Wednesday, April 22, 2009

For the good of the Union, has Barnett (finally) reached its sell-by date?

This appears to have slipped below the radar.

Prime Minister’s Question-Time:

David Simpson (DUP, Upper Bann) asked what impact the scrapping of the Barnett formula would have on the least well-off regions of the UK, including Northern Ireland.

Brown said that there has been agreement between all parties that the allocation of public spending should be based on need, and said it remained the correct formula. He added that £600m had been allocated to Northern Ireland to aid the economy.

Excuse the double negatives, but that's not Brown saying that Barnett won't be scrapped is it?

All parties still agree that allocation of public spending should be based on need, but that doesn't (apparently) now necessaily mean it will be allocated on the basis of the Barnett Formula- Owen Patterson, Conservative Spokesman on NI has been even more forthright on the matter:
"Furthermore, we have never said that a Conservative Government would make severe cuts to Northern Ireland’s block grant. We have said the Barnett Formula can't last forever. Any replacement would be a needs-based formula and as Northern Ireland has substantial needs it would therefore get substantial resources.

"These comments prove that debate about the Barnett Formula is happening in a fact-free vacuum and we have repeatedly called on the Government to show some leadership on this issue and look at an updated needs-based assessment of how spending should be allocated across the UK"

"Fact-free vacuum" indeed, which reminds me, I'm still waiting for a logical, coherent reasoning from the DUP (or anyone else actually) for the retention of Barnett...well?

13 comments:

fair_deal said...

"All parties still agree that allocation of public spending should be based on need"

Barnett isn't based on need (no matter how many times Brown says it is). You also have to be careful with the use of need as that creates a perverse incentive for the areas of devolution - e.g. if we improve health and unemployment they'll cut our block grant.

Reasoning for retaining Barnett from a NI perspective is simple, NI seems to do pretty well out of it with the expectation that anything new will more likely be worse than better.

Right now this breathing space/plenty is particularly useful to NI as it gives scope for savings that could go towards capital spend of which NI has a huge backlog - one of the physical legacies of the troubles that will be with us for some time.

As regards Barnett itself, IPPR made the point that it would have been more successful in achieving its goal of aligning spend pattern if it hadn't been interfered with for political reasons - pretty much anytime Scotland's grant was to be cut they fiddled with it to prevent this from happening (IIRC it said the Tories were particular culprits of that). So to a degree it is made the blamehound for things it isn't entirely responsible for.

The other advantage of Barnett is it is there and operating and replacing it will be difficult to say the least. Funding formulas are a nightmare to develop and agree. Most likely parties/areas will develop different formulas with impartial rationales for them whch conveniently happen to deliver very well for them (with the probable exception of Alex Salmond who won't give a stuff about an impartial rationale he'll just shout about Scotland's oil)

I grant you none of these arguments are the strongest in the world upon based upon practicality rather than principle and I would be interested in seeing some of the alternatives (see below) but sometimes it needs to be remembered that muddling through can be a viable option.

Here is the recent work on the issue in Canada.
http://www.eqtff-pfft.ca/english/index.asp

wildgoose said...

I think it is pretty simple really.

He who pays the piper, calls the tune.

Seeing as after Devolution we have been denied any say in most of the internal matters of Scotland, Wales and Northern Ireland then the legislatures in those areas should raise their own funds and actually be accountable for their spending.

Naturally, the argument will be made about poorer areas. I should know, I hail from a poor area of Northern England. One that despite being much poorer than Scotland has nonetheless consistently received much less funding than Scotland. So if it was acceptable before, it should still be acceptable with the boot on the other foot.

But as a sop, seeing as Benefit Payments are a reserved matter then they can continue to be paid for from the central (English) pot. There, that deals with the issue of more money for poor areas with high unemployment. And rich areas of low unemployment (e.g. Edinburgh) will just have to fund themselves without dipping into the pockets of the working poor in England.

Cue howls of "It's oor Oil"...

O'Neill said...

Fair Deal,

Barnett isn't based on need (no matter how many times Brown says it is).-I took that part of his reply as indicating a less than 100% commitment to the formula (I know how he finished the sentence, but saying “all” parties remain committed to sharing on a need basis is nearer to the truth).


You also have to be careful with the use of need as that creates a perverse incentive for the areas of devolution - e.g. if we improve health and unemployment they'll cut our block grant.-Depends on how what kind of replacement we come up with, but, as a principle, “need” surely is a much more equitable form of redistribution than simple population?


