Examination of Witnesses (Questions 600
- 619)
FRIDAY 20 MARCH 2009
Mr Paul Griffiths, Mr Ian Carruthers and Ms Maria
Jones
Q600 Chairman:
We will be taking evidence about the Australian system. Without
getting into too great a detail, as I understand it according
to the Australian independent commission, they produce their report
and make recommendations, and there are then two days in which
everybody complains that they are not getting enough and are being
badly treated and it is unfair, and then they all go to sleep
for the next 363 days until they produce the next one. That is
something we could live with, as long as there is a basic satisfaction
and understanding that the way in which the process takes place
and the conclusions that are arrived at are reasonably objective
and transparent.
Mr Carruthers: Yes. One of the advantages we
see is that that is a debate that is had on a level playing-field
between the federal government and the states and territories.
Very clearly, the commission has terms of reference for particular
pieces of work, so it is very clear what the objectives are. They
are agreed up-front and, as you say, there is a short period of
disagreement at the end, but it has been done on the basis that
the clear set of objectives has been very well rehearsed and explained,
and the public methodologies—
Q601 Chairman:
It is clearly not being done by the federal government. That is
the key to it, is it not?
Mr Carruthers: No. Formally the instructions
are from the federal government, but they have to be agreed between
various different states. You have that agreement up-front rather
than from the position here that the devolved administrations
have to argue at a very late stage with the Treasury when de
facto the Treasury already knows the answer it wants.
Q602 Chairman:
It is not the Treasury in Australia that determines the solution.
That is the real point.
Mr Carruthers: That is right. That is why we
see merits in that sort of system.
Q603 Lord Sewel:
The slightly different view we have had in our evidence is that
it ought to be done very similar to the Australian model—take
the Treasury out because basically no-one trusts the Treasury,
and get some quasi objective body to do it. The other is to set
up some sort of commission that can give advice but then the final
distribution being done across the negotiating table with the
territorial authorities and the UK Government.
Mr Carruthers: I think if you go down that route,
ostensibly there is more objectivity, but you have saddled yourself
with extra process, and you still have the haggling that goes
on at a later date. It seems to me that if you are clear about
what you are trying to achieve and the methods up-front, then
it takes away a lot of that scope for subjectivity. Frankly, if
you are better at putting your arguments, you get what you negotiate
rather than what you feel you deserve.
Q604 Chairman:
You want to take the smoke-filled room out of the process.
Mr Carruthers: Yes.
Q605 Chairman:
You do not want the haggling, as they do in Brussels until the
early hours of the morning.
Mr Carruthers: It comes back to what I said
at the beginning; you need to be clear about the objectives of
what you are trying to deliver. If what you are trying to deliver
is an equitable solution, then you need to be very clear up-front
what you are trying to achieve and how it is going to be achieved.
You need objectivity and methodology and so on to get you there.
Mr Griffiths: I am equally suspicious of smoke-filled
rooms of statisticians and accountants even. There is an important
concept of political accountability, and resource allocation is
at the heart of politics. I believe I can make a case that the
ultimate responsibility for resource allocation needs to be made
by a responsible politician, and if we are in the United Kingdom
that would have to be the Chief Secretary or the Chancellor. The
advantage to having an independent commission is that there will
be independent advice, which, if the Treasury was not going to
accept, it would have to provide very public explanations for
why it was not going to accept it. There is a balance there.
Mr Carruthers: If I can add, there is a parallel
for that in terms of the way that the financial reporting framework
works across the public sector in the UK, which is the Financial
Reporting Advisory Board, which reviews the guidance that is developed
by the Treasury and the other relevant authorities. That reports
to Parliament each year on the way in which the process has operated,
and there have been a number of occasions where there was a potential
for disagreement, particularly with the Treasury in the way that
this operated, and on those occasions the Treasury has backed
down because it has not wanted to press that nuclear button of
publicly disagreeing with that advisory board.
Q606 Lord Sewel:
The point about the dangers when you are doing these assessments
going down to a service-by-service level—and the danger
there being identified is a quasi hypothecation. Is there not
another argument that as a result of devolution—indeed one
of the objectives of devolution was to have Scottish solutions
for Scottish problems with Scottish priorities, and the same with
Wales—that the pattern of provision, the profile, will over
time diverge significantly from England in Wales and Scotland;
and if the reference is always back to an English profile, then
that comes so detached as to be quite misleading?
Mr Griffiths: I agree, and that is why we have
pointed out the danger of having a service-based set of assessments
and indicators.
