Scotland Act 2016: Commencement Regulations

David Mundell Excerpts

Wednesday 30th November 2016 Written Statements

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

In March this year, Her Majesty the Queen gave Royal Assent to the Scotland Act 2016, marking an important milestone in fulfilling the UK Government’s commitment to deliver on the Smith Commission agreement, making the Scottish Parliament one of the most powerful devolved Parliaments in the world.

Since Royal Assent, a number of important provisions in the Act have come into force, including new powers in relation to consumer advocacy and advice, gaming machines, equalities, transport, and welfare.

I can today inform the House that the UK Government have made the commencement regulations for the following sections of the Scotland Act 2016:

13: Power of Scottish Parliament to set rates of income tax

14: Amendments of Income Tax Act 2007

15: Consequential amendments: income tax

The regulations ensure that the transfer of income tax powers will occur, as agreed by the UK and Scottish Governments, from 6 April 2017, bringing into force substantial new financial levers enabling the Scottish Government to set income tax rates and thresholds for the earned income of Scottish taxpayers.

In addition, commencement regulations will be made on 5 December for the following sections of the Scotland Act 2016, to be commenced in April 2017:

20: Borrowing

21: Provision of information to the Office for Budget Responsibility

67: Destination of fines, forfeitures and fixed penalties

These commencement regulations represent another milestone in delivering the recommendations of the Smith Commission agreement, and it is a testament to the constructive work between the UK and Scottish Governments.

The two Governments continue to work closely together to ensure a safe and secure transition of the remaining powers in the Scotland Act 2016.

[HCWS293]

Scotland Act: Commencement

David Mundell Excerpts

Thursday 14th July 2016 Written Statements

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

In March this year, Her Majesty the Queen gave Royal Assent to the Scotland Act 2016, marking an important milestone in fulfilling the UK Government’s commitment to make the Scottish Parliament one of the most powerful devolved parliaments in the world.

On 23 May, two months since Royal Assent, a number of important provisions in the Act came into force. These included new powers in relation to consumer advocacy and advice, gaming machines, equalities and transport, and marked an important milestone in the devolution of powers to the Scottish Parliament and Scottish Government.

The Joint Ministerial Working Group on Welfare met in June to take forward discussions on commencement of the welfare sections of the Act. This was the first meeting of the group since the Scotland Act 2016 gained Royal Assent and since the new Scottish Parliament was elected. The UK and Scottish Governments both agreed an approach to commencing the welfare and employment support powers set out in the Act. This approach included bringing into force 11 welfare sections of the Scotland Act 2016.

I can today inform the House that, with the agreement of the Scottish Government, we will now commence the following sections of the Scotland Act 2016:

Section number: section title

24: Discretionary payments: top-ups of reserved benefits

25: Discretionary Housing Payments

26: Discretionary payments and assistance

28: Powers to create other new benefits;

29: Universal credit: costs of claimants who rent accommodation

30: Universal credit: persons to whom, and time when, paid

31: Employment support

32: Functions exercisable within devolved competence

33: Social Security Advisory Committee and Industrial Injuries Advisory Council

34: Information-sharing

35: Extension of unauthorised disclosure offence

Commencing these powers brings into force substantial new levers which will allow the Scottish Government to design a welfare system tailored to local needs, while maintaining our social union and the benefits of being part of the United Kingdom. For example, these regulations bring into force the power for the Scottish Parliament to create its own new benefits in any area of devolved responsibility.

The UK and Scottish Governments have been working together constructively to enable this and will continue to do so. We recognise the importance of ensuring the safe and secure transition of powers. Work is continuing on the remaining welfare sections of the Act and both Governments are committed to reaching an agreed approach on how they should be commenced. A further meeting of the Joint Ministerial Group on Welfare is expected to take place in the autumn.

I am pleased that the commencement regulations also include section 65 of the Scotland Act which enables Scottish Ministers to appoint a member to the Ofcom board. The section also requires Scottish Ministers to lay Ofcom’s annual report and accounts before the Scottish Parliament and underlines my commitment to implementing the Scotland Act 2016 and the Smith Commission agreement.

The commencement regulations I have made today represent another milestone in making the Scottish Parliament one of the most powerful devolved Parliaments in the world.

[HCWS90]

Government’s Legislative Programme (Scotland) 2016-17

David Mundell Excerpts

Thursday 19th May 2016 Written Statements

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

Following the passage of the Scotland Act 2016, the Scottish Parliament is now poised to become one of the most powerful devolved Parliaments in the world. Ensuring the smooth transfer of those new powers will be a major priority for the UK Government over the next parliamentary Session and beyond.

A total of 13 of the 21 new Government Bills for this Session of Parliament contain provisions that apply in Scotland, either in full or in part. Elements of others may extend later depending on discussion with the Scottish Government.

The Government’s legislative programme has three clear aims: to deliver security for working people across our country, to increase the life chances for the most disadvantaged, and to strengthen our national security. Some of the Bills announced yesterday apply across the UK, while others cover areas where responsibility is devolved to the Scottish Parliament.

UK legislation on the digital economy will enable the building of world-class digital infrastructure including fast broadband and mobile networks, as well as helping to support new digital industries.

A new Lifetime Savings Bill will create a new help to save scheme to support those on the lowest incomes to save and also a new lifetime ISA, providing savers with a bonus on savings that can be used for a first home, or retirement, or both.

A Better Markets Bill will give UK consumers more power and choice, open up markets and make economic regulators work better. We will also take forward further reforms in a Pensions Bill that will provide greater protections for people in master trusts and remove barriers for consumers who want to access their pension savings flexibly.

This statement provides a summary of the new Government legislation for 2016-17 and its application to Scotland. It does not include draft Bills.

In line with the Sewel convention, the Government will continue to work constructively with the Scottish Government to secure legislative consent motions where appropriate.

The Bills listed in section 1 will apply to Scotland, either in full or in part. Section 2 details Bills that will not apply in Scotland, though some elements could be extended later following discussion with the Scottish Government.

Section 1: Legislation applying to the United Kingdom, including Scotland (either in full or in part);

Better Markets Bill

Criminal Finances Bill

Lifetime Savings Bill

Modern Transport Bill

Overseas Electors Bill

Pensions Bill

Small Charitable Donations Bill

Cultural Property (Armed Conflicts) Bill

Digital Economy Bill

Wales Bill (as a constitutional bill this extends to the UK, but policy will impact on Wales)

Higher Education and Research Bill

Neighbourhood Planning and Infrastructure Bill

Bill of Rights

Section 2: Legislation that will not apply in Scotland, though some elements could be extended following discussion with the Scottish Government.

Counter-Extremism and Safeguarding Bill

NHS (Overseas Visitors Charging) Bill

National Citizen Service Bill

Bus Services Bill

Children & Social Work Bill

Education for All Bill

Local Growth and Jobs Bill

Prison and Courts Reform Bill

[HCWS4]

Scotland Bill

David Mundell Excerpts

Wednesday 23rd March 2016 Commons Chamber

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

I beg to move, That this House agrees with Lords amendment 1.

[Mr Deputy Speaker]

With this it will be convenient to discuss Lords amendments 2 to 62.

[David Mundell]

This is a truly significant day for Scotland. If this Bill completes its parliamentary progress, it will add to the already extensive responsibilities of the Scottish Parliament a range of important new powers. It provides even greater opportunities for the Scottish Government to tailor and deliver Scottish solutions to Scottish issues. The Scottish Parliament that returns in May will be a powerhouse Parliament that has come of age. Crucially, it will be much more accountable to the people who elect it, which is the hallmark of a mature democratic institution.

I am pleased to say that Lord Smith of Kelvin has confirmed that the Bill puts into law the agreement that the five main political parties in Scotland reached, and that the fiscal framework that was agreed means that the recommendations of his commission have been delivered in full.

