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Barnett Formula

Volume 783: debated on Thursday 13 July 2017


Asked by

To ask Her Majesty’s Government what changes they propose to make to the application of the Barnett formula to Wales and Scotland arising from any potential additional financial provision for Northern Ireland.

My Lords, the Government remain committed to the Barnett formula, which is designed to ensure that devolved Administrations are funded to deliver their priorities within their devolved responsibilities. Like those previous interventions, this exceptional funding will be made outside the normal ongoing Barnett funding system. It will therefore not attract Barnett consequentials.

Surprise, surprise. The noble Lord will be aware that £1,000 million has been allocated primarily to hospitals, schools and roads in Northern Ireland—mainstream Barnett elements. Clearly the Government have perceived an extra need in Northern Ireland, however that is defined. Will they therefore move towards a needs-based formula for Scotland, Wales and indeed, for the regions of England, to ensure that valuable and important economic projects, such as the M4 in south Wales, the A55 in north Wales and the Swansea Bay lagoon—things that are important to the economy—can move ahead and are not constrained by the way in which these matters are approached at present?

The noble Lord will be familiar with the long-running debate over the needs-based versus the population-based formula. The Government always remain responsive to needs. That is one reason why a number of investments have taken place in Wales, for example, outside the Barnett formula. There is the Cardiff capital region city deal of £500 million, the Swansea city deal of £115 million, and I hope the north Wales growth deal. All those will be outside the Barnett formula and reflect the particular needs of Wales, as the deal to which he referred reflects the particular needs of Northern Ireland.

What advice will the Minister give us? What do we in Wales have to do to get an extra £1 billion? It would be extremely helpful to have that advice. For example, on the Swansea Bay lagoon, investors now say they are becoming wary of keeping their money on hold. Are the Government capable of making a decision?

We are certainly always open. That is why we spend £120 in Wales for every £100 that we spend in England. We continue to be committed to that. It is why we increased the overall capital borrowing limit to £1 billion from £500 million, and we continue to look for opportunities to grow the economy in Wales, both within and outside the Barnett formula.

My Lords, given the Prime Minister’s emphasis on fairness and on strengthening the United Kingdom, why are the Government so resistant to taking the advice of the late Lord Barnett and of the committee of this House that looked at the Barnett formula, which unanimously concluded that Wales lost out as a result and that a system based on needs would unify the United Kingdom and be fair to England, Scotland, Wales and Northern Ireland?

I recognise that—and of course for 40 years there has been an ongoing debate about the Barnett formula. Our response to that, as my noble friend will recognise, is to believe that we should devolve to the devolved Administrations more responsibilities and financial accountability in taxation and how money is spent in the Budget. That is the best way in which to eventually work towards a needs-based rather than population-based formula.

Do the Government understand that this is an issue of trust? While the Barnett formula is not a legal requirement, it is clear to everyone in this House that the additional £1 billion for Northern Ireland is a sort of pork barrel, as they would say in America—a politically induced donation—which ought to fall within that formula if one was keeping to the conventions of Parliament.

It is wrong for the noble Baroness to refer to it in that way. First, the details of the deal have been made very clear and published on the website on 26 June. There have been Written Ministerial Statements about it. As for terming this a donation, I stand by a donation that gives £100 million extra for health and education, £400 million for infrastructure, £50 million for mental health, £100 million for severely deprived areas and £150 million for broadband in one of the most needy parts of the United Kingdom.

In the context of the discussion of a possible needs-based formula, is it worth the Minister noting that Northern Ireland appears to have considerably more disadvantaged young people per percentage of population as against Scotland, and cannot afford the sort of things that Scotland appears to be able to afford, both in certain provisions of social care and in tuition fees?

That is a good point. It is recognised, of course, in a lot of funding that goes through at the moment. When we look at employment in the UK, which we are pleased to say reached record levels this week, we recognise that there is a 75.2% employment rate in England, 74.1% in Scotland, 72.6% in Wales but only 68.7% in Northern Ireland. That is one reason why this is a good investment in the future of young people in Northern Ireland.

Is my noble friend aware that the person who was most perplexed by the Barnett formula was the much-loved Joel himself, who came to believe that it was distorted and very unfair—for instance, to the north-east of England?

He did. Although I am no student of history on this, it was introduced very much as a short-term formula to get the then minority Labour Government through to the 1979 election. It was not intended to be ongoing but it has been ongoing, and we have come up with a better solution, which is to have greater fiscal and political devolution.

My Lords, all regions and nations across the United Kingdom have been subject to cuts, so if this fund can go towards ending austerity in Northern Ireland that is a positive step—but most regions and nations will continue to struggle, and government policy is only exacerbating that further. As the Industrial Strategy Commission reported this week, the United Kingdom is by far the most regionally unequal EU economy. The Cambridge area has twice as many jobs in scientific research and development establishments as the whole of the Midlands, more than Scotland and Wales combined, and only 2,000 fewer than the whole of the north of England. How do the Government intend to structure their policies to ensure that every region and nation in the United Kingdom benefits from them?

Part of it is through devolution, but part of it is through recognising the particular needs of Northern Ireland. Owen Smith, the shadow Northern Ireland Minister in the other place, said last week that:

“Talking about parity between the sorts of treatment that Northern Ireland gets and other parts of the UK isn’t what we’ve done in the past. Northern Ireland is a special case and it will always need special consideration”.

He is absolutely right on this and we are following that advice.