The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 860 - 872)


Mr Peter Bunting, Mr John Corey and Mr Seamus McAleavey

  Q860  Chairman: You cannot run a system on the basis of ad hoc decisions dependent upon who thumped the table last, and that is the danger with the bypass, there is no coherent stream.

  Mr McAleavey: I think the Treasury seem to have tried very hard in recent years to stop all bypass decisions with regard to Northern Ireland. That is our experience. When people talk about that "Barnett squeeze", we have seen it in Northern Ireland in the last ten years in that there has been a significant drop in the per capita spend here on public expenditure over England. Scotland does not have the same, I am sure it is because there are various bypass deals, but certainly Northern Ireland has dropped from around 30 to 21, the increase in public expenditure working on the Treasury formula pushes it closer rather quicker. One of the things we worry about is if Lord Barnett did not think that there was a calculation for convergence, yet there so obviously appears to be in terms of the mathematical formula, somebody designed that in the Treasury.

  Q861  Chairman: We do not deny that.

  Mr McAleavey: You worry then if we move to assessment on need, how will the needs assessment be made, who will carry it out, and will you just make the figures suit the ones to where you want to get to. That becomes the worry.

  Q862  Lord Sewel: You are quite right on "squeeze", and clearly there have been lots of bypasses in the past, and you are right to suggest that the more you go down the devolution route, the more the opportunity for bypass decreases. Also, it is important whether your population is increasing or decreasing. Your population is increasing, Scotland's is decreasing, so if your population is decreasing your base provides a very effective buffer to stop the "squeeze" squeezing. Let us go to alternatives. You mentioned needs assessment. The types of services that the devolved parliament and assemblies are responsible for, they are ones where need is a very sensitive, powerful driver of expenditure. I would have thought that in many of those areas you would be better off looking at issues like deprivation, cost of provision, including services, and the detailed make-up of the demographics as they affect the service, rather than just a straight population adjustment.

  Mr Bunting: That is a fair comment. I suppose in many senses initially we would all be representing that our main ethos would be of social conscience and we would be in some way inclined to agree with that. We probably have the highest number of this, that or whatever, okay, the highest number of disabled people, especially with mental health needs, and probably the highest number of people deemed to be economically inactive, which is a wonderful phrase, but a lot of that came about through the manipulation of unemployment figures at one stage or other. This is where we have to be very careful. These are very subjective. The question is what do we mean by that because it varies from academic to academic and in the Joseph Rowntree Foundation's report on poverty and social exclusion in Northern Ireland, which we would maintain is quite high, but there again it could be comparable with other areas, for example in England, and I know we do not want to go into that, but there is northeast England, northwest England, and huge levels of social deprivation right across the UK and Northern Ireland, much of it stemming in the valleys of south Wales from the demise of heavy engineering, which we experienced as well in Northern Ireland. The interesting point about unemployment, for example, was we had allegedly the lowest level of unemployment in 20 years in Northern Ireland last year, but since the global recession that has gone askew within a short period of nine months or whatever. There is an interesting development there. It also camouflages the fact that we still have over half a million people of working age being non-productive, whether it be students or whatever. How do you reconcile the economically inactive with a very low level of unemployment? It is an oxymoron in many senses. If you were doing this on needs it is very difficult from our perspective. The other point we would have to make is who is the determiner of deprivation and social need. That is very problematic for us. Having said that, if we could work out some form of combination would it be more beneficial to Northern Ireland, I do not know. The other issue in Northern Ireland from our perspective is that we are separated from GB by the ocean. We have a landlocked border with a country in many senses where their infrastructure 15, 20 years ago was less than ours—you knew when you entered into Northern Ireland by the quality of roads—but now we have the reverse, their infrastructure, their road network, is far superior to ours. We sit back and say, "Whilst we are competing with the regions within the United Kingdom and Northern Ireland, we are now competing with a far higher level of infrastructure in economic terms attracting economic development, et cetera. We need a dynamic economy to eliminate social deprivation, et cetera. I do not want to be of the begging bowl mentality because that is one thing I totally disagree with, but in relation to that those are objectives. In terms of criteria, where would you locate that land mass, that competition in economic terms, in infrastructural terms, and where do you go, because that is all rooted in attracting foreign direct investment, exports and all the rest of it. We have a problem with that. Whilst my heart would say it is a great way to go and I can throw all sorts of statistics at you, levels of mental health, disability, whatever, I have to say that is transient by its nature as well, very subjective and would it help Northern Ireland to get a fair shake, I do not know.

