The Barnett Formula - Select Committee on the Barnett Formula Contents

Examination of Witnesses (Questions 1020 - 1033)


Mr Liam Byrne, Mr Mark Parkinson and Ms Helen Radcliffe

  Q1020  Lord Trimble: Assume the Government wanted to have a different basis?

  Mr Byrne: I guess what I am saying is that I do not think the constraints necessarily would be financial because the dynamics of a block grant are to avoid any risks of hypothecation. As I say, the increments are bundled up, put in a block, moved over and the devolved administrations then have the flexibility to spend it as they see fit. I suspect the constraints on the kind of flexibility which you mentioned, for example, are in other aspects of legislation would be my working hypothesis.

  Q1021  Lord Forsyth of Drumlean: We have an example. Water was privatised in England but not in Scotland, so the Barnett consequentials were lost in Scotland. With health obviously it would be a much bigger bundle?

  Mr Byrne: Yes.

  Q1022  Lord Trimble: Actually we preferred that we continued with water in the public sector, which led to significant under-investment because the money was no longer there and the scope for variation is actually very limited. My impression is that you can only vary policy where it does not cost a huge amount. Once it come to any significant amount of expenditure, then you have problems. That is why there has been so little variation, obviously.

  Mr Byrne: I will have to reflect on that a bit further, but I think the constraints are not within the rules of how flexibly you can spend the block grant. There may be constraints which are imposed by the overall envelope which comes to different nations and there may be other constraints in legislation, but I should reflect on that a bit further.

  Q1023  Lord Forsyth of Drumlean: When I was Secretary of State—Lord Sewel gave the example—we used to do deals. If there was a problem with, for example, a big pay rise in the Health Service and the formula consequentials were going to be less because our baseline was 25 per cent higher, there would be a big gap and I would go along to see the Chief Secretary and he would say "No," and then I would go and see the Chancellor, or whatever, and that is how the formula bypass operated. Now, of course, that you have different administrations and a different regime that kind of collegiate collective responsibility does not operate in that way and looking at what has happened since the Scottish Executive was established there has not been a lot of formula bypass. You gave some minor examples. Insofar as there have been disputes, they have related to English expenditure, which have been classified as English expenditure and not UK expenditure. There have been one or two issues, I think the Olympics, the prisons, and one or two other issues. So the question I want to ask is, what are the criteria which the Treasury use to establish whether something is an expenditure which has not got formula consequences, i.e. is England only? It would be very helpful to have that, or even to have a note on it. The second part of the question is, why should the Treasury of all people be the sole arbiter in this matter because they are hardly impartial and without an interest? Is it not the Treasury's job to resist all expenditure of all kinds, in all circumstances?

  Mr Byrne: Clearly the Treasury is the best judge of this question.

  Lord Forsyth of Drumlean: Because?

  Q1024  Lord Lawson of Blaby: No, that is absolutely right! It was a good answer!

  Mr Byrne: I can do a note. I think there are basically three dimensions to this. The starting point is obviously the schedules to the Scotland, Wales and Northern Ireland Acts, which I read this morning. The schedules are very long and detail in great length exactly what are reserved matters and what are not, and what the Treasury does is basically take those schedules and translate them into budget lines, and those budget lines and, in essence, the comparability factors are then set out in the statements of funding policy. Those statements of funding policy are then consulted on with the devolved administrations. I think they have been pretty consensual, actually. I think people have tended to agree to quite a large extent on that sort of mapping between the schedules and the budget lines. Then the third dimension is obviously exceptions, as you have said, the Olympics. I think you are right to say that the controversies, such as they are, have centred on spending and projects in England. Two obvious examples are the Olympics, where the Treasury quite correctly said that that is a UK venture of benefit to the entirety of the UK. A different example would, for example, be Crossrail, which was judged to be much more of benefit to London and England and therefore did carry a series of Barnett consequentials with it.

  Q1025  Lord Forsyth of Drumlean: But not initially? The initial line was that Crossrail, as I understand it, was not and there was this problem of funding the Forth Bridge and suddenly the Treasury decided that it was, which suggests that the Government -

  Mr Byrne: It was clearly a finely-balanced decision!

  Lord Forsyth of Drumlean: What was it balanced on?

