Scotland Bill

(Limited Text - Ministerial Extracts only)

Monday 8th June 2015 Commons Chamber

[The Secretary of State for Scotland (David Mundell)]

I beg to move, That the Bill be now read a Second time.

May I begin by offering my warmest congratulations to all new MPs from Scotland on winning their seats? This Government respect the results from Scotland in the general election, just as we respect the result of the referendum last year. As the Prime Minister said, this is a one-nation Government. That is why one of our chief priorities is to bring the four nations of our United Kingdom together. The Bill is an important part of a package of measures that we believe does just that. If the House agrees to give the Bill a Second Reading it will be subject to four days of line-by-line scrutiny on the Floor of the House. I am happy to have my feet held to the fire, and for the Bill to receive full scrutiny, because I am confident that it delivers the Smith commission recommendations in full, but that does not mean that we will not listen carefully to contributions as it is debated.

[Alex Salmond (Gordon) (SNP)]

rose—

[David Mundell]

Let me progress a little.

Let us not allow bluff and bluster to obscure the fact that there is already substantial agreement on the most significant aspects of the Bill. The UK and Scottish Governments agree on the devolution of income tax, representing £11 billion in revenue, and on the principle, if not yet the detail, of devolving £2.5 billion in welfare.

[Alex Salmond]

Has the Secretary of State seen today’s edition of the Daily Record, in which there is an excellent eight-page supplement? The paper, after all, offered the vow, and more than any other newspaper, was influential in securing a no vote in the referendum. In its editorial today, the Daily Record describes the Bill as “unacceptable” for not implementing the promises of the Smith commission. Why does the Secretary of State believe that the Daily Record describes his Bill as unacceptable and accuses him of reneging on the Smith commission’s recommendations?

[David Mundell]

I am afraid that that is the right hon. Gentleman’s interpretation. There is an excellent piece, which I commend to him, by Professor Adam Tomkins, in that very edition, in which he sets out the argument that the Bill clearly meets the Smith commission recommendations.

[Alex Salmond]

rose—

[David Mundell]

Let me continue. We are going to debate the Bill in full. We are going to scrutinise, over four days, every line and every clause. I am satisfied that the editor and readers of the Daily Record will be confident that the Bill meets the Smith commission recommendations in full when we complete that process. [Interruption.] No, we have dealt with that issue. [Interruption.]

[Mr Speaker]

Order. We cannot have argument by gesticulation. The right hon. Member for Gordon (Alex Salmond) is a seasoned observer—he does not have the excuse that he is a newcomer to the House—and he has a sort of cheeky chappie countenance, but I am afraid that it will not wash at this stage. He will have to try his luck later.

[David Mundell]

I fear there is a lot of cheek still to come.

Over 18 years, the devolution of power and decision making from this Parliament to the Assemblies of Wales and Northern Ireland and to the Parliament in Scotland has changed the constitutional make-up of the United Kingdom fundamentally. I was proud to be elected as a Member of the new Scottish Parliament at its inception in 1999—indeed, I was the first MSP to ask a question in that Parliament on the opening day, so I draw from my experience of the Scottish devolution settlement as I take this Bill forward.

Even though some had doubts at the time, few would now deny that devolution has been a success story for Scotland. It has ensured that decisions affecting our homes and our families, from schools to hospitals to our police service, have been taken closer to the people they affect. As today’s Bill makes clear, the Scottish Parliament is a permanent part of the UK’s constitutional arrangements. The Bill recognises that, and rightly so.

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

To what extent does the Bill represent a full and final settlement for the future of the United Kingdom? How stable will it be?

[David Mundell]

I anticipate that the Bill will be a very stable settlement for Scotland as it was signed up to by all five of the political parties represented in the Scottish Parliament, including the Scottish National party.

That does not mean that the devolution settlement is or ever was perfect. From the start the settlement contained an imbalance, with a Scottish Parliament responsible for spending money which another Parliament—this one—was chiefly accountable for raising. It is one of the most important features of the Bill that it seeks to redress that balance. I will go into that in more detail later in my remarks.

[Stewart Hosie (Dundee East) (SNP)]

With reference to the Minister’s comments on responsibility, can he confirm to the House that this Bill is so inadequate that it does not even allow the Scottish Parliament to raise all the money that it spends?

[David Mundell]

In my opening comments, I mentioned that there had been a referendum in Scotland last year in which the people of Scotland voted to remain within the United Kingdom as part of this United Kingdom Parliament, but with a strong Scottish Parliament. The Scottish National party was part of the Smith commission which signed up to the tax powers. I find it interesting that the Scottish Government made a 61-page submission to the Committee in the Scottish Parliament about this Bill. How many lines were dedicated to the £11 billion of tax measures? Two lines, because the Scottish Government agree with those measures.

[Mrs Maria Miller (Basingstoke) (Con)]

Can my right hon. Friend confirm that the measures that he is putting forward will make the Scottish Parliament one of the most powerful devolved Parliaments in the world?

[David Mundell]

Indeed. I hope these measures will allow the debate to move from process to action and policy, and that we can finally hear from the Scottish Government how they intend to deploy the significant powers that are provided in the Bill and in the Scotland Act 2012.

[Geraint Davies (Swansea West) (Lab/Co-op)]

The hon. Member for Dundee East (Stewart Hosie) said that the deficiency of the Bill is that it does not allow Scotland to raise all the money it spends. I am confused. I thought the SNP did not want full fiscal and financial autonomy because that would get rid of the Barnett formula. Is the Secretary of State any the wiser?

