Examination of Witnesses (Questions 845
- 859)
FRIDAY 27 MARCH 2009
Mr Peter Bunting, Mr John Corey and Mr Seamus McAleavey
Q845 Chairman:
Good afternoon. Gentlemen, thank you very much indeed for coming.
You probably know what we are about and what we are doing here.
We have been asked by the House of Lords to conduct an inquiry
into the operation of the Barnett Formula. Our terms of reference
are pretty limited and focused. We cannot look at the whole area
of how you fund the devolved administrations. We cannot say whether
Northern Ireland should or should not have tax raising powers.
What we can do is look at the way in which money is allocated
at present, see whether that works properly and, if it does not
work properly, why does it not work properly, and what sort of
alternatives there might be to doing it. Perhaps I can ask a general
question to start off with and get your responses to it. Do you
think that the Barnett Formula has treated Northern Ireland fairly,
and, if so, why, or unfairly and, if so, why there too?
Mr Bunting: Our initial response to that is
if we knew the answer we could give you a definite commitment
one way or the other. I suppose in many senses that is the big
conundrum. There are people in Northern Ireland, including ourselves,
who are schizophrenic on that particular issue in that sometimes
we believe it treats us fairly and sometimes we believe it treats
us unfairly.
Q846 Chairman:
That is only natural.
Mr Bunting: Greater minds than ours have attempted
to answer that question as well. I will quote David Heald who
said: "Although the Barnett Formula is now heavily criticised,
these criticisms come from diametrically opposing viewpoints.
The Formula is variously said to over-fund and to under-fund the
devolved administrations". We could not come down in a definitive
manner to answer that question. It is a Formula which has been
in operation for over 30 years or so. Probably within the original
answer to the question, does it treat us fairly or unfairly, there
are difficulties as to how would you at some stage or other change
that particular Formula. I know that is a question that follows.
If we were clear on that we could give you a more definitive answer.
It is problematic in many senses that in some cases because of
the consequentials people may well argue that they did not follow
on into Northern Ireland and people may well take a degree of
umbrage at that, and at other times people say, "The Formula
itself by the `crude' definition based on population, is it fair,
is it unfair?" and then you will have the whole area of a
needs base as well. I know this is not very helpful to you in
that sense but in many senses we believe that it has been a Formula
which has been in operation for 30 years and, like every other
formula and every other criteria by which any funding is available,
there are times when you are very happy with it and there are
times when you are unhappy with it. You will always have competing
variations as to funding and under-funding. It is very problematic
to give you a definitive answer on that point. Some of my colleagues
might join in in answering as well.
Mr McAleavey: I represent community and voluntary
organisations in Northern Ireland and, like colleagues in the
trade union movement, we have debated and discussed the Barnett
Formula at times and how it has impacted in Northern Ireland.
For most people obviously it is a strange thing, they are not
quite sure how it really works. We do understand the notion, and
you have been debating it, I suppose, about convergence, that
if you apply the mathematics the Barnett Formula might lead to
convergence in terms of UK spend, although like others we have
seen how at times that does not seem to happen because of all
the bypasses that take place with regard to Barnett. A lot of
people are never quite sure what the actual funding relationship
is. I suppose where we do think a formula or mechanism like this
is a good idea is that it takes out what would be a very complex
negotiation between the Treasury and a whole series of departments
here in Northern Ireland and providing money by way of block makes
devolution possible. We support the notion of the mechanism but
how it is arrived at is the big question that is up for debate.
Mr Corey: I do not think I have a lot to add
because I am from the same position as Peter from the trade union
movement. You asked the question is it treating Northern Ireland
fairly, but what is fair? Fair is a comparative question, so is
it fair compared with what, does it treat Northern Ireland fairly
in comparison with Wales, Scotland and England? We have no reason
to say something else would have been fairer given the 30 years'
experience of this. From what I read, that is not dissimilar from
the view that was presented by our trade union colleagues in Scotland
as well, that they could not say Barnett has been unfair to Scotland.
Whether it should be maintained in this form is a more open point.