Last week, the Scottish Parliament debated the motion on whether to grant legislative consent to the Bill before us today, and the agreement was unanimous. Deputy First Minister John Swinney remarked:

“The Smith process delivered an agreement for additional powers that—if they are used in the right way—can benefit the people of Scotland.”—[Scottish Parliament Official Report, 16 March 2016; c. 3.]

I agree with him wholeheartedly on that.

The debate last week demonstrated the consensus among all parties in Scotland that these new powers present a tremendous opportunity for Scotland. That was clear in their unanimous vote to grant legislative consent to this Bill. This process goes to show that both of Scotland’s Governments and both of Scotland’s Parliaments can work effectively together in the interest of the people in Scotland and right across our United Kingdom.

No individual or party held a monopoly of wisdom on how the Smith agreement might best be translated into legislation. Many people, both inside and outside this Chamber, have contributed to the Bill as it stands before us today. I thank hon. Members and noble Lords for their contributions as the Bill passed through this House and the other place.

[John Redwood (Wokingham) (Con)]

I am grateful to the Secretary of State for giving way. When this important work was being done, there were obvious and big consequences for England. Which Minister or Ministers spoke for England during the negotiations?

[David Mundell]

My right hon. Friend has asked that question before. This legislation has been debated on the Floor of this House and on the Floor of the other place. Extensive scrutiny of the Bill has taken place. Indeed, there has been the opportunity to scrutinise the fiscal framework as well, so extensive scrutiny has been delivered in relation to this legislation for the people of England, Wales, Northern Ireland and Scotland.

The Bill has been strengthened by the scrutiny it has received, and I am pleased that the amendments that I will cover shortly are a positive and constructive culmination of that process.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Going back to the previous intervention, it was obvious from the voices on the Scottish National party Benches that all the other Ministers, especially those from the Treasury, spoke for interests other than those of Scotland. Is it not time to move away from this form of devolution, whereby we effectively get the crumbs from the table at Westminster, to a model that Copenhagen shares with the Faroe Islands and Greenland, in which the larder is always open and they get to choose their own powers. Instead of taking the crumbs from Westminster, we should be able to take the powers that we want from Westminster when we want them.

[Hon. Members]

Hear, hear!

[David Mundell]

The hon. Gentleman’s colleagues may agree with him, but I do not think that the people of Scotland do. The people of Scotland made it very clear in September 2014 that they wanted to remain part of our United Kingdom, but they wanted a Scottish Parliament with enhanced powers, which is what this Government are delivering. The hon. Gentleman strikes a rather sour note, given the consensus within the Scottish Parliament and among his colleagues in the Scottish Government—a consensus that recognises the importance of the powers that will be delivered by this Bill if it completes its passage today.

I also acknowledge the work of the Committees of both the Scottish and the UK Parliaments, including those chaired by the hon. Member for Perth and North Perthshire (Pete Wishart) in this place, by the noble Lords, Lord Lang, Baroness Fookes and Lord Hollick, in the other place and by Bruce Crawford in the Scottish Parliament. The broad range of evidence and expertise they marshalled in the Bill’s scrutiny has improved it materially.

I also wish to thank the Deputy First Minister, John Swinney MSP, and Scottish Government officials for their always courteous engagement in this process. Scotland gets the best outcome when its two Governments work together.

I am truly grateful to all my officials at the Scotland Office and the officials from the 10 other Whitehall Departments whose hard work has got us to this stage. My noble Friends Lord Dunlop and Lord Keen of Elie have played an essential role in the Bill’s passage through the other place; I also commend Lord McAvoy and Lord Wallace of Tankerness in particular for their work. The origin of the Bill is the Smith agreement, and I once again pay tribute to Lord Smith of Kelvin and the representatives of all five of Scotland's main political parties for reaching an agreement that redefined the devolution settlement.

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[Angus Robertson (Moray) (SNP)]

I am delighted to follow the hon. Member for Edinburgh South (Ian Murray). It is a calumny that he has been described as negative. He spent much of his time at the Dispatch Box trying to be positive about the Scotland Bill. Parts of his speech were positive and we welcome that, and we also welcome the Secretary of State’s positive comments.

The Scotland Bill is an important step in extending the responsibilities of the Scottish Parliament and in Scotland’s journey towards greater self-government. That journey has quickened in pace since the Scottish National party was first returned to power in 2007. The Bill follows progress including the Scotland Act 2012, the independence referendum and the Smith commission itself. As Deputy First Minister John Swinney has said, the Bill delivers additional powers that can benefit the people of Scotland, including extended powers over tax, new powers over welfare, and responsibilities for the Crown Estate, tribunals and the licensing of onshore oil and gas activity.

The agreement on a fiscal framework published on 25 February increases the Scottish Parliament’s financial responsibility, is consistent with the Smith principles of no detriment, and is fair to the people of Scotland. As the Bill, including the amendments under discussion, provides useful powers and has moved towards delivering more of the recommendations made by the Smith commission reports, and as the agreement on the fiscal framework would be a fair basis for future funding consistent with the principles agreed by the Smith commission, the Scottish Government recommended that the Scottish Parliament should consent to the Bill. On 11 March 2016, the Devolution (Further Powers) Committee published its report on the Scotland Bill and the fiscal framework. Although it makes recommendations on specific policy areas, its overall conclusion is that the Scottish Parliament should consent to the Bill. That is what is before us. On 16 March, the Scottish Parliament consented to the legislative consent motion for the Bill.

The SNP has, of course, governed in Scotland for nine years, and every indication is that the people of Scotland have been delighted with the governance of Scotland under the SNP. I join the Labour party spokesman in paying tribute, as I did earlier today, to every outgoing Member of the Scottish Parliament—not least my right hon. Friend the Member for Gordon (Alex Salmond)—of all political parties, who have worked hard to achieve the best governance that decision-making closer to home can bring.

The outgoing Scottish Government have already acted with pace and creativity, in consultation with others, to be ready to use the limited powers—there are, of course, limits on the powers that are being devolved. That includes introducing a social security Bill within the first year of the new Scottish Parliament, to support the transfer and administration of Scotland’s new, devolved social security benefits. It also includes enhancing opportunities for employment and inclusive economic growth by improving support for people to move into employment through reform of the Work programme and linking employment programmes with training and education.

The outgoing Scottish Government have also committed to abolishing fees for employment tribunals, to reduce the burden of air passenger duty by 50%, and to promote equalities by taking early action on gender balance on public boards. They have also set out longer-term intentions for further income powers, are committed to a progressive taxation policy and have applied that to the decision on existing tax powers. Commencement of most of the new powers will take place in 2016, but new arrangements for the use of major new powers on matters including tax and welfare will not be in place before April 2017 following scrutiny of the proposals by the Scottish Parliament.

On 11 March 2016, the Scottish Parliament’s Devolution (Further Powers) Committee published its final report and gave its unanimous recommendation that legislative consent be given to the Scotland Bill. That was described as

“a significant milestone in a remarkable political process”

by Committee convener Bruce Crawford MSP. I pay tribute to him and his colleagues on the Committee, as I do to my hon. Friend the Member for Perth and North Perthshire (Pete Wishart), the Chair of the Scottish Affairs Committee, for their work. Although the Scotland Bill and the Smith commission could have delivered more effective and coherent powers to the Scottish Parliament, the Bill provides useful additional powers in important areas such as taxation and social security.

