The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 600 - 619)


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.

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2009