[David Mundell]

I think the hon. Gentleman, like me, looks forward to amendments to the Bill being tabled, setting out the SNP position on full fiscal autonomy. I have heard that issue raised on numerous occasions but I am still not absolutely clear what it means in the SNP’s terms. The Institute for Fiscal Studies identifies a black hole of between £7 billion and £10 billion in Scotland’s finances.

[Sir Edward Leigh (Gainsborough) (Con)]

With respect—[Interruption.] Actually, I am going to make a point that might be quite positive. With respect to my right hon. Friend’s arguments, what worries me is that this might not be the end of the story, because it does not get to the kernel of the problem, which is that the Scottish Parliament will raise only about 50% of what it spends and, therefore, will be fundamentally a spending Parliament, not a tax-raising Parliament. There is a good Conservative case to be made for full fiscal autonomy, because it would breed responsibility.

[David Mundell]

I do not believe that there is a Conservative case, or indeed any case, to be made for an outcome that would leave Scotland with a gap of between £7 billion and £10 billion in its finances, which would affect every school, every hospital and every person in Scotland.

The independence referendum on 18 September 2014 was a truly historic moment, and I am proud that the people of Scotland voted decisively to remain part of our United Kingdom. The debates were passionate, as many here today will attest, and extensive, and the level of participation was a credit to Scotland. The result was clear and decisive. It represented the sovereign will of the Scottish people. In voting no on independence, we Scots, for the first time in our history, made the positive, conscious and collective choice to pool our sovereignty with our neighbours in England, Wales and Northern Ireland. We made the positive choice to enjoy the best of both worlds. We chose to continue to share the benefits of being part of a strong United Kingdom while enjoying the benefits of a strong devolved Parliament in Edinburgh delivering Scottish solutions to Scottish issues. However, a no vote was not a vote for no change. The Conservatives, Labour and the Liberal Democrats all published extensive proposals for more powers for the Scottish Parliament in the months before the referendum.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

The SNP accepted the result of the Scottish people but, during the referendum campaign, when Gordon Brown spoke on behalf of the Conservative, Labour and Liberal parties, we were promised that we would get as close to federalism as possible; that we would have home rule in the spirit of Keir Hardie. We hear about respect. The SNP won the election in Scotland conclusively. We stood on a mandate of powers for a purpose. Why does the Secretary of State not deliver what the people of Scotland voted for: a powerhouse Parliament with full economic powers?

[David Mundell]

I have heard the hon. Gentleman make his points before. The facts of the matter are that the SNP took part in the Smith commission after the referendum, signed up to a package of measures set out in the commission’s report and then, during the election, argued that its MPs would come to this Parliament to ensure that it was delivered.

[Ian Paisley (North Antrim) (DUP)]

Can the Secretary of State outline whether any of the fiscal arrangements that will be changed as a result of the Bill will affect Northern Ireland in any way?

[David Mundell]

It will clearly be the case that the Scottish Parliament will have significantly greater powers over income tax and welfare than it has now, but the Scottish Parliament is currently able to introduce policies that are significantly different from policies that are adopted in Northern Ireland. That is the nature of devolution and the devolution settlement.

[Ian Paisley]

I will put it the way a Ballymena man would: how much will it affect Northern Ireland?

[David Mundell]

It will depend on the policies that are pursued in the Scottish Parliament. For example, were my colleague Ruth Davidson to become First Minister of Scotland, we would see taxes reduced in Scotland, which I think would have a positive effect in Northern Ireland, because it would be an incentive to see business done in a compatible manner. But devolution is about taking decisions in the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly, and increasingly in different parts of England.

[Andrew Bridgen (North West Leicestershire) (Con)]

Does my right hon. Friend agree that, at a time when we are devolving more powers to Scotland and other parts of the United Kingdom, we also need a fair and equitable settlement for the people of England, starting with English votes for English laws?

[David Mundell]

As my hon. Friend is aware, that proposal was in the Conservative party manifesto and it will be brought to this Parliament. [Interruption.] I think we have concluded on the issue of what devolution means throughout the United Kingdom.

The Conservative-led coalition Government passed the Scotland Act 2012—the biggest single transfer of fiscal responsibility to Edinburgh in 300 years. They also oversaw significant further devolution to Wales and Northern Ireland, as well as groundbreaking work on city deals and a step change across England with the work towards the creation of the northern powerhouse. The Bill before the House today represents a further step forward in the governance of Scotland and our United Kingdom.

The settled will of the Scottish people is now that Scotland should remain part of the United Kingdom. As such, this Bill demonstrates the Government’s determination that the Scottish Parliament should be made more powerful, more accountable yet autonomous, and better equipped to serve the people of Scotland. It is the fulfilment of our manifesto commitment that the all-party Smith commission agreement should be implemented in full. The fact that the Bill was introduced on the first day after the Queen’s Speech and that its Second Reading is taking place at the first opportunity since the general election speaks volumes for the Government’s determination to honour that manifesto commitment and get on with the job.

[Tommy Sheppard (Edinburgh East) (SNP)]

I congratulate the right hon. Gentleman on his new position and on beating off the opposition that he no doubt had in getting it. Does he not have cause to reflect that, whereas the previous Government in which he served as a Minister had the support of about a quarter of the elected Members of this House from Scotland, he is now this Government’s sole representative in Scotland? Does not that place on him a moral obligation to discuss with the elected representatives of the people of Scotland how to take forward this Bill? Is he not concerned that the all-party group in the Scottish Parliament that considered his draft proposals says that they do not equate to the proposals made by the Smith commission?

[Mr Speaker]

Order. Interventions must be brief.

