Coalition Watch - edition 4
Welcome to the fourth edition of the Public Law & Regulation team's Coalition Watch alert series.
Reforming the structures of government is easy to talk about, but very hard to do.
Shortly before the general election of 1997, the then Leader of the Opposition, a certain Tony Blair MP, promised if elected to bring an end to the 'quango state'. He would, he said - quoting Trotsky for perhaps the only time in his life (possibly without knowing it) - consign quangos to 'the dustbin of history'. In this he was echoing the words of his Shadow Chancellor, who had earlier called for a 'bonfire of the quangos'.
Yet in the 13 years of the last government there were no bonfires or dustbins - just a continued and steady expansion of number and reach of the arm's length bodies that had been so much criticised.
However, the Coalition has now begun its serious attempt to do what has been promised so often before. This, surely the most important week in UK politics for many years, is bookended by two announcements.
The first, on 14 October, set out the Coalition's proposals to reform public bodies. As trailed in the last edition of Coalition Watch, the numbers are striking. Officially, this now involves 192 which are to be abolished, 118 to be merged (down to 57) and 171 to be substantially reformed. But, will this really be quite as dramatic a change as the figures suggest? Or is the 'bonfire of the quangos' smouldering rather than catching light? In this edition we consider that question.
The second announcement is the delivery of the results of the comprehensive spending review promised on 20 October. With all but two government departments required to find cuts of at least 25%, and total public spending reductions of £83 billion, there is surely little chance that this will do anything other than start a genuine conflagration. We will report on this announcement in a special edition of Coalition Watch shortly after it is made.
In this edition we also bring all the other news of the major government policy developments of the last fortnight, which include the publication of the first parliamentary Bill of the autumn - the Postal Services Bill. It is the herald of much more legislation to come.
Helping you to stay on top of all the changes that matter, we provide expert commentary on:
- Constitutional change - looking at the progress made in the Coalition's proposals concerning devolution and sovereignty, voting reform, parliamentary reform, as well as human rights and civil liberties.
- Managing the machinery - covering changes to the functions performed by central, regional and local government and arm's length bodies.
- Regulation - assessing the Coalition's proposals to prevent an expansion of the overall regulatory burden on society, together with the reorganisation of regulatory frameworks.
- Money and everything else - considering the impact of reduced government spending, the details of potential public body privatisations, and the building blocks of the 'Big Society'.
- Outstanding/omissions - the Public Law & Regulation team discusses an important policy that finds itself on the backburner.
If there is anything you would like us to cover in future Coalition Watch alerts or if you wish to comment on this edition, please feel free to email the team at email@example.com - we welcome your comments.
The Public Law & Regulation team
Devolution and Sovereignty
In a written ministerial statement the Minister for Europe has updated the House on the progress made in preparing the EU Bill. The Bill, which was set out in the Queen's speech, will, among other things, require that:
- where any proposed future EU treaty agreed by all EU member states' governments (including the UK Government) sought to transfer areas of power or competence from the UK to the EU, it would be subject to a referendum, and
- the use of ratchet clauses in existing EU Treaties (provisions which allow the rules of the EU to be modified or expanded without the need for a formal Treaty amendment) would require an Act of Parliament before the Government could agree to its use.
In addition, the Minister reiterated the Coalition's commitment not to join the Eurozone in this Parliament, or agree to participate in the establishment of a European Public Prosecutor. Coalition policy is that any future proposal to do either of these things would require a referendum. A referendum would also be required for any proposal, which would mean the UK giving up its border controls or adopting a common EU defence policy.
The Parliamentary Voting System and Constituencies Bill
The Electoral Commission has given evidence to the Political and Constitutional Reform Committee on the Parliamentary Voting System and Constituencies Bill. The Commission stated that it was as ready as it could be, but alluded to the tight timetable of the Bill.
Research undertaken by the Commission has stated that some people, particularly those with lower levels of education or literacy, will find the proposed referendum question hard work and not understand it. The Commission has recommended that the question is redrafted to address these issues.
