The Barnett Formula - Select Committee on the Barnett Formula Contents


Examination of Witnesses (Questions 660 - 679)

FRIDAY 27 MARCH 2009

Mr Leo O'Reilly, Mr Richard Pengelly and Mr Mike Brennan

  Q660  Chairman: That is the 1976-79 model?

  Mr Brennan: The 1979 model. We tried to form a view as to where Northern Ireland might be in today's world if we were forced to implement and police a NAS model. Over many, many months we laboured with economists and statisticians to first of all populate the model with the statistics and the indictors and we came to the conclusion that looking across programmes which covered 70 per cent of the Northern Ireland DEL, at that point in time need in Northern Ireland was about 25 per cent above parity with England. We had not realised that the actual allocations that would come through in the Spending Review in 2002 would bring about very rapid convergence. That was a worrying position to find ourselves in, that the NAS model was saying, "Yes, you have a higher level of need but the actual provision you will get going forward for the three CSRs 1999-2002 will put you in a deficit".

  Q661  Chairman: Was this based on the Treasury's needs assessment of the 1970s and did you take the same amount, the variables and the rest of it?

  Mr Brennan: We looked at five particular areas: health and social care, schools, financial assistance to industry, training and vocational education and housing. Then we created one of our own, which was culture, arts and leisure. We took the Treasury model and then we added another sub-programme on, culture, arts and leisure. It covered 70 per cent of the total Northern Ireland DEL at that time, so it was quite comprehensive. As I say, we took a raft of indicators, many hundreds of indicators, in the Treasury 1979 model and we repopulated and updated the statistics within that model.

  Mr O'Reilly: I am sure you know this, but any needs assessment is by definition ultimately a subjective exercise. A more recent exercise we did was in relation to some work we did following a report here by John Appleby of the King's Fund on the Health Service in Northern Ireland. We did some work following that up in terms of seeking to identify relative need in Northern Ireland compared to the rest of the UK. What came out of that very strongly was how big the differential was depended critically on how you treated deprivation and measures of deprivation as an indicator of health need. We found we got into this very complex debate as to the relationship between levels of deprivation and health need and whether deprivation is an absolute measure of health need or not. It brought back to me the non-objective nature of much of needs work and how do you measure needs in an objective way.

  Q662  Chairman: We do for local authorities, do we not?

  Mr O'Reilly: Yes.

  Q663  Chairman: We do quite a detailed series of variables which people live with anyway.

  Mr O'Reilly: Yes.

  Q664  Chairman: I wonder, could we see your work in 2001?

  Mr Brennan: There were two elements to the work that we were doing in 2001. The first one looked at the needs factors and the second one looked at the effectiveness of public service delivery. The public service delivery work is certainly published and we can make that available to you.

  Q665  Chairman: Which one is published?

  Mr Brennan: The effectiveness reports were published.

  Q666  Chairman: Yes, but could we have a look at the needs assessment?

  Mr O'Reilly: It was not published at the time.

  Mr Brennan: The difficulty we had was just when we were about to publish we reverted back under direct rule and the Treasury requested that we did not publish it.

  Q667  Chairman: A brick wall with the British constitution!

  Mr O'Reilly: From memory, I am sure the work that was done more recently on the Health Service was published.

  Mr Brennan: The Appleby work was all published and we can certainly send that to you as well.

  Q668  Chairman: So we can have a look at the Appleby and effectiveness evaluations. As far as you are concerned you would not mind us looking at the needs but the Treasury say no, is that right?

  Mr Brennan: Certainly the Treasury were aware of our research and where we were going.

  Q669  Lord Sewel: The Treasury have a copy of it, do they?

  Mr Brennan: Yes, they do.

  Q670  Chairman: We will do a Freedom of Information request and see what we get. The Treasury put the block on it before the new devolved administration came in. The situation is now so different, do you think the Treasury block still applies?

  Mr O'Reilly: It would fall into the category of papers of a previous administration for us at the moment.

  Q671  Chairman: Okay. We will try.

  Mr O'Reilly: We can ask the Treasury.

  Mr Brennan: We can certainly register your interest in it with the Treasury and the fact that you would like to see a copy of it.