The UK Government amended the Bill to reflect some of the comments of the Scottish Government, the Scottish Parliament and its Committees. With an agreed fiscal framework that increases the Scottish Parliament’s responsibility and protects the Barnett formula, the Scottish Government recommended that the Scottish Parliament consent to the Scotland Bill. The final report of the Devolution (Further Powers) Committee also had some important things to say:

“There are still some areas where we feel that the Scotland Bill continues to fall short of the spirit and substance of Smith…Nevertheless, the Bill has been improved during its passage through our detailed scrutiny and we welcome the fact that the Secretary of State for Scotland has been prepared to listen to the evidence we have presented and improve the Bill in other areas…in our view, on the basis of the information provided to date by both governments, we are prepared to endorse the fiscal framework underpinning the powers to be devolved to Scotland as part of this Bill. Therefore, on balance, we recommend that the Scottish Parliament gives its legislative consent to the Scotland Bill.”

UK Government amendments that implement more of the Smith report, including the permanence of the Scottish Parliament, are welcome. However, it needs to be said that the Scotland Bill continues to fall short of the spirit and the substance of Smith in some areas, including the devolution of employment programmes and the future operation of the legislative consent provision. It is important to understand that the UK Government can still effectively veto the exercise of devolved powers over universal credit by inserting their own date for the changes to commence. The social security provisions on discretionary payments and assistance are still subject to restrictions, notably for those who are under sanctions. The Smith report was clear that the Scottish Parliament should have complete autonomy over devolved benefits. The Scotland Bill is many things, but it is not federalism or near-federalism. Anybody who understands the powers of the German or Austrian Länder knows that to be true. It is an improvement, and it is progress.

We in the SNP thank all in the Scottish Government who have been involved, especially John Swinney. We also thank those on the UK Government side, even though—this is an important rider—I see that there is a Minister from the Treasury on the Treasury Bench, and we all know that the Treasury wanted a fiscal framework that would have made Scotland worse off by £7 billion. Thank goodness for the efforts of John Swinney and colleagues in the Scottish Government. I would like to take the opportunity to thank my SNP MP colleagues, who have worked so hard on the Bill throughout the parliamentary process. In fairness, it is also right to place on record the fact that Members in the other place spent a lot of time on the Bill.

Most importantly, I thank all those in Scotland who have believed in more powers. They did not draw lines in the sand or say, “This far, and no further”, as others have done, even in the recent past. Thanks to all those yes voters and all those SNP voters, Westminster has had to take note. This is just the latest stage on Scotland’s journey, and there will be many more. We agree with the amendments, and we wish the Bill to proceed. That is exactly what will happen today.

[David Mundell]

I will not detain the House for long, but I want to respond briefly to some of the points that have been made.

I add my best wishes to all Members of the Scottish Parliament who are leaving at this election, particularly my colleagues and others who were elected to the Scottish Parliament alongside me back in 1999. A number of people who have served in Parliament throughout that period are leaving, and others who are standing in the election will be leaving, although not necessarily of their own accord. We should wish them well.

Inverness and Highland City Region Deal

David Mundell Excerpts

Tuesday 22nd March 2016 Written Statements

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

In March 2015, the Government announced their intention to negotiate an Inverness and Highland city region deal. As well as deals across England, this followed the successful agreement of a city deal in Glasgow and Clyde Valley. An Aberdeen city deal was announced on 28 January 2016.

I can today inform the House that the Government have reached agreement with the Scottish Government, the Highland Council and other partners on a heads of terms city region deal for Inverness.

This heads of terms city region deal agreement provides a transformative opportunity to position the area as a region of digital opportunity and strength, thereby enabling the highlands to be the best digitally connected rural region in Europe.

Central to this will be a significant funding package which invests up to £315 million of public money into the regional economy. As part of this funding package, the UK Government will commit up to £53.1 million, the Highland Council along with regional partners will commit up to £127 million and the Scottish Government will commit up to £135 million. This funding package will be provided over a 10-year period subject to detailed business cases, statutory processes and implementation plans.

The UK Government’s contribution to the fund will support a set of proposals from the region intended to enable the highland area to be the most digitally connected rural region in Europe by investing into extended digital coverage, including superfast broadband and mobile 4G connectivity.

It will also support a package of new innovation measures that builds on existing academic and industry expertise in Inverness, as well as business support networks across the highlands. This will include exploring ways to support a multi-disciplinary centre focused on the commercialisation of new medical products and technologies, and a northern Scotland innovation hub.

[HCWS638]

Scotland’s Fiscal Framework

David Mundell Excerpts

Wednesday 24th February 2016 Commons Chamber

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

With permission, Mr Speaker, I would like to make a statement about the new fiscal framework for Scotland, which was agreed yesterday by the United Kingdom and Scottish Governments.

I begin by paying tribute to everyone who has worked so hard to arrive at this point: my right hon. Friend the Chief Secretary to the Treasury and the Deputy First Minister of Scotland, John Swinney, who have led these negotiations with skill; my colleague the Under-Secretary of State for Scotland, Lord Dunlop, whose contribution has been invaluable; and the dedicated teams of officials from Her Majesty’s Treasury and the Scottish Government who have worked tirelessly on behalf of their respective Governments. They can be proud of what has been achieved and the service they have given.

This is a truly historic deal that will pave the way for the Scottish Parliament to become one of the most powerful and accountable devolved Parliaments in the world. We have respected all the principles set out in the cross-party Smith agreement and delivered a deal that is fair for Scotland and fair for the whole United Kingdom. As Lord Smith said himself yesterday evening:

“When the Smith Agreement was passed to the Prime Minister and First Minister both gave their word that they would deliver it into law—they have met that promise in full”.

Scotland’s two Governments will give more details in the coming days, but I would like to set out a few key elements of the deal.

The Scottish Government will retain all the revenue from the taxes that are being devolved or assigned, including around £12 billion of income tax and around £5 billion of VAT. The Scottish Government block grant will be adjusted to reflect the devolution and assignment of further taxes and the devolution of further spending responsibilities. We have kept our commitment to retain the Barnett formula, extending it to cover areas of devolved welfare. For tax, we will use the UK Government’s preferred funding model. Under that model the Scottish Government hold all Scotland-specific risks in relation to devolved and assigned taxes, just like they do for devolved spending under the Barnett formula. That is fair to Scotland and fair to the rest of the UK.

However, for a transitional period covering the next Scottish Parliament, the Governments have agreed to share those Scotland-specific risks as these powers are implemented. Specifically, the Scottish Government will hold the economic risks while the UK Government will hold the population risks, so the Scottish Government will not receive a penny less than Barnett funding over the course of the spending review simply due to different population growth. By the end of 2021, a review of the framework will be informed by an independent report so we can ensure that we are continuing to deliver Smith in full, with the Scottish Government being responsible for the full range of opportunities and risks associated with their new responsibilities.

We have also agreed that the Scottish Government will have additional new borrowing powers. That will ensure that the Scottish Government can manage their budget effectively and invest up to £3 billion in vital infrastructure. In line with the recommendation of the Smith agreement, we will provide the Scottish Government with £200 million to set up the new powers they will control.

The Government have delivered more powers to the Scottish people, ensuring that they have one of the most powerful devolved Parliaments in the world and the economic and national security that comes from being part of our United Kingdom. That is what we have agreed and that is what we have delivered in full. Now that we have agreed this historic devolution deal, the conversation must move on to how these new powers are to be used.

The Scottish Government will have extensive powers on tax, welfare and spending. They will have control over income tax and be able to change the rates and thresholds. They will be able to create new benefits, and of course the permanence of the Scottish Parliament is put beyond any doubt.

The people of Scotland voted for these new powers, and they deserve to hear from the parties in Scotland how they will use them. They are new powers that, if used well, can grow Scotland’s economy, and indeed population, and bring greater opportunity and prosperity. Now that we have agreed this fiscal framework, I hope and trust that this House and the other place will welcome it, while of course subjecting it to full scrutiny. I commend this statement to the House.