The Coalition has announced that from 2014 voters will be asked to register individually. Registration will involve the cross-checking of a voter's date of birth, signature and national insurance number. This aims to modernise the registration system and combat fraud.
The Coalition has announced that the Queen's Speech will be moved from autumn to spring. Its professed aim is to align the time of year for the state opening of parliament with the time for elections (as provided for in the Fixed Term Parliaments Bill). The proposed change means that the current session of parliament will run until around Easter 2012.
The Supreme Court
The Supreme Court heard its first cases in October 2009. This summer, the Chief Executive of the Court stated that if it could not make the cuts of up to 40% requested by the Coalition, it would be forced to close.
In addition, the leaked document of bodies to be abolished (referred to in the last edition of Coalition Watch) stated that the future of the Supreme Court is 'still to be decided.'
The Coalition's official list of public bodies to be reformed, which has now been published (see below), makes no reference to the Supreme Court. The Court is therefore presumably one of the remaining 40 bodies, as to the future of which the Coalition even now says that it remains undecided.
Human Rights & Civil Liberties
- Outside advisory group to identify human rights abuses
The Secretary of State for Foreign and Commonwealth Affairs has announced that he intends to set up an advisory body to identify and report upon international human rights abuses. It is intended that the body will be comprised of independent experts.
- Identity Documents Bill
The Identity Documents Bill has now completed its passage through the House of Commons. The date of its first reading in the House of Lords has yet to be announced.
- Freedom Bill
The consultation asking for views on laws that should be repealed, which featured in the first edition of Coalition Watch, has now closed. 46,000 people submitted 14,000 ideas and 95,000 comments to the 'Your Freedom' website. The Coalition will now begin considering the ideas put forward.
The above analysis was written by Chris Warburton in Wragge & Co's Public Law & Regulation team.
The Coalition has formally announced its proposals for the reform of public bodies. The full list is now available online.
On the Coalition's analysis, there are currently 901 arm's length public bodies within the scope of its review. As to these -
- 192 will cease to be public bodies
- 118 will be merged (down to 57)
- 171 will be retained, but subject to substantial reform
- 380 will be retained
- 40 remain under consideration.
After the proposed reforms, there will still be at least 608 public bodies, plus any of those currently under consideration which survive the process. But, more than half of all the bodies, including those which will be subject to reform, will have been directly affected by the review.
The proposals should be regarded as broadly final, but in most cases they require legislation and may of course be subject to amendment during the parliamentary process. The Coalition proposes to give effect to them predominantly via a Public Bodies Bill which will be introduced shortly. Assuming that the Bill receives Royal Assent in the spring or early summer of next year, we can expect to see it starting to have legal effect in the second half of 2011. However, in practice, administrative transfers of the functions of a number of public bodies are likely to begin much earlier than that.
The Coalition's list should be consulted directly for a comprehensive view of all the bodies affected, noting that some of the items on the list are confirmations of announcements made earlier. But, we list a selection of the major headline changes below.
Among the more notable bodies which the Coalition proposes to abolish are the following:
- The National Consumer Council (also know as Consumer Focus) - the government hopes that its functions can be performed by third sector bodies such as Citizens Advice.
- The Design Council - the government hopes to reconstitute this body as an independent charity.
- The Audit Commission - the audit function of which will be privatised.
- The Office for Tenants and Social Landlords (also known as the Tenant Services Authority) - its regulatory functions will be passed to the Homes and Communities Agency.
- The Horserace Totalisator Board (better known as the Tote) - this is to be privatised.
- The UK Film Council - the functions of which are to be transferred elsewhere in government.
- British Waterways - this will cease to be a public body but the government will seek to establish it as a third sector organisation on the same lines as the National Trust.
- The Council for Healthcare Regulatory Excellence - this will cease to be a public body but may continue as an independent organisation if it can become self-funding.
- The General Social Care Council - this will be abolished and have its functions transferred to the Health Professions Council.
- The Health Protection Agency, Human Fertilisation and Embryology Authority and Human Tissue Authority - three important health sector public bodies which are to be abolished and have their functions transferred elsewhere in government.
- The Security Industry Authority - this regulator will be abolished as part of a phased transition to a new regulatory regime.
