House of Lords Committee on the Barnett Formula

The House of Lords Select Committee on the Barnett Formula (the Richard Committee) published its report yesterday. The Barnett formula is the formula which distributes block grant to the devolved administrations in Scotland, Wales and Northern Ireland for the funding of devolved matters. It does this mechanically, by apportioning a percentage of any increase of expenditure in England in any financial year on those matters to the block grant paid to the devolved administrations.

The Committee recommend that the Barnett formula should be scrapped and a needs based formula substituted for it to distribute funding on devolved matters. The Committee have come up with their own formula based on a combination of the relative number of infants (under 5s), children (5s to 16s), pensioners (over 65s), the level of child poverty, household income, unemployment, disability, and mortality rates. It concludes:

"The main points of note here are as follows:

• On most measures, the levels of relative need in England and Scotland are quite similar (that is, the blue and the white lines are usually quite close to one-another). England has slightly higher levels in matters to do with children and poverty and Scotland has much higher levels regarding disability and mortality.

• With the main exception of mortality, need in Wales is usually higher than in Scotland (that is, the red line is usually outside the blue one).

• Reflecting its young population, need in Northern Ireland is high on the children measures and low on the pensioner measure. In this combination of highest need on some measures and lowest need on others, Northern Ireland is unique."

In comparison with the Barnett formula, the general effect is that on the Committee's needs measure, people in England would not see their position changed to any great extent in terms of share of overall UK resources, people in Scotland would see less, people in Wales would see more (although even now they receive more per capita than do those in England albeit less than Scotland) and I am not clear about the position on Northern Ireland - the Committee's proposal is probably broadly neutral for Northern Ireland because the administration there already receive considerably more per head than the rest of the UK under the Barnett formula. Broadly therefore, the Committee's proposed formula would transfer some of Scotland's block allocation to Wales.

What is the chance of this being implemented? Next to zero. The Treasury are against the changes: their spokesman said about the report "The Barnett formula has served the UK well over the years. It has proved to be a robust mechanism for allocating spending to the devolved administrations and has stood the test of time". This reflects Treasury evidence given to the Committee. Whilst David Cameron has recently made some noises about looking to revise Barnett, he has also said that this ought to be on the basis of consensus and generally agreed principles.

It would be unfair to label the Committee's proposed needs formula by reference to the axiom "Garbage in, garbage out". But any particular outcome under the Committee's proposals is highly dependent on what indexes of "need" are chosen and how they are measured. The Committee suggest that respective needs can be settled in accordance with recommendations made by a new "independent" UK Funding Commission. The problem is both that such a Commission could never and should never be independent because any needs-based funding formula requires taking a view on social priorities, which would inevitably and rightly have to be subject to political control, and that the temptation for politicians to tweak the inputs to achieve previously determined and desired outputs would probably be irresistible. By contrast, the Barnett formula is purely mechanical - find out what the uplift or reduction in England in any financial year has been on devolved matters, and apply a proportion of the same uplift or reduction to the block grant to the devolved administrations.

But the main problem, and the one probably causing the Treasury to pour cold water on it, is the likely impossibility of achieving agreement. First, the Committee's approach would not cater for those in England who, rightly or wrongly, see themselves as unfairly treated (an overlooked majority) as a source of subsidy for the rest of the UK. Secondly, there is no way that the Scottish government will do anything other than oppose it - their "remedy" to the Barnett formula is fiscal autonomy for Scotland. Thirdly, it is difficult to see the Tories, with their miserable Scottish representation, wanting to reignite claims that they are an "anti-Scottish" party by cutting Scottish block grant in comparison with the rest of the UK as one of their first actions should they take office after the next general election, particularly as all devolved block grants will almost certainly be cut anyway in proportion to the ramping down of UK public expenditure from next year to cope with the ballooning of the national debt. Fourthly, any tweaking of funding arrangements within the UK is likely to give rise to fresh calls for some of the other constitutional anomalies affecting England to be remedied, which the current Labour government would like to avoid in their own self interest, particularly as in the lobbying that would inevitably be made to the proposed independent Commission with respect to how funds should be shared out, someone somewhere would need to be seen to be standing up for people in England in the same way that the devolved administrations would undoubtedly stand up for their own people.

The fact is that devolved government has heightened sensitivities between the constituent parts of the UK and this has resulted in the making of revisions of the Barnett formula having become too hot a political potato to handle. "Do nothing" would probably be the favoured course for any government in the forseeable future.

Parliamentary Standards Bill

The government introduced the Parliamentary Standards Bill into the House of Commons on 23rd June. It completed its Commons' stages and passed to the House of Lords on 2nd July.

It has been criticised by some newspapers and commentators as a piece of poorly conceived legislation given inadequate Parliamentary time. Some have even claimed that it is a constitutional affront to Parliament. Some have rejoiced over the loss at Report stage of clause 10 of the Bill as introduced (see further below on clause 10). These criticisms appear to have been formed on the basis that the Bill comprises an inadequately considered knee-jerk reaction to the Parliamentary expenses scandal, but in my view they are for the most part unwarranted and, in the case of clause 10 of the Bill, based on a lack of understanding of the legal and constitutional background. The Daily Telegraph came up with an editorial on Thursday which was vastly overblown, and which I analyse a little further below.