[Ian Murray (Edinburgh South) (Lab)]

I thank the Secretary of State for advance notice of his statement, and indeed for coming to the House yesterday to indicate he would be making it today. I begin by welcoming unequivocally the news that an agreement has been reached on the fiscal framework, and I would also like to echo the thanks to both Governments, the Deputy First Minister, the Chief Secretary to the Treasury, who is in his place, and of course the Secretary of State himself for working so hard to secure this historic deal. Our heartfelt thanks also go out to the officials of both Governments, who we all know are the people who do the real work in these negotiations.

Yesterday’s agreement marks the removal of the final obstacle to the transfer of significant and substantial powers to Scotland, and, as Lord Smith himself has said, the agreement

“sees the recommendations of the Smith commission delivered in full.”

Importantly, the vow stipulated clearly that the Barnett formula should remain the key mechanism for calculating Scotland’s budget. That has now been agreed and Barnett has been secured.

I note the Secretary of State’s commitment to publishing details of the agreement by the end of this week, and I welcome that commitment, but can he indicate whether this House will have time to scrutinise the agreement in detail? I have been saying for some time that greater transparency is required in the way these deals are negotiated. This process has highlighted the fact that future intergovernmental relationships must be improved to make these powers work for Scotland. Lord Smith’s recommendations that both Governments need

“to work together to create a more productive, robust, visible and transparent relationship”

and that the Joint Ministerial Committee

“must be reformed as a matter of urgency”

echo in this process. Can the Secretary of State confirm that this will be done?

We all know that the major stumbling block was the indexation method used for the block grant adjustment. Under the compromise reached, there will be a five-year transitional period, which will cover the full term of the next Scottish Parliament. Towards the end of that period, an independent review and recommendation will be published that will form the basis of a more permanent solution. When he gave evidence to the Scottish Parliament’s devolution Committee last night, the Secretary of State suggested that the period between the review being published and the transitional period ending at the end of March 2022 could be as little as 12 weeks. If no agreement is reached, what happens then?

On the transitional period itself, it is my understanding that the Scottish Fiscal Commission will carry out the necessary forecasts of Scottish GDP and tax revenues. Can the Secretary of State confirm that, under the terms of the fiscal framework negotiations, those forecasts will be fully independent of the Scottish Government? Last week, the Scottish Finance Committee voted against allowing for that independence.

There also seems to be some confusion over the block grant adjustment during the transitional period to 2022. The First Minister said it would be done according to the Treasury’s favoured method but with the Scottish Government’s favoured outcome. Can the Secretary of State confirm what method will be used? Will it be the catchily named tax capacity adjusted levels deduction, which I understand was the Chief Secretary to the Treasury’s latest offer?

Further clarity is also needed on the timeframe for the devolution of powers. The Secretary of State has said that the new income tax powers will be available by April 2017. However, the Deputy First Minister has said he does not agree that that timeframe is realistic. Is the Secretary of State able to confirm that the new tax powers will be transferred by April 2017?

Today the Scottish Government are passing the Scottish budget. Twelve months from now, at the time of the next Scottish budget, we want them to have full control of income tax and air passenger duty and the deployment of 50% of Scotland’s VAT revenues. We also want them to have the considerable powers over welfare, which will allow us to design a new social security system for Scotland.

I welcome the review and the fact that it will be fully independent. I have stated several times that impartial oversight and, if necessary, arbitration should be an established part of intergovernmental relations. Will the Secretary of State tell us how the review body will be chosen, and can he confirm that it will be done in a spirit of consensus with the full agreement of both Governments? Will he also tell us to what extent the recommendations of the review will influence the decision taken on the long-term solution for block grant adjustment?

I close by welcoming once again the agreement that has been reached. Today marks an historic date in Scotland’s devolution journey: the creation of one of the most powerful devolved Parliaments in the world. The promises made to Scotland in 2014 have been met—the Smith agreement implemented, Barnett protected, powers transferred, the vow delivered. Scottish politics will never be the same again thanks to these new powers. We have entered a new and exciting era of devolution. What an opportunity to transform Scotland for everyone—an opportunity that my party will grasp with both hands.

[David Mundell]

I agree with most of what the hon. Gentleman said about the opportunity this presents to change Scottish politics. I think the people of Scotland want us to move on from discussing process to discussing policies and the difference that we can make for them with these extensive new powers. It is my full expectation that the agreement and associated details should be available tomorrow, and I very much hope that that will afford the maximum amount of scrutiny. It will of course be open to Committees of this House to scrutinise the arrangements as they see fit.

For understandable reasons, the hon. Gentleman makes reference to intergovernmental relations, but it is important to look at what Lord Smith said about how this agreement was arrived at. He said:

“It is difficult to imagine a bigger test of inter-governmental relationships and while it was obviously a very tough negotiation, what matters is that an agreement was reached.

He continued:

“This provides an excellent basis for constructive engagement between the governments long into the future.”

I accept that fully. I believe that when the transition period is over and the independent reports have been published, it will be possible for the Governments to reach agreement.

The hon. Gentleman has asked many times why it has taken so long, but many important agreements are reached at the eleventh hour, just by the very nature of doing a deal. I am sure that we will be able, on the basis we have set out, to ensure that that is the case at the end of the transitional period. The independent review, to which he referred, will indeed be a matter for agreement between the two Governments, but as he is well aware, many people in Scotland hold themselves out as being independent but are perhaps not as independent as they superficially seem. It is therefore important that there is agreement between the two Governments as to how that independent review should go forward.

On the Fiscal Commission, the agreement with the Scottish Government is that its forecasts will be fully independent. Finally, this Government will place no impediment on the transfer of powers. Obviously we cannot impose the income tax powers on the Scottish Government, and we would not seek to do so, but I would have thought and hoped that they would want to take them on as soon as possible, and that is the end to which we will be working.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

First, I congratulate my right hon. Friend on his apparent success in achieving a settlement of this difficult issue—we look forward to the details tomorrow. Can he assure the House that when the settlement is implemented, it will not only give a strong Scottish Government the powers they need to conduct their devolved affairs properly, but do nothing whatever to impair the ability of United Kingdom Governments to maintain financial discipline and healthy public finances for the British economy? That, surely, is an essential condition for the future growth and prosperity of the English, British, Welsh, Irish—United Kingdom—economy.

--- Later in debate ---

[David Mundell]

I am very happy to give my right hon. and learned Friend the assurance he seeks. The Scottish fiscal framework will be consistent with the UK fiscal framework.

[Angus Robertson (Moray) (SNP)]

May I begin by thanking the Secretary of State for advance sight of his statement and indeed for the conversations he had yesterday, given the constraints of parliamentary time and being able to make a statement only today? We appreciate his having done so.

I speak on behalf of all Scottish National party Members in welcoming the agreement on the fiscal framework, and we all look forward to the draft heads of agreement being published for parliamentary scrutiny in this place and in the Scottish Parliament later this week. My SNP colleagues in the Scottish Government were clear throughout these protracted negotiations that they would not sign a deal that included a threat to the Scottish budget. Members on the SNP Benches here, too, pursued the UK Government’s commitment to the principle of “no detriment”, a promise made during the Smith commission negotiations and a promise that the SNP has ensured has been delivered.

When negotiations began, Scotland’s budget faced a threat from the Treasury of a cut of £7 billion. This week, it was £3 billion, and yesterday morning it was £2.5 billion, but last night my colleagues in the Scottish Government secured a deal that will ensure that Scotland will not be a pound or even a penny worse off, and that the new powers that were promised will be delivered. I pay tribute to the First Minister, Nicola Sturgeon, and the Deputy First Minister, John Swinney, for their efforts to stand up for Scotland and for being stronger for Scotland.