Reasoning for retaining Barnett from a NI perspective is simple, NI seems to do pretty well out of it with the expectation that anything new will more likely be worse than better. -You’ll be not surprised that this is the point I’d probably disagree with you most on, or not the point actually, but the rationale behind it. As Unionists, our concern and responsibility is surely beyond N.Ireland and should encompass the United Kingdom as a whole? Has the United Kingdom (and by extension the Union) as a whole done well out of Barnett?


The other advantage of Barnett is it is there and operating and replacing it will be difficult to say the least. -Maybe (and I’d say perhaps, for the UK as a whole that may be the only viable argument at the present time), but Unionism as whole (and this is not just the case in NI) has generally not even been prepared to consider the possible amendments, never mind alternatives; Simpson’s question to the PM, which could have been basically rephrased, “Why should we think about alternatives, Barnett’s working for you and me Gordie, stuff the rest?” is a prime example of this.

For the sake of the overall Union, thinking a bit less parochial and a bit more long-term on the part of all the Unionist parties is required with this.

Thanks for the link, I’ll have a read of it later.

fair_deal said...

"as a principle, “need” surely is a much more equitable form of redistribution than simple population?"

Equitable is in the eye of the beholder. My warning about perverse incentive is so that we don't have a solely need based replacement, it plays a role but pick the wrong ones and encourage bureaucracies not to tackle problems because of the practical disincentive to them.

The welfare system encourages families to present themselves as being separated, what is the result, lots of people claiming they live separately with an significant additional cost to social housing through dole drops. In America a bureaucrat in the welfare system had no incentive to reduce unemployment rolls as they got a bigger salary, budget and department from higher unemployment. Part of the drop in the unemployment rolls in Clinton's time was they introduced incentives to get them down (although some of the practices to do this proved dubious). Which is a long way of saying the forumla needs to include some incentivisation to tackle certain issues of 'need'.

In the sector I work there is a focus on need which is partially debilitating when you have communities complaining that they aren't bad enough to get government assistance, or funding presentations that make communities seem like hell-holes to get resources and then complain that there is low community morale.

"As Unionists, our concern and responsibility is surely beyond N.Ireland and should encompass the United Kingdom as a whole?"

Political representatives have a dual role, their ideology and their locality. It is always a balance of both.

To a degree this is simply a revisiting of the debate in Stormont and with the national government in the early 30's with Spender arguing the NI should be as little drain on the exchequer as possible in the interests of the Empire while Craig took the position of equality of taxation (ie being part of a national taxation system) meant equality of benefit.

"For the sake of the overall Union, thinking a bit less parochial and a bit more long-term on the part of all the Unionist parties is required with this."

Sorry O'Neill but if you think those seeking the change are being less parochial than those defending you are mistaken.

We have a funding formula that some sections do well out of and some not so well. The greatest advocates for change are those whose areas aren't doing so well so it is equally parochial, it is the starting point which differentiates them.

It is interesting that the principle that was accepted with Barnett to try and equalise spend actually started to have an effect the politicians lost their nerve as they feared negative political consequences for the Union. For the sake of the Union they chose to leave well alone. Were their fears irrational or did they make decisions that have proven to be in the Union's interests?

"Has the United Kingdom (and by extension the Union) as a whole done well out of Barnett?"

I am not aware of Barnett causing harm to the Union. I would describe Barnett's performance as being alright for the Union.

I believe you are actually coming at this the wrong way. Barnett shouldn't be treated as a political litmus test of greater or less commitment to the Union, it should be assessed on its practicality.

If ideology comes into the debate about Barnett at any level it is actually around the issue of the role and size of the state rather than the existence and perpetuation of the country. Is it healthy for significant parts of the UK to be so dependent on public spending?

IIRC It should also be noted that despite Barnett not being particularly generous to the North of England public spending still accounts for comparable levels of the economy as Scotland and NI, which shows the issues go beyond Barnett

O'Neill said...

“Equitable is in the eye of the beholder. My warning about perverse incentive is so that we don't have a solely need based replacement, it plays a role but pick the wrong ones and encourage bureaucracies not to tackle problems because of the practical disincentive to them. “

I have a little indirect experience at what you’re driving at here. My better half is involved with funding NGOs who every November are rushing round frantically to spend all their allocation up on new coffee machines and photocopiers in order that they don’t have their financing cut the next year because they’ve been so “successful” this year at meeting targets. However as a principle surely “need” rather than population should be the driver? But that (for me) basic principle isn’t even being accepted by the supporters of Barnett, never mind them moving onto the next step, finding correct ways of defining, measuring and analysing what constitutes that “need”.

