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Barnett Formula

My Lords, like all other noble Lords who have spoken, I begin by congratulating the noble Lord, Lord Richard, on producing this report, and not just on its content. The way he led his committee has meant that those who were on it have an unusual desire to have a final committee meeting. Three-quarters of the members of the committee have spoken in today’s debate, which I suspect is a record for any Select Committee debate in your Lordships’ House. It has seemed at times as though those of us who were not on the committee are intruding into this final wind-up session. I also congratulate the committee on the report. The conclusions that it reached had unanimous support in your Lordships’ House. The Liberal Democrats accepted those conclusions some time ago. In terms of gaining public acceptance for a conclusion which will inevitably mean funds being taken away from Scotland, it is interesting to note that within the Lib Dems we had quite a spirited discussion with our colleagues in Scotland when we first proposed this, as you can imagine. In the end, the argument that fairness is the only long-term sustainable basis for allocating expenditure won the day, as I am sure it will in future as this case is made more widely. I will not detain the House too long because I know all Members are agog to discover whether the noble Lord, Lord Davies, is going to be able to do a better job than the Treasury in defending the Government’s refusal to look at this issue. Without repeating everything that has been said, looking at the strengths and weaknesses of the system tells us a lot about the way in which we run Britain today. In terms of the strengths, it is easy to say that this is a short-term fix and does not deserve to continue, but it has continued. Surely its apparent simplicity is one of the reasons why it has survived. It is interesting that over two-thirds of the speakers in today’s debate were Ministers. A significant number of them had at least some ability to change the formula during their period of office, but none of them did so, so clearly the formula has some strength or else surely it would have been changed. Bizarrely, the apparent simplicity which is probably its greatest strength turns out to be a chimera, as the noble Lord, Lord Selkirk of Douglas, pointed out. It is not simple at all. It has, like the Forth road bridge, been repainted to such an extent that it is an extremely complicated system and one which, outside your Lordships’ House and the few cognoscenti of public finances, is barely understood. The example in the report which surprised me—and I thought I knew a small amount about this—was that of Crossrail. How many people, given the ongoing arguments about the cost of Crossrail, realise that one of the hidden costs is £0.5 billion allocated to Scotland which would not otherwise have been allocated? Extraordinary amounts of money are sloshing backwards and forwards north and south of the border, depending on a more or less arbitrary decision by the Treasury on how to allocate funding. While the original formula was a political expedient, it is clear that the way it is implemented still involves considerable political expediency rather than it being a straightforward matter. The principal argument as to why the formula deserves to be changed is simply that of fairness, and there is virtually nothing new to be said on that. The other argument that was advanced by the noble Lords, Lord Forsyth, Lord Lawson and Lord MacGregor, and others relates to the effect on the union if you do not change the Barnett formula, and the relationship between the formula and the devolved settlement in Scotland at the moment. The noble Lord, Lord Forsyth, said that a revision was inevitable now that there is a Scottish Parliament. I am surprised by this issue’s lack of resonance up and down the United Kingdom. Every now and then, there are some rumbles in the north-east of England about the clear disparity between provision there and in Scotland. It is at its starkest simply because they can see it—it is just up the road. However, as the noble Lord, Lord MacGregor, pointed out, East Anglia does extremely badly under the current system, but I do not believe that the Barnett formula has ever been an issue in politics in East Anglia—perhaps it should have been. When we had the great arguments about devolution to the English regions—I cannot agree, I am afraid, with my noble friend Lord Mar and Kellie about the de minimis nature of regionalism in England—the Barnett formula component was small compared to issues such as the cost of establishing provision across the English regions. The political arguments for changing the formula to protect the union are very strong and have been made extremely well today. The noble Lord, Lord Sewel, spoke about Scotland being a policy success on the back of the high levels of public expenditure that have been extended to it. He is right, but that is an argument for higher rather than lower levels of public expenditure. If Wales had had the same level of public expenditure as Scotland, I suspect that it too would have been a greater economic success than it has been.