- All of the Regional Development Agencies - the functions of these bodies are expected to be adopted to some extent by local enterprise partnerships formed between local authorities.
- The Standards Board for England - both the body and its functions are to be abolished.
There will be a number of high profile mergers, including the mergers of -
- The Gambling Commission with the National Lottery Commission.
- The Competition Commission with the competition side of the Office of Fair Trading (the consumer functions of the latter body largely being transferred to local government).
- The Postal Services Commission (Postcomm) with the Office of Communications (Ofcom).
- Sport England with UK Sport.
- The Serious Organised Crime Agency (SOCA) into the new National Crime Agency.
In practice, there will be a large number of other de facto mergers resulting from those bodies that are being abolished, as functions are transferred elsewhere.
Moreover, the Coalition proposes to consider bringing many tribunals which for the time being have retained their independent status within the unified Tribunal Service that was established by the previous administration. Among others, this is likely to affect the Competition Appeals Tribunal, the Copyright Tribunal, and the Valuation Tribunal.
Retained but subject to substantial reform
A large number of public bodies are subject to the conclusion 'retain and substantially reform', which means that the Coalition sees a need for them to continue in operation, but subject to a range of reforms to the scope of their functions, culture, governance or funding.
Among those which fall into this category are -
- The Financial Reporting Council - this is to become a self-funding body.
- The Homes and Communities Agency - the HCA will take on the regulation of social housing but is generally to become a smaller enabling and investment body, and its functions relating to London will be transferred to the Mayor of London.
- The Environment Agency and Natural England - the government aims to make these more 'efficient' (read 'slimmed down') and 'customer focused' bodies; further announcements are promised after the spending review.
- The Forestry Commission - the government is currently engaged in a strategic review of forestry in England which will result in announcements later in the autumn on the reform of the Commission.
- The Internal Drainage Boards - these are to be reformed to increase their 'efficiency and accountability', and in particular to increase the involvement of local communities.
- The Parole Board of England and Wales - this will be retained, but its future status is under ongoing review.
- The Equality and Human Rights Commission - the EHRC is to be required to have a 'better focus on its core regulatory functions' and to make 'improved use of taxpayers' money' (in other words, it will have its wings clipped).
- The Rail Passengers' Council (Passenger Focus) - this body will be retained, but required to focus on its core role and reduce its costs (in other words, slim down).
In addition, there are three regulators which are to be retained but which may find their functions adjusted in the light of wider reviews that are currently ongoing in relation to their sectors - Ofwat, Ofgem and the Health and Safety Executive.
Finally, it is notable that of those bodies whose future is still under consideration, a number are of considerable importance. These include the Local Better Regulation Office, the Office for Fair Access, the UK Atomic Energy Authority, the National School of Government, the Central Office of Information, the Commission for Architecture and the Built Environment, Partnerships for Schools, the Consumer Council for Water and the Office of the Children's Commissioner.
The above analysis was written by John Cooper in Wragge & Co's Public Law & Regulation team.
Regional and Local Government
The Coalition has announced that byelaws to create local nature reserves will no longer need to be confirmed by the Secretary of State. English local authorities will be able to make, confirm and revoke local nature reserve byelaws following consultation with the local community and interested parties.
The Thurrock Development Corporation will be absorbed by Thurrock Borough Council from 1 April 2012. The company will move into the Council's premises by March 2011 to work more closely with the Council ahead of the change, and ensure efficiency savings can be made as soon as possible.
According to the Coalition's announcement on the future of public bodies a similar approach will be taken to the London Thames Gateway Development Corporation and the West Northamptonshire Development Corporation, each of which will also have its functions allocated to the relevant local authorities.
The Coalition has announced that centrally funded local transport grants will be pooled to create fewer but larger funding schemes, and a new Local Sustainable Transport Fund. The driver for these measures is increased efficiency and a shift of initiative and planning to the local level.
