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Barnett Formula

My Lords, the original decision by my noble friend Lord Barnett, as Chief Secretary to the Treasury, was to simplify the very complicated examination of the expenditure and to avoid the many sessions with those concerned with expenditure in England, Scotland and Wales. I was the Financial Secretary and I agreed fully with what he had to say, which was that England should have 85 per cent, Scotland should have 10 per cent and Wales should have 5 per cent. That was a sensible reduction of the complicated expenditure system. It was intended to last for a limited time, with perhaps a year or two before it was changed. We did not consider that the decision would be successful after more than a few years. This was not a matter that came before us. The formula was substantially based on population, not need. It avoided the negotiations with and pressures from all Secretaries of State, which would have been a major problem for the Chief Secretary to the Treasury. In Question 74 in the evidence, the noble Lord, Lord Lawson, said to the noble Lord, Lord Barnett: ""What has happened since then—it is not your fault because you had no intention in this regard—is that the population trends have diverged and that has not, except to an absolutely minimal extent, been taken into account by your successors in the operation of the true system"." The noble Lord, Lord Barnett, said, "Yes". That was a sensible response. Although there was no needs assessment at the time, there was one in December 1979, after the noble Lord, Lord Barnett, had left office. A major problem has been the failure to take account of the change in the population in Scotland compared with that in England. At the end of the session, the chairman said to the noble Lord, Lord Barnett: ""You devised a mechanism which you hoped would last for a few years. You did not expect it to last for as long as it has lasted. You are not sure now whether it is based on the right criteria and you lean towards having, among other things, a needs based assessment. Is that fair?"." The noble Lord replied, "That is fair". In the years that followed, what needed to be the main considerations in assessing the needs of Scotland compared with England were the age of the population, the levels of population with low income, the numbers with ill health and disability, and the levels of unemployment. The change in expenditure over the country over the last 30 years has been enormous. Expenditure in Scotland was £126 per head, in England it was £103 and in the United Kingdom it was £100. This has grown up enormously, far more than anybody ever expected. If they had taken that into account, those 30 years would have been quite a different period. The noble Lord, Lord Lawson, said in his valuable speech that we need to assist people, not the territories. Although that is opposed by Scotland, it is justified. He further said that the Treasury response to the Barnett formula report is an embarrassment. I look forward to hearing the response from my noble friend Lord Davies to all the questions in the debate that we have had today. The view has been unanimous, so he will have a rather difficult time in dealing with some of these points. The Barnett formula has no legal standing. It can be removed and I believe that it should be.