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Barnett Formula

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 19th July 2001.

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Photo of Andrew Smith Andrew Smith The Chief Secretary to the Treasury

As my right hon. Friend knows, the Government's spending plans have been set down and agreed for the years until 2003-04, including spending allocations for Scotland, Wales and Northern Ireland. Those allocations are governed by the statements of funding policy incorporating the Barnett formula, and that remains the Government's policy.

Photo of Ms Joyce Quin Ms Joyce Quin Labour, Gateshead East and Washington West

Does my right hon. Friend appreciate that, despite the welcome increases in public spending in the regions, the Barnett formula continues to be the focus of public concern and public attention, especially in the north-east of England? Indeed, the issue was raised several times during the general election campaign. Given the Government's commitment, which I very much hope that they will honour, to hold referendums on regional government in England, does he agree that we should grasp the opportunity to devise a long-term formula, more closely related to needs, which would benefit the whole of the United Kingdom?

Photo of Andrew Smith Andrew Smith The Chief Secretary to the Treasury

My right hon. Friend refers to remarks made during the general election campaign and she will be aware of what the Prime Minister said. I have nothing to add to his words. However, for those who have concerns about the Barnett formula, I point out, first, that it is not the formula that is responsible for the inequalities in funding about which people are worried. Those are historic matters which, of course, the Barnett formula addresses. It is a convergence formula—something on which we receive representations from other parts of the United Kingdom.

Secondly and importantly, I am glad that my right hon. Friend welcomes the substantial increases in public expenditure and the benefits that they bring to the north-east and other regions. Money from, for example, the new deal, the working families tax credit and the child tax credit, the extra help for pensioners and the employment credit that will operate from 2003 give extra resources precisely to those areas that need them most, including of course the north-east.

Photo of Mr Simon Thomas Mr Simon Thomas Plaid Cymru, Ceredigion

I welcome the new honesty from the Minister about the fact that the Barnett squeeze does exist in Wales and Scotland. What is the real justification for the formula, other than as a bad habit or for the avoidance of blood on the carpet? Does he realise that Wales, Sheffield, Cornwall and Liverpool will lose out in additionality from European funding until we get a better and more equitable funding regime in these islands? Is it not time to replace the Barnett formula with a new relationship between the nations and regions of these islands? Is he not enamoured of a needs-based formula for Wales and fiscal autonomy for Scotland?

Photo of Andrew Smith Andrew Smith The Chief Secretary to the Treasury

I thought that the nationalists did not want a formula at all, but to be wholly responsible for raising and spending their own money. We have shown sensitivity to the particular needs of regions and countries. The hon. Gentleman refers to structural funding: in the case of Wales, we specifically made additional provision in recognition of the objective 1 funding. He should be thanking us for that, not complaining about it.

Photo of Louise Ellman Louise Ellman Labour/Co-operative, Liverpool, Riverside

What mechanism does my right hon. Friend have for relating public spending to public needs in the English regions? Will he consider spending billions of pounds of public funds through the science research councils, especially in relation to the regional implications and the development of the knowledge economy, particularly in the north-west?

Photo of Andrew Smith Andrew Smith The Chief Secretary to the Treasury

I was fortunate enough to launch our knowledge economy White Paper in the north-west, and I know how much of a contribution the investment in science is making there, building up clusters and building on the traditional strengths of industry in the region. There is innovation and new investment in pharmaceuticals and other sectors in which the north-west has a relative competitive advantage. We will build on that in the interests of my hon. Friend's constituents. Long-term unemployment in the region has dropped very sharply, thanks to the Government's initiatives. She asked what mechanisms we have for relating public expenditure to need; I think that the new deal is the best example.