I welcome the fact that the UK Government will guarantee that the outcome of the Scottish Government’s preferred funding model—the per capita indexed deduction—is delivered in each of the next six years. I understand that a transitional funding arrangement will be reviewed following the UK and Scottish parliamentary elections in 2020 and 2021 respectively. The review will be informed by an independent report, with recommendations presented to both Governments by the end of 2021. In that context, let me say this: the Smith report was crystal clear that the fiscal framework had to be agreed by both the UK and Scottish Governments. The Treasury tried to engineer an agreement that would have allowed it to impose a model of indexation in five years’ time—those are the facts of the matter. That would have seen billions cut from Scotland’s budget. Let me therefore ask the Secretary of State the following questions: will he confirm that the Treasury no longer has the power to impose a method of indexation? Will he confirm that the review will go ahead without prejudice to the outcome? And will he confirm that there is no default indexation option and that the Scottish Government’s agreement is required before any new indexation model can be adopted?

[David Mundell]

I thank the right hon. Gentleman for welcoming the parts of the agreement that he did. This has been a negotiation, and this is the point arrived at in the agreement; it is not possible for the Treasury or the UK Government to have engineered an agreement, as what was needed was the agreement of the Scottish Government, and that is what has been achieved. The two parties have been able to reach an agreement on a fiscal framework that is both fair to Scotland and fair to the people of Scotland.

I can reassure the right hon. Gentleman that the review will go ahead on an independent basis, without prejudice or a predetermined outcome, and it will be concluded by the end of 2021. There will be no imposition of any formula at the end of that period, and what happens will be by way of agreement. As I said in my previous comments, when I quoted what Lord Smith said, I believe that this process, through some of the most difficult types of negotiation, gives us confidence that in a maturing relationship the UK Government and the Scottish Government will be able to reach such an agreement.

[John Redwood (Wokingham) (Con)]

Extrapolating recent population trends, what is the additional cost to England, Wales and Northern Ireland of the transitional arrangements on population?

[David Mundell]

There will be no additional cost to England, Wales and Northern Ireland from the powers being transferred compared with if we were not proceeding with this devolution settlement, because the sum being delivered to the Scottish Government is exactly the same as would have been delivered under the Barnett formula.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Scottish Government have committed to halving air passenger duty in 2018, if still in government. That leaves Newcastle airport, in my constituency, most at risk from cross-border tax competition. Following today’s statement, when can we expect a decision from the Government on support for regional airports, as promised by the Prime Minister? Ongoing uncertainty is very damaging to regional economies, and an approach of “wait and see” is not acceptable.

[David Mundell]

I note what the hon. Lady says. Of course people in Scotland will know that the SNP position used to be to abolish air passenger duty completely, so there is somewhat of a change there. None the less, she makes an important point. There is a review, and I am sure that those issues will be considered as the Budget process goes ahead in this Parliament.

[Sir Edward Leigh (Gainsborough) (Con)]

Is not the measure of statesmanship the imagination to give to others what one demands for oneself? For centuries, the English have demanded full control over our spending and taxation. Why should the Scottish people feel any different? Does the Secretary of State not realise that there must be some merit in the argument that as long as we maintain the outmoded, outdated and unfair Barnett formula, which thoroughly disadvantages the English, we will simply stoke up resentment on both sides of the border, and that will ultimately lead to more calls for independence?

[David Mundell]

My hon. Friend, as we well know, is the staunchest advocate of full fiscal freedom in this Chamber—more staunchly so than those on the SNP Benches when he moved his amendment for complete fiscal freedom. My response is that the people of Scotland would not respond well to having a £10 billion annual black hole in their finances, and that full fiscal freedom is not the answer. Further devolution as set out in the Scotland Bill to create a powerhouse Parliament is what the people of Scotland want and it is what this Government are delivering.

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

Let me congratulate all the parties involved on managing to agree on a position that got us here, which is that principle of no detriment. I also thank the Chief Secretary to the Treasury and the Deputy First Minister for attending the Scottish Affairs Committee. I hope that the Chief Secretary will agree to attend the Committee again to explain a little bit more about the details of this fiscal framework. At the beginning of the process, we heard that the Treasury intended to cut £7 billion from the Scottish budget. Why did the Treasury intend to cut billions of pounds from the Scottish budget, and what did he, as the Secretary of State for Scotland, attempt to do about it?

[David Mundell]

I know the hon. Gentleman does not understand the concept of negotiation, in which two sides work together to get an agreement. Assertion and soundbites sound good, but they do not deliver for the people of Scotland. What delivers for the people of Scotland is the two Governments working together to produce a sustainable agreement. That is what we have done; we have an agreement that underpins the Scotland Bill, which means that Scotland can get these extensive new powers over tax and welfare. People will now want to move on from the process debate to hear the policy ideas.

[Maggie Throup (Erewash) (Con)]

During the inquiry of the Scottish Affairs Committee into the fiscal framework, we asked searching questions of our witnesses about the new welfare powers that have been devolved to Scotland. Has my right hon. Friend heard any details from the Scottish Government about how they plan to use the new welfare powers?

[David Mundell]

I very much welcome the fact that the First Minister and the Deputy First Minister have indicated that they plan to set out how they intend to use the powers. It was interesting to hear some of the media reports in Scotland that suggest that the SNP plans to increase significantly the tax burden on middle income earners in Scotland. Obviously, we will have to await the detail in the manifesto, but there will be no excuses now. SNP Members can come here and complain about certain welfare changes, but they will have the ability within Scotland to set their own welfare arrangements.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Scottish Government have been able to achieve their chosen deduction method through their vigorous and skilled negotiation strategy. What advice will the Secretary of State give to the Welsh Government when it comes to negotiating the fiscal framework for Wales? Does he think that the Labour Government’s usual passive compliance with the Treasury will work?

[David Mundell]

What I am clear about is that the position in Wales will be as it is in Scotland: the people of Wales will benefit most when the Welsh Government and the United Kingdom Government work constructively together for their benefit.

[Alberto Costa (South Leicestershire) (Con)]

Is it not time that we heard from the Scottish Government detailed plans to devolve power down to the Scottish communities? Devolution should not stop at Holyrood.

[David Mundell]

I absolutely agree with my hon. Friend. I am sure that he will have read my speech of 21 December delivered in Glasgow City chambers making exactly the case for devolution within Scotland. Unfortunately, in recent times, Scotland has become one of the most centralised countries in terms of government. The new Scottish Government that will be elected in May should devolve further powers. The best way to achieve that is to elect more Conservative MSPs under Ruth Davidson’s leadership.

[Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)]

How great it is to follow that remark from the Secretary of State!

How does the amount agreed by the UK Government for the implementation costs compare with the Government’s current calculations for implementing the deal agreed at last week’s EU summit on benefits for foreign workers in the UK?

[David Mundell]

I welcome the hon. Lady’s question, because of course she and I were both Scottish Conservative candidates for the Scottish Parliament in the dim and distant past—[Interruption.] I am sure that the detail of this agreement and the issues that she raises will stand up to scrutiny.

[Mr Speaker]

Order. It is a moderately unedifying spectacle when such large numbers of Members are quite so vociferous. The saving grace is that all of them do have a very notable smile on their face, so at least there is good humour in the Chamber.

--- Later in debate ---

[Mr Mak]

Thank you, Mr Speaker. I thank the Secretary of State for his statement. Does he agree that the conclusion of this new agreement shows that Scotland’s two Governments can work together? Will he undertake to keep pressing the Scottish Government to reveal details of how they will use these new powers?

[David Mundell]

I certainly do agree with my hon. Friend, and I have, on a number of occasions in this Chamber, paid particular and sincere tribute to the Deputy First Minister of Scotland, John Swinney. He and I have had numerous conversations throughout this process and, although at times we have been in disagreement, they have always been cordial and civil. That is the basis of the relationship that I want to see with the Scottish Government. My hon. Friend is right: what this agreement means is that the Scotland Bill can pass through this House and, hopefully, receive the legislative consent motion at Holyrood. There will then be no hiding place on these issues for the Scottish Government. If they want to spend more, they will have the tax powers to do so, and if they want higher welfare, they will have the ability to achieve that.

