Scotland Bill

My Lords, I support the noble Lord, Lord Barnett, in his attempt to abolish the formula in his own name. Most of us would give our eye teeth to have a formula named after us. The noble Lord carries a great burden and I sympathise with him because it is a burden based on a complete misunderstanding, to which the noble Lord, Lord Richard, has just alluded. Although, over the years, Secretaries of State have taken advantage of it in the territorial departments to varying degrees, it is not something that we have done with particular pleasure because we have become increasingly conscious of the anomalies inherent in it, as those anomalies have expanded. It has distorted the debate with colleagues, created resentment in the country and spilled over into antipathy towards Scotland, which could colour the debate and the future referendum on Scottish independence. Because it is indefensible it really should be got rid of and we need a clear statement from this House that that should happen. I disagree with the noble Lord, Lord Steel of Aikwood, whose formula for keeping it and allowing it to wither on the vine was peppered with ““ifs”” and ““assuming thats””. I think that we need a clear statement on it. The reason why I think that the noble Lord, Lord Barnett, has been unfairly treated in having the formula named after him is that it—the twist to the arrangements, as he called it—was not a formula at all. It was a change in the way in which the additions were made to the baseline. They used to be expressed as percentages and be applied evenly across the whole United Kingdom. As the Scottish baseline rose, those percentages delivered larger cash sums. So the ingenious scheme which the noble Lord hatched with Mr Bruce Millan, the Secretary of State for Scotland at the time, was that instead of Scotland getting a percentage transfer, it would get a cash transfer. They would get the same cash increase to baselines per year, which would represent a smaller percentage when applied to their own baseline. It is a mathematical certainty which I have never quite understood myself, but I have had it confirmed by experts, that eventually that would create convergence. However, of course, the Barnett formula does not just cover the whole of government expenditure in Scotland; it covers only around half of it. In addition to the allocation from Barnett were individual one-off deals struck by Secretaries of State each year. Those deals, plus the anomalous Barnett add-on, plus the existing baseline, every year, accumulated, aggregated and magnified the injustice that was developing, measured as it was against an irregularly compiled population census which was nearly always out of date. That is how we came to the situation that we have been in for the past few years. It is the baseline, or the block, that is the villain in the argument. It is nothing to do with the noble Lord, Lord Barnett, who made a very worthy attempt to sort it all out. That aggregation and accumulation of payments and special one-offs created this notional, but always out-of-date, arrangement. In the Select Committee that looked at this formula, on which it was a pleasure and honour to serve under the noble Lord, Lord Richard, we came up with a relatively simple solution, transferring the burden from outdated and notional population levels to relative need. We all recognised that that was the far fairer and more important way of doing things. We had always been told—I dare say my noble friend Lord Forsyth was, as was I in the Scottish Office—that it would be terribly difficult to arrange and heavily biased by the Treasury against Scottish interests and so on. So we never pressed for it. If anybody had asked us to undertake an independently conducted review into relative need, I would certainly had said yes; I would think that one would feel morally obliged to have said yes. We were never asked by the Treasury to do that. It may have been that successive Prime Ministers and Chancellors decided that it was not worth the candle to create a problem. The formula that we came up with proved that it was remarkably simple, as the noble Lord, Lord Richard, has just said. The components that our experts suggested were relatively simple to calculate and apply, such as births, under-fives, children and young people aged under 16, the number of over-65s, the number of over-75s, morbidity levels, the simple mortality rate, poverty of all kinds and child poverty. By applying a measurement of those for all four components of the United Kingdom, it showed a remarkable convergence. It was not an identical pattern, but patterns averaged out in terms of convergence and gave a degree of accuracy which one would never have expected. It is fairly easy to calculate from existing tables and information, and very easy to apply. Sadly, that was not followed up. It was rejected on the day of publication by both major parties, which indicated that they, too, wanted a relatively quiet life. We considered various other possible components of such a formula, including things such as sparsity or density and other matters. But they did not make any difference to the basic scheme on which our experts had advised us. As the noble Lord, Lord Steel, pointed out, this formula will become outdated assuming a certain number of things happen in the course of the Scotland Bill provisions and other possible developments thereafter. But that is not a firm enough situation for us to be in now. It is unacceptable that we should continue and that Wales should be strongly disadvantaged, incidentally, by the existing formula arrangements. It demeans Scotland and distorts the distribution of public expenditure. I support the amendment. I have no idea whether my noble friend the Minister intends to accept it. At any rate, the noble Lord, Lord Barnett, may look forward to the fact that he has a very good chance of outliving his own formula one way or another.