  Q863  Chairman: Can I put this point to you. The Treasury did a very detailed needs assessment in the mid-1970s, 1977/78, and what they seem to have been doing over the last 30-odd years is updating that periodically and still using it not exactly as a base for the whole thing but as part of the calculations. If you had a needs assessment drawn up by a wholly independent commission, nothing to do with the Government, you would have to take it out of the hands of the Treasury, I accept that—

  Mr Bunting: I think we would all agree on that.

  Q864  Chairman: So you take it out of the hands of the Treasury and you give it to an independent body and tell them to have a needs assessment, it need not be as detailed or as comprehensive as the one the Treasury did, which took about three years, but you could have five or six comparators, variables, and if they concentrated on those you would get 95 per cent fairness. You would never get 100 per cent fairness but you could get a very considerable degree that is fairer than the present system. That would take care of a fair number of your problems, would it not?

  Mr Bunting: The other point that would have to be factored in there as well is the legacy of our own conflict.

  Q865  Chairman: Yes, of course.

  Mr Bunting: With the segregated society still there, is the conflict over, as witnessed two weeks ago, what is the future of it and where are we all going. If this formula came out and we examined it and said it had given us a degree of assurance, why not even if it went for a short period of time and then we could all stand back and review it.

  Q866  Chairman: The Australians do it via a Commonwealth Grants Commission and review it on an annual basis.

  Mr Bunting: Yes.

  Q867  Chairman: They are independent of the state governments, independent of the federal government and they produce their assessment. I am told that what happens after that is for about two or three days everybody complains how unfair it is and, "They have forgotten this. We deserve more than X, Y or Z", but it then goes to sleep after that for another 360 days, then they produce the next assessment and you have another two or three day eruption and then it calms down again. I would not say it was an ideal system because there are obviously differences between the way in which they are structured in Australia and the UK and all the rest of it, but the principles behind that would seem to me at any rate to be something that clearly we should look at very, very seriously indeed.

  Mr McAleavey: I think the reaction to the allocation, no matter what formula or method is used, is probably the same. I do not think there is anybody who would jump up and down and say, "The Barnett Formula is wonderful and does us really well", so everybody tends to say negative things no matter what the formula may be. I would support a needs-based analysis because it seems that the only need in what is called the Barnett Formula that is recognised is population size, which is fairly objective but clearly very crude. I certainly would support a needs-based analysis. We used it here for small amounts of money in the first peace programme, we allocated money to district council areas by population with a weighting for deprivation and using the Noble indicators that were deprivation indicators here that the government had in Northern Ireland. I would support that type of thing. Where you get worried is how you arrive at what the needs are and are they different for Scotland, Wales and Northern Ireland. One of the issues in Northern Ireland is the economic one in that we do sit between the economies of the Republic of Ireland and England. For quite a while the Treasury lost 500 million a year in revenue in terms of diesel taxes because everybody bought their diesel south of the border because it was cheaper. The economic development that took place and the pain that has taken place has always had an impact on the development of our economy. Our economy is clearly under-developed with a heavy dependence on public expenditure and all of that. Is that going to be the same in Wales and Scotland? I am not so sure. I am wondering can the same indicators be used for all. The wider the indicators, the better they are at seeing need, but presumably it gets more and more complex and presumably the reason that the Treasury has stuck with Barnett for 30 years is that it has been relatively straightforward.

  Q868  Chairman: It is easy. From the Treasury's point of view it is absolutely marvellous, they have not got to think too much about it and they apply mathematical formula and that is it.

  Mr Bunting: They know exactly what the calculation is going to be for all of us.

  Q869  Chairman: So from that point of view I can see that it is easy. The question is, is it sufficiently fair? I have doubts as to whether it is.

