The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 780 - 800)


Mr Michael Smyth, Professor John Simpson and Professor Colin Thain

  Q780  Lord Sewel: I am talking about social work.

  Professor Thain: Then your argument is that England does not have social work problems that come through the social work allocation that then goes to Scotland, Wales and Northern Ireland.

  Q781  Lord Sewel: England has some and it distributes its social work expenditure to local authorities on a needs-based formula, so why should the amount going to Scotland out of the UK bit not go on a needs-based formula?

  Professor Thain: But it does via the rate support grant element of the Barnett Formula. If the debates are in England, the block figure in England, the consequential increases each year or in the three-year cycle of the Comprehensive Spending Review includes debates about putting more money into social work which you then give on the basis of need and then there is an increase in the budget for social work.

  Q782  Lord Sewel: There is an increase in the budget for social work and you get a consequential of that, but that consequential is a population driven consequential, it is not a needs driven consequential.

  Professor Thain: It is not related to pockets of particular need, absolutely not. My problem is how would you generate your formula so that would be acceptable to say social work needs in rural parts of Scotland or rural parts of Northern Ireland are more important than urban social work needs. How would you build a formula? It has been difficult enough with the rate support grant to come to an agreement about what figure is being given for that element of social need.

  Q783  Chairman: Population cannot be a substitute for that surely?

  Professor Thain: It is a proxy for the policy debates which you then have.

  Q784  Chairman: It is a 35-year old proxy pretty well, is it not?

  Professor Thain: It is not because it has moved on.

  Q785  Chairman: The basis of the thing is.

  Professor Thain: The upgrading of the population, Northern Ireland getting a larger proportion as its population rises, Scotland going down, admittedly it has not happened regularly enough for that to feed through to the Formula but a larger proportion of public spending that is going to be covered by the Formula, something like 90 per cent or so instead of something like 45 or 50 per cent when it first started, are all movements in the process. It is not a dead system that has kept the same, there are elements of dynamism.

  Professor Simpson: I have no difficulty with the concept of the block grant being based on a needs formula which I hope would not be too complicated, not too many variables, but I am worried about the discussion that goes on to say we are going to try and assess need so we will end up knowing what the comparative need is for social workers, for doctors, and the next step is you spend it without any discretion. For example, on the whole health and social services network we spend it differently. Put schools to one side for the moment. Part of the logic of what you are doing is leaving the regional authority, be it Northern Ireland or Scotland, with permission to play at the edges of that but they accept the basic principles of, say, a National Health Service. If Northern Ireland decided not to have a National Health Service then we would have trouble.

  Chairman: I think we would, inside and outside Northern Ireland.

  Q786  Earl of Mar and Kellie: Can I come back to the Australian model. Presumably the Australian Treasury gives a block grant to the Territorial Grants Board to divvy up amongst the states and territories, all of whom in theory have applied on the same basis.

  Mr Smyth: Yes, on the recommendation of the Commission.

  Q787  Earl of Mar and Kellie: Does this mean that the Commonwealth government decides how much is being put into the state and territorial activities, or do they say, "We would like so much, please send it to us"?

  Mr Smyth: They make a series of reports. There are certainly annual reports under different headings to the Commission and then the Commission publishes its report and, as the Chairman said, there is always a big row and then it settles down. The states themselves have considerable discretion in how they use that money.

  Q788  Earl of Mar and Kellie: The gross amount of money which is put to these activities is determined by the Commonwealth Treasury?

  Mr Smyth: Yes.

  Professor Thain: But it is a federal spend. It is like the US Federal Government giving money to the states. It is not the same as having what we have got.

  Earl of Mar and Kellie: To a degree we are being encouraged to head towards the Australian system, but in actual fact it strikes me as being more different than I initially thought it was.

  Q789  Lord Sewel: What is the best thing to read on the Australian system?

  Mr Smyth: Their annual reports. They set out their desired outcomes and then their actual outcomes. Their annual reports are put in terms of, "Here's what we were instructed to do and here's our considered opinion" and they go through their decisions in detail each year.

