The Treasury and the Barnett formula

Thanks to its responses to the Calman and Holtham Commissions, we already knew that the  Treasury had no plans to make any significant changes to the Barnett Formula.  It has now, at long last, formally responded to the Lords Select Committee on the Barnett Formula, and so set out its stall pretty clearly.  The response, published as Cm 7772, is available here.

The response is a polite but definite rebuttal of the Committee’s report, taking just 3½ pages (the substantive report is 48 pages long, with another 360 pages of evidence) .  For the most part the response simply ‘notes’ the Committee’s recommendations, and shows no intention whatever of acting on them.  The gist is paragraph 2.15:

The Government notes the Committee’s views on the desirability of their suggested needs-based system. The Government’s view is that the Barnett formula has a number of strengths, among them the merit of allowing the devolved administrations to determine their own assessment of needs and priorities in devolved areas.

The Government will continue to keep all aspects of public spending under review, including the operation of the Barnett formula, and welcomes the careful analysis presented in the report.

The Treasury’s disarray is also confirmed in section 1 of the response, which states that this response, together with the Treasury’s evidence to the Committee and the Calman Commission, constitute the ‘factual paper’ on the formula promised by Alistair Darling in January 2008.  In other words, the ‘factual’ paper is in fact at least 3 papers.

The only positive point relates to the quality of data about financing, where the Treasury says:

The Government accepts the Committee’s recommendation that the allocations of grant to the devolved administrations, changes from previous years and explanations for any changes made, as provided to the Committee, should be included in PESA supplementary material.

That’s a meaningful step forward, but only a small one.  Those data have been very hard to find before now, but this changes fails to do what’s really needed if the Barnett formula arrangements are to be applied in a transparent way.  That is to bring together the full material about how the formula works in a ‘devolution finance report’.  At present, that material is scattered – in PESA (the Public Expenditure Statistical Analyses, an annual Treasury publication and the bible on public spending), and in the annual reports of the Scotland and Wales (but oddly not Northern Ireland) Offices.  Even when the Treasury has conceded that the Committee had a point, it has failed to deliver fully what’s needed.

There will now be a debate in the House of Lords on the report and the government response, some time in the New Year.  Given the high-powered composition of the Committee and the nature of the Treasury’s response, it will be interesting to see what happens in that debate.

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Filed under Calman Commission/Scotland bill, Devolution finance, Northern Ireland, Scotland, Wales, Whitehall

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