  Mr Corey: I suppose you could almost argue that the Treasury's line saves public expenditure in that there is no money being wasted on complex formula. We represent working people and families in Northern Ireland, Seamus represents the voluntary and community sector, and our anxiety is not to see something which in time comes to be seen as having the result of less public expenditure being available in Northern Ireland. Everything is caveated by that.

  Q870  Chairman: We understand that.

  Mr Corey: The opening answer from Peter to the question "Has Barnett been fair" is we do not really know, in truth. I would make four points in addressing the needs issue. It comes back to something you said, my Lord Chairman, a wee while ago about how the Treasury makes decisions, say on the Olympics, and nobody has a say in that. The first question is the Formula is about dividing up the cake and what size is the cake that is being divided up. At the moment the Treasury can make decisions about the overall size of the UK cake knowing that their decisions will have no impact on the devolved administrations in terms of their funding. It has an impact in the sense the cake has got smaller, but the Treasury can make decisions in terms of how it is going to spend money in the UK in the knowledge as to whether or not this is going to have a consequence for a devolved administration. If we were moving to a needs-based assessment, and that would be the needs of all regions of the UK and all devolved administrations, then the question would arise as to what is the cake that is going to be divided up in the needs-based assessment and is it the same cake that is there at the moment. Would it be the comparable services and functions formula that would be used or in some way would it be different. That is a question that occurs to me. The second point is in relation to the needs assessment itself you said could you have five or six comparables or variables. In moving to any needs assessment, all the commentators in everything we read say this is very complex, it is going to be subjective, it will not be wholly objective, and there will be all sorts of arguments as to what should or should not be in it. I think Seamus made the point, which is the third point I would make, is a needs-based assessment sufficient to accommodate any other inherent demographic or geographic differences between Northern Ireland as it sits—we are separated by water from the UK—which do not affect Wales or Scotland to the same extent or in the same way. Is needs-based assessment capable of addressing that. The other point would be to what extent can a needs-based assessment exclude politics in its application because, and I hasten to make it clear we are non-party political, we are a trade union without any political objects and we are not in any way linked politically, the reality is decisions about expenditure by the UK Government for Scotland has very different political implications than it does about expenditure for Northern Ireland in terms of the UK Government. To what extent can you create a needs-based formula and bring all the variables into play which would have no political influence or would be objective as opposed to subjective. Those are the things we would be anxious to examine if someone was presenting an alternative by way of a needs-based assessment from a Northern Ireland perspective.

  Mr Bunting: Just to add a caveat. Reading through Heald, I will read the quote again because you can understand our dilemma at times here. It says: "However, it is an illusion to think that a needs assessment automatically brings more resources". From an empirical researcher with data like that, that frightens me, worries me, concerns me.

  Q871  Lord Sewel: There will be winners and losers.

  Mr McAleavey: Inevitably.

  Mr Bunting: We are not here to advocate that we be losers.

  Q872  Lord Sewel: I think it is a little bit rich, quite honestly, to hear the argument, and you have not advanced it but we have heard it elsewhere, that because it is population-based it is objective and that contrasts with a dreadful, politically manipulatable, subjective needs assessment. Okay, the formula may be objective, but if you look at everything that is in the base from pre-1979 that was all subjective. If you look at the bypassing that went on right the way through, that was subjective. The total amount that is delivered through that process, a heck of a lot of it is subjective.

  Mr Bunting: If you go back to what we have said about three or four times, we do not know if it is fair or unfair. It is unfair if we are in the very subjective position of others saying, "We're not going to advocate something in that sense", so denying people more public expenditure in Northern Ireland, and that is a problem for us. What happens will happen. No matter what it is in life, everything changes. Workplaces change, technology changes, terms and conditions of employment change, we all change. In essence, the Barnett Formula at some stage or other will be reviewed and everything has to evolve, nothing can stay static forever. That is life. What we would be attempting to do is get the best for Northern Ireland and you would not expect us to say anything else.

  Chairman: I think you have made the Northern Ireland position very clear. Thank you very much indeed, it was kind of you to come.

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