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Barnett Formula

My Lords, it is a daunting task to follow the noble Baroness, Lady Hollis of Heigham, and her tour round the whole of government finance. The Barnett formula keeps coming up in discussions on finance and it is over 12 years since the last time the operation was considered in as much detail. The House owes a debt of gratitude to the noble Lord, Lord Richard, and his committee for the width of evidence that was collected and the way the committee has presented its conclusions. It has been drawn to our attention that, in the intervening years, devolution has come to three regions of the UK, which makes this study all the more appropriate. Having sat through the arguments on the passage of the then Scotland Bill, it is interesting to look back now and see what areas of administration were envisaged and the criteria that we now have to apply to things such as climate change or the marine environment. In many ways what was contained in the Scotland Act gives Scotland the opportunity to act more independently of the UK if it wishes to do so. My noble friend Lord Forsyth raised the strange anomalies in the question of the replacement of the Forth road bridge with a second bridge. But if the concept of the definition of "national infrastructure" had been foreseen, as has now occurred with the Infrastructure Planning Commission, it would have been easier to argue that something like the new Forth road bridge was an investment with implications for the whole UK economy and not just for the Scottish block grant. As it is, the Infrastructure Planning Commission projects are for England only, but their financial implications will mostly trigger adjustments under the Barnett formula. Reading the report, one can only be struck by the number of arguments put forward for greater transparency and a definition of criteria by almost all respondents except the Government. The House of Commons Select Committee even called for the publication of the criteria governing the inclusion or exclusion of spending in the statement of funding. Perhaps it is a step too far to ask the Minister to say when they plan to do this. There is obviously a tension between a totally defined transparency and a pragmatic approach. The contribution in the report provided by Dr Gillian Bristow merits much consideration, with her proposal that what was needed was what she termed territorial justice provided by, ""broadly equal levels of public service at a similar tax burden"." She then offered three yardsticks. One was to use needs assessments—which we have all been talking about—that presume some sense of merit or desert linked to GDP per capita. The second was perhaps more narrowly linked to merit alone. The third was our current welfare state, where distribution is linked to contributions. There is a great challenge before us. We are faced with a loosening of the ties and administration that have bound the UK together. There is no doubt that different countries in our union have all maintained their cultural differences with unabated enthusiasm over the years, even though we have operated under one Administration. On a point alluded to by the noble Earl, Lord Mar and Kellie, I like to think that I have ancestors who played their part in the pride that the Scots maintain, fighting at the right hand of the original William Wallace, although not the Hollywood one. The suggestions which seem to find favour with the Government at present of seeking a measure of greater fiscal autonomy for Scotland will present new and greater challenges as to how anything like the Barnett formula should be calculated. As the noble Lord, Lord Barnett, himself pointed out, those involved need to think clearly about whether the path chosen is one which helps us to celebrate our unity and diversity or whether it merely drives a wedge more firmly between us.