Examination of Witnesses (Questions 640
- 646)
FRIDAY 20 MARCH 2009
Mr Phil Jarrold, Mr Peter Price, Mr Cynog Dafis,
Mr John Osmond and Mr Geraint Talfan Davies
Q640 Lord Moser:
That is a very important point. Thank you.
Mr Davies: It is a very interesting contrast,
if I may say, on the word "convergence", which is used
in the European context in order to try and bring people up to
a common level. It seems to me that convergence in terms of the
Barnett Formula is that it gives you precisely the opposite effect.
Mr Price: Exactly.
Mr Osmond: To be specific, as I understand it,
when devolution began, for every £100 spend in England we
were spending £125 in terms of the block, and that is now
down to £114. If this goes on and we do not put a floor underneath
it, our relative spending per head in Wales is going to fall below
the poorest of the English regions, and I do not think that is
tolerable.
Q641 Lord Sewel:
Are we not here in the area of common cause, because the one thing
I would have thought that all the territories do not want is convergence?
Mr Dafis: Convergence on the basis of per
capita—
Q642 Lord Sewel:
By strict Barnett, Wales has had most likely the purest Barnett
application of all the territories. Post devolution the sorts
of things done before devolution become much more difficult, so
pure Barnett is likely to emerge as the basis upon which the territories
are funded. I would have thought there would be common cause throughout
the territories to avoid convergence!
Mr Dafis: We were asked some time ago about
the indicators we would advocate. There was a discussion this
morning, was there not, about whether as a fall-back or whether
as an overall indicator, a proxy, you referred to GVA or to disposable
household income. Professor Foreman-Peck was arguing that you
should use disposable household income. If all you wanted to do
was to devise a method of helping people who are disadvantaged
to get an equivalent level of service, there is a case then for
using disposable household income; but if you want to get to the
root of the problem and bring about a radical change in the nature
of the economy and society and the community in a place like Wales,
then we would argue that GVA is a better way of doing that. If
you look at the kinds of problems we have got in Wales that are
identifiable and measurable, we have got serious health requirements;
we have levels of economic inactivity with all the attendant difficulties
that come with those: they are a consequence of economic failure.
In the South Wales valleys they are the consequence of economic
collapse as a result of the collapse of coal and to some extent
iron and steel. If you want to enable the people of those areas
in those regions to improve their health and quality of their
communities, then you have got to do something about the nature
of the economy. That is the only way the valleys are going to
pull themselves out of the difficulties that they are in—if
their economy improves. That is why we say if you take GVA as
an indicator or as a proxy, then you would be transferring resources
in a way that would create a reasonable chance of tackling things
at the root level; and that is a better way of doing it than constantly
providing a subsidy in order to enable high levels of service
need to be provided. That may be the difference between the Foreman-Peck
approach and—
Q643 Chairman:
I think that is probably outside our terms of reference. I regret
it, but the way in which you revive the valleys I do not think
is something that we can get into.
Mr Dafis: Can I not persuade you to regard that
as an aspect of need?
Q644 Chairman:
It is a good try!
Mr Jarrold: Peter Price's made an earlier comment
about relative prosperity and relative health or relative educational
attainment: if you wanted to take as part of our needs approach
an approach that would generate the investment to create those
improvements, what we would be looking for there is convergence
in terms of attainment.
Mr Davies: It may be outside the terms of reference,
but it is very, very germane to any sense of fairness. As somebody
who spent a lot of my life working in Newcastle and the north-east
of England, there is an element of that within England itself.
I would argue that certainly since 1979 the notion of reducing
these spatial disparities within the UK has not had a very high
priority in the policies of government. That underlying fact,
which takes you outside the question of identifiable public expenditure,
is still a very real factor in people's perceptions of how these
arguments are made.
Mr Osmond: By analogy—you have probably
seen the operations in the EU and have experience of the Republic
of Ireland—we all know that Ireland for many decades was
a poor country, but partly as a consequence of EU subsidy in the
form of Objective 1, it managed to reinvent the so-called Celtic
Tiger. Then it began paying money back in as a net contributor
to the EU, and that was partly a consequence of the operation
of distribution of funds. I do not see why the same principles
cannot apply to the way we operate distribution of funds within
the UK.
Chairman: It is very interesting that
we are charged with looking at the Barnett Formula and seeing
the way it works and if it is not, what we are going to do about
it!
Q645 Lord Sewel:
I hope we do not return to Ireland ....
Mr Price: You have picked up my colleague Cynog's
comments specifically about the regeneration of the South Wales
valleys and we do not expect that you would make that an objective,
but within the context of what you are looking at in examining
a possible alternative to the Barnett Formula, you are clearly
examining a needs-based formula of some description. What we are
arguing for is much more than principle: that a goal of that formula,
if it is to reflect fairness and need, is to reduce disparities
for prosperity over time. We take that, as it were, as a factor
that ought to be included in a good needs-based formula which
looks to the future of the United Kingdom.
Mr Davies: I agree entirely with Peter there
because you could take one example as proof of the fact that the
current policy actually specifically excludes that from Barnett,
and that was the question of the Olympic Games. Within a £9
billion budget there is a line within the budget of £2 billion
for regeneration of East London, which is not included in the
Barnett baseline. So that wider objective seems to be to be specifically
excluded from the Barnett Formula, if you take that example.
Q646 Chairman:
As I understand the Olympic example, what has happened there is
that the Treasury suddenly decided that the regeneration bit should
be a UK expenditure, which does not attract Barnett consequentials,
as opposed to an English expenditure which would attract Barnett
consequentials.
Mr Davies: Would that decision have been taken
by an independent—
Chairman: No, of course not; it was taken
by the Treasury behind closed doors without telling anybody what
they were doing, as far as I can see. I am not here to defend
the Treasury; on the contrary. In that part of the operation of
the Barnett Formula there are very serious criticisms indeed that
it may well be that this Committee at the end will wish to make.
What I am concerned about is where we go from here. The message
that I have from all of you is that we should move away from the
existing formula to something based upon needs: precisely what
sort of needs and how we define the needs, or what variables we
use in order to assess the needs, I think all of you seem to say
that that depends upon either the Calman Committee in Scotland
or down here, or perhaps even with this Committee. We will do
our best.
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