”Political representatives have a dual role, their ideology and their locality. It is always a balance of both.”

But particularly as Unionists our priority should be our idealogy (ie what is best for the nation as whole)? At the minute, there isn’t even an acknowledgement of the possible adverse effect that Barnett has outside NI or any attempt to address its weaknesses.

”Sorry O'Neill but if you think those seeking the change are being less parochial than those defending you are mistaken. “

Barnett himself has said that it is no longer a practical or equitable formula.

“The greatest advocates for change are those whose areas aren't doing so well so it is equally parochial, it is the starting point which differentiates them.”

Of course that’s true, but shouldn’t we as Unionists naturally not be looking at the wider UK picture rather than concentrating on our own small corner?

”For the sake of the Union they chose to leave well alone. “

Or perhaps for the sake of Labour’s continuing hegemony in Scotland and Wales they chose to leave well alone?

”I am not aware of Barnett causing harm to the Union. I would describe Barnett's performance as being alright for the Union.”

It’s noticeable over the last 2 years or so, it’s come much more into prominence. The reason being I think is that the English version of tabloids have started seeing it as an “issue” which can tap into latent discontent and galvanise the readership/sell papers. If the campaign takes off, we will see real damage.

“Is it healthy for significant parts of the UK to be so dependent on public spending?”

No, it isn’t, yet another reason for a full overhaul of the whole system!

fair_deal said...

"as a principle surely “need” rather than population should be the driver? But that (for me) basic principle isn’t even being accepted by the supporters of Barnett, never mind them moving onto the next step, finding correct ways of defining, measuring and analysing what constitutes that “need”."

Best one I heard was an civil service department office getting new carpet laid on top of 6 month old carpet.

Need is insatiable and ultimately undefinable. Only certain needs' will get chosen and that is were it all turns political and regional interests come into play.

I would not wish to exclude need from a new formula but I would want other issues taken into account and if possible budget incentives to reduce need.

Without examining the issue in the depth it requires I'd probably have a mix of population (with some account of age structure), certain identified needs (physical, economic and social) and incentives to tackle need (probably around capital budgets).

The defenders of Barnett may have more understanding of the difficulty of the task of developing a new one.

"But particularly as Unionists our priority should be our idealogy (ie what is best for the nation as whole)?"

Successful politics is a mixture of the ideological and the practical. I believe you are over-estimating the 'threat' that Barnett represents to the nation. It's an issue but not a fundamental destabiliser of the state.

"Of course that’s true, but shouldn’t we as Unionists naturally not be looking at the wider UK picture rather than concentrating on our own small corner?"

Balancing the interest of both, a Union dictated from London is as unwise as a Union dictated from Belfast/Cardiff/Edinburgh. It is about balance.

The challenge you describe is equally true to those who oppose Barnett. In the broader interests of the state is it something to be tolerated? Which reinforces the point that Barnett is not a suitable test of one's Unionism, the argument can be applied to either side.

Devolution also reinforces the dual role.

"If the campaign takes off, we will see real damage."

But it hasn't taken off which makes me wonder if it is one of those issues (regardless of importance) that can't sustain public interest.

"Or perhaps for the sake of Labour’s continuing hegemony in Scotland and Wales they chose to leave well alone?"

As I said the Tories not Labour were particualr culprits of it so it isn't a Labour conspiracy.

"InpartthisisbecausetheConservativeParty,asthepre-eminentlyunionist
partyatthetime,sofearedanationalistthreattothecontinuationoftheUnitedKingdomthat
wheneverBarnettthreatenedtoproduceembarrassingresultstheyfoundwaystobypassit
throughoutthe1980sandmostofthe1990s." From IPPR fair shares report

IPPR's research actually showed Barnett was beginning to squeeze NI's and Wales's budgets

"The paper finds evidence of the ‘Barnett Squeeze’ in Wales and Northern Ireland between 2002-3 and 2007-08 but not in Scotland:

In Wales spending per head fell from 13% to 8% above the UK average in this period
In Northern spending per head fell from 38% to 21% above the UK average
In Scotland there is little evidence of a spending squeeze. Spending in Scotland declined between 2002-03 and 2004-05 (from 21% above the UK average to 15% above), but it then increased again sharply from 2004-05 onwards."