[David Mundell]

I was intending to cover a number of the points that the hon. Gentleman raises. I have met the Scottish Parliament committee that was set up in relation to the Bill, and I am going to appear before it to give evidence directly on 25 June. I am in ongoing and constant dialogue with the Scottish Government in relation to this Bill. This very morning, I had a very cordial meeting with John Swinney, the Deputy First Minister, who is responsible for constitutional matters. During the four days when the Bill will be debated on a line-by-line basis, I will be very pleased to hear the suggestions and proposals that come forward from the hon. Gentleman’s group and, indeed, from any Members of this House.

[Tommy Sheppard]

What, then, is your observation on the fact that an all-party group of the Scottish Parliament, including members from your own party, has come to the conclusion that the proposals before us do not put into effect the Smith commission proposals? What is your reflection on that?

--- Later in debate ---

[Mr Speaker]

Order. All these things take some acclimatisation, but debate must always go through the Chair. The concept of “you” does not arise, because “you” means me—and I have no views on these matters.

[David Mundell]

The hon. Gentleman will see that there have been significant changes to the draft Bill—[Interruption.] There have been. If he goes through the Bill in detail, he will see that there are significant changes. [Interruption.] Well, I do not regard the power to give the Scottish Parliament the right to top up all welfare benefits in Scotland as some minuscule change; I regard it as a very, very significant clause in the Bill. It is one of a number of changes that have been made. We have made it very clear that throughout the Committee stage of the Bill we will look at proposals for changes to it. The Scottish Government published some proposed changes to the Bill yesterday—it was nice to see them—and no doubt we will have a greater chance to debate them in detail.

[Pete Wishart (Perth and North Perthshire) (SNP)]

I do not think that I have ever seen such a shambling Front-Bench performance. Why does the Secretary of State believe he should have a veto over certain issues decided by the Scottish Parliament?

[David Mundell]

I had thought that being part of a larger number might change the hon. Gentleman’s habits, but he remains as ungracious as ever. The Bill contains no vetoes, as he will be well aware if he has read it in detail. What it contains are mechanisms to allow two Governments to work together on matters of shared interest and application. To me, the meaning of a veto is that when someone says they want to do something, someone else has the capacity to say, “No, you can’t.” Not a single provision of the Bill relates to such a proposal.

[Martin John Docherty (West Dunbartonshire) (SNP)]

Does the Secretary of State fundamentally believe that the decisions of a democratically elected Government sitting in Edinburgh, who have 56 of the 59 Scottish Members in this House, should be challenged by him or any other Government Member with a veto?

[David Mundell]

I am sorry that the hon. Gentleman did not hear what I said in response to the hon. Member for Perth and North Perthshire (Pete Wishart). There are no vetoes in the Bill. The hon. Gentleman and others will see that clearly when we scrutinise it line by line.

[Several hon. Members]

rose—

[David Mundell]

I need to make a little progress.

Let me turn to the all-party Smith commission agreement, achieved under the chairmanship of Lord Smith of Kelvin. The morning after the decisive no vote in the referendum, the Prime Minister announced that all-party talks should take place to ensure further devolution to Scotland. The remit was defined by the referendum result: keeping the UK together and keeping Scotland a strong part of it. All four parties represented in this House, with the addition of the Scottish Green party, took part in the process, and all five parties signed up to the final agreement without caveat.

[Jo Stevens (Cardiff Central) (Lab)]

Does the Minister not agree that the Prime Minister gambled with the Union to sweeten the SNP, and that that sweetness has now turned sour? The Prime Minister is in chaos over Scotland, as he is over Europe.

[David Mundell]

I do not quite get the hon. Lady’s multiple metaphors. I am sure that there are some SNP Members who are sweet, and there are certainly some who are sour.

The central aim of the Smith commission was to address a flaw that had existed in the devolution settlement from the outset by making the Scottish Parliament more accountable for raising the taxpayers’ money that it spends. The significance of that point should not be overlooked, and we have alluded to it already: before fully implementing the Scotland Act 2012, the Scottish Parliament controlled almost 60% of public expenditure in Scotland, yet it was responsible for raising only about 10% of the funding. I did not believe that that was sustainable, and neither did the people of Scotland. For Holyrood to be the powerhouse Parliament that it rightly aspires to be and that this Government want it to be, it must be accountable to the people of Scotland for raising more of the money that it spends. The Bill is about ensuring that that missing link is fixed.

A second key aim of the Smith commission was to ensure that more decisions about welfare policy can be taken in the Scottish Parliament, so that specifically Scottish circumstances can be taken into account. The timetable set for the talks was that an agreement should be reached by St Andrew’s day. It was a challenging deadline, but it was met with a few days to spare—another commitment delivered to the people of Scotland on time.

I pay tribute to the 10 members of the Smith commission who represented their parties with skill and tenacity and worked constructively and co-operatively throughout the duration of the commission. They should be proud of what they have achieved for the people of Scotland. Again, I pay particular tribute to Lord Smith of Kelvin, who chaired the talks. He brought to the task his characteristic blend of good humour, insight and hard work. Of course, the occasional bout of strong-arming was also needed, but he says such bouts were mercifully rare.

Key to the success and the credibility of the talks was the fact that Lord Smith made sure that the voice of civic Scotland was heard loud and clear as the negotiations progressed. More than 18,000 people made submissions to the commission on what powers should be devolved to Scotland, and more than 400 individual organisations the length and breadth of Scotland submitted their views on the way forward.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I am sure it will not have escaped the Secretary of State’s notice that the five parties that signed up to the Smith commission are the same ones that are involved in the Scottish Parliament’s Devolution (Further Powers) Committee, which has stated that the Government’s Bill does not live up to either the substance or the spirit of the Smith commission. Why will he not now go back to the drawing board and listen to what was said by the Smith commission, as well as by the 60 organisations that have called for welfare powers to be devolved, and actually deliver it?