The Coalition has launched a consultation on the extension of the strategic road network to include the A1 from Newcastle to the Scottish border and a number of roads linking Bootle with Twelve Quays Ferry Terminal in Birkenhead. If added to the strategic road network these roads will be eligible for central funding, therefore the announcement at once potentially reduces local control, but recognises the importance of key regional links to the national infrastructure.
Local authorities in England are to be granted new borrowing powers, known as Tax Increment Financing (TIF), intended to promote local investment and economic growth. The TIF will allow local authorities to borrow against predicted growth in local business rates in order to finance capital projects.
The Communities Minister has announced that councils will be able 'to run themselves under a system that works best for their area.' The proposed reforms do not amount to a free for all in local government structure, but local authorities will be allowed to readopt the committee system; an option that was removed for local authorities with a population of 85,000 or more by the Local Government Act 2000.
The Coalition is consulting on proposals to tighten up the publicity rules for councils. The proposals will stop municipal newspapers being published more often than four times each year and prevent the hiring of lobbyists. The stated aims of the stricter controls are to assist local newspapers which have struggled in a saturated news environment, and prevent public funds being spent on publicity documents which step over the line between legitimate local authority information and political campaigning.
The above analysis was written by Rachel Martin in Wragge & Co's Public Law & Regulation team.
- Standards of local government
The Standards Board regime, which prescribes a code of conduct governing the behaviour of all elected, co-opted and independent members of local authorities, is to be abolished as part of the Localism Bill. It will be replaced by measures which include:
- The further empowerment of the Local Government Ombudsman - the Ombudsman will investigate incompetence and local authorities will be obliged to implement the Ombudsman's decision.
- The criminalisation of serious misconduct by a councillor for personal gain. It will be a criminal offence for a councillor to fail publicly to register or declare certain types of personal interest, or to seek deliberately to mislead the public about an interest. Relevant interests are stated to be those that 'could reasonably be regarded as likely to influence or affect their actions, conduct when on business for the authority or voting.'
- Farming regulation
In the second edition of Coalition Watch we highlighted the establishment of a new Task Force on Farming Regulation in July 2010. Defra is now asking for comments and suggestions by 31 October as to how the Task Force can deal with 'red tape' which affects issues such as farm animals, growing crops, food processing, business and management, environment and land management.
- Reducing bureaucracy in schools
The Secretary of State for Education has asked Ofsted to dispose of the lengthy and time consuming school Self Evaluation Form (SEF), which schools are required to complete prior to their Ofsted inspection. The SEF asks teachers and heads to collect and verify facts and figures about their school in preparation for the inspection. Schools will be expected to use their own approaches to self-evaluating the performance of their schools. Ofsted has already been asked to focus on four principal areas: the quality of teaching; the effectiveness of leadership; pupils' behaviour and safety; and pupils' achievement.
- Fines for silent calls
A possible £2 million fine was introduced on 25 September to penalise firms which persistently pester consumers with silent and abandoned calls. This increases the previous maximum limit of £50,000. Such calls do not necessarily have to be made with malicious intent, but tend to be generated when call centres use automatic dialling systems and insufficient staff are available to handle the call. It is expected that in the future such calls will include an information message to avoid the fine.
- IT in the NHS
As a result of the cross government review of ICT projects, the NHS National Programme for Information Technology (NPfIT) scheme is likely to be replaced by a more locally-led modular system of procurement. This is intended to allow NHS organisations to introduce smaller changes to satisfy their requirements and to save costs. However, any changes will be expected to 'connect in' to the national system. This new approach will not affect national applications already procured, which include national infrastructure such as Choose and Book and the Electronic Prescription Service.
- Health & Safety
Lord Young of Grafham, the Prime Minister's Adviser on Health and Safety law and Practice has published a report into health and safety and the 'compensation culture' entitled 'Common Sense, Common Safety'.
The report, which professedly aims to restore a proportionate approach to health and safety law, contains a series of specific recommendations, including:
- Ensuring that individuals will not be liable for compensation as a result of 'voluntary well-intentioned acts on their part'.
- Simplifying health and safety risk assessments for low hazard workplaces.
- Professionalising health and safety consultants, who would be required to hold a qualification to carry out that role.