That is not to say that the Bill has not been improved during its Committee and Report stages in the Commons: it has, particularly in relation to the proposed new MPs' code of conduct relating to financial matters, which was sketchily dealt with in the Bill as first introduced. But as passed to the Lords it seems to me to be in a workmanlike shape, or rather will be once clause 10 is reinserted in the Lords, as surely needs to happen for the reasons mentioned below.

What the Bill does

The Bill as passed to the House of Lords does three main things:

• it creates the Independent Parliamentary Standards Authority
• it creates the office of Commissioner for Parliamentary Investigations
• it creates new offences concerning the conduct of MPs

The IPSA has the role of setting the allowances (ie expenses) that members may claim in relation to the carrying out of their duties by reference to a scheme which it is to prepare after appropriate consultations. It is to be noted that although the IPSA would pay MPs' salaries, it would not be concerned with determining their amount, which will continue to be set by resolutions of the House itself. Likewise, the IPSA is not concerned with MPs' pensions.

In addition the IPSA is to prepare a code of conduct for MPs' financial interests, also after appropriate consultations. The Bill requires that the code should include provision stopping MPs being "bought", such as by speaking or advocating for a person or body for payment, and for a register of MPs' financial interests. Members will retain a role in relation to the code prepared by the IPSA, because under the Bill it has to be approved by resolution of the House before it comes into force. That seems to me to be a reasonable balance.

The Commissioner is responsible for investigating whether breaches of the code on financial interests have occurred. The IPSA can require a member to repay sums found by the Commissioner to have been wrongly paid. The procedures to be followed are to be set down by the IPSA.

While failures to comply with the code will be punishable by the House, not all failures will comprise criminal offences. The Bill provides for new offences where a member knowingly makes a false claim, indulges in improper paid advocacy or fails to register an interest required by the code. The first of these (false claims) is at first sight odd, because subject to Article 9 of the Bill of Rights, which I deal with further below, deliberately making false expenses claims would generally already be an offence under the Fraud Act 2006.

The creation of the new Independent Parliamentary Standards Authority and a separate office of Commissioner for Parliamentary Investigations is intended to separate the roles of propounding the rules of conduct applying to members and the investigation of failures to comply with it. It is for debate whether this separation is necessary but it cannot it seems to me to be a source of criticism apart from perhaps being overly complicated. At best it emphasises the impartial nature of the investigation of MPs' conduct; at worst the separation does nothing very much. I would hope that by now most are of the view that it can no longer be left to MPs acting together to police themselves - doctors and lawyers, for example, have no longer done so far a number of years.

Clause 10

Clause 10 of the Bill as introduced said this:

"No enactment or rule of law which prevents proceedings in Parliament being impeached or questioned in any court or place out of Parliament is to prevent—
(a) the IPSA from carrying out any of its functions;
(b) the Commissioner from carrying out any of the Commissioner’s functions;
(c) any evidence from being admissible in proceedings against a member of the House of Commons for an offence under section 9."

This clause is intended to override, for the limited purposes stated, Article 9 of the Bill of Rights 1689, which provides "That the freedom of speech and debates or proceedings in Parliament ought not to be impeached or questioned in any court or place out of Parliament"

The Daily Telegraph said this about it in an editorial:

"MPs would have dispensed with one of the foundations of parliamentary democracy: the privileged protection afforded to Members to speak their minds in the Chamber without fear of prosecution in the courts. It is not suggested that MPs should be above the law of the land, which, after all, they set and to which the rest of us are subject; and there is a clear need for tighter controls to prevent MPs misusing their allowances. But that is not an argument for wholesale constitutional upheaval."

Clause 10 would cause no constitutional upheaval of any kind. On its terms, were the editorial writer to have troubled to read them, he or she would have found that it would not affect the immunity of members when speaking their minds in debates. The exclusion of Article 9 only related to matters done by the IPSA or the Commissioner (not members) and to evidence brought in prosecutions of members for an offence of making false claims of expenses, failing to register interests or conducting paid advocacy.

One of the problems of Article 9 of the Bill of Rights is that what comprises a "proceeding" in Parliament which benefits from its protection is not clear. We know on the one hand from decided cases on defamation that it does not include most correspondence a member has with his or her constituents; and on the other hand it clearly covers things said in the House or one of its Committees, and also papers distributed to Committees. There is a large grey area in between. Arguably Article 9 might prevent MPs' expenses claims from being investigated by the Commissioner or, following such an investigation, a prosecution being brought where the claims were found to be fraudulent, and it would make no sense to make these new offences in the Bill subject to such hazards which might prevent any satisfactory prosecution. Article 9 would almost certainly prevent prosecutions of MPs relating to the new offence of paid advocacy, except in so far as the Bill is to be treated as impliedly overriding Article 9. Why leave it to implication?

My main complaint about this aspect of the Bill relates to the new offence of making false expenses claims. But for the Article 9 point, if proven this would already comprise an offence under the Fraud Act 2006, and the 2006 Act has a higher penalty than does an offence under the Bill. Rather than this particular new offence being provided for, it would be better in my view for the Bill to override Article 9 in respect of evidence relating to any offence arising under the 2006 Act relating to an MP's allowances, so permitting a normal fraud prosecution to be brought.

I do not necessarily object to members still being able to set their own salaries - someone has to do it. But nonetheless I think the manner in which salary recommendations are prepared and on which the House will resolve should be more clearly set out. They should in my view be subject to independent recommendation and review notwithstanding that the final decision may remain with members of Parliament.