--- Later in debate ---

[David Mundell]

I have made it clear, and the hon. Lady is aware, that significant changes have been made to the draft clauses, which were published ahead of the Scottish Parliament committee considering them. I have told the House that we look forward to seeing amendments and proposals. Yesterday the Scottish Government produced some draft clauses, which we most certainly will look at as part of our ongoing discussions with them. If the hon. Lady and others feel that the Smith commission is not met in full by the exact terms of the Bill, there will be plenty of opportunities for debate and discussion in this House. As I have said, there will be four days of line-by-line scrutiny of the Bill.

[Alex Salmond]

rose—

[David Mundell]

I have a quote from the current First Minister, so perhaps the right hon. Gentleman will wait until I have reminded him that last week she said that

“compromise isn’t…the same as concession.”

Compromise was made by all parties in respect of delivering the Smith agreement. This Bill is not about reopening those issues.

[Alex Salmond]

I know that the Secretary of State would never knowingly mislead the House, but earlier he said that the Daily Record was behind him in saying that the Bill implemented the proposals of the Smith commission. I have had an opportunity to consult today’s editorial, which says that

“there are serious concerns the proposed Scotland Bill does not fully implement what was proposed…This is an unacceptable situation that must be rectified quickly as the Bill makes its way through Westminster.”

Does the Secretary of State hold to his previous statement, or does he accept the concerns that he has not implemented what Smith proposed?

[David Mundell]

I do not think the right hon. Gentleman listened to my response, because I made it very clear that I felt that, after today’s debate and four days of detailed scrutiny of the Bill in Parliament, the Daily Record, its readers and, indeed, the people of Scotland will be satisfied that it meets the full recommendations of the Smith commission.

The coalition Government committed to bringing forward draft clauses to implement the Smith commission agreement by Burns night 2015: they did so on 22 January —another commitment met in full and on time. When the Prime Minister went to Edinburgh on that day in January, he gave assurances that he would listen to the views on those draft causes and, as I have set out to a number of Members, we have done so. Since January, the Government have engaged extensively with interested parties in Scotland. Hundreds of people have attended events, from the north-east to the borders, giving their views on the clauses and how they could be refined further.

Of course, work remains to be done during our deliberations on the Bill and we will listen to proposals. The Smith commission recommended, for example, that the Scottish Government should be able to create new benefits in areas of devolved responsibility. We are working closely with the Scottish Government to examine whether new powers, if any, are required to implement that recommendation.

I am proud that the Bill has already benefited from significant input from people and groups across Scotland. This Government will continue to listen to views from all parts of Scotland and from those in all parts of the Chamber as we take forward the Bill and refine its provisions to ensure that the spirit of Smith can be met in full.

[Danny Kinahan (South Antrim) (UUP)]

The Secretary of State has partially answered my question by saying that he will listen to all angles and to everyone in the Chamber, but will he set up some commission or congress so that the other parts of the Union have the chance to have their say before this all goes ahead and we find we are on a roll into the future that we cannot stop?

[David Mundell]

This Government are committed to deliver the Smith commission recommendations, and that is what we will do. We are bringing forward a Bill to implement the Stormont House agreement. Proposals that anyone makes in relation to their own parts of the United Kingdom, or indeed their say on other parts of the United Kingdom, will always be capable of being debated in this House. If, however, the hon. Gentleman is asking whether I support the idea of a constitutional convention, the answer is that I do not.

[Stewart Hosie]

The Secretary of State has now been on his feet for more than half an hour. Will he actually speak about the contents of the Bill today, or will he continue to waffle until he sits down and lets others speak?

[David Mundell]

As you are well aware, Mr Speaker, the hon. Gentleman would have been equally critical of me had I chosen not to take the numerous interventions. I have done so because I want this to be a debate and for me to be held accountable to Members of the House.

I am grateful to the Scottish Parliament’s Devolution (Further Powers) Committee for its work. I am due to meet its members shortly. In getting us to this point, my officials have worked extensively behind the scenes with their Scottish Government counterparts to listen to their views, and they will continue to engage actively with them throughout the process on this Bill.

[Heidi Allen (South Cambridgeshire) (Con)]

I thank my right hon. Friend for taking my intervention. So much of what I am hearing is a lack of trust—[Interruption.]—and my point is that that has to change. There is nothing that we cannot achieve together if we have a little bit of trust. I am very new to politics, as many Members will know, but I would not stand behind a Government who I felt just wanted to play their part and play the game. I think all that Members are hearing is just noise. [Interruption.] My question is: can we not take the Secretary of State at his word, go through the Bill line by line and find a route through this together, rather than assume that there is no trust and no will to give the Scottish people what they want? Unless we are presented with that mindset, we will achieve nothing.

[David Mundell]

I very much welcome that contribution, and I hope that that is the spirit in which we can proceed. Many people who saw the Smith commission agreement signed at 8 o’clock on a Tuesday evening were disappointed when, at 8 o’clock the following morning the now Deputy First Minister suggested that there were parts of it that he did not like. I hoped that the agreement could and will be a comprehensive settlement for Scotland.

[Mr David Anderson (Blaydon) (Lab)]

Why are the Secretary of State and his party denying the people of England the right to have a constitutional convention, given that over the past two decades the Scots have had two referendums and the Welsh, the Northern Irish, the people of London and the north-east have had referendums? Why is he denying the rest of the people of England such a right, and fobbing them off with an idea drawn up by the Chancellor on the back of a fag packet?

[David Mundell]

We have had a general election in which the issues were debated extensively across the United Kingdom. What the Government are committed to do in relation to Scotland is to deliver the Scotland Bill.

