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Barnett Formula

My Lords, I am glad to follow the noble Lord. I enjoyed his speeches as a Minister in the House of Commons and I enjoy them in this House as well. All noble Lords will be aware of the Schleswig-Holstein question. Lord Palmerston famously remarked: ""The Schleswig-Holstein question is so complicated, only three men in Europe have ever understood it. One was Prince Albert, who is dead. The second was a German professor who became mad. I am the third and I have forgotten all about it"." Unfortunately, today we are not able to follow the mathematics of the Barnett formula like Lord Palmerston into a state of happy oblivion. The issues are far too important. I mention an interest as a former Member of the Scottish Parliament—I was a Member for eight years—and as a member of the Calman commission, which reviewed the working of the present devolution of powers from Westminster to Scotland and made a number of significant recommendations for change. The most important and far-reaching of those was to give the Scottish Parliament more tax-raising powers, which would be proportionate to a reduction in the current block grant from Westminster. I request of the Government—and whatever Government may follow—that the report from the Select Committee be considered in conjunction with the Calman conclusions, the Holtham commission report to come this summer about funding devolved government in Wales, and the position of Northern Ireland. That is extremely important, as the report that we are debating and the Calman report do not entirely endorse each other. Calman wished to retain the Barnett formula at least for the time being, while the Select Committee wants to see it replaced by a new needs-based funding system. Paragraph 37 of the Calman report states: ""Until such time as a needs assessment is conducted, the Barnett formula, proportionately reduced to take account of devolved taxes, can continue to be used to determine the grant element in the Scottish Budget"." This may indicate a different approach from that taken in the Select Committee report; it certainly does on the issue of a timescale. Interestingly, the response from the Government to getting rid of the Barnett formula was fairly dismissive. The Government defend the present arrangements, saying: ""The Government’s view is that the Barnett formula has a number of strengths, among them the merit of allowing the devolved administrations to determine their own assessment of needs and priorities in devolved areas"." They later say that they have "no plans" to make the changes to the funding formula recommended in the Lords report. The Select Committee chaired by the noble Lord, Lord Richard, contributed a great service in two respects: first, in its recommendation of the example of the Australian commission on grant funding, which takes account of individual needs, and, secondly, in what it says about transitional arrangements. I agree with the noble Lord, Lord Lang, that the timescale should be considerable and perhaps even longer than the Select Committee recommended. I note that London Councils has come out in support of the Select Committee by stressing the importance of equity. Part of the remit of the Calman commission was to concentrate on accountability, but equity is every bit as important.