Memorandum by the Wales Council for Voluntary
Action
1. WCVA represents the interests of voluntary
organisations, community groups and volunteers in Wales. It has
over 2,600 members, and is in contact with many more groups
through national and regional networks.
2. Its mission is to strengthen voluntary
and community action at the heart of a civil society in Wales
that:
— Is inclusive and offers equality of opportunity;
— empowers people to participate and fosters
community leadership;
— encourages and promotes the independence
of voluntary action;
— celebrates and reflects linguistic and
cultural diversity and choice; and
— engages in genuine partnership with other
sectors on a "who does what best" basis.
3. WCVA has consulted widely with the third
sector throughout the process of devolution and recognises its
role in promoting the interests of the sector in this process.
We have been actively engaged in debates around the role of the
National Assembly for Wales and its relationship with the sector
from the original proposal to establish the Assembly, through
the Richard Commission, the implementation of the Government of
Wales Act 2006, and most recently the work of the All-Wales Convention
established to explain to the Welsh public about the powers currently
available to the National Assembly for Wales and assess the implications
of moving towards full law making powers.
4. The third sector is broad and diverse
and makes a major contribution to the economic, cultural, social
and environmental life of Wales. Third sector organisations can
provide valuable evidence of how government policies are affecting
Welsh citizens, facilitate often marginalised voices to be heard,
and contribute to the delivery of public services. Effective governance
depends on government working with the sector and ensuring that
its mechanisms for doing so are as transparent and effective as
possible.
5. WCVA does not claim to be familiar with
the internal workings of government finance. Our perspective is
primarily a lay view from outside government. Our evidence is
not technical, but is informed by the way in which a wide range
of third sector organisations and networks experience government
finance policies and arrangements.
6. In discussing the Barnett formula with
third sector organisations, there are three main issues that have
been raised.
7. Firstly, there is the question of whether
any formula (either the current Barnett formula, or a potential
alternative arrangement) is applied in a transparent manner that
is clearly understood by organisations with an interest in government
funding.
8. Secondly, there is of course the question
of whether the existing formula fairly meets the distinctive needs
of Wales, particularly with reference to levels of social need,
and to providing services in sparsely populated areas.
9. Thirdly, there are occasions when the
Barnett Formula is used as a basis for the negotiations regarding
the division of non devolved funding or as a benchmark against
which to measure the "fairness" of any allocations.
The fact that the formula is not related to need or cost of service
provision means that these allocations may disadvantage Wales
compared to the rest of the UK.
10. The current formula is in fact relatively
straightforward, using population share and comparable functions
as the basis of the calculation. Its application leads to a stable,
predictable and automatic increase in the funds available to the
Assembly Government.
11. However, there is no doubt that many
organisations are confused by the Barnett formula. Although there
are reasonably clear explanations of how it works available, these
are not well known or understood.
12. There are a number of questions that
arise from the current arrangements.
13. As far as we understand, the formula
is only applied to new expenditure. We are unable to comment on
whether the historic settlement that pre-dates the application
of the Barnett formula provided a fair allocation across the UK,
but this is clearly a key consideration in determining the fairness
of the current arrangements.
14. We also understand that the trigger
is the commitment of new funding in England, providing a "catch-up"
mechanism for the devolved administrations. Whilst it is right
that UK government decisions for initiatives in England should
lead to a commensurate increase in Wales, we are not clear about
how the Assembly Government might seek additional Treasury resources,
over and above the existing settlement, for initiatives in Wales
that may not be desired in other parts of the UK.
15. Our members are regularly confused by
the way in which the formula applies (or does not apply) to individual
spending decisions and announcements. Spending announcements are
frequently silent on whether a particular initiative is England
only and funded from within existing English budgets (and therefore
with no consequential for Wales); or whether there is new funding
for which there is a consequential for Wales.
16. It is important that there is both transparency
and debate about the way in which the Treasury applies the formula.
As an example, we gather that the Treasury has determined that
the additional local regeneration expenditure in south east England
associated with the Olympics—which we had understood were
to benefit the UK as a whole—does not lead to consequential
funding for the devolved administrations. We are not aware of
a formal mechanism for the devolved administrations to debate
or challenge this decision.
17. Whilst the formula does provide more
predictable funding levels, it takes no account of the particular
needs of Wales. We are not aware of any evidence that supports
the case for lower levels of comparable expenditure in Wales compared
to that in Scotland and Northern Ireland. The very fact that two-thirds
of Wales qualifies for European Convergence funding demonstrates
the case for higher levels of expenditure.
18. The Barnett formula was not intended
as a permanent arrangement, and the progress of devolution has
inevitably focused attention on the formula. We do agree that
it is timely for a review to be undertaken.
19. We are not in a position to suggest
specific alternatives; but we do believe that it is important
to investigate the following:
— Will a formula based on a combination
of population, need and costs of service delivery would lead to
a fairer allocation of resources?
— Will a formula that is implemented in
an open and transparent way improve the confidence of the public,
and third sector organisations?
20. An assessment of need could take account
of:
— The relevant population base in relation
to the expenditure being allocated;
— The need for services, reflecting relative
social deprivation factors;
— The cost of delivering services, taking
account of rurality and population sparsity.
21. This approach could target higher levels
of funding at areas of greater deprivation, where there is a greater
need for public services is greater, and to low population density
rural areas where service delivery is more costly. We would expect
Wales to warrant above average expenditure levels on both counts.
22. This approach could also be considered
as a basis for the negotiations regarding the division of non
devolved UK funding or as a benchmark against which to measure
the "fairness" of any allocations. For example, the
government is allocating Unclaimed Assets according to the Barnett
formula so that the four countries of the UK will receive a population-based
share of the assets available on a UK-wide basis. Again, an alternative
to consider is a formula based on population, needs and service
cost for such calculations.
23. Finally, the future application of any
formula—either the existing Barnett formula or a new mechanism,
will need to be easily understood and transparent in order the
address the problems identified with the current arrangements.
The government's partners, including the third sector, and the
electorate, need to have confidence in the system.
24. We believe that formal arrangements
between the Treasury and the devolved administrations should be
introduced to ensure that decisions which affect funding allocations
are transparent and are not taken without formal agreement from
devolved governments. These arrangements could:
— Ensure that the implications for devolved
administrations of policies developed in Whitehall were fully
understood.
— Enable dialogue and agreement between
devolved administrations and the Treasury before changes to funding
arrangements are made.
— Require announcements about expenditure
to be made simultaneously for England, Northern Ireland, Scotland
and Wales, giving a greater sense of coherence and equity rather
than the "catch-up" confusion that presently often exists.
— Enable third sector organisations to
have an opportunity to comment to their government on the implications
of spending proposals.
19 March 2009
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