and dirty top-down
exercise and say, "Right, this is the GDP per head of population
or GVA of the population in a particular part of the United Kingdom
and therefore the needs are greater." I do not know whether
or not that would fit the bill, meet people's requirements or
not. If you were to do a much more detailed bottom-up exercise,
it would arguably take longer. So I think the things that are
in place in order to judge the answer to your question are, do
we have an agreed assessment of what the needs are, do we have
an agreed view of how we are going to determine that, do we have
an agreed view about whether or not we are going to buy the devolved
administrations into that process or whether or not the UK Government
is going to do it to them, and that will take some ministerial
negotiation. Then the question I think you have notified us of
is whether or not this should be done by the Treasury or whether
we should get somebody else in to do it. I think that is entirely
a matter for ministers, taking into account the questions I have
posed to you and doubtless many others that I have not yet thought
of.
Q499 Lord Rowe-Beddoe:
I think we would perhaps all agree that it cannot be something
which is a quick and dirty exercise because it has to satisfy
the constituent parts of the United Kingdom and, to come back
to the Chairman's opening statement, it has to be seen to be fair.
So it is going to be, I would suggest, be quite a detailed exercise
for it to fly. Could you give us some idea of how long a detailed
exercise might be?
Ms Bailey: It is hugely difficult to do that
without knowing what the component elements of such an exercise
would be. I am not seeking to be unhelpful in any way at all,
but depending on whether you wished to look at it by individual
community, by geographical area or whether you wished to start
from an income per head, whether you wished to look at, as I say,
GBA per head of population—
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