Government of Wales Bill

: The problem with new clause 11 is that it would set up a panel of so-called experts to make recommendations about the Welsh block grant. In other words, it would create another new quango to determine how much money would be devoted to public expenditure in Wales. The Barnett formula has been used for some time to determine public expenditure in Wales, and has produced significant increases in that expenditure, but the quango created by the new clause would make recommendations in isolation from the rest of the UK. It would not pay heed to fairness, transparency and the particular needs of Wales—language that the hon. Member for Chesham and Amersham (Mrs. Gillan) described as ““wishy-washy””. Essentially, the new clause would adjust public expenditure in Wales according to the views of the panel of experts, but in isolation from what was happening with public expenditure in the rest of the UK. However, funding public expenditure in Wales cannot be separated from what happens in the UK as a whole. I think that hon. Members recognise that, although the new clause does not. No rational system of resource allocation for public expenditure could ever consider funding the needs of one part of the UK in isolation from the whole, as that would make it impossible to manage any logical process for setting budgets. The Barnett formula is operated by the Treasury, and it determines the funding allocations for Northern Ireland and Scotland as well as for Wales. However, this Bill deals only with Wales, and so is inappropriate for the new clause’s proposal to abandon the Barnett formula in respect of Wales alone and replace it with a new system for allocating public expenditure there. The Barnett formula has been criticised by various hon. Members, but it has worked well in practice. It has provided a stable and secure financial context, and allowed the National Assembly to plan public expenditure with some confidence. The National Assembly has received financial settlements without the need for lengthy annual negotiations with the Treasury. The Barnett formula is a relatively simple mechanism, whereby money is allocated to the National Assembly in a way that is open, transparent and comprehensible to the people of Wales. The Barnett formula ensures that changes to planned public expenditure on comparable services in England are properly reflected in the budget in Wales. The formula will provide average growth of more than 4 per cent. each year in the period since the spending review of 2004. All public institutions must be realistic and work within a fixed budget. They have to concentrate on the outcomes of the use of public money, and not just on the quantum figure, important though that is. The National Assembly Government are committed to providing quality public services, using the funding provided through the Barnett formula. As a result of that process, the Assembly budget has risen from less than £8 billion in 1999 to more than £14 billion in 2007–08. That means that the budget has almost doubled in that period. I confirm that the Government have no plans to review the Barnett formula, which has served the UK very effectively. In practice, it has produced reasonably fair settlements, and we will continue to monitor its operation to ensure that it is being applied properly and rigorously. Clearly, the mechanism has some advantages in the context of devolved government, and indeed it was developed originally by Joel Barnett in the 1970s when the question of devolution was first visited. The Barnett formula is simple to understand, and provides the degree of stability that is essential in the consequential flow of resources to Wales. It also allows Administrations a considerable degree of freedom when it comes to making spending decisions. The Government have looked carefully at the matter, but we have concluded that there is no advantage in reopening the question of the Barnett formula at this time. New clause 11 is well meaning, but would be unworkable in practice. It would create yet another quango, and mean that decisions about public expenditure in Wales would be made outside the context of such decisions in respect of the rest of the UK.