Alexander signals Lib Dem u-turn on Barnett Formula

In an appearance before the Welsh Assembly’s finance committee yesterday, the Liberal Democrat’s cutter in chief, Danny Alexander, performed what can only be described as the next in a long line of Lib Dem U-turns, this time on how the devolved administrations are funded by Westminster.

In an appearance before the Welsh Assembly’s finance committee yesterday, the Liberal Democrat’s cutter in chief, Danny Alexander, performed what can only be described as the next in a long line of Lib Dem u-turns, this time on how the devolved administrations are funded by Westminster.

In 2009, the Independent Commission on Funding and Financing for Wales, chaired by the economist, Gerald Holtham, outlined how under the Barnett Formula, used to calculate the block grant for Scotland, Wales and Northern Ireland, Wales lost out by £300 million a year, which would amount to £8.5 billion over the next decade.

The reason? The Barnett Formula is not based on needs. However, speaking to AMs on the finance committee, the Chief Secretary to the Treasury argued:

“… as a government it is not our policy to reopen the question of the Barnett formula or the funding allocations within the United Kingdom whilst this very serious fiscal consolidation is going on.”

Rewind back to the general election, and it is clear that Alexander was elected on a clear mandate to reform the funding formula, with the Lib Dem manifesto having made crystal clear the party’s commitment to (page 92):

“… replace the current Barnett formula for allocating funding to the Scottish, Welsh and Northern Irish governments with a new needs based formula, to be agreed by a Finance Commission of the Nations.”

Putting aside the minister’s screeching u-turn, Alexander’s suggestion that reforming Barnett would be somehow complicated or expensive doesn’t chime with expert opinion. In publishing his committee’s interim report, Holtham concluded:

“In the past it has been suggested that a needs-based formula would have to be extremely complicated in development or design, making it prohibitively difficult to devise or operate.

“Our analysis suggests that this is not the case – a needs-based replacement for Barnett could be relatively straightforward, and based on no more than half a dozen or so simple proxies for need.

“Such a formula could therefore preserve the simplicity and automatic character of the Barnett formula which has been its main justification.”

What is more, even Lord Barnett who as a Labour predecessor to Danny Alexander introduced the Barnett Formula in the 1970s has called for the system which bears his name to be scrapped. Writing in the Times last January he declared:

“What has become known as the Barnett formula has to go. When I introduced it, as chief secretary to the Treasury, I did so to make life a little easier when negotiating public expenditure settlements for Scotland, Wales and Northern Ireland. The idea was not to give Scotland an advantage over the rest of the country.

“I thought it would last about a year, not 30 years. And over those three decades, while many thought it would eventually bring spending across Britain into line, it has of course done the opposite and looks increasingly unfair to the regions of England.”

Even the Lib Dem’s coalition allies understand the need for a reformed funding system, with the Chair of the Assembly Finance Committee, Conservative AM Angela Burns having told the Treasury Minister:

“As a committee, and as an assembly, in the main, we believe that Barnett is unequal. We are seeking a needs-based formula – the Barnett formula has run its course.”

When will Danny Alexander wake up and smell the coffee?

24 Responses to “Alexander signals Lib Dem u-turn on Barnett Formula”

  1. Rosie

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula: //bit.ly/hTEanS reports @EdJacobs1985

  2. Toque

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula: //bit.ly/hTEanS reports @EdJacobs1985

  3. Brian Moylan

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula: //bit.ly/hTEanS reports @EdJacobs1985 #libdems #ukpolitics

  4. Hazico_Jo

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula: //bit.ly/hTEanS reports @EdJacobs1985

  5. william

    Smell the coffee?Mr. Alexander is probably aware of a needs -based formula approach,but knows that the English taxpayer has had enough.A Libdem u-turn?Welcome to the real world of government, or opposition, and choose where you would rather be.

  6. L DTUC

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula: //bit.ly/hTEanS reports @EdJacobs1985

  7. Man in a Shed

    Is it me or isn't the next step for the Left Foot Forward logo with the right foot ? //bit.ly/fykbvy

  8. Man in a Shed

    Isn’t it time to treat all the UK equally according to need and unravel the anti-English policies of Labour ?

  9. No evidence

    How about a serious examination of the case for a “needs based” allocation rather than simply gloating at the latest piece of Lib Dem stupidity (and they are stupid I am not defending them for an instant, but their mistake was to promise a “needs based” index in the first place.

    The key point of devolution is that it gives the devolved discretion. Moving to a needs based index removes that – if you are identifying a “need” then you must surely also be identifying a need to respond to it.