So it is starting to work to a degree.

"No, it isn’t, yet another reason for a full overhaul of the whole system!"

Then come at it from such an angle and not a test of someone's Unionism and the debate may actually progress.

O'Neill said...

“Without examining the issue in the depth it requires I'd probably have a mix of population (with some account of age structure), certain identified needs (physical, economic and social) and incentives to tackle need (probably around capital budgets).”

All three of your points are connected with “need”- looking at age structure would determine need for childcare provision, pensioner assistance etc.
It’s the definition and working practice connected with “need” that requires fine-tuning, but I believe it is, as far as is humanly possibly, the fairest way to distribute funding.

“Balancing the interest of both, a Union dictated from London is as unwise as a Union dictated from Belfast/Cardiff/Edinburgh. It is about balance.”

It doesn’t need to be a Union dictated from anywhere- but there needs to be a recognition of the full implications of what it means to be in a truly United Kingdom, as opposed to a set of bickering regions seeing everything “won” or “lost” from the Exchequer always as a zero-sum game.


“But it hasn't taken off which makes me wonder if it is one of those issues (regardless of importance) that can't sustain public interest.”

If you were cynical, you’d be probably wondering then why the Conservatives are increasingly making it an issue?!

“As I said the Tories not Labour were particualr culprits of it so it isn't a Labour conspiracy.”

Nevertheless, it’s Labour in Scotland and Wales who (bar the DUP) are the staunchest defenders of Barnett in the UK.

“Then come at it from such an angle and not a test of someone's Unionism and the debate may actually progress.”

The point made about coming up with alternatives is a valid one…however, as Unionists our interests in what goes on in the Union surely shouldn’t (and can’t) begin and end at Aldergrove or Larne Harbour. Much more UK-wide awareness is needed than is being currently shown.

fair_deal said...

"the Conservatives are increasingly making it an issue?!"

They haven't especially, there are more headlines about Barnett gets more attention in local media than it gets in the national media and they are doing so because as far as it does play it plays well in England particularly southern England not because of a concern about the UK.

"however, as Unionists our interests in what goes on in the Union surely shouldn’t (and can’t) begin and end at Aldergrove or Larne Harbour. Much more UK-wide awareness is needed than is being currently shown"

No one said it does. I'd suggest you'd follow bobballs recent line of argument that the little ulster nationalist line (explicit or implied) is a poor one and alienates voters.

The problem with the undercurrent to this is every 'national' issue is made a test of Unionism which it isn't and that the Conservative or English view is presented as the 'national' view which it is isn't.

Also it comes close to implying that NI must be ever self-scarificing to the concerns of other parts of the Union, particularly the English part as if NI is not a constituent part of the Union (along with the other three) but a guest of England.

Finally Barnett is primarily a fiscal policy issue and should be dealt with as such. Unionism as a whole is too keen on creating faux tests for other parts of Unionism to fail so their Unionism can be questioned. It is one of the debilitating aspects of Unionism. People can have different persepectives on issues and still be Unionists. If that was grasped then Unionism might be able to start having some decent policy discussions.

O'Neill said...

It show happens that for some reason this has just popped up on Twitter:

http://www.niassembly.gov.uk/io/research/2009/4909.pdf

When I've got some time I'll have a look at the arguments presented and put it on a new post.

O'Neill said...

Amd just a quickie re your comment earlier about Conservatives' history with the Barnett and I know we shouldn't take all that emerges from the depths of the DUP Propaganda bunker necessarily as gospel...

"The Barnett Formula which sets the size of our block grant from the Treasury, has never been favoured by the Tories."

Arlene appears to be contradicting you!!

fair_deal said...

IMO the press office are mistaken.

O'Neill said...

Theoretically it's Arlene who's mistaken but I guess she was just the unlucky one they pulled out of the hat for this statement.

Anyroads I better stop now, seems like the DUP Press Office are trawling blogs now, wouldn't want a "Senior Ulster Unionist/Conservative in sod Ulster, Barnett must go blast!"

fair_deal said...

"Anyroads I better stop now, seems like the DUP Press Office are trawling blogs now, wouldn't want a "Senior Ulster Unionist/Conservative in sod Ulster, Barnett must go blast!"

Wouldn't worry on this issue Owen Patterson has already sold the pass on that ;-)