You have not selected the amendment, Mr Speaker, but, as the hon. Member for Perth and North Perthshire (Pete Wishart) stated, it mentioned a veto, and I want to clarify the issue of so-called vetoes. The Smith agreement is clear that matters such as the mechanism for paying universal credit across the UK and the Jobcentre Plus network will remain reserved. That was an important argument during the referendum and was endorsed by the majority of Scots. In order to deliver, we need a system that allows the Scottish Government to take responsibility for benefits, including by being able to top them up, but allows the reserved universal credit payments mechanism to carry on working effectively. That is what the Bill does.

It is wrong to call that a veto—as I said earlier, a veto means that someone can prevent something from happening if they do not like it. The Bill does not give the UK Government that power. In fact, it explicitly says that consent for a change cannot be unreasonably withheld.

[Mike Weir (Angus) (SNP)]

But that does mean that it can in fact be withheld, because a Minister here in Westminster will have to give agreement to when a change will take effect. That Minister is not obliged to give any agreement, so consent could be withheld and it is effectively a veto.

[David Mundell]

I do not agree with the hon. Gentleman’s analysis at all. The provision is not even about agreement to a decision. It is a timing arrangement as part of the systems that need to operate. It will work the other way, too; the UK Government will need to consult the Scottish Government when they want to make changes to devolved universal credit flexibilities that will have an impact on Scotland. Other clauses, such as those on transport and elections, also require the UK Government to consult Scottish Ministers before acting.

[Kate Green (Stretford and Urmston) (Lab)]

It is helpful that the Secretary of State has said on the record in this Chamber what the intentions are in relation to the clauses in question. What will happen in the event of a dispute about the outcome of such a consultation process? Where will disputes be decided?

[David Mundell]

There are existing dispute reconciliation mechanisms in the Joint Ministerial Committee. There have inevitably been a number of disputes between the Government of the United Kingdom and the devolved Administrations, and most of them have been able to be resolved through that process.

To respond to the hon. Member for Dundee East (Stewart Hosie), I will turn to the provisions of the Bill. It is a wide-ranging Bill that will bring about a transfer of responsibility to Holyrood that will touch just about every aspect of Scottish life, affect every pay packet in Scotland and have the potential to deliver real and tangible benefits to the people of Scotland.

I turn first to the provisions on taxation. Central to the Bill is the devolution of income tax. Although the definition of income tax will remain reserved, the Scottish Parliament will have full control over rates and bands. That builds on the tax devolution set out in the Scotland Act 2012, which provided for significant powers over income tax that will come into effect next April.

One notable change to the Bill, compared with the draft clauses published in January, is the confirmation that the Scottish Parliament will be able to set a zero rate of income tax on earnings if it so chooses. That effectively gives it the opportunity to reduce the individual’s tax burden significantly if it can afford to do so and makes appropriate spending cuts or tax rises elsewhere. Of course, the reverse is true—if the Scottish Government want to spend more, they will be able to do so by taxing more, and they will be accountable to the Scottish taxpayer for it.

Alongside the devolution of income tax sits the assignment of half of Scotland’s VAT revenues. Members will recall that it is against EU law to have differential VAT rates within a member state, so the devolution of VAT would not be legal.

[Geraint Davies]

Will the Secretary of State give way?

[David Mundell]

No, I have already taken an intervention from the hon. Gentleman.

Instead of the devolution of VAT, the Smith commission recommended that half the VAT revenues raised in Scotland should be assigned to the Scottish Parliament, thereby further linking Holyrood’s funding to the performance of the Scottish economy. The more the Scottish economy grows, the greater the revenue from VAT that Holyrood will be able to keep. That is an incentive to achieve growth.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Will my right hon. Friend give way?

[David Mundell]

No; let me make a little progress.

The devolution of income tax on earnings and the assignment of VAT revenues, when taken together with the devolution of air passenger duty and the powers under the 2012 Act, mean that the Scottish Parliament will have important decisions to make. The Scottish Parliament is now responsible for raising about only 10% of what it spends, but under the Bill Holyrood will be responsible for raising more than 50% of what it spends. It will truly be one of the most powerful devolved legislatures in the world.

[Andrew Gwynne (Denton and Reddish) (Lab)]

May I take the Secretary of State back to the comments made by my hon. Friend the Member for Blaydon (Mr Anderson) and the hon. Member for North Antrim (Ian Paisley) on the impact of changes on the rest of the United Kingdom? Air passenger duty is a case in point. Regional airports in the north of England will undoubtedly feel the impact of any changes to air passenger duty in Scotland. Is that not yet another reason why, as we proceed with devolution arrangements, we need to have a proper constitutional convention so that all measures can be considered across the whole of the United Kingdom?

[David Mundell]

I have made my views on a constitutional convention known. Other hon. Members have raised the issue of air passenger duty. The Treasury has established a group to look at the impact any changes to air passenger duty in Scotland could have on airports in England.

On welfare policy, there will also be a highly significant transfer of responsibility. While the social security reservation remains in place, part 3 of the Bill means that the Scottish Government will be responsible for welfare, which last year accounted for around £2.5 billion of spending in Scotland. The Scottish Parliament will be able to make provision for a number of types of social security benefit, discretionary payments and employment support. The Bill also contains provision to transfer executive competence to Scottish Ministers to allow them to vary certain aspects of universal credit. It will give the Scottish Parliament more responsibility for benefits paid to carers, disabled people, those who are ill, those who require help with winter fuel costs, funeral payments and maternity payments. As a result of the Bill, when people most require help the Scottish Government will be able to tailor that help to particularly Scottish circumstances.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The new powers are clear. Is it not time we heard what the SNP will do with the new powers?

