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Barnett Formula

My Lords, I congratulate my noble friend Lord Richard and the committee on an excellent report. When I persuaded the House to set up an ad hoc Select Committee, I hoped it would be a strong committee, and I was certainly not disappointed. It was a very strong and distinguished committee; it had two Secretaries of State for Scotland and the former Chancellor of the Exchequer, the noble Lord, Lord Lawson, with whom I agree from time to time—and I certainly agree with him and what he said today. It was wonderful to hear the noble Lord, Lord Moser, with his great statistical knowledge and experience, speak in the way he did in support of the committee’s report. The case for a needs-based formula has been set out so clearly in this report and by speakers in this debate that there is no need to repeat it. The reason I have been pressing for change for so long is, as has been pointed out by other speakers, the need for basic fairness in the allocation of expenditure. The worry I have had for some considerable time is that, if we did not do something about it soon, the only people who would benefit from this would be those who wanted to break up the United Kingdom, like the SNP in Scotland—something of which I doubt whether anybody else in this House or in any other House would be in favour. The overwhelming case in this report has been made brilliantly, in my view, as has the case for an independent commission to deal with the job. I should like to follow the noble Lord, Lord Lawson, on one aspect—this whole question of convergence that we have heard so much about. Like the noble Lord, I have affection for officials in the Treasury; no one who has spent as long as he and I have in the Treasury could not but have affection for officials there. But convergence was referred to in paragraph 53 of the report, and it is worth quoting: ""The most serious criticism of the current basis of funding is that, whilst the core allocation (the baseline) has been built upon since the Formula was first applied, it has never been reviewed"." The only convergence there could conceivably have been, therefore, would be back to that corrupt baseline. But in any case, over the years that have gone by, there has not been any convergence, so how anyone could say that it would bring about convergence I do not know, because we have seen that it has not brought about convergence. As I indicated in my evidence, from which my noble friend Lord Richard was kind enough to quote, I never expected that the formula would last three years, let alone 30 years. I think it was the noble Lord, Lord Moser, who said that it was a tribute to the formula that it lasted 30 years. It was not a tribute to the formula; it was a tribute to the fact that Governments of all persuasions do not like to make the major changes that are needed. As we all know, that is really the case—it is not just new Labour; it is everyone else as well. I myself thought it would last only a short period time. It began to be recognised as the Barnett formula only after the Thatcher and Major Governments kept it going for another 18 years, followed by the Blair-Brown Administration for another 13 years. So, when I published my book in 1982 called Inside the Treasury, which everybody will have read, of course, I never even referred to the formula, because I never dreamt it would last that long. Now there is the question of pressure for a review. I should indicate that it is not anti-Scottish; it is about fairness. Indeed, when we have a needs-based formula, which I am sure we will have at some time or other, there will need to be a transitional period, as the committee rightly said. It is possible that the review might show that Scotland needs some extra money. There is certainly a case for parts of the north-west of England and the whole of the north-east—if one looks at the figures and sees how badly they have done—to have some more expenditure. I do not know how long the transitional period would have to be, but there may well be a need for a transition if the grant to Scotland were substantially reduced. Why on earth anybody should worry politically about it, I do not know, because after keeping that formula for 18 years—I do not have to tell noble Lords—the Conservative Party lost every single seat in Scotland. So keeping the formula going or turning it into what is called "a recognised formula" did not exactly do it any good. The next Parliament, whoever forms the Government, will, as the noble Lord, Lord Lawson, indicated, need to make major cuts. If it does not do something about this, the people of England will not take kindly to those public expenditure cuts when they see, as the noble Lord, Lord Lawson, said, 27 per cent higher expenditure—approximately £1,600—per head in Scotland. It is very cleverly used by the present SNP Administration in Scotland to the political benefit, it hopes, of that party. I come now, briefly, to the Government’s "response", though it is a disgrace to call it a response. The committee made a carefully drafted case for change, and what did the Government say? I do not mean my noble friend Lord Davies, who, I am sure, would not have said this. In paragraph 2.15 the Government note the committee’s views. They go on to welcome "the careful analysis". What will the Government do? We are told that they will, ""keep all aspects of public spending under review"." We do not need another review; we have an excellent review here in this report. There has been no attempt to answer the overwhelming case made. In paragraph 2.17, all we have is that there are, ""no plans to make … changes"." It must not just end here. There is a need now for whoever is in government after the next election to do something about this report. Public expenditure will be a crucial issue. The noble Lord, Lord Lawson, referred to it as the number one challenge for the next Administration. I entirely agree. In chapter 2 of the report, we are told that spending in devolved Administrations is £62,956 million and the part subject to the formula is £48,976 million. It is not petty cash. I hope the Minister and the Opposition will today make a case. Doing nothing is simply not possible. I hope my noble friend will not, once again, give us some waffle. I know he is very good at it. Perhaps today he will give us a better reply to this excellent report. We have not had it yet but I hope we will by the end of today, whatever my noble friend says and whatever the Opposition say. We should remember that when David Cameron went to Scotland for the first time as leader, he assured the Scots that he would keep the formula. He obviously had not noticed what had happened previously. I hope that whoever is in government after the next election will implement this report. It is vital to the future of this country.