If you are extending your fairness comparison to is it fair compared
with an alternative formula, that gets you into a deeper area
and presumably one that you are going to come to as to what are
the alternatives to Barnett. As Seamus has said, we all recognise
from a Northern Ireland perspective where people have to go and
negotiate with Treasury for funding for Northern Ireland—that
is the reality of life—if there is a relatively straightforward,
simplistic formula that can short-circuit those negotiations or
make them more automatic in terms of the response then that is
a fair arrangement to have. No matter what alternative you would
create to Barnett, I know it is referred to as the Barnett Formula,
you would have to create a formula that, as with the current one,
still has to have some degree of simplicity for its application
each year.
Q847 Chairman:
I think that is a fair point. Lord Barnett came and gave evidence
to us.
Mr Corey: We are aware of that.
Q848 Chairman:
He made a very interesting set of remarks. He was very firm about
this. He said it was only meant to be a short-term measure; it
was designed to deal with a political problem at the time; it
was designed to involve detailed negotiation between the Treasury
on the one hand and what could have been the devolved governments
on the other hand. He did not know anything about convergence.
The Treasury at the time was doing a huge needs assessment in
the 1970s and they did not even tell Joel Barnett that they were
actually doing it, so he did not know about that needs assessment.
His view was that it was now well past its sell-by date and needs
to be replaced by something and his view is it has to be replaced
by something which has a needs assessment element in it. He was
not very specific about that, but he was quite specific that it
has gone on far, far longer than it was ever intended to. Maybe
that is just because it is a good Formula, it is simple, therefore,
let us carry on with it.
Mr Corey: Maybe the mistake was giving it a
name.
Q849 Earl of Mar and Kellie:
Mr Bunting introduced the idea of the "Barnett follow-on".
I think that was the phrase you used.
Mr Bunting: Sorry?
Q850 Earl of Mar and Kellie:
You introduced the idea of the "Barnett follow-on".
How aware are people, do you think, according to English spending,
of, "We ought to have had such and such an increase in a
particular service but, in fact, devolved government has spent
the money differently so what we and a particular service thought
we were going to get an increase on, we suddenly find that we
have not"? Is that something people are aware of?
Mr Bunting: In various constituencies. One example
of that would be the Trade Union Modernisation Fund and the trade
union people said, "Oh, we'll go off to the Department of
Employment and Learning and seek our Barnett share of the Trade
Union Modernisation Fund", but when we went to the Department
of Employment they said, "Well, we fund you on other issues,
education and training, et cetera, and if you were to get more
money out of this it's going to be decreased there, so the status
quo prevails". In many senses people are aware, and I am
sure Seamus' constituents are as well. People will be aware but
they will be aware of the simplistic notion that there is this
automatic follow-on of an increase for England or there is money
allocated to whatever, and one assumes automatically it will percolate
directly across pro rata into Northern Ireland. In that sense
I think there is a degree of confusion and probably a degree of
ignorance. I spent last night reading some of this and it is a
good thing to send you to sleep in many senses. It is not couched
in a sense that many people, and particularly the constituents
we represent, ordinary workers, would be tremendously aware of.
Having said that, I suppose like many things in life, whatever
the alternative may be, if there is an alternative, it has to
be one that is open, transparent and simplistic. But, having said
that, that is easier said than put into action. People will be
aware of it in a very simplistic notion, that automatically there
are going to be increases right across the board, but then you
have to explain that does not actually happen, that even the devolved
administration, although it gets direct grant, could spend it
all on health or education to the detriment of something else
and then you would have a public outcry, or whatever. That is
probably the nitty-gritty that people are not really aware of.
Mr McAleavey: I come across that all of the
time in that if you take it from the voluntary organisations'
point of view, and we work with 1,000 member organisations in
every sort of discipline, if there is a major announcement in
England, as there have been over the years, about Government making
a big investment in pre-school provision, and I would say SureStart
was one, the amount of money would be talked about and there would
be a consequential for Northern Ireland of X amount, I can guarantee
you that all the children's organisations would think that is
really good and that is going to happen here, but then when it
does not it causes confusion. That is not a problem of the Barnett
Formula. It seems to me fairly obvious that if we have devolution
then local ministers have to have some control and discretion
as to how they spend money. We could do with explaining that better
to the public but we cannot expect that the public might be that
interested at times until it personally affects them.