[David Mundell]

I absolutely agree with my hon. Friend. As ever, I have been working very closely with the Scottish Government. I am looking forward to speaking tomorrow with Alex Neil, the Cabinet Secretary responsible for welfare matters, and to taking forward the work of the joint ministerial welfare group. I have made it clear, in relation to that group, that we want to put in place transition arrangements to allow the powers to be transferred as quickly as possible. However, we need to know what we are transitioning to and so need clarity on the Scottish Government’s position in relation to the operation of those powers.

[Alex Salmond]

On a point of order, Mr Speaker. There is a rumour sweeping the Benches that Conservative Members have been provided with a prompt sheet on questions to ask the Minister. If such a disgraceful thing had happened, would that be within the rules of the House?

--- Later in debate ---

[Mr Speaker]

I gather it has been denied. I must say, I would not have lasted long in the House had I been required to sign any such paper. I am innocent of such matters. It is the first I have heard of it and I doubt it will last.

[David Mundell]

Thank you, Mr Speaker.

The Smith agreement does not stop at powers over tax and welfare. The Scottish Parliament will receive a transfer of legislative competence in a range of significant policy areas. I cannot list each power in detail now—as I have said, the House will have ample opportunity to scrutinise them in Committee—but I will provide some examples. The Bill will enable the devolution of the management of the Crown Estate’s economic assets in Scotland to the Scottish Parliament and of the management and operation of reserved tribunals to designated Scottish tribunals. The Scottish Parliament will also have additional responsibility over roads, speed limits, road signs and the policing of railways in Scotland, as well as powers over onshore oil and gas extraction—

[Ian Blackford]

rose—

[David Mundell]

I have already taken a small speech from the hon. Gentleman.

The Bill provides the Scottish Parliament with powers over gaming in new premises and for additional duties on the UK Government to consult Scottish Ministers on functions carried out by a range of important public bodies. It will also enable public sector bodies to bid for rail franchises in Scotland; provide for the ability to state how schemes related to fuel poverty and energy efficiency are run; and increase the ability of the Scottish Parliament to require certain bodies to give evidence before it. In addition, part 1 will take forward in full the Smith agreement that the permanence of the Scottish Parliament be recognised in UK legislation and that the so-called Sewel convention be put on a statutory footing.

[Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)]

Under the Bill, this Parliament will retain an incredibly broad power to legislate on devolved matters, even without the Scottish Parliament’s permission. Why is that, and will the Secretary of State provide examples of when he thinks such action would be appropriate?

[David Mundell]

The hon. Gentleman will be aware that since the coming into existence of the Scottish Parliament, the UK Parliament has legislated in devolved areas only with the agreement of the Scottish Parliament, under the Sewel convention, and that the Bill will put that convention on a statutory footing.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

On income tax, what will happen if someone is resident in Scotland but works over the border for an English company? If the income tax rates are different, will that not add to the compliance costs for that business? Who will compensate that small business in England for the additional compliance costs of the income tax variation?

[David Mundell]

That point was debated in full during the passage of the Scotland Act 2012, which introduced the Scottish income tax rate. In simple terms, for the hon. Gentleman’s purposes, it will be done by way of a tax code generally containing the letter S, allowing businesses to operate the PAYE system as they would normally do and without additional expense. There is a designation of “Scottish taxpayer” that is dependent on residence—and, as a point of fact for new colleagues, all Scottish MPs are resident in Scotland for Scottish tax purposes.

Finally, the Scottish Parliament will find itself largely responsible for how it runs itself, how it is elected and the people who can vote to elect it. I am pleased to confirm that we have already agreed to a request from the Presiding Officer to take action to ensure that the 2020 UK general election date and the Holyrood election date do not clash.

It is clear that a significant range of powers will be devolved to the Scottish Parliament and that the onus is now on the Scottish Government to be clear with the electorate about how they will use them.

[Robert Flello (Stoke-on-Trent South) (Lab)]

My constituents in England will no doubt be listening to what powers are being devolved, but they are also waiting to hear what is happening to the block grant and the Barnett formula, for example. They will be interested to hear how the money is flowing. Will the Secretary of State say something about that?

[David Mundell]

The hon. Gentleman’s timing is impeccable, because I was just coming on to the so-called fiscal framework that underpins the transfer of tax and welfare powers to Holyrood. Alongside the Barnett formula, the framework will deliver a fair and lasting financial settlement for Scotland and the rest of the UK. The framework will provide the Scottish Government with the means by which they can determine a mix of taxation and spending specific to Scotland, but which fits with the UK Government’s overall fiscal plan.

This means that Scotland will continue to benefit from the pooling of risks and resources across the whole of the UK, but the Scottish Government will soon be responsible for raising substantial amounts of its revenue through taxation. As a result, it will be more accountable to the Scottish Parliament and to the Scottish people. The Scottish Government will in future be responsible for more than 50% of their funding. Changes in the Scottish Government’s funding will therefore be increasingly determined by changes to Scottish taxation.

The detail of the Scottish fiscal framework will be agreed between the UK Government and the Scottish Government on the basis set out in the Smith agreement. Discussions on the framework have already begun with the aim of reaching an agreement alongside the passing of the Scotland Bill. My right hon. Friend the Chancellor of the Exchequer has met the Scottish Government Deputy First Minister, John Swinney, today. This timetable demonstrates the Government’s determination to make quick progress on the fiscal framework.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Will the Secretary of State clarify whether the final say on social security levels will rest with the Scottish Parliament?

[David Mundell]

The Scottish Parliament will have the capacity to top up welfare benefits. It could be said that it would have the final say on the level of benefit. UK benefits will obviously be determined in this House, but the Scottish Parliament will have the opportunity to top them up, as is clearly set out in the Bill.

