Examination of Witnesses (Questions 873
- 879)
WEDNESDAY 1 APRIL 2009
Rt Hon Jim Murphy, Rt Hon Paul Murphy and Rt Hon
Shaun Woodward
Q873 Chairman:
Thank you very much for coming. You know what we are about and
you know the limitations on our mandate and the extent of it.
It is very important that we talk to the three Secretaries of
State as to how they see it. I do not know whether each of you
would like to make an opening statement or whether we can launch
into the questions?
Mr Paul Murphy: Lord Chairman, we can launch
straight in. We will all say the same thing anyway, I think.
Q874 Chairman:
I have a general question to start off with and I would clearly
like all three of you to answer it, if you would. What do you
think are the chief merits and demerits of the existing formula
as the basis for funding the Devolved Administrations? Do you
think it is a sustainable basis for funding with Devolved Administrations
in the long term? Do you think there have to be changes to the
Formula? What effect do you think it has on equity and fairness
across the UK as a whole and do you think it is a device which
actually pulls the UK together or does it tend to drive it apart?
Mr Paul Murphy: I have lived with Lord Barnett's
Formula for almost 30 years myself. When I talked to government
a long time ago in Wales Lord Barnett had just started to implement
his Formula and entering government a dozen years ago as Finance
Minister in Northern Ireland, and then later as Secretary for
Wales and Northern Ireland, it has been part of my life for a
long time. Its longevity says something for it because it has
been there for three decades and there have been a number of attempts
to have a look at it and see whether it could be improved, or
indeed completely replaced. All of those attempts, it seems to
me, have come to nothing and I think that although inevitably
any system will have difficulties and problems, my own view is
that I think this one works reasonably well. I know there will
be detailed questions about how it works during the course of
this session, but as you are asking us, Lord Chairman, about the
overall view of it, I see great merits in it. I think that because
the Devolved Administrations are able to spend the money that
they get in what is effectively a block grant in a way they want
is a good thing. I think it is good that they do not have to spend
exactly the same way that it is spent in England. They may choose
to do so but they do not have to and that is a good thing. I think
its relative simplicity is good because any other system I guess
would be more complex. I think it is reasonably fair with all
four countries getting the same cash increase per head and I do
think that to replace it would be more trouble than it is worth.
Generally speaking, I cannot see any huge disadvantages but I
do see pretty significant merits in it, even though it is not
perfect. I suspect the reason why any system would not be perfect
is that we do not have a federal system of government in our country,
that our devolution system is an asymmetrical one with three different
settlements being served by the same system of funding which,
despite problems that may have occurred over the years, has stood
the test of time.
Q875 Chairman:
Do you know what Lord Barnett himself says about it?
Mr Paul Murphy: I do. He is my neighbour.
Q876 Chairman:
He gave evidence here to us and he was really very specific and
forthright about it and said it was a political decision to start
the Formula in the first place. It did not even become the Barnett
Formula until it had been around for ten years. It was designed
to deal with the short term set of problems that they had with
potentially Devolved Administrations but he thought it was way
past its sell-by date and that there should be some question of
some injection of the idea of need into the way in which the Devolved
Administrations receive their money from the centre. Do you disagree
with that?
Mr Paul Murphy: I disagree in the sense that
I think he underestimated the success of his creation by those
of us who have to administer it. Over 12 years on and off I have
lived with this Formula and, although there have been ups and
downs, I cannot think of a better one. I suppose we will come
later on to the detailed question of needs formula, but I think
it has met the needs, certainly in terms of the country I represent
around the Cabinet table. Obviously my colleagues will have to
comment themselves on how they feel it meets the needs of Northern
Ireland and of Scotland, but I do believe it has met those needs
well. It has met them in the sense that, indeed, some English
Members of Parliament and Members of the House of Lords doubtless
would think it has met them too well, but then that is not my
job. My job is to ensure we get the best possible deal for those
territories and countries that we represent around the table,
and certainly from the Devolved Administrations' point of view
they have done pretty well out of the system.