- Making it easier to challenge local authorities which ban events on health and safety grounds.
- Consolidating all health and safety regulations into a single set of regulations.
The above analysis was written by Robyn Farmer in Wragge & Co's Public Law & Regulation team.
- National audit office access to BBC accounts
Fulfilling one Coalition pledge, the National Audit Office (NAO) is to have full access to the BBC accounts, and rights of access to BBC management information and confidential contracts with third parties, although not to commercially sensitive information. Rather than the BBC Trust choosing when to invite in the NAO and what it should study, the NAO will have the power to decide which value for money studies to undertake and when.
- Immigration cap: constraint on business?
Our second edition of Coalition Watch reported the launch of a consultation on the annual limit of the number of non-EU migrants admitted to work in the UK. The cap has come under criticism as a constraint on growth in British companies who seek overseas talent owing to a lack of skilled workers in the UK. The government has issued some responses to such criticism (see Government defends interim limit on economic migrants and Department to defend immigration limit).
- Prison factory plans
The Ministry of Justice has announced proposals to encourage private businesses to establish their factories in prisons. This is intended to help rehabilitate prisoners by giving them meaningful work, reduce reoffending rates by giving them the skills to find work on release and promote a system of repayment to the victims, their families and the state. A government last attempted this in 1996 through the Prisons Earnings Act, which never entered into force. Prisoners would be allowed to earn more than the current average of £8 a week (untaxed cash in hand), so that deductions could be taken from their wages. One further proposal is to provide an incentive 'pot' that prisoners could access if they do not reoffend within two years of gaining their freedom.
The above analysis was written by Eleanor Baynes and Robyn Farmer in Wragge & Co's Public Law & Regulation team.
According to the Minister for the Armed Forces, the Coalition is committed to maintaining and updating Britain's nuclear deterrent, but the decision on how much of tax payer's money will be spent on renewing the nuclear deterrent programme will be made following a value for money review. The Minister said that although the commissioning of technical designs could take place later on this year or in early 2011, the main decision to spend billions of pounds (the current scheme is estimated to cost £20 billion) is likely to be taken in 2014 or early 2015.
- Government Efficiency Review
Sir Philip Green has concluded his review into government efficiency. He found that central government spent large amounts of money without any co-ordinated procurement strategy, and therefore failed to obtain the full value of the government's credit rating or of the purchasing power that should accrue to its size. In particular, he highlighted considerable disparities in the cost of basic items purchased by different government departments. Among other things he recommends an audit of all existing contracts with a value of £100 million or more by a skilled team which will seek to break the contracts or negotiate improvements if they do not represent value for money.
The Chancellor has announced that from 2013, child benefit will be axed for higher rate taxpayers. This could save approximately £1 billion a year from the welfare bill. The effect would be that any couple where one parent earns about £44,000 or more, which puts them in the 40% income tax bracket, would no longer be eligible for child benefit.
The Chancellor has also unveiled plans for introducing a cap on benefits from 2013. This means that households shall receive no more than roughly £500 per week in benefits, equivalent to roughly £26,000 a year. The Chancellor said that this is the amount that 'the average family gets for going out to work.'
The cap will be based on the combined income from jobseekers' allowance, income support, employment support allowance, housing benefit, council tax benefit, child benefit and child tax credit. However, households receiving a disability living allowance will be exempt from this cap.
- Universal credit system
Against the background of the Coalition's aim to ensure 'work always pays,' the Coalition has revealed plans to create a new universal credit system. Under the new system, those who are unemployed or in low paid jobs will receive a single benefit payment rather than separate payments for each benefit that they are currently entitled to.
The claimants would continue to receive some benefits as they got back into work but the amount would be reduced as their earnings increased. The idea behind the proposed new system is to encourage claimants to work rather than staying on benefits in the belief that that they are better off staying on benefits than working.
The proposed reforms shall be put to Parliament in a welfare reform bill next year.
- Spending data to be published
The Secretary of State for Communities and Local Government has published online every departmental spend over £500 for the first quarter of 2010-2011 (April to June 2010). The Secretary of State also the disclosed austerity measures that the department is taking to reduce spending. These include an end to refreshments for internal staff meetings and any meeting under four hours; and switching off a number of lifts during quiet periods.