  Q672  Chairman: Can we have a private look at it on the guarantee that it goes nowhere but to the Members of the Committee?

  Mr O'Reilly: It is papers of a previous administration so it is not for us. We cannot give a definitive response.

  Q673  Chairman: Who would we have to ask?

  Mr O'Reilly: Possibly through the NIO at the moment.

  Mr Pengelly: It was prepared under the direction of the Secretary of State in the NIO.

  Q674  Chairman: So the Secretary of State for Northern Ireland would have the authority to release this?

  Mr O'Reilly: Probably after consulting the Treasury.

  Chairman: We are seeing him on Wednesday so we will ask him and see what he has to say about it.

  Q675  Earl of Mar and Kellie: I think we have already mentioned the Olympics. What I would like to ask is whether the Northern Ireland Executive is concerned about the fact that it was the Treasury which got almost complete control of the scheme, particularly when it came to deciding a particular activity is an English one or a United Kingdom one. Does the Northern Ireland Executive see that as being fair and the way it should be?

  Mr Pengelly: There are a number of issues. Despite what we said on Barnett, there are areas where some independence, some objective dispute resolution process at this level of detail would be good, and the Olympics is a classic example of that. Our Minister's position, and I think it is a position that we share with the Scots and the Welsh, is we do not question that there are significant elements of the Olympics which are being taken forward on a UK-wide basis and it is absolutely appropriate that Barnett should not apply to it, but there is in excess of a billion pounds of clear regeneration work and that regeneration is taking place in England only, therefore the Barnett Formula should apply. This was debated in many forms with the Chief Secretary of the Treasury and the Treasury view was that, while under the rules of Barnett when you disaggregate a spending programme into the sub-components and look at each sub-component and build up a weighted comparability factor, the Olympics was just one budget and it was either all in or all out.

  Q676  Earl of Mar and Kellie: One budget which the Treasury was in control of?

  Mr Pengelly: Absolutely.

  Q677  Earl of Mar and Kellie: We heard in Wales that there had been a Barnett claw back over some English health spending which had an under-spend and led to some of the Welsh health Barnett money being clawed back. Has anything like that happened?

  Mr Pengelly: We were in exactly the same position as the Welsh. Prior to the announcement of the 2007 Comprehensive Spending Review, the Treasury introduced a downward adjustment to the Department of Health baseline and Scotland, Wales and Northern Ireland took a negative Barnett consequential for that. Again, in the Pre-Budget Report last November there was an adjustment for the Department of Health in 2010-11 which is the result of a downward adjustment. That is a slightly different issue from the Olympics because the Treasury position is that is a straightforward application of Barnett and when the health budget goes up we get Barnett consequentials.

  Q678  Earl of Mar and Kellie: Was it a little unfair in Northern Ireland because of the fact that it related to the fact that in England they had not spent all of their health money which they had been allocated?

  Mr Pengelly: I am not sure whether you are referring to the baseline issue back in the 2007 CSR or the recent PBR issue because they are two slightly different issues. In terms of the former, the Treasury were saying the Department of Health had a track record of under-spend, therefore looking forward into the future Spending Review they were going to make a downward adjustment to their baseline. As much as we could feel aggrieved by that, it does seem to sit within the conceptual framework for Barnett, as ultimately looking forward they were adjusting the long term spending plans. The recent one, which may be the one the Welsh have articulated, is essentially that the Treasury are anticipating that an under-spend will happen in 2010-11 and that that should be subject to Barnett. Our view is that it should just fall as an under-spend and end-year flexibility should apply for the Department of Health. If we under-spend we have end-year flexibility. They are different issues but it is extending the reach of the Barnett Formula because it happens to suit a position.

  Q679  Chairman: The decision on the Olympics, how did you actually hear about that? Did somebody just ring you up and say, "This is going to happen", or did you get a letter saying, "This is the Treasury view as to what should happen"?

  Mr Pengelly: From memory, and I would need to check, the nature of a Spending Review is that we are in almost daily dialogue with the Treasury and I think it was just mentioned in the course of one of those conversations.


 
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