Q877 Chairman:
I do not think that is the view of the administration in Cardiff,
if I may say so. We went to Cardiff and took some evidence down
there. It was very difficult to find anybody saying an enthusiastic
word for the existing Barnett Formula and the general feeling
there seemed to be that a fairer system was capable of being developed
and it would be more equitable were it to be introduced.
Mr Paul Murphy: As you know, the Welsh Assembly
Government is having its own inquiry into how the Barnett Formula
works. I have obviously met with the chairman of that inquiry
and I meet on a regular basis with the First Minister and the
Minister of Finance and of course there are issues which again
we will come to later which are raised on a day by day basis.
I am not yet convinced that there is a better one. I am not saying
it is perfect but I do not think there is a better one and we
must wait and see the evidence of that commission and see what
they have to say. I am sure your Committee would find it of great
use and interest. I think it has served us well.
Mr Jim Murphy: My namesake, the Secretary of
State—and the irony is that the only one who is not a Murphy
here is the one representing Northern Ireland, but that is maybe
neither here nor there—has said that he has lived most of
his political life under the Barnett Formula. I have lived most
of my entire life under the Barnett Formula. The advantages are
many of the ones Paul has already referred to but the relative
transparency, the predictability, the stability that it offers
alongside the three year spending review process—I think
this terrible jargon that is in Anton Muscatelli's thoughtful
report which talks about horizontal fiscal equalization; in other
words, a degree of redistribution—I think that is a strength
of the current arrangements and that is something that is referred
to in Muscatelli's report. As we have already heard, it is not
without its imperfections, but one of the strengths that the Muscatelli
document refers to is, having looked at all of the other current
articulated alternatives, it is certainly stronger than those.
Of course, it is something that the Calman Commission continues
to look at and their work continues. It certainly offers those
principles of transparency, stability, efficiency and on that
basis it has considerable merit.
Q878 Chairman:
Do you think it is fair?
Mr Jim Murphy: I believe so, yes.
Mr Woodward: I would endorse the comments made
by my colleagues and really add that there is an expression of
humility on the part of Lord Barnett in saying to some extent
he is surprised that it lasted. The answer to that is it seems
to me self-evident because actually nobody has produced anything
better. The fact of the matter is that any system is going to
produce unfairness. The question is whether or not you can actually
produce a system which fundamentally and in a wholesale way removes
the inconsistencies and the unfairness in the process. I do not
think it has been a want of trying or a want of talking about
it and a want of politicking about it; it has been the fact that
nobody has produced anything. It may be that this awesome system
responsibility that this Committee has taken on will actually
produce that. I can certainly see that it is possible for the
administration in Wales to make the argument that they do and
I can see that the administration in some other part of the United
Kingdom could make a similar argument, but in the end would we
produce something which has as great an equitable value as this
system has? That really leads me to say on the question of is
it fair I can answer by saying yes I think it is reasonably fair.
Does it, after all, through the Barnett squeeze actually work
towards some kind of sense that one day we might have greater
equality? Yes, it does, and it does it in an incredibly slow,
tortuous and incremental way, which is perhaps quite a good thing
in an English system, but fundamentally the question I would put
on the table is "does it work?" At the moment it works.
The only thing I would say is that before the wheel is reinvented,
which I am sure it will be by this Committee, I only hope that
what is put in its place, if that is the design of this Committee,
will actually give whatever the inadequacies of Barnett, as great
a fairness and as great a workability as this has, albeit, I am
sure, it is perfectly possible for people in different parts of
the Devolved Administrations to actually say it could be better.
Q879 Lord Lang of Monkton:
The baseline for the Formula was not based on any assessment of
need; it was based on an accident of history. Do you regard that
as a fair long-term basis?
Mr Jim Murphy: It has borne the rigorous test
of different political philosophies, change of governments and
decades. It is a reflection of spend at that moment in time. On
the basis that it is using that baseline rather than a zero-based
approach, then of course it is tied to that original baseline
and events, priorities and profile at that time. I would argue
that it starts from a reasonable basis. I can only speak in respect
of Scotland of course. On the basis that it is a country with
10 per cent of the population, a third of the landmass, 800 islands,
8 per cent of Europe's coastline and public services are more
expensive to deliver in Scotland and I think that is reflective
of both what was happening in the 1970s, throughout the Eighties
and today.
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