The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 845 - 859)


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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