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My Lords, does the Minister agree that Barnett provides secure funding for the Scottish Government and if they had relied on oil revenues they would not have produced the £7 billion that was in the SNP White Paper, but just over £1 billion, and that an independent Scotland would now be bankrupt? Is it not a good job that we voted no in the referendum?
My Lords, it is always a pleasure to agree with the noble Lord. It is, however, worth underlining the point that he has just made. There would be a £6 billion deficit compared to the figures in the Scottish Government’s November 2013 White Paper in respect of oil revenues, which would mean that for that reason alone the Scottish deficit in 2016-17 would be more than 6% of GDP, one of the biggest in the developed world.
My Lords, as the progress of Scotland towards independence seems to be almost inexorable, should we not be getting them used to the idea of doing without English money and phasing out the Barnett formula over a period of years?
Well, my Lords, that is exactly what we are doing. The transfer of tax revenue to the Scottish Government means that the block grant, the element to which the Barnett formula applies, is falling by two-thirds from approximately £30 billion to £10 billion.
My Lords, does the Minister accept that the comments he has just made about phasing out the Barnett formula will be noted with considerable interest in Wales? Does he understand that on the formula that Scotland is receiving at the moment, adjusted for population, Wales is getting £1.2 billion less than we would if it was calculated on the Scottish basis? When are the Government going to phase in a new arrangement for Wales so that we get a fair deal out of the Treasury?
My Lords, the noble Lord knows that this year Welsh spending will be at a level which Gerry Holtham has said is the appropriate level for Wales.
My Lords, can my noble friend first confirm that the preservation of the Barnett formula was one of the key elements of the vow given by all the main party leaders from this Parliament in the run-up to the referendum? Secondly, can he confirm that there would be no Barnett formula whatever if there had been an independent Scotland, and thirdly, that as a consequence the finances of Scotland would be in tatters and the country facing financial ruin if there had been a positive referendum vote in favour of independence?
My Lords, I agree with all the points my noble friend has made.
My Lords, there are many different views about where equity lies in this respect. The effect of the transfer of fiscal responsibility means that, going forward, the extent to which Scotland has money to spend will depend increasingly on the success of the Scottish economy and therefore very much upon the effectiveness of the Scottish Administration.
My Lords, will my noble friend reflect on the fact that if it is the Government’s policy that the Scottish Parliament should be more responsible for the money it spends and should raise that money, the corollary is that the grant should be done on a needs basis and not on the basis of a formula that dates back to the 1970s, which clearly disadvantages the north of England, Wales and the rest of the United Kingdom? Why have the Government set their face against the report of the Select Committee of this House on the Barnett formula which spelled this out very clearly?
My Lords, apart from the fact that the parties have supported the Barnett formula, the effect of the changes being made is that the relevance of the Barnett formula going forward is being cut by two-thirds and therefore any disparity that it might bring about will be reduced by an equivalent proportion.
My Lords, does the Minister agree that this exchange reinforces the view that we must have a constitutional convention and that a core part of that must be to address the relationship between the four parts of the United Kingdom? If we do not do that, we will lose the union, and I for one would deeply regret that.
My Lords, it is absolutely clear that a consequence of the Scottish referendum is that a raft of issues around the way the union operates, not least the way in which power works in the Commons and in
England, needs to be revisited. All the parties are setting out proposals at the moment about how they propose to do that.
My Lords, as the noble Lord knows, all-party talks are going on at the moment about future constitutional and other developments in Wales, and funding is one of the items.
My Lords, in terms of what is happening on the ground in Wales, the level of expenditure which Holtham suggested would be appropriate if there was to be a fair allocation is actually being spent.
The Minister said that the Barnett formula is becoming less relevant to Scotland. That may be so, but does he recognise that it is deeply relevant to Wales? The committee of this House in relation to the Barnett formula, which I had the honour of chairing, was crystal clear: it is unfair. It should be changed, but the Government have set their face against that. I do not for the life of me understand why. It ought to be based on needs and not upon some mathematical formula being applied to a block grant system which has been out of date for 40 years.
My Lords, I am well aware of the noble Lord’s views. The Secretary of State for Wales is considering the devolution settlement at the moment and is aiming to reach a cross-party agreement by
My Lords, I am extremely confident about the electoral prospects of my colleagues in Scotland.