[Callum McCaig (Aberdeen South) (SNP)]

Does not the notion of “topping up” benefits suggest that in and of themselves they are deficient?

[David Mundell]

What I think it suggests is the requirement for responsibility. If the Scottish Government believe that benefits are not at the level they should be, they will be able to ask the Scottish taxpayer for the funds to increase them. That is what I would regard as responsibility within a Parliament.

[David Mowat (Warrington South) (Con)]

A few minutes ago, my right hon. Friend described the fiscal framework of the Barnett formula as long-lasting and fair. Surely that would be the case only if the Barnett formula were based on need rather than on a historic anomaly. It is a formula that results in my constituents getting £1,600 less per person per year than they would get if it were based on need, which one would think a progressive party would wish to be the case.

[David Mundell]

My hon. Friend is a long-standing critic of the Barnett formula, and I acknowledge the point he makes. The Prime Minister, the then Leader of the Opposition and the leader of the Liberal Democrats made it absolutely clear that their parties had no intention of changing the Barnett formula. That certainly remains the position on the Government side.

[Graham Stringer (Blackley and Broughton) (Lab)]

The Secretary of State has acknowledged the point, but can he justify why English constituents will get £1,600 less?

[David Mundell]

I did not know that that was the policy of the Labour party. I had understood that it supported the Barnett formula, and I can reiterate the continuing support of Government Members for it.

One issue closely linked to the fiscal framework is the much talked-about issue of full fiscal autonomy. This issue was raised a number of times today and during the general election campaign, and some SNP Members have talked tirelessly about it. My party and the Government have made it clear that we will strongly oppose full fiscal autonomy for Scotland. As the analysis by the independent and respected Institute for Fiscal Studies told us, full fiscal autonomy would leave Scotland with a £7.6 billion black hole in its finances this year and almost £10 billion by the final year of this Parliament. This Government will never support a policy that leaves one part of the UK in such a perilous financial situation: we are members of a social union, too. However, given that the SNP set such store by the issue in its election campaign, I look forward to SNP Members bringing forward amendments on full fiscal autonomy in Committee. That is to be welcomed, because apart from anything else, such amendments would mean the people of Scotland might actually get to see what the definition of full fiscal autonomy is.

[Mr Rees-Mogg]

Is not the lesson of the euro that fiscal autonomy needs to go with monetary autonomy, and that if Scotland has fiscal autonomy it must also have its own currency?

[David Mundell]

That is a very good point and I think my hon. Friend and the right hon. Member for Gordon (Alex Salmond) will be able to spend hours debating it.

[Sir Gerald Howarth (Aldershot) (Con)]

The Secretary of State is being remarkably generous in giving way—very much like the SNP is with other people’s money. The Secretary of State said it would lie within the power of the Scottish Government to top up—I think that was his expression—welfare benefits. We know how they like being generous with other people’s money, but if they overspent at the end of one year—because of course benefits are demand-led—who will pick up the bill, the British taxpayer or the English taxpayer?

[David Mundell]

In relation to matters for which the Scottish Parliament is responsible, it will be the Scottish taxpayer who has to pay. So if the Scottish Parliament and Government want additional spending, the Scottish taxpayer will have to pay.

I wish to conclude my remarks, but I have sought to take as many interventions as possible because part of the Bill is about accountability. The Bill represents the fulfilment of a promise to the people of Scotland that a no vote in the referendum was not a vote for no change. It delivers on the all-party Smith commission agreement, as the Law Society of Scotland and many others have already made clear. The Government and the Smith Commission engaged extensively on the agreement, and on the draft clauses since January, and the Bill before us today is all the stronger for that extensive engagement. It will benefit further from four days of full line-by-line scrutiny in this Chamber. The challenge will then be for the Scottish Government to finally set out what they will do with the new powers they will receive. Now is the time for the Scottish Government to stop acting and start doing. I commend the Bill to the House.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to conclude today’s debate—a very good debate with a large number of contributions. We heard a large number of maiden speeches, all consistently of a very good standard.

Let me begin by saying a few words about those speeches. My hon. Friend the Member for South Leicestershire (Alberto Costa) delivered a fluent and thoughtful speech in which he covered the whole of his constituency. I think he mentioned every village—I hope so. He certainly mentioned a very large number, and if one was missed off I am sure that someone will notice.

I congratulate my hon. Friend the Member for Eddisbury (Antoinette Sandbach) on an excellent speech in which she spoke passionately about childcare, the dairy industry, and, indeed, devolution. She mentioned that she did not have an entirely successful introduction to being a Member of Parliament in terms of the tug-of-war competition, but she had a very successful maiden speech, and I congratulate her on it.

I also congratulate the SNP Members who delivered their maiden speeches today. They may, at one level, not want to be part of this House, but they certainly made very good contributions to this House today. The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) delivered a passionate speech, which embodied her point that we in this House should respect one another. The hon. Member for North Ayrshire and Arran (Patricia Gibson) told a moving family story. She also spoke passionately and will clearly be a strong defender of her constituents. The hon. Member for Aberdeen South (Callum McCaig) delivered a fluent and articulate speech, as did the hon. Member for Livingston (Hannah Bardell); I suspect that both of them will have significant roles to play in their party in the years ahead.

The hon. Member for East Renfrewshire (Kirsten Oswald) delivered a strong and passionate speech, on which I congratulate her. The hon. Member for Dunfermline and West Fife (Douglas Chapman) made an engaging speech, winning over the House with his remarks, particularly his well-made comments about the Westminster staff and the support that they provide to new MPs.

