Funding Formula

Debate between Andrew Selous and Mark Lazarowicz

Tuesday 18th January 2011 Westminster Hall

[Andrew Selous (South West Bedfordshire) (Con)]

I am grateful to Mr Speaker for allocating me this important debate. It is a particular pleasure to serve under you, Mr Dobbin.

I have wanted to make this speech for a considerable time. As a member of a governing party with a bold and reforming agenda across large parts of Government, I hope that that spirit of boldness will also be applied to this issue and that it will be allied to a keen sense of fairness and justice so that we do the right thing by every part of the United Kingdom.

I speak as a committed Unionist and I want every part of the United Kingdom to be treated absolutely fairly as far as central Government funding is concerned. However, the formula that currently allocates funding between England, Wales, Scotland and Northern Ireland for large parts of public expenditure is broken. Even the man after whom it is named, Lord Barnett, wants to get rid of it and speaks against it. It really is time for us to look at it, as I shall try to show in my remarks.

The formula dates back to 1976. It was decided, across certain parts of Government spending, to allocate 85p in every pound to England, 10p in every pound to Scotland and 5p in every pound to Wales. That was done on the basis of population figures from the mid-1970s. Those figures have never been changed; all that has been changed over the years are the annual increments. We are therefore working on a population baseline from the mid-1970s that bears no relation to the significantly increased population in England or the increased population in Wales. At the same time, the population in Scotland has remained broadly static. In the excellent debate on the Barnett formula in the House of Lords, Lord Sewel, a Labour peer, referred to

“a series of fantasy populations”—[Official Report, House of Lords, 11 March 2010; Vol. 718, c. 381.]

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

I am grateful to the hon. Gentleman for bringing this important subject for debate, but his comments about the starting point for the Barnett formula give the impression that the 85%, 10% and 5% figures reflected the populations of the different parts of the UK at the time. Surely, that was not the case. Even at that stage, the formula reflected the different needs in the different parts of the UK by giving Scotland and Wales a slightly higher allocation per head. Population did not define the breakdown in different parts of the UK at the start.

[Andrew Selous]

The formula was fundamentally on a population basis. If the hon. Gentleman reads the excellent report by the House of Lords Committee on the Barnett formula, which came out in July 2009, he will see the significance of the population issue. I propose that we move to a needs-based formula, and that was the Committee’s unanimous, cross-party conclusion, which was supported by its Conservative, Liberal Democrat, Labour and Cross-Bench members. I think I can assure the hon. Gentleman that I absolutely want to reflect the higher need that is clearly evident in Wales and parts of Scotland so that we are totally fair. The evidence is that we are not doing that now. The situation has become unfair, and that is a danger to the Union.

Let us see what the man after whom the formula is named has said. Speaking of the formula’s creation in 1976, he said:

“I just wanted to get through every day without too much trouble.”

He also said:

“I do not consider it is successful. I do not think it is fair.”

He added:

“I thought it might last a year or two before a government would decide to change it. It never occurred to me for one moment that it would last this long”,

or more than 30 years. Those who pray in aid the Barnett formula should be well aware that its author thinks that it is time we moved on to something that is fairer and that is built on a needs basis.

--- Later in debate ---

[Andrew Selous]

I am glad that the hon. Gentleman is with me in wanting a needs-based formula. He is right that the evidence of the Holtham commission, and the evidence that the House of Lords took, suggests that Wales would benefit from such a formula and that if it is to be applied fairly there should be some reduction in what Scotland currently receives.

I agree with the hon. Gentleman that it is up to the Welsh Assembly Government and the Scottish Government to spend their money as they see fit. What is not fair and right is the allocation of money in a block grant on a bust formula from 1976, whose author no longer thinks that it is fair, when there is clearly in many cases such an imbalance between what the English and the Scottish can be offered. That is an entirely reasonable case.

[Mark Lazarowicz]

Will the hon. Gentleman give way?

[Andrew Selous]

I will, but I want to finish my list—I have not got to the end of it yet—of what we do not get in England. It is really worth listing, because even the Library did not have a comprehensive list. I was adding to it as I went along.

Certain cancer drugs were available earlier in Scotland than in England—we are just catching up. Concessionary bus travel is more generous in Scotland. People can go on long-distance journeys there and take a companion, if they are disabled, which they could not do in England. I think that hon. Members who are fair and who consider the issue dispassionately and want to do the right thing by every part of the United Kingdom will agree that we cannot allow the situation to continue if we are committed Unionists.

[Andrew Selous]

I cannot remember who wanted to intervene earlier; I give way to the hon. Member for Edinburgh North and Leith (Mark Lazarowicz).

[Mark Lazarowicz]

I am grateful to the hon. Gentleman for giving way again, but it is an important debate. I welcome the tone in which he presents his case, even if I disagree with some of the conclusions. Would it not be better if he were to mention not only the areas where residents of Scotland and Wales appear to get a better deal, but those where, because of a choice made under devolution, spending is less? There is now a debate in Scotland and Wales about university funding and the effects of different tuition fee levels on university fee income. In some areas of health and transport, provision is less than in England. It is not right, as my hon. Friend the Member for Pontypridd (Owen Smith) said, just to cherry-pick the areas where Scotland and Wales seem to be doing well, without referring to choices that have resulted in different consequences, which can be easily pointed out as examples of relatively lower levels of service than in England.