It might sound like a bad rock band but the Commission set up to review the Barnett formula’s funding of Welsh Government is doing a remarkable job of exploding some well worn myths.
Commissioners Holtham, Miles and Spahn (Lead, Rhythm and Bass) have exceptional expertise and are supported, on percussion, by high quality civil servants. The result should be that many people will now sing along and change their view of the world; a rare achievement for any commission.
The Barnett formula determines the block grant to Welsh Government, largely and arbitrarily by continuing the historic distribution of 1979 and then adding each year an increment of comparable expenditure in England, based on Wales proportion of UK population
The first myth is that Wales has suffered through the Barnett Formula throughout the devolution decade and that if only there was a better and more just formula for allocating money to Welsh Government then such would the excess of public expenditure that never again would we in Wales have to do the tedious political business of allocating scarce resources, deciding winners and losers.
The first Holtham report of last July exploded that myth by pointing out that if Wales was a region of England it would, by existing English ‘needs based’ distribution formulae, get 14% above the English average; but that Wales had for the first thirty years of the Barnett formula always got more than that figure. Far from doing Wales down, Barnett has served Wales well enough, at least until 2008-9.
But, Holtham warned, if nothing was done now to replace or mitigate Barnett, Wales would in future get less than a comparable English region and that this was not tolerable.
The second myth has been that any needs based alternative to the arbitrary Barnett formula would inevitably be horrendously complicated and unpredictable. The working paper produced by Holtham last week explodes this myth by providing a creative and convincing illustration of a distribution formula based on just 7 indicators tested for their ability to explain historic spending patters within and between nations of the UK.
As the Commissioners say, this is not the final word on what a needs based assessment would look like but it does illustrate that a simple and legitimate needs based assessment is possible. The undeclared problem is not that Wales would receive markedly more from such a formula but Scotland would receive a whole lot less. Which British Government will grasp that particular thistle?
Whilst Wales has not suffered historically from Barnett it has suffered significantly from the Treasury’s unilateral ability to determine what is and what is not comparable expenditure in applying the Barnett Formula.
If anyone is interested I could explain the missing £billion in council house finance…
Luke 11:22 am on 9 December, 2009 Permalink
You owe Huw Lewis a few quid for the title – I’m sure he copyrighted “mythbusters”.
Jeff Jones 1:38 pm on 9 December, 2009 Permalink
Scotland is the problem. As I read it the Scottish government would lose probably £3 billion under a needs based formula. This would be on top of the £3 billion black hole already identified in the Scottish budget by the Scottish Audit Office. Can anyone honestly expect any UK Party to agree to such changes in the foreseeable future? Not only isn’t there the political will, the advice from Treasury civil servants would either be to keep the status quo or make changes along the lines of those suggested in the recent White Paper in response to the Calman Commission. Unless of course Plaid in the interests of fairness and Celtic solidarity can persuade Salmond that the SNP should support a change to a needs based formula !
Lee Waters 3:58 pm on 9 December, 2009 Permalink
You never know what the impact of horse trading in a hung Parliament will be.
Jeff Jones 6:11 pm on 9 December, 2009 Permalink
Lee Do you really believe that there will be a hung Parliament? I think we shoudl wait to see the political effect of the PBR before making predictions. Most gamblers still seem to be putting money on a Tory win even if the majority isn’t that great. In the event of a hung Parliament the odds are that there will also be more SNP MPs than Plaid. The nationalists had influence in the 1970s because they worked together. But any attempt to revise Barnett will divide the SNP and Plaid. In any case Wales isn’t Catalonia and the UK isn’t Spain.
Lee Waters 10:34 am on 10 December, 2009 Permalink
Jeff, I’m not a gambler and I didn’t make a prediction. I simply suggested that in the event of a hung Parliament new dynamics come into play and your analysis (which I agree with) of the roadblocks in in place in current state of play may no longer apply. Who knows?
Ian Courtney 1:26 pm on 11 December, 2009 Permalink
It interested me that when the Working Paper was published last Friday the only papers to pick up on its significance regarding Scotland and the application of a Needs Based Formula were Brian Groom in the FT and Sion Barry in the Western Mail. Others may know better but I think the Working Paper was the first to conduct a rigorous exercise to measure the oft asserted Scottish windfall. I believe it was only when the work was mistakenly reported to have been conducted by a Scottish academic the nationals picked up on it.