I turn now to the Labour Benches. I congratulate the hon. Member for Lewisham, Deptford (Vicky Foxcroft) on her speech. She spoke about her background in drama and performing arts; she certainly delivered a fine performance today. She did not quite burst into song with “The Red Flag”, but she recited it. Personally, I am not sure that that is the right direction for her party to be taking, but who am I to say? The hon. Member for Cambridge (Daniel Zeichner), after much determination to arrive in this place, delivered a thoughtful speech, mentioning the success of the innovative companies in his constituency. He also discussed devolution within Cambridge, and he will be aware of the measures that the Government are taking on that.

The hon. Member for Swansea East (Carolyn Harris) delivered an excellent speech, demonstrating a great knowledge and love of her constituency that was much appreciated. The hon. Member for Bristol South (Karin Smyth) delivered an excellent speech as a successor to Dawn Primarolo; as someone who has been a tax Minister for a number of years, I too know what it is like to follow in her distinguished footsteps. The hon. Member for Manchester, Withington (Jeff Smith) delivered a witty and engaging speech. He mentioned “Mr Smith Goes to Washington”; his was a “Mr Smith goes to Westminster” speech. As someone who also knows and loves that film, I hope that he does not engage in filibustering in quite the same way as James Stewart’s character in that film.

The hon. Member for Stoke-on-Trent North (Ruth Smeeth) delivered a passionate speech, making the case with great sincerity that her constituency is the most beautiful seat in the country. I am not quite sure that she brought the House with her on that point, but she had a pretty good stab at it. An easier case, if I may say so, was made by the hon. Member for Workington (Sue Hayman), who delivered an excellent speech highlighting some of the most beautiful scenery in the nation. All those speeches were excellent starts to parliamentary careers.

I also mention my hon. Friend the Member for North Dorset (Simon Hoare), who delivered his second speech, although he sounded like a parliamentary veteran; it was a fluent speech. Indeed, given that it was his second speech, he was one of the more senior Members speaking in this debate. A similar point could be made about the hon. Member for Torfaen (Nick Thomas-Symonds), who also spoke extremely well.

This has been an excellent debate about an important matter. At times, there has been a strong sense of consent and a constructive approach, which I certainly welcome. To echo the comments made by my right hon. Friend the Secretary of State for Scotland when he opened this debate, I thank the members of the Smith commission, particularly Lord Smith, for helping us to take devolution in Scotland to the next stage after the referendum. Their hard work secured a consensus among all five parties, of which all participants can be proud. Implementing the Smith commission agreement will make the Scottish Parliament one of the most devolved in the world. The Scotland Bill represents the formal step by which we will make that transformation happen in full.

[Alex Salmond]

Will the Minister give way?

[Mr Gauke]

I appreciate that the right hon. Gentleman has not spoken for a little while, so I will give way.

[Alex Salmond]

The Minister will know that a lot of this debate is centred on what a dispute resolution and an adjudication would look like and in what circumstances consent could be reasonably or unreasonably withheld. He has been a Treasury Minister for five years. Can he point to a single occasion when a dispute between the Treasury and a devolved Administration—there have been many such disputes—has been resolved in favour of the devolved Administration by the Treasury?

[Mr Gauke]

The reality, as the right hon. Gentleman knows very well, is that there has been a spirit of working constructively from the Government across the piece. On the particular issue of welfare, concerns have been raised about what the SNP describes as a veto. Put simply, it is not a veto. The position is that there are clauses whereby, for practical reasons, the Secretary of State needs to give consent to ensure that something is practical. That consent cannot be unreasonably withheld, and if something is unreasonably withheld the courts can declare that it has been unreasonably withheld.

[Ian Murray]

I hope I do not get struck by lightning for agreeing with the hon. Member for Perth and North Perthshire (Pete Wishart), but could the Minister and the Secretary of State look at clause 25, particularly subsection (3)(b), to see whether it could be redrafted to take away the ambiguity about whether or not there is a veto?

[Mr Gauke]

There is no veto. Our approach will be constructive throughout all stages of the Bill. I want to be clear with the House. The intention is not to block a measure in perpetuity; it is to ensure that something that has an impact on the Department for Work and Pensions can be done practically, because DWP has to deliver it and needs to be able to ensure that it can do so.

I am pleased to say that earlier today the Chancellor and the Chief Secretary to the Treasury met the Deputy First Minister. They had a productive meeting and agreed to immediately start work on the fiscal framework, which works alongside the Scotland Bill, ensuring that the Scottish Parliament has the tools it needs to manage its significant new tax and spending powers. We have agreed to aim to finalise the fiscal framework by the autumn, alongside the passage of the Scotland Bill through Parliament.

[Mr Graham Allen]

Will the Minister give way?

[Mr Gauke]

I am short of time and need to make more progress before concluding.

Last year the people of Scotland made a clear choice. It is a choice that must be honoured, so it was a key commitment in this Government’s manifesto that the all-party Smith commission agreement should be implemented in full. With this Bill, we deliver on those commitments. It will make the Scottish Parliament one of the most devolved legislatures in the world. It will deliver unprecedented new powers to Holyrood. It will give the Scottish Government the tools to manage their economy and make important decisions on behalf of the people of Scotland. This Bill demonstrates our willingness and determination to ensure that we fulfil our obligations. It implements the Smith commission and I hope it has the support of Members on both sides of the House. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Scotland Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Scotland Bill:

Committal

(1) The Bill shall be committed to a Committee of the whole House.

Proceedings in Committee

(2) Proceedings in Committee of the whole House shall be completed in four days.

(3) The proceedings shall be taken on the days shown in the first column of the following Table and in the order so shown.

(4)The proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.