Q851 Earl of Mar and Kellie:
So it would be more helpful if there was no reference to a Barnett
consequential?
Mr McAleavey: It is always very helpful to me.
If I know there is a Barnett consequential I am likely to know
what extra money is coming into the Northern Ireland block and
we think maybe it is worth pursuing for that activity. We have
done that at times where we have said, "In England they are
investing in whatever and we think it would be a good idea to
do that in Northern Ireland", but we have to argue the case
with ministers.
Q852 Earl of Mar and Kellie:
Is that an argument which actually works?
Mr McAleavey: Sometimes. Ministers will automatically
respond, "You do understand that the money can be applied
during direct rule by the secretary of state or now by the devolved
ministers and it could be applied as they see the priorities",
and certainly we accept that.
Q853 Chairman:
Do you think that is right?
Mr McAleavey: I think so, yes, otherwise why
devolution?
Q854 Chairman:
I am not arguing it, I just wanted your view. I think it is right
and inevitable.
Mr McAleavey: It will always cause confusion
because, as I say, if you think there is a very good announcement
that has been made in England then you would like to see that
simply transfer across.
Mr Corey: I am not sure what the Committee has
found in other devolved administrations, but if you did a poll
in Northern Ireland a very large percentage of people would say,
"Yes, I've heard of the Barnett Formula", no doubt about
that. I do not know if it is like that in Scotland or Wales, but
in Northern Ireland the term "Barnett Formula" is very
familiar. That does not mean people understand how it works precisely
and most people perceive that it determines the total public expenditure
on the DEL side, as we would refer to it, when it does not do
that. This is the point that Seamus made. The Barnett Formula
now has to be considered in the context of devolved administration.
Devolved administration in Northern Ireland is still finding its
feet is a fair way to put it and that would not be the situation
in Wales or Scotland. Any consideration of what you do or do not
do about the Barnett Formula has a huge political dimension for
all devolved administrations, but particularly for the Northern
Ireland one. It goes back to the earlier question that if the
Government of the UK announces, "We're going to give the
highest priority to this head of expenditure" is there an
expectation in Northern Ireland that will follow through, and
the answer to that is yes, that is the expectation of people in
Northern Ireland, but whether it does is another matter.
Q855 Earl of Mar and Kellie:
So in some respects that is a perverse form of criticism of some
degree of transparency, that it would be helpful if the increases
were worked out not according to precise programmes but more on
other vaguer, more objective factors.
Mr Corey: At the end of the day Barnett is a
very simplistic objective factor, and that is the size of the
population really, and to whatever degree it has been accepted
or negotiated that this is comparable or not, so it is subjective
to that extent. I think everyone agrees about the need for transparency,
although to make Barnett transparent is no easy task. You probably
have access to David Heald's report that he did a few years ago
and that is probably the most extensive piece of work that I know
of on Barnett with particular reference to Northern Ireland, and
if anyone thinks that is transparent, it is transparent if you
study it but, nevertheless, it illustrates how difficult it is
to make this transparent to the public.
Q856 Earl of Mar and Kellie:
I am interested in what for me is a new idea, that is the "Barnett
disappointment". That was a factor I had not thought of before.
Mr Corey: It is not a phrase that has come to
mind.
Q857 Chairman:
I was not thinking of making it transparent to the public, I was
thinking of making it transparent to the devolved governments.
One thing that has emerged very clearly from all the evidence
we have taken is the extraordinary extent to which the Treasury
seems to take these decision on their own and then announce them.
Mr McAleavey: Absolutely.
Q858 Chairman:
And then devolved governments have got no option.
Mr Bunting: Have no say in it, exactly.
Q859 Chairman:
The Olympics is a very good example. As far as I can tell nobody
was consulted about that in any detail, the Treasury took the
decision and then told everybody that was what was going to happen,
so no consequentials.
Mr McAleavey: It certainly seems clear to us
that that big decision was taken, the Government decided, "We
have got to back this and it will be expensive enough as it is,
so no consequentials, keep it outside" and there you have
got another bypass. Resource allocation is the most political
thing that any government anywhere can do, it is what people are
in politics for, and that is why you get all these swings and
roundabouts and bypasses.
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