  Q1026  Lord Rowe-Beddoe: Chief Secretary, before I ask the question, in the absence of Lord Rooker I would like to place on record that I thought he should be recommended for appointment to the Order of the Red Dragon, First Class, for his intervention! I was greatly appreciative, and I know my Lord Chairman was, too. Let us talk about something which is really very speculative for you, I appreciate, but it is actually coming back to an interchange between you and Lord Lawson with regard to one of your `C's, change, and how would one manage change. We understand that there is a six monthly meeting between the Chief Secretary and the three Finance Ministers of the devolved administrations. What do you think they do at that meeting and what do you intend to do?

  Mr Byrne: I have not fitted one of these meetings in during the last week and a half, but my steering brief says that the last one was on 12 March and the last one focused on what I think is colloquially known within the Government as "fighting back against the global downturn", by which I think they mean the economy! Seriously, it centred on what measures can be conducted together to combat the recession. How do we make sure that the programmes for delivering counter-recessionary measures are delivered effectively because there are differences in delivery arrangements in different parts of the UK. They also centred on how we can improve value for money and how the Treasury's efficiency targets should be shared between different parts of the UK. So from that I take it that they will be pretty wide-ranging and it is my ambition to get one of these meetings in fairly quickly.

  Q1027  Lord Rowe-Beddoe: You would obviously envisage that if you wanted to have a Barnett Formula discussion, this is the forum in which it could take place?

  Mr Byrne: I think so. I think that would be a good forum. I am not sure what extent of agreement we would get out of it, but it would certainly be a good forum to start a discussion.

  Q1028  Lord Rowe-Beddoe: Probably more than you would think at this stage, I would say?

  Mr Byrne: With the Committee's report on the table we will all be better equipped to conduct it.

  Q1029  Lord Moser: Chief Secretary, I think in your last post you were responsible for all government statistics. That is right, is it not?

  Mr Byrne: Yes.

  Q1030  Lord Moser: So I think it is quite appropriate that we end with this one. It is really just that a number of witnesses have expressed criticisms of one kind or another about the statistics bearing on the Barnett Formula and public expenditure generally. There are different kinds. Some of the complaints or some of the confusion is about how the Treasury works out the comparability factor. That is one thing. Some witnesses complained that it was extremely difficult to get data showing the spread of public expenditure across the UK, et cetera, so various points and I am sure at this time of day we do not want to go into details. I think what is important is whether the Committee might be in a position to say that the Treasury is improving the transparency of the operation of the Barnett Formula by publishing clearer and simpler statistics. You have made some progress in the last week or two, the Treasury has suddenly come up with more helpful data to us, so I think the basic issue for the Committee is whether, because so many witnesses have expressed frustration about the transparency of the operation, the way the formula works, we might be able in our report to say something positive about improving the data?

  Mr Byrne: It would be enormously helpful to me personally to have the Committee's opinion on which data could really do with more clarity and more transparency. I guess I would urge the Committee to go beyond merely the elements in the Barnett Formula because, of course, they basically come down to what are the changes in DEL budgets, what are the ONS population figures, what are the comparability factors, and those data are pretty well set out in Spending Review White Papers and in the statement of funding policy and I have just got a sneaking suspicion that many of your witnesses will actually be interested in that basis, for sure, but actually they will be interested in some underlying factors as well, but it would be terrifically useful to have the Committee's advice on which is the real data that needs a better job done with it.

  Q1031  Lord Moser: It may be, Chairman, if the Treasury has in mind any changes in the way it publishes data relating to the Barnett Formula perhaps we could have a note?

  Mr Byrne: I would be very happy to do that. It may also be useful to either the Committee or the Committee's advisors to look at, I think it is either chapter 6 or chapter 9 of PESA published tomorrow, which obviously provides a complete comprehensive breakdown by region and by function.

  Q1032  Chairman: Thank you very much indeed. There was one other matter I wanted to raise, if I might. I think the Treasury has offered to send us the 1994 assessment. If you could let us have a copy of that, we would be greatly obliged. It would be very helpful.

  Ms Radcliffe: Yes, absolutely. You should have had it.

  Q1033  Chairman: We do not seem to have had it, so if you could let us have it?

  Mr Byrne: Yes, we will get it out of the basement!

  Chairman: Can I thank you very much indeed for coming. It has been a very useful session and we have learnt a great deal. You have opened a few windows and closed others, but thank you very much indeed. You have been very helpful. You have been so generous of your time.

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