The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 920 - 937)


Rt Hon Jim Murphy, Rt Hon Paul Murphy and Rt Hon Shaun Woodward

  Q920  Lord Rooker: I agree entirely with what Shaun said about the drug. Policy diversion from devolution, that is what we expect. What we do not expect is competition. If it was thought by, let's say, the English that the Welsh, Scots and Northern Ireland got more unfairly and then used the extra bit for competition against them, they would be annoyed. The example I have got is this. As I understand it, the Welsh Assembly Government has given a subsidy to manufacturing industry causing mayhem with companies who have branches on the English side and the Welsh side of the border. Do they sack and close their factories in England and move to Wales to take advantage of that? This is not a devolved issue in the sense that subsidy to manufacturing industry does not figure on the list. The fact is they have got the money to do it. Because they have that extra money to do it that the regions have not got here, the RDA's in England do not compete with each other. It is set down in tablets of stone, I understand. They do not compete with each other with the various tranches of money they get. This is an example on the mainland where the border now is a problem and a policy divergence on an issue like that where it creates competition between the regions of England and in Wales cannot be acceptable.

  Mr Paul Murphy: If those differences are as stark as that then I rather suspect the state aid rules would come in and tell us that that could not happen. Certainly there are different schemes and, Lord Rooker, if you want to let me know particularly what concerns you, we could look into it for you. There are different schemes in England and in Wales to help, particularly at this time of the downturn, companies which are in difficulty. My explanation for that is that there are different ways in which different governments decide to help. That is an inevitable consequence of the policy of devolution. If in fact there were regional governments throughout England, as some of us think there should be, then we would be perhaps in a better position. Wales would compete with Scotland, Scotland would compete with Northern Ireland and Northern Ireland certainly competes with the Republic of Ireland. I am afraid in a sense we have to live with that because that is the way we deal with it.

  Chairman: We have a division.

  The Committee suspended from 6.18 pm to 6.30 pm for a division in the House

  Q921  Earl of Mar and Kellie: To finish off my question which was about how the actual process of decision about whether spending was United Kingdom or England, the one time when this definitely seems to have worked against Scotland, Northern Ireland and Wales would be over the regeneration aspect of the Olympics. We have been given evidence of the fact that the Treasury makes all these decisions but I wonder whether that is really the case. What was your part in the decision that there should be no Barnett consequential?

  Mr Jim Murphy: I was dealing with the Lisbon Treaty in the House of Commons at the time which was much more straightforward.

  Q922  Chairman: Do you know whether your predecessors were consulted?

  Mr Woodward: I do not know.

  Q923  Chairman: Would you expect them to have been consulted?

  Mr Paul Murphy: If the Devolved Administrations had felt uneasy about the decision then most certainly they would have been discussing the issue with the ministers. That is my guess but I do not know.

  Q924  Chairman: If you had been in that position would you expect to have been consulted before the decision was taken?

  Mr Woodward: We cannot speak for our predecessors. That is relevant, Lord Richard, in relation to answering your question. What we can say of course is that this was discussed at Cabinet. The decision about the Olympics was discussed at Cabinet. There were Cabinet subcommittees and by implication Cabinet Members were involved in discussions about that. What none of us can possibly tell you is what any financial implications might have been from that and what discussions might have taken place. It would be risky for us to speculate.

  Q925  Chairman: Can you tell me what was discussed in Cabinet? I do not want the details but just the subject?

  Mr Woodward: You would have expected the Olympics to have been discussed at Cabinet.

  Mr Jim Murphy: While it is not strictly the regeneration aspect, whether for example the associated investment in London around Crossrail with the approximately £500 million now confirmed as a Barnett consequential is something that since taking up this post I have been involved in discussion with the Treasury and the Scottish Finance Minister about. The read across from that number one transport investment in London to the number one transport investment in Scotland would again be the Forth rail crossing.

  Q926  Chairman: Are you getting anywhere with the discussions?

  Mr Jim Murphy: Yes, it is now confirmed.

  Q927  Lord Forsyth of Drumlean: What the Earl of Mar and Kellie was getting at was the arbitrary nature of the decision as to whether something is UK or English expenditure. Mr Jim Murphy, the Scottish Secretary, has had a victory in persuading somebody—presumably the Treasury—to treat the Crossrail expenditure part of it as being infrastructure and therefore having Barnett consequences in order to fund the second Forth Road Bridge crossing. The original position taken was that Crossrail was not expenditure which would have Barnett consequences. The point which the Earl of Mar and Kellie is making is is it not a great weakness in the system that somebody—we do not know who—in the Treasury will decide without any accountability what is UK and what is English expenditure and if there is accountability can we know what the criteria are for determining it?

  Mr Jim Murphy: The way in which this is arranged of course is contained in the Statement of Funding which sets it out in a transparent way. Alongside the Statement of Funding there is also a disputes mechanism. As far as I am aware, but I stand to be corrected, none of the Devolved Administrations and none of the parties to that Statement of Funding have ever invoked that disputes mechanism. Not only is it there in the Statement of Funding, but there is an appeals procedure that has never been invoked.