[Tommy Sheppard (Edinburgh East) (SNP)]

My constituents will welcome this agreement. In particular, they will welcome the fact that the Scottish Government were able to persuade the Treasury to abandon its initial position, which would have meant £7 billion of cuts to Scottish finances, and to come to the Smith position that there should be no detriment. They will observe though that had that been the original position for the Treasury, we might have been able to get this agreement before Christmas rather than spend all this time on it. Will the Secretary of State confirm that it is now the case, beyond doubt, that the principle of no detriment to the Scottish budget is enshrined in his Government’s thinking both now and in the future?

[David Mundell]

Yes, as is the other element of the Smith commission consideration of no detriment, which is taxpayer fairness—not just in Scotland, but across the UK.

[David Mowat (Warrington South) (Con)]

The vow was very clear that Barnett would be retained. That has been done, and rightly so. The starting point for public spending in Scotland now is 115% of the UK average. Can the Secretary of State tell the House, in terms of his modelling, what that percentage per capita will be at the end of this Parliament?

[David Mundell]

As my hon. Friend asks for complex calculations, I will certainly be happy to write to him in that regard. Although I respect his strongly held views in relation to the Barnett formula, I have to say that the Government’s clear position is that the Barnett formula is being retained.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Following yesterday’s devastating votes on the Lords amendments to the Welfare Reform and Work Bill, can the Secretary of State say a little more about when welfare powers will be transferred to Scotland, so that at least in Scotland we can do something to prevent the appalling effects of poverty on children and disabled people?

[David Mundell]

Obviously, I do not agree with the hon. Lady’s perspective on specific policies, but she is right that the Scottish Parliament will now have specific and detailed responsibilities in relation to welfare. We have a joint ministerial group on welfare, which includes myself and Scottish Ministers Alex Neil and Roseanna Cunningham, and we look to work though that group on the transfer of the specific powers. We do not want a transfer of power without new arrangements being in place, because the people in receipt of the benefits must be our prime concern. We will work closely together. An enormous amount of work has been done by officials to date and I am confident that once we know what the Scottish Government’s proposals are—we do not know fully—we will be able to make an effective transition.

[George Kerevan (East Lothian) (SNP)]

In his reply to my hon. Friend the Member for Perth and North Perthshire (Pete Wishart), the Secretary of State seemed to confirm that the Treasury’s opening bid in these negotiations—the so-called level deductions approach, which would have led to a £7 billion cumulative cut in Scottish spending—was merely a negotiating ploy. If that is the case, will the Secretary of State confirm that it was disrespectful of the negotiations to start with a position so far from the vow, and will he confirm that that will never happen again?

[David Mundell]

What complete and utter nonsense. A deal is done that is good for Scotland and good for the United Kingdom, and hon. Members on the Scottish National party Benches have to trawl through newspaper reports to find something that they can complain about. This is a good deal for Scotland which gives Scotland new powers. Let us talk about how we use those powers for the benefit of Scotland, and let us put the grievance agenda to bed once and for all.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I have no desire to sour the tone of consensus on an historic day for Scotland, but many of my constituents believe that the funding arrangements for Scotland, and specifically the operation of the Barnett formula, are unfair to northern England. Does the Secretary of State acknowledge that grievance and how does the new fiscal framework change that?

[David Mundell]

I acknowledge that people have those feelings. A number of people on both sides of the House have raised issues about the Barnett formula. That is their job as representatives of different parts of the United Kingdom. My position is clear: the Barnett formula is good for Scotland, and this Government are keeping the Barnett formula.

[Patrick Grady (Glasgow North) (SNP)]

Can the Secretary of State name some of the devolved assemblies around the world that will now be less powerful than the Scottish Parliament?

[David Mundell]

I can produce a list and send it to the hon. Gentleman. I am not focused on other assemblies around the world. I am focused on the Scottish Parliament and making it a powerhouse Parliament with the powers that make a difference in Scotland. That is the state of the debate. The hon. Gentleman’s constituents will not want to hear about Parliaments in South America and other parts of the world: they will want to hear about what his party intends to do on income tax and welfare.

[Kirsty Blackman (Aberdeen North) (SNP)]

We have had a particularly mild November, December and January because the Secretary of State for Scotland promised the Scottish Affairs Committee an agreement by the autumn. Can he let us know when he expects the Bill to complete its passage through the House of Lords; when he expects it to come back to the House of Commons; and when he expects it to get Royal Assent?

[David Mundell]

In respect of the first two questions, I expect that to be March. I hope Royal Assent will be achievable in March but it may be April. I am also respectful of the Scottish Parliament process and the need for a legislative consent motion.

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

I thank the Secretary of State for advance sight of his statement. I note that he mentions the UK Government holding population risks. Will he concede that the limited powers available to the Scottish Government do not allow for population growth? Will he now listen to calls for a Scottish post-study work scheme?

--- Later in debate ---

[David Mundell]

On the latter subject, I have had the pleasure of appearing before the Scottish Affairs Committee and being grilled by the hon. Lady on the issue of student work visas. I made it clear that I would look closely at the report produced by the Committee, and I repeat that undertaking. However, I do not accept the premise of her question. I believe that, properly used, the tax and other powers that the Scottish Government have will allow them to grow the Scottish economy, create jobs and grow the population of Scotland.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

The Secretary of State talks about negotiations. This is an important point. When the Treasury first considered making £7 billion worth of cuts to the Scottish budget, can the Secretary of State—Scotland’s man in the Cabinet—tell us what personal interventions he made to the Treasury to protect Scotland?

[David Mundell]

I have been closely involved in these discussions throughout, but they are negotiations—they are not about the Treasury imposing. As Lord Smith recognises, they are about the two Governments coming together in difficult circumstances to negotiate about money, which is often the most contentious thing that is ever the subject of negotiations. We have demonstrated that both Governments had the maturity to reach a deal which is good for Scotland and good for the rest of the United Kingdom.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

The Secretary of State for Scotland has just confirmed that the initial proposal put forward by the Treasury of a £7 billion cut to Scotland’s budget was not an opening negotiation position, but a serious proposal. In the light of that, does he consider himself Scotland’s man in the Cabinet, or the Cabinet’s man in Scotland?

[David Mundell]

What complete and utter nonsense. This was a negotiation. Of course, it was conducted not by SNP MPs, but by John Swinney, who adopted a completely different tone—a civil and cordial tone—throughout. I respect his objective of getting the best deal for Scotland. That is my objective too, but we had to get an agreement, and we got one. It is a good agreement. It is an opportunity to move away from the grievance agenda, but this afternoon’s proceedings leave me in doubt that, even with these extensive new powers, the SNP will be able to leave that grievance agenda behind.

[Callum McCaig (Aberdeen South) (SNP)]

The Secretary of State has repeatedly criticised the SNP for allegedly failing to set out how it will use the new powers contained in the legislation, yet barely an hour ago the Prime Minister floundered badly when asked whether the Scottish Conservatives would reduce the tax rate on high earners. I am sure the Secretary of State will want to avoid suggestions of hypocrisy and extend his criticism to his boss.

[David Mundell]

I have nothing but admiration for Ruth Davidson. She is the one person in the Scottish Parliament who can stand up to the SNP and hold it to account. If people do not want a one-party state in Scotland, the way to achieve that is by voting Scottish Conservative. The Prime Minister did not flounder; he told us exactly what the position was. Ruth will set out the tax proposals and they certainly will not be the same as the SNP’s proposals, revealed in the Scottish press today to hit middle earners hard.

