Speech to Senedd on Barnett Formula July 2015

Speech to Senedd Barnett Debate 14 July 2015

Thank you Presiding Officer

The motion is a simple one

And one I hope all members can support

Believes that as long as the Barnett formula continues then expenditure on developments that only benefit England, such as HS2, should produce the full Barnett consequential for Wales; and

 

 Further believes that, when the UK Government and Welsh Government are in dispute over whether expenditure should produce a Barnett consequential for Wales, there is a need for an independent body to arbitrate.

 

I am not trying to make any party political points here

 

Just get Wales its fair share of resources under the current system

The Barnett formula has been used since the late 70s

A formula for allocating funds between the Countries of the union goes back to the Goschen formula introduced in the 1880s

The Barnett formulas great strength as far as the treasury is concerned it is simple to calculate and the treasury decides if expenditure is inside or outside the formula

The Barnett formula generates a change by multiplying the increase or decrease of Spending by Government Department*% devolved* relative population

The treasury decides what % is devolved

There is also a problem of relative population change but that is beyond the scope of this debate

More important the Treasury decides what is excluded or included

Crossrail was included so I am told

High Speed rail is not

Purely a treasury decision

London Olympics was excluded then partly included on appeal

There is no independent appeal method

There is no independent arbitration

Firstly I am going to examine the London Olympics

The Olympics are given to a city not a country

Expenditure on the Olympics was almost all spent in London

Some team sports like Football were played all over Britain and shooting for historical reasons was held at Bisley

The big stadium development and the regeneration took place in London

One of the selling points of the London Olympics was that it would regenerate a part of East London

Both regeneration and sport are substantially devolved

Under our current devolution settlement I am afraid to describe anything as wholly devolved

Whilst on the face of it this should be a simple process that should have taken up very little time

This was a prolonged & lengthy matter, starting under one Government of one colour in 2007/8, passing through a number of discussions and finishing in a dispute brought by the three devolved Nations against the Treasury ruling, with a Government of another colour.

Essentially, at the outset the Treasury had some 4 or 5 different budget lines for the Olympics

Some were recognised as UK orientated and some as falling into the Barnett remit, ie those related to infrastructure & regeneration spending & on which there should be a consequential generated.

However, before anything happened, the Treasury collapsed the spending into a couple of lines & ruled that they were both UK orientated & hence no consequential would be provided.

Wales and the other devolved Governments challenged this ruling, initially at officials, then at Ministerial level. However the Treasury were judge and jury on these matters and would not budge, but the Ministers argued strongly, persevered & then entered into the JMC dispute mechanism.

After several rounds, the matter was eventually referred to a meeting chaired by the UK Cabinet Office Minister

He determined that there should be a settlement ; which after considerable deliberation, was accepted.

The process took over 4 years and as far as I know it is the only matter which has gone through to the end and the first time Treasury were instructed to make payments.

What Wales received was £8.8m in 2011-12 as a one-off settlement. It was allocated to reserves and supported the allocations that year.

 

It was received as £8.622m revenue, £0.241m capital.

The Olympics cost has been declared at £9 Billion

5.4% of £9billion

Is about £480Million

£8.62 Million is less than Swansea East should have had

Decision made and no appeal

We have budget decisions made and then the negative or positive Barnett consequential is announced.

If the system worked correctly the positive or negative amounts could be calculated and more importantly checked

In today’s budget there will inevitably be positive and negative Barnett consequential

It is not possible to sit down and calculate it and be certain of being accurate even within the 5% you would expect.

The Treasury still seems to treat the devolved administrations in Wales, Scotland and Northern Ireland as if they were Government Departments.

I would like to see the calculations that indicate how much more or less that the Welsh Government gets following each spending review.

If it is possible for the Welsh Government to publish the local government formula then it should be possible, if there is the political will, to produce the same for funding of Wales, Northern Ireland  and Scotland

It is the big schemes that cause me the most concern

I have discussed the London Olympics now I want to turn to Crossrail and HS2.

Wales is alleged to have had the full Barnett consequential of the Crossrail 1 development in London

Crossrail is classified as a "local transport project", hence generates a Barnettt consequential.

We'll need to watch carefully of course that future Crossrail projects are similarly classified because a change in classification could mean no consequential

Currently there is a Barnett consequential for Scotland and Northern Ireland from spending on Network Rail and Capital Rail Projects, but not for Wales.

 However, there is a consequential for Wales from spending on Crossrail in England, and Wales will hope to benefit from up to £1bn extra from a proposed Crossrail 2 scheme.

There are two ways that Wales can be excluded from any Barnett consequential of HS2

Firstly HS2 is an investment that will benefit all of the UK, the current plans will benefit England more than other countries but if an investment is deemed to benefit all of Britain then it does not provide a Barnett consequential for Wales.

Also rail is not devolved but transport is partly  devolved. So if a rail scheme is defined as a rail scheme there is no consequential but under the local Transport heading there is.

What I hope I have argued successfully, although I expect I will discover whether that is true later this afternoon, is the need for transparency and an independent appeal mechanism.

If we are going to continue with the Barnett formula then we should have openness and fairness in its distribution

For that reason I urge members to support this motion today