Funding Formula

Debate between Owen Smith and David Mowat

Tuesday 18th January 2011 Westminster Hall

[Owen Smith]

I agree with my hon. Friend—that is essentially what I was trying to say a moment ago. An arm’s-length independent organisation, which Holtham considered—whether it is the Office for Budget Responsibility or whether it is some other body—is an excellent idea that we should take account of.

[David Mowat]

The hon. Member for Edinburgh North and Leith (Mark Lazarowicz) has said that it is not easy to conduct a needs-based analysis, but that does not mean that it should not be tried. He has raised the issue of sparsity in Scotland and the fact that many people live in the Western Isles, Orkney and such places, which makes a difference. There is a precedent for such an analysis, which was carried out by the Scottish NHS and which is referred to in the report by the House of Lords Select Committee on the Barnett formula. The cost was about 15% extra for that component of the population. However, the point is that that component of the population is very small and the overall impact is less than 1.5%. So it is right that that factor is taken into account, but it is not material to what we are discussing.

[Owen Smith]

The point that my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) has made—that it will be very difficult to introduce a needs-based formula—is valid. The aspects of a needs-based formula that ought to be taken into consideration and the weighting that ought to be placed on those aspects individually will not be incontestable. So it is easy to bracket them under “deprivation and sparsity”, or “deprivation” and some other criterion. Within that, there will be all sorts of eminently contestable notions related to the number of children in a country, the number of older people who are dependent, sparsity and all sorts of other aspects, which will be eminently contestable.

The simple point that I was trying to make is that even if we shift to a wholly independent—or ostensibly independent—and wholly needs-based formula, we will still see divergences and differences between the relative spending priorities and the relative quantum spent on individual aspects of public services across different parts of the country. That will still fuel a sense of resentment in certain quarters, when parts of the country are perceived as doing better than others. I therefore caution that we would not all be happy with a needs-based formula and I suggest that the hon. Member for South West Bedfordshire—