  Q928  Lord Forsyth of Drumlean: Why did it change on the funding of the Forth Road Bridge Crossing?

  Mr Jim Murphy: A strong argument was made about the importance of the Forth Road Crossing, the way in which it was a strategic priority for Scotland and that that money should then read across on Barnett consequentials. This picks up on a number of points.

  Q929  Lord Forsyth of Drumlean: When you say that a strong argument was made, what was the argument? Was the argument we are in great political difficulty here, we need the money, and somebody then decided there are Barnett consequentials, or was the argument about why it merited Barnett consequentials?

  Mr Jim Murphy: There was an argument based on the merit of the individual case, based around the issue of the Statement of Funding made the argument in the context of the Statement of Funding that this was important and that there would be Barnett consequentials. It was a detailed straightforward argument with the Treasury.

  Q930  Lord Forsyth of Drumlean: I may be missing something but whether there are Barnett consequentials or not relates to whether or not this is English or UK expenditure, does it not?

  Mr Jim Murphy: Yes.

  Q931  Lord Forsyth of Drumlean: You must have had to argue that this was not UK expenditure but English expenditure in order to get it. It is nothing to do with the merits of the proposal.

  Mr Jim Murphy: One never knows why one is successful in an argument with the Treasury. If one could make the precise argument and understand the most effective way of doing it, then you would use that argument on each and every occasion. I made the argument along with others, my colleague Des Browne as well, about the Barnett consequences on Crossrail and it is important in terms of that strategic infrastructure project that there is a read across in terms of Scotland as well.

  Mr Paul Murphy: There are developments in terms of how disputes are looked at and hopefully resolved. They have grown up over the last number of years. There are three really: the first is the increasing use of bilateral meetings between the devolved finance ministers and the Chief Secretary to the Treasury on individual issues that affect the particular country. Secondly, quadrilateral finance meetings to which I referred earlier, but perhaps most significantly in the last year or so the Joint Ministerial Committee structure which has lain dormant for some time and has now been resurrected—it is my job to look after that side too—and a new Statement of Funding but also a new memorandum of understanding in the Joint Ministerial Committee which allows for distributes ultimately to go at the final point to the JMC to be discussed. Obviously it is best if they can deal with it earlier.

  Q932  Lord Trimble: You have described how there are ways in which issues can be raised and to a certain extent resolved. We are dealing here with a situation where you have Devolved Administrations of a different political complexion than yourselves. Is it really then a hope that you should continue to play a role in these issues when we are dealing with different institutions and different parties? Is it appropriate that everything at the end of the day always comes back to the Treasury and the Treasury do things and you do not know what they are doing and you are not in a position to explain and there is not proper accountability, that there are not proper criteria? Would it not be better to have a more formal process here? We were given the example of the Grants Commission in Australia. There is a separate commission which is not controlled by the Treasury there which handles these issues and does so by reference to clearly stated criteria rather than something that always comes back to some sort of star chamber-like proceedings.

  Mr Paul Murphy: Australia has a federal system which covers the entire country and it is different when you have an asymmetrical system such as ours.

  Q933  Chairman: Why does that make such a difference?

  Mr Paul Murphy: I guess in Australia that it is based on their constitution.

  Q934  Lord Trimble: It is a more recent development. Even if you go back to the very asymmetrical devolution of the Government of Ireland Act 1920, there was provision in it for a Joint Exchequer Board which would sit on and resolve these issues but for various reasons the board was never constituted and never met.

  Mr Paul Murphy: I rather fancy that the Treasury might still have been as powerful in 1920 as it is in 2009.

  Q935  Lord Trimble: That is the issue, is it not?

  Mr Paul Murphy: Yes, but essentially because the British Government is funded by general taxation. Although in Scotland there is an option for some amount of taxation, there is none in Wales or really in Northern Ireland.

  Q936  Lord Trimble: Is it not desirable to have some more transparent procedure because it is all very well to have this private proceedings with the Treasury virtually calling all the shots at a time when you had no significant difference in the political complexion of the regional administration and the centre. Now when there are political differences these are issues which are potentially difficult political issues and if there are not some clearly stated criteria, some clearly transparent procedure, are you not storing up trouble?

  Mr Paul Murphy: There is a procedure there. The procedure which first of all allows for it to be resolved at the lowest possible base, either between officials and if it cannot be officials it is ministers between the two administrations and ultimately through the JMC machinery which has been revived and which has met on more than one occasion to deal with these issues with politicians from different political parties.

  Q937  Lord Trimble: Is it not the case that JMC's are dominated by the London ministers?

  Mr Paul Murphy: I would not say that to some of the members who come from the Devolved Administrations. They make their point very forcibly.

  Mr Jim Murphy: This is an issue that Ken Calman and the Commission on the future of Scottish devolution is exercising some thought on. Initially this was not a piece of work that he had envisaged undertaking but the evidence took him in this direction of seeing what further could be done to enhance working relationships in addition to what Paul Murphy said and that is an important piece of work on which we will have some conclusions later this year.

  Chairman: We have another division. Thank you very much for coming. You will appreciate that your views have not exactly met with universal approval.

previous page contents

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2009