- High Speed Rail
The future of high speed rail became a little firmer when the Secretary of State for Transport Philip Hammond announced plans to consult in early 2011 on an envisaged extension to the UK's planned high speed rail network. The proposal sets out a 'Y' shaped network with two routes between Birmingham and Manchester and Birmingham and Leeds, so that each limb can connect to the coastal mainlines travelling further north. A reverse 'S' route from Birmingham to Manchester and then across the Pennines to Leeds was considered, but concluded to be disadvantageous in respect of journey times, number of trips, and reduced benefits for regional markets.
- Civil service redundancy terms
The government has agreed a deal on civil service redundancy terms with five of the civil service unions. Only the Public and Commercial Services Union (the UK's largest civil service trade union) remains to agree. A deal with all of the unions would make the Superannuation Bill itself redundant, however in the meantime the bill continues through Parliament.
- Public service pensions report
Lord Hutton (chairman of the Independent Public Services Pensions Commission) has published his interim report on the future of public service pensions. For more information and comment, see our Pensions update Public Service Pensions Review - Hutton Report published.
The above analysis was written by Dipti Dashore and Robyn Farmer in Wragge & Co's Public Law & Regulation team.
- Postal Services Bill
The updated report by Richard Hooper, highlighted in the last edition of Coalition Watch, has now been published. It identifies three factors crucial to the preservation of the universal postal service as (i) an injection of private sector capital, either via a sale to a partner or trade investor or an IPO, (ii) government assumption of the £8 billion pension deficit and (iii) a new regulatory approach.
Hot on its heels, the Coalition announced its commitment to the privatisation of Royal Mail, and very shortly after that has introduced a Bill - the first major regulatory statute of this parliament - to give effect to the proposals. As part of its approach, the Coalition also pledged that at least 10% of the shares in Royal Mail will be reserved for its employees. The Post Office network will not be privatised, but the Coalition has said that it will look to other options such as its mutualisation
- Northern Ireland Water
The corporate status of Northern Ireland Water (NIW) is very similar to that of Royal Mail: a private company with the government as the only shareholder. Nevertheless, whereas the Coalition is proposing to sell off (albeit partially) Royal Mail, it appears that there is a difference in opinion between Northern Ireland Ministers on the appropriate status of NIW.
The Minister for Regional Development has called for NIW to be brought back into public ownership (effectively a renationalisation), while the Minister for Finance and Personnel considers that such an approach would only lead to higher costs for consumers and a reduction in investment.
- Audit Commission
Previous editions of Coalition Watch reported on the Coalition's intention to abolish the Audit Commission. We can now report that, in response to a request from the Minister for Local Government, the Commission has given its views on the issues that need to be considered in developing the new legislative framework for local audit. As a separate exercise, the Commission has been asked to look at the options available for transferring its audit work into the private sector.
- The Tote
The Coalition's intention to look at the future of the Tote was first announced in its June 2010 Budget. This month the Government has confirmed that it will sell the Tote and will launch an open market process inviting bids from all interested parties.
The above analysis was written by Ravi Randhawa in Wragge & Co's Public Law & Regulation team.
The Big Society?
- Working together
The Government's THINK! Campaign is working with the Stobart Group and Tesco to promote road safety. The Stobart Group and Tesco have agreed to allow 200 trucks to bear adverts encouraging drivers to take regular breaks and not to use mobile phones while driving.
- Independent schools
The Attorney General has asked the Charities Tribunal to clarify the law on how the 'public benefit' test is applied to independent schools. This was prompted by the action of the Independent Schools Council (ISC). The ISC is seeking a judicial review of the Charity Commission's ruling in which two independent schools were refused charitable status. It claims that this was owing to the narrow interpretation applied by the Charities Commission to the meaning of 'public benefit.'
- The Big Society Strategy
The Minister for Civil Society, Nick Hurd, has published "Building a Stronger Civil Society" - a strategy to help charities, voluntary groups and social enterprises to take advantage of the opportunities arising from the Big Society concept.