Points of Order

David Mundell Excerpts

Wednesday 24th February 2016 Commons Chamber

[Mr Speaker]

It is open to any Member who believes that he or she has made a mistake to correct the record voluntarily. It is not the responsibility of the Chair to arbitrate between competing claims about a sequence of events, and nor is it my responsibility to interpret what the Minister might have meant in responding to the hon. Gentleman at the time. The hon. Gentleman has made his point with force and alacrity—we would expect no less of him. If the Secretary of State wishes to respond, he is perfectly at liberty to do so, but he is under no obligation.

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

Further to that point of order, Mr Speaker. I have noted what the hon. Gentleman has said and will have the matter investigated.

[Mr Speaker]

The Secretary of State has kindly said that he will have the matter investigated. I ought to emphasise, for the avoidance of doubt, that he was not the Minister who answered in the debate. I hope that the hon. Member for Ross, Skye and Lochaber (Ian Blackford) is satisfied with his prodigious efforts for the day and that we might now move on to other fare. I know that he will be absolutely delighted that we can now move on to the ten-minute rule motion, to be put forward by his hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry). I am sure that he is sitting expectantly with that in mind.

Public Finances: Scotland

David Mundell Excerpts

Wednesday 3rd February 2016 Commons Chamber

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

Let me add my welcome to this debate this afternoon. A debate on Scottish public spending is important at any time, but it is particularly apposite today, as our colleagues at Holyrood are debating the latest draft Scottish Budget.

I am sure that we will be hearing a lot from SNP members about austerity, even as their counterparts in the Scottish Parliament vote through massive cuts to Scottish local government, while maintaining a council tax freeze which prevents councils from addressing their shortfalls and making use of the new Scottish rate of income tax. Public spending is about choices, and I am proud to be part of a Government who cut tax for over 2.3 million people in Scotland, reducing the tax paid by a typical taxpayer by £825 and taking 290,000 Scots out of paying any income tax at all.

[Ian C. Lucas (Wrexham) (Lab)]

Will the Secretary of State give way?

[David Mundell]

I have not started yet. I will give way to the hon. Gentleman in due course.

On the motion and the amendment, let me start by reminding the House what the Government are working on in relation to the fiscal framework. We are implementing the Smith commission—a cross-party agreement for the future of Scotland. I am determined to deliver the legislation required to implement the Smith agreement in full. That is why we are negotiating a new fiscal framework agreement for the Scottish Government. That is what the people of Scotland voted for—a stronger Scottish Parliament in a strong United Kingdom. They did not vote for independence. As the SNP’s former adviser Alex Bell has noted,

“the SNP’s model . . . that it was possible to move from the UK to an independent Scotland and keep services at the same level, without either borrowing a lot more or raising taxes”

is “broken”.

We base our position on the principles set out in the all-party Smith agreement. Smith stated that a fiscal framework needed to be agreed—that there should be no detriment at the initial point of devolution, that there should be appropriate indexation to adjust the block grant in future years, that this should be fair to taxpayers across the UK, and that we should address so called “spillover effects”. That means that the Scottish Parliament and Government will take on more economic responsibility and accountability.

[Callum McCaig (Aberdeen South) (SNP)]

The Secretary of State quoted the Smith agreement as stating that, at the point of devolution, there should be no detriment to the Scottish public finances, but does he agree that the key to that is ensuring that the fiscal agreement does not build in detriment in the coming years, which is the crux of the deal and the problem in reaching agreement?

[David Mundell]

The crux of the deal is to deliver a settlement that is fair to Scotland and fair to the United Kingdom. As the hon. Gentleman knows, a number of mechanisms have been set out that could achieve that and they are part of the ongoing negotiation.

[Melanie Onn (Great Grimsby) (Lab)]

Will the Secretary of State give me a little more information about what he considers to be fair? Will he explain the mechanisms that are being discussed?

[David Mundell]

If the hon. Lady is new to this debate, she will be able to find many detailed discussions about all the mechanisms. Under the new proposals, the Scottish Government would benefit from good decisions that they take which produce additional revenue for them, but they would bear some of the risk if they take decisions that lead to less revenue than had been anticipated. That is what I think is at the heart of fairness in the proposals being debated.

[Mr Christopher Chope (Christchurch) (Con)]

Following on from what my right hon. Friend has just said, does he therefore confirm that the per capita indexed deduction is not the right way forward?

[David Mundell]

I do not think even my hon. Friend would expect me to express a view because I am not going to negotiate the arrangement on the Floor of the House. I am happy to comment on a number of aspects of the negotiation, but the Deputy First Minister of Scotland has made it abundantly clear to the United Kingdom Government that it is he who is negotiating these arrangements on behalf of the Scottish Government, not MPs, not the First Minister and not members of the Scottish National party. I have confidence in his wish to reach an agreement and to conduct those negotiations, as we have done so far, on the basis that we committed to—that is, by not giving a detailed running commentary.

[Several hon. Members rose—]

[David Mundell]

I give way to the Chair of the Scottish Affairs Committee.

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

We have heard from the Labour party that it does not know which index it favours in these negotiations, and I think that the Secretary of State is saying that he does not have a view about the indexation he prefers. Surely we need to know what both respective parties favour. We know what we want. What does he want?

[David Mundell]

The hon. Gentleman has just heard me set out the position. We are in an ongoing negotiation, and I remain optimistic that it will reach a positive conclusion. I must say that I do not recognise some media reports that say there is a gulf between the two Governments. I believe that we are both on the same page—one Government might be at the top of the page and the other might be at the bottom, but it is eminently possible for us both to move to the middle. That is what my colleagues the Chief Secretary to the Treasury and the Deputy First Minister will continue to do when they next meet. The Government are doing all we can to reach an agreement based on the Smith principles.

[Neil Gray (Airdrie and Shotts) (SNP)]

The Secretary of State is unwilling to state his position today, but surely he agrees with Professor Anton Muscatelli, and indeed with the Scottish Trades Union Congress, that these powers cannot come at any cost. He must commit today to a position on non-detriment to the Scottish budget.

[David Mundell]

What I commit to is a fair settlement for Scotland. The discussions are ongoing. I am confident that we will be able to achieve a fair settlement for Scotland. The hon. Member for Edinburgh South (Ian Murray) alluded to the fact that the Joint Exchequer Committee has met eight times, with constant engagement at official level. I have met John Swinney on numerous occasions during this period. Work at official level continues. Senior UK Government officials will meet Scottish Government officials in Edinburgh tomorrow. My right hon. Friend the Chief Secretary to the Treasury has today confirmed that he will be available all day on Monday for further discussions. We stand ready to agree a deal. Our door is open and our efforts continue.

[Stella Creasy]

The Minister is setting out the discussions that have taken place and are taking place. I take him back to the Smith principles, to which he alluded, which state that there should be

“pro-active reporting to respective Parliaments of, for example, the conclusions of Joint Ministerial Committee, Joint Exchequer Committee and other inter-administration bilateral meetings established under the terms of this agreement.”

Is he really telling us that refusing today’s request for the minutes meets that principle, because it does not sound like it, and we have had so little detail of so much work?

[David Mundell]

I am sure that the hon. Lady could find a lot more detail if she studied the Scottish press and looked through the various debates that have been conducted on the issue. We will report what happened in full. I do not recall important negotiations being reported in detail and on a daily basis in the House of Commons or elsewhere when Labour were in government. We do not intend to do that. We intend to reach an agreement that is fair for Scotland and fair for the rest of the United Kingdom. That is where our efforts are focused.

I remain an optimist. We are making progress, and I believe that we will reach an agreement. A deal can and will be reached if both sides want it. I know that the UK Government want a deal, and I believe the Scottish Government when they say that they want one too. The two Governments have agreed to speak again in the coming days. Although there are still some difficult issues to resolve, we remain confident that a deal can be reached that is fair to Scotland and fair to the rest of the UK, now and in the future.