    Secondly it creates perverse incentives. Need more money for education? Keep delivering poor exam results. For economic development? Keep unemployment high, and so on.

    Thirdly it removes the automaticity that is perhaps the greatest benefit of Barnett – there is not a debate about what goes into the index, it’s just a formula and the money flows automatically.

    Of course the fourth weakness of the “needs based” argument and the one that Alexander has just run slap into is the essential idea of its proponents that money grows on trees. If you want more money for Wales and NI then you want less for Scotland or for England. I am sure that, of course, LFF would be praising the coalition for their political bravery in telling the oversubsidised Scots that they’ll have to go without. NOT

    Barnett is not perfect but, like democracy, it is better than the alternatives. That’s the reason why Labour did little to it in office. Now we are in opposition we should recall why that was and be criticising the Lib Dems for taking so long to catch up with reality not adopted their policy just as they realise it was nonsense from start to finish.

  10. Hotspur

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  11. Tony Holyoak

    RT @stgeorgeiscross: RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  12. Loraine Hardy

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  13. DeludedDonny

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  14. Ed Jacobs

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  15. Chris

    “Mr. Alexander is probably aware of a needs-based formula approach”

    I bloody well hope he is, he was elected on a mandate to introduce one.

    “A Libdem u-turn?Welcome to the real world of government, or opposition, and choose where you would rather be.”

    What a cop-out! Dismissing every u-turn, broken promise or pledge as just a consequence of being in government erodes a most basic tenet of democracy – the mandate.

    The Barnett formula and its supposed unfairness on England reflects the unbalanced nature of this country. All the money is in London and South East, this needs to be redistributed to the other regions of Britain.

  16. Anon E Mouse

    Chris – Do you never stop? When did the Lib Dem’s campaign for a coalition government?

    As for Scotland they have elected the SNP, obviously a good thing compared to the useless Labour Party up there, so let them have independence I say.

    At least then they wouldn’t have an opposition run by Little Ed Miliband, the union stooge, property millionaire and poster boy for posh boy eco toffs like Joss Garman and his bunch of middle class wusses.

    Those jocks don’t realise how lucky they are…

  17. paulstpancras

    Alexander signals Lib Dem u-turn on Barnett Formula | Left Foot Forward
    //bit.ly/i7kPw2

  18. yorkierosie

    RT @paulstpancras: Alexander signals Lib Dem u-turn on Barnett Formula | Left Foot Forward
    //bit.ly/i7kPw2

  19. janie_s

    “Some have suggested I am not patriotic by coming to Britain and attempting to enslave through Marxism those that gave me sanctuary. Brothers; Marxism is freedom, capitalism is slavery. I came here as a liberator.”

    Ralph Miliband, “Marxism and Me”, 1992 OUP.

  20. Chris

    @mouse

    “Do you never stop?”

    Not while you and your paid sockpuppets are trying to re-write history one blog post at a time.

    “When did the Lib Dem’s campaign for a coalition government?”

    They campaigned against rising fees but not just on the hypothetical of them forming a majority government but specifically on voting against any increase in fees. Clegg denounced the Browne review when it was set up and is on video saying he would vote against the Labour-tory stitch up. The issue of a needs based grant is exactly the same, the liberals are dropping everything they’ve said for the past 5 years – its a disgrace.

  21. Anon E Mouse

    Chris – You forgot to address my point about the Labour leader and the union cheating to get him elected. It’s not like you to miss a paragraph to comment on so here it is again:

    At least then they wouldn’t have an opposition run by Little Ed Miliband, the union stooge, property millionaire and poster boy for posh boy eco toffs like Joss Garman and his bunch of middle class wusses.

    I’d hate it if you neglected to pander to your obsessional nature sweetie xxx

  22. Spir.Sotiropoulou

    RT @leftfootfwd: Alexander signals Lib Dem u-turn on Barnett Formula //bit.ly/f9Inxo

  23. Chris

    @mousey

    “You forgot to address my point about the Labour leader and the union cheating to get him elected.”

    I thought it best to ignore it as answering would only encourage you.

    “At least then they wouldn’t have an opposition run by Little Ed Miliband, the union stooge, property millionaire and poster boy for posh boy eco toffs like Joss Garman and his bunch of middle class wusses.”

    I hope your employers know that you’re just copying and pasting again, you get paid for each original and new line you post not to just repeat; they’ve got the twat-o-tron for that.

  24. IFS: Welsh “lose” from Barnett Formula | Left Foot Forward

    […] even Lord Barnett himself, after whom the formula is named, has previously outlined his belief that the system has run its […]

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