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Public Expenditure: Scotland

Volume 692: debated on Tuesday 5 June 2007

asked Her Majesty’s Government:

Following recent elections to the Scottish Parliament, what plans they have for changes in financial policies with regard to Scotland.

My Lords, the financial arrangements for Scotland are set out in Funding the Scottish Parliament, National Assembly for Wales and Northern Ireland Assembly: A Statement of Funding Policy, published by the Treasury in July 2004. The statement of funding policy will be updated in the normal way as part of the Comprehensive Spending Review, which is due to be published later this year.

My Lords, I start with the assumption that my noble friend has read the Treasury’s latest figures on public expenditure per head. They show that in England the figure is £6,949, while in Scotland it is £8,414. I assume my noble friend will agree that those figures are clearly in need of a change. I recognise that he has a problem in that the only consensus among the leaders of the political parties is that there should be no change—for some reason, they like the formula—but surely my noble friend will accept that in the circumstances the least he can agree is that there should be a review of the current formula to see that we have one based on genuine need. I can assure him that if such a formula were agreed, I would be happy to see the name continue.

My Lords, the House will be relieved on that last point. I was not going to mention the name of the formula, of course.

We have no plans to change the formula at this stage. My noble friend, who is well versed in these issues, will know that the disparities in expenditure are not just due to the formula but reflect other aspects of the details of the expenditure allocations to Scotland, Wales and Northern Ireland. There are also specific considerations in each case. But I hear what he says—he has been pressing for a review for a considerable time. In a sense, the issue is reviewed every time we have a Comprehensive Spending Review because the allocation of resources is determined at that point.

My Lords, as there is nothing sacrosanct about the formula and it was not part of the constitutional settlement between Scotland and the United Kingdom, is it not time, in view of the inequitable distribution of public funding to the territories of England, Northern Ireland, Wales and Scotland, that the Government gave serious consideration to a mechanism other than the existing one for determining what will bring about the equalisation of the state’s capacity to provide services? Would the Minister look with favour on the example of the Australian Commonwealth Grants Commission, which has existed since 1933 and is widely regarded as having produced equitable results all round in that country?

My Lords, of course the Treasury looks at all aspects of expenditure elsewhere that help to enlighten it on how it should proceed for the future, but the noble Lord will recognise that there is a vast difference between organising expenditure for devolved Administrations and organising expenditure in a federal structure, which is the Australian position. The noble Lord will also appreciate that the formula, as he indicated, was not the subject of debate during the time of the decisions with regard to devolution, and he will recognise, too, the strides that this Government are making to ensure that expenditure per head in regions is equalised by a wide range of government policies, which are helping to iron out some of the past inequalities.

My Lords, the Minister will be aware that spending in Scotland is not only higher per capita but also does not shine in value-for-money terms. Will he join me in congratulating the new First Minister for Scotland on publishing the Howat report, which revealed the true horror of the inefficient spending of the years of the Labour/Lib Dem coalition?

My Lords, the House might have wondered just at which stage the Official Opposition would join the Scottish National Party in its attacks on the Government, and we all think of the implications of that for the future in terms of the development of the Opposition’s own policies for the United Kingdom.

Of course there are disparities between the individual countries of the United Kingdom. The noble Baroness will recognise that a very substantial tranche of money was voted for Northern Ireland in the wake of the recent agreement, and the whole House would see the reasons for that and the benefits derived from it. The noble Baroness may think that the case of Scotland merely shows ill judged expenditure, but that is not the experience of many people in England who look to certain aspects of social care, for example, in Scotland that reach higher standards than may be the case elsewhere.

My Lords, in light of the fact that massive contributions have historically been made to the United Kingdom economy by Scotland and Wales and on account of their structural and economic deficiencies, will the Minister kindly give an undertaking that no review would leave either country in a worse financial situation than it is in at the moment? Might I also tempt the House to consider whether, if there is to be a successor to the Barnett formula, it should be named “Barnett 2” or “Barnett revisited”?

My Lords, we have made a determined attempt to improve the ratios of expenditure between the regions in England and have had some success in bringing up to the standards of the best those which in the past have been poorly served. If we had to look at an overall policy for Wales, Scotland and Northern Ireland, the same principles would obtain. As I have indicated, we are not proposing a wholesale revision. I add the obvious point that it is easier to countenance the concept of a wholesale revision than to deal with the Pandora’s box once it is opened.