  Q790  Lord Sewel: Are there any articles on it at all?

  Professor Thain: There is a very good serious by John Wanna of the National Australian University who has been working on budgetary policies.

  Mr Smyth: I think the Institute of Fiscal Studies here did a study on the Canadian and Australian ones from about 2004-05 by Richard Blundell.

  Q791  Chairman: How do they do it in Canada?

  Mr Smyth: I know less about Canada but I think it is similar. It is an independent—

  Q792  Earl of Mar and Kellie: No, it is not.

  Mr Smyth: I thought it was independent oversight.

  Professor Thain: It is a federal disbursement based on GDP variation between the territories and Quebec because there is an issue about the statistics you use. It is a variation from 100 per cent of GDP. So if a region is doing particularly badly it gets an increase in its federal disbursement. The Canadian model is one where it is based upon GDP.

  Q793  Chairman: I think it is based upon tax revenues. Canadian equalisation is based on tax revenues.

  Professor Thain: We may be talking about two separate things here.

  Mr Smyth: The other advantage of the Australian model is it has the chairman and four members and, as far as I can determine, the membership changes at certain times. There seems to be no political connection between the membership of the Commission and any of the main parties.

  Q794  Chairman: Any representatives of the individual states?

  Mr Smyth: Three of them are from different states. The fourth one I could not determine. They are a mixture of former Treasury people and academics, or both.

  Chairman: We will have to have a serious look at this because I am bound to say it is one of the mechanisms that seems to have attracted us as to whether this is one possible way of doing it.

  Lord Sewel: We have been talking about that approach and I suppose we could ask the question would the data be available in the UK to do that sort of exercise?

  Chairman: That is for the Treasury if the data is there.

  Q795  Lord Sewel: I do not know whether the data is there.

  Professor Thain: National statistics have improved.

  Professor Simpson: It could be organised but I am not sure the political will is there to do it.

  Mr Smyth: I am not sure about that. It changes so frequently. Their presentation changes suddenly and the only people who really know are a small number of people in the Treasury and I think you would need to ask them.

  Q796  Lord Sewel: Oh joy! Oh joy!

  Professor Thain: Also I think there is an issue about national statistics in the UK and the quality and impartiality of them. Probably you should get Michael Scholar in front of you to ask him about the National Statistics Commission and see whether he thinks more work could be done to put pressure on to get an agreed set of statistics that we could all look at and say, "That is fair" and keep them consistent.

  Mr Smyth: How would this sit within the increasing calls for an independent Monetary Policy Committee equivalent in terms of fiscal policy nationally? Could it be nested? If that ever came about, could you nest this underneath that?

  Q797  Lord Sewel: I think a Fiscal Policy Committee is a big issue.

  Professor Thain: Beyond the scope of the House of Lords!

  Q798  Lord Sewel: It certainly is!

  Professor Simpson: I cannot see any Chancellor of the Exchequer accepting that willingly.

  Professor Thain: I think there is a strong feel for that.

  Q799  Chairman: I may be wrong about this but I get the impression, or at least the beginning of a feeling, that this issue of how you sort out transfers between the centre and a lot of the administrations is an issue that people have got to start trying to settle.

  Professor Thain: Yes.

  Q800  Chairman: With the present situation you could argue for it, particularly a great ad hoc man like you, if there is a problem you move outside it and solve it, I understand all that, and politically that is very attractive, but I think there is a feeling as a country we have got to try and produce a structure and this Committee is a very small part of that.

  Professor Simpson: You have been talking about a needs base and you may be aware the statisticians are actually reviewing the basis on which they calculate relative GVA by region in the United Kingdom, so if you are going to pronounce will you wait until they have got the revised figures. I understand it is at an early stage but the revision of GVA is going to make Northern Ireland's degree of poverty less.

  Chairman: Well, gentlemen, we have had a good run round the course. Thank you very much indeed.

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