[John Redwood]

I am grateful to the Secretary of State, who is doing a difficult task with great skill. Has a recent model been produced for how the income tax might work, because we have seen in previous debates that the forecasts for oil revenue were grossly exaggerated, and there is an unfortunate danger that with the collapse of the oil price will come the collapse of oil-related incomes in Scotland, which would have a bad impact on income tax receipts?

[David Mundell]

My right hon. Friend makes an important point, which speaks against those who argued just a few short months ago for full fiscal autonomy. It is quite interesting to look back at the amendment launched by the SNP in November to bring about full fiscal autonomy, which the Institute for Fiscal Studies predicted would create a £10 billion gap in Scotland’s finances. When the SNP asked for that full fiscal autonomy, it did not ask for what they now claim are the levers it needs to grow the Scottish population and offset the risk it is being asked to take on in relation to the Smith commission proposals.

The Government have been as open and transparent as possible in these negotiations, and each meeting has been notified to the House. Just this afternoon, the Chief Secretary appeared before the Scottish Affairs Committee. Last month, we responded in detail to the Economic Affairs Committee in the other place on fiscal devolution, having previously submitted written evidence to that Committee.

[Catherine McKinnell]

It is vital that these negotiations have the confidence of not just the Scottish people, but the people of the whole UK. Does the Secretary of State recognise that there is a significant risk of these negotiations suffering from the same problems as the negotiations over devolution in England, which the Communities and Local Government Committee report published today clearly states have lacked openness?

[David Mundell]

I do not recognise, for the reasons I have just set out, that those circumstances characterise the negotiations we have been conducting with the Scottish Government, and I make the case that a degree of privacy for negotiations of this type is required.

The hon. Member for Edinburgh South mentioned deadlines. I do not think in terms of self-imposed or arbitrary deadlines. Personally—keen though I am to have a warm and supportive relationship with the Scottish Government—I have never felt that the St Valentine’s day date had much relevance to this process. I am willing to continue working towards a deal for as long as that takes and for as long as we can. However, the usual channels have agreed to move the next day of Committee on the Scotland Bill in the other place to 22 February, as discussions on the framework continue to progress, to enable us to give their lordships as full an update as possible.

We have shown flexibility in the negotiations. While I cannot, as I have said, give a commentary to the House, Members will have seen via media reports that the UK Government have put compromise proposals on the table. That is a clear signal of our commitment to reach agreement and of our willingness to be as flexible as we can be, within the Smith principles.

Without commenting on the proposals, I would point out that the House will be aware of some of the tenets of those on the table. There are some suggestions that the Scottish Government should retain all income tax raised in Scotland, as well as a guaranteed share of the growth in income tax in England, Wales and Northern Ireland. Professor Muscatelli, who was referred to earlier, told the Scottish Parliament that such an approach would not meet the test of taxpayer fairness. This seems, once again, to be the Scottish Government wanting to have their cake and eat it—indeed, to have a slice of everyone else’s cake while they are at it. That might be understandable enough politics, and an understandable enough position to adopt at the start of a negotiation, but it cannot really be said to be a credible position.

Once the powers are devolved, Scotland

“should retain the rewards of our success, as we will bear the risks.” —[Scottish Parliament Official Report, 16 December 2015; c. 23.]

Those are not my words, but those of John Swinney. Mr Swinney has been very clear in the past about exactly what he meant by “risks”. He meant the risk that Scotland’s population might decline relative to the rest of the UK’s.

When asked at the Scottish Parliament’s Finance Committee by Malcolm Chisholm MSP if the Scottish Government would seek to be protected from the possibility that the rest of the UK’s population will expand more quickly than Scotland’s, John Swinney was very clear:

“That is another of the wider range of risks that we take on as a consequence of gaining the responsibilities.”

The Daily Record newspaper, sometimes brandished by SNP MPs, set this out clearly, finding it hard to see why

“a tax-raising Scotland should benefit from a growth in tax receipts in England and Wales”

and stating that

“there is an undeniable logic”

to opposing that view.

[Kirsty Blackman (Aberdeen North) (SNP)]

The Daily Record completely misunderstood how per capita indexed deduction works. Academics have been clear that the Barnett equivalent is per capita indexed deduction. If the Secretary of State supports anything other than PCID, he is attempting to undermine Barnett. Is he trying to scrap Barnett to appease his Back Benchers?

[David Mundell]

I respect the hon. Lady’s imagination, which, I am afraid, she still sometimes lets run riot. We are committed to the Barnett formula. We are committed to delivering an agreement that is fair to the people of Scotland and fair to the rest of the United Kingdom, and that is what these negotiations are about.

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

rose—

[David Mundell]

The position set out in the Daily Record reflects the reality. If the population of the rest of the UK were to rise at a faster rate than Scotland’s, that would cause an increase in demand on public services such as schools and hospitals in the rest of the UK, which would need to be funded. How could it be fair that those services be denied the funding required to sustain them because part of the income tax growth was being transferred to the Scottish Parliament? What would people in Carlisle, Newcastle or Liverpool say if their local services were not able to keep up with demand because the Scottish budget was being increased?

[Ian Blackford]

rose—

[David Mundell]

Let us imagine if the situation were reversed. Does anyone think for a minute that the Scottish Government would accept a deal in which a growth in Scottish income tax relative to the rest of the UK was clawed back by the Treasury in Whitehall, to the detriment of Scottish public services? Of course they would not, and quite rightly. I want Scotland to enjoy the benefits when good decisions are made at Holyrood. As John Swinney said,

“If we take on a responsibility and make a success of it, we should bear the fruit of that; if we get it wrong, we must bear the consequences.”

[Ian Blackford]

I am grateful to the Secretary of State for giving way—I almost thought I had become invisible. We are having a very important debate. He talked about his responsibility to put the Scotland Bill through this House. Surely he has to see that the fiscal arrangements that are put in place are central to that. He must have a view on what is in Scotland’s best interest if we are to avoid detriment to Scotland. Is he really Scotland’s man in the Cabinet or the Cabinet’s man in Scotland?

[David Mundell]

The hon. Gentleman is not invisible, unlike some of his colleagues. He will find that I am very clear on my responsibility, which is to deliver the Scotland Bill and the powers that the people of Scotland voted for comprehensively in the referendum. The fiscal framework underpins that. It is to be based on the Smith principles of no detriment and fairness to taxpayers in Scotland and across the rest of the UK. That is what I am determined to achieve. Because my glass is half full, I have confidence in the Scottish Parliament to do what is right for Scotland—to pass a legislative consent motion to agree a fiscal framework. The powers contained in the Scotland Bill will present the Scottish Parliament elected in May with a great opportunity to show how devolution can really benefit the people of Scotland.

I want to say a couple of things about population risk. I do not accept the counsel of despair that says that Scotland needs a more lax immigration system if it is to address the issue of relative population growth. The Government rightly wish to see net immigration come down, and we are taking steps to achieve that, but I am afraid we do still have some way to go. The latest figures show that annual net migration stands at 336,000 and there were 636,000 migrants coming to the UK in the past year. Those are considerable numbers, and if Scotland is not getting a share of that migration, the Scottish Government have some serious questions to answer.

The levers that the Scottish Parliament has over health and education, among other things, can be used to make Scotland the attractive place to live and work that it should be. The powers contained in the Scotland Bill will give the Scottish Government even more levers to make Scotland even more attractive. If they use the new tax powers in the Bill cleverly, they can attract more taxpayers to Scotland to make a contribution, boost the population and increase the tax take. Of course, if they adopt the frankly ludicrous proposals put forward by the Scottish Labour party this week to increase the income tax bill for most Scottish taxpayers by 5%, they may not succeed in making Scotland a more attractive place to live