The above analysis was written by Dipti Dashore in Wragge & Co's Public Law & Regulation team.
"England does not love coalitions", or so Benjamin Disraeli famously said.
Whether England turns out to love this Coalition in the aftermath of the forthcoming spending cuts is of course an open question, and one that the Coalition hopes we will not be asked to answer in a general election for another five years.
But whatever England may think, there are indications that Scotland, Wales and Northern Ireland are about to be seriously out of love with the Coalition as the First Ministers of each country issued a joint declaration opposing the likely depth of the fiscal retrenchment in the light of its likely impact on their jurisdictions.
This is politics, of course, and each of the First Ministers has a weather eye on their own electorates, since none of them has the luxury of being able to wait for half a decade before putting themselves forward for re-election. Moreover, there is every reason to believe that the spending cuts will have a particularly significant effect on those nations of the UK which are particularly dependent on public sector spend as a component of their GDP.
But the intervention of the First Ministers raises the question of another issue that has so long been outstanding that it is almost caked in the dust of ages - the Barnett Formula.
For the uninitiated, the Barnett Formula is the formal mechanism by which HM Treasury allocates government spending between the component nations of the United Kingdom. It is named after Joel (now Lord) Barnett, who devised it while he was Chief Secretary to the treasury in the late 1970s. As originally conceived, it was a short term measure intended to resolve Cabinet disputes by providing a basis for the allocation of additions or reductions in expenditure between the different nations. This was set in the context of what was then expected to be an imminent devolutionary settlement (which in fact took another 20 years to deliver). The formula allocates expenditure by reference to population differentials rather than need, and is famously complex, at least for non-specialists.
Since the baseline populations have shifted, the effects of the continued application of Barnett are now, in the words of the House of Lords Select Committee on the Barnett Formula report of 9 July 2009, 'arbitrary and unfair'.
To put this in crude terms, the Barnett Formula has the effect of allocating spending on a per capita basis in a way that differs significantly between the nations of the UK. For the year 2007-2008, if we take average UK per capita spend as a baseline figure of 100, the split was as follows:
- England - 97
- Wales - 111
- Scotland - 118
- Northern Ireland - 125
In pure financial terms, this means that the per capita government spend in England was £7,121, in Wales £8139, in Scotland £8623, and in Northern Ireland £9,385.
There is obviously no rational justification for these disparities, which are based on no consideration of where money needs to be spent and where need actually falls. Even Lord Barnett himself, in giving evidence to the Select Committee, has claimed that a reassessment of his formula is long overdue.
Why has this situation been allowed to continue by successive governments over a 30-year period? And, more to the point, why has the Coalition, with the benefit of a recent and very clear House of Lords report into the issue, stayed silent on it?
The historic answer is, of course, largely political. Any rational redistribution of spending is unlikely to be quite so favourable to Scotland, Wales and Northern Ireland as the Barnett Formula has been, and any redistribution in favour of England is unlikely (due to its larger population) to be at a level which would make a substantial difference in terms of what can be delivered by government. So, there is significant political risk to non-English votes in any reassessment of the formula, without any likely corresponding gain in England.
Nonetheless, it is surely absurd that the Barnett Formula - a short term political fix for a different era - has now gained a status almost equivalent to that of a constitutional convention that cannot be touched. Its effects are patently irrational, and its perpetuation - like that of other constitutional anomalies like the West Lothian question - cannot be justified.
But the Coalition has at least committed to revisit the West Lothian issue. It is therefore high time that it also opened up the Barnett Formula as part of its broader public sector reforms.
First Ministers in Scotland, Wales and Northern Ireland might of course want to bear that risk in mind when commenting on the adverse effects for their nations of the forthcoming spending review.
The above analysis was written by John Cooper in Wragge & Co's Public Law & Regulation team.
If there is anything you would like us to cover in future editions of Coalition Watch or wish to comment on from this edition, please feel free to email the team at firstname.lastname@example.org - we welcome your comments.
This analysis may contain information of general interest about current legal issues, but does not give legal advice.