Q607 Chairman:
What indicators would you like to have? I know your paper says
you would like a few, and if there were too many of them I totally
understand, but what sort of indicators?
Mr Griffiths: If I was re-designing the Welsh
Local Government distribution, then instead of doing what we do
at the moment, testing the salience of our deprivation indicators
and population dispersal indicators, service by service, I would
like us to test them against a basket of services so that we can
conclude with indicators which have been tested for their relevance
but not reaching conclusions on the assessed need to spend for
primary schools or roads or whatever. That is not what we are
doing at the moment, and in that sense I am suggesting something
novel, but it does not seem to me to be methodologically impossible.
It looks as though I have confused everyone!
Q608 Chairman:
You have confused me a bit, but that may be my fault not yours.
Try again more simply.
Mr Griffiths: The proposition that the proportion
of your population which is in receipt of benefit, defined as
"in poverty" is a driver of spend; then, rather than
test the significance of that in terms of what you should spend
on education or social services or health, test it against the
basket of services. It is driving that basket, and you can come
with an indicator that is tested, but not on a service basis.
That may prevent you ending up with service-based assessments.
Q609 Lord Sewel:
So you would do it on—say on deprivation, you would have
the measure there of people in receipt of benefit, and you would
test it against what?
Mr Griffiths: Against patterns of expenditure
which you can find within the United Kingdom, to see whether those
expenditure patterns have been correlated with that particular
indicator; so has your range of care services, social services,
health, education or whatever, been influenced by that indicator?
Q610 Lord Moser:
I do not fully follow. It would be helpful to have this on paper.
I do not think it is set out in detail. This is your way of choosing
the indicators.
Mr Griffiths: Yes.
Q611 Lord Moser:
Having chosen the indicators, would I be correct in assuming that
the same indicators in your system would be used for every one
of the devolved areas, though with different weights, in the sense
that if one of the indicators is saying "health", that
might have more weight in Wales than Scotland. It might—I
am not saying it does. Could the weights differ between areas,
though the indicators must be uniform?
Mr Griffiths: Certainly in our local government
distribution, having tested the salience of the indicator we applied
equally to all parts of Wales—
Q612 Lord Moser:
The same weights.
Mr Griffiths: The same weights, yes. I would
have to think through—
Q613 Lord Moser:
Me too.
Mr Griffiths: —the case of doing the alternative.
Q614 Lord Moser:
I was just trying to think of a way in which uniform sets of indicators
would be acceptable for all the devolved areas, though they are
actually of different importance and therefore one could cope
with different weights. I thought you might be doing that, but
you are not doing that within Wales.
Mr Griffiths: We apply a common set of indicators.
Q615 Lord Moser:
And a common set of weights.
Mr Griffiths: I am trying to think this through.
We have, for instance, a service concerned with sea fisheries,
and various local authorities have no coast.
Q616 Lord Moser:
That would be a good example of what we are talking about.
Mr Griffiths: they get no allocation for sea
fisheries because one of the indicators is the length of coastline.
That is zero, and whatever you multiply it with, it ends up as
zero.
Lord Moser: If it is zero, it is easy,
but if it is small it is not so easy. Maybe we could have a bit
more background to this! It is interesting.
Q617 Earl of Mar and Kellie:
During the course of the evidence I have been quite impressed
by the purity of the Barnett Formula and how it has worked out
even with convergence and everything in Wales. The only thing
that does interest me is that I believe the cost of living in
Wales is slightly lower. That strikes me as being quite a good
thing. If there is a re-booting of the amount of public money
allocated to Wales, would that compromise the cost of living?
Mr Griffiths: If I have taken the point you
make correctly, my answer would be that I actually agree with
the modelling done by Professor McLean where he modified his GVA
model to take account of differential housing costs. That is the
one cost-of-living cost that varies. Our energy prices and food
prices and everything else are pretty much the same. The thing
that does vary is house prices and housing costs, so if you were
using income levels as an indicator, it would seem to me that
you would compensate that with some indicator for relative house
prices.
Q618 Lord Sewel:
I am totally ignorant—are labour costs any different?
Mr Griffiths: They are different in the sense
that our incomes are on average about 20 per cent lower than the
UK average, but I would argue that—
Q619 Lord Sewel:
That may be a cost driver because the composition of the labour
market will be different.
Mr Griffiths: Yes, but our composition is different,
and sometimes in similar trades our incomes are lower. I do not
think labour costs translate into costs of living. They may translate
to some extent in cost of delivery, but given that public services
are highly unionised with England and Wales' bargaining machinery,
the end result is that you are better off as a public servant
in Wales than in other parts of the United Kingdom.
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