Hain and the Barnett Formula

Discussion of Peter Hain’s statement on the Barnett Formula on Thursday has generally been confused due to a distinct lack of clarity from Hain himself.

It is clear that briefings given to both the Welsh lobby and to Welsh MPs and peers in London suggested that they would be introducing a ‘floor’ to the Formula so that Wales wouldn’t be worse off. This floor, of Welsh spend being approximately 114% of England, was suggested in the Holtham Commission report as an interim measure.

Initial reports on the statement were therefore very positive, until people read the statement itself and realised that there was no such commitment given in the text, only that at the time of Comprehensive Spending Reviews the Welsh position would be assessed and action taken if Wales was found to be ‘disproportionately disadvantaged’ (whatever that means).

As a mechanism already exists for querying departmental expenditure limits but has never been used, it seems that the statement is effectively one of ‘no change’.

But convergence, the method by which expenditure per head between the UK countries should eventually level, is just one of the issues of the Barnett Formula.

It has, of course, already taken place, with the proportionate increase per head of spending in Wales far less under Labour in the last decade than in England or Scotland.

But what about the abstract notion of comparability which is central to the Barnett Formula?

The formula for variation in the block grant is increase/decrease in England spend x comparability x population.

Government investment in the Olympics are a UK spend which means no comparability for Wales = no money while billions are poured in to East London.

Comparability therefore is a very big issue.

Or what about the whole concept of spending in Wales being dependant upon public spending positions defined by the UK Government and their promises on specific departmental budgets?

When people complain about Welsh and Scottish MPs voting on English issues they often forget that increasing spending on education and health in England will mean more money for the Welsh and Scottish Governments – hardly a recipe for sensible discussion.

If the English NHS decides to save money then the Welsh Government has to make savings too, irrespective of need.

As the reports this year have made clear, the Barnett Formula is fatally flawed and needs to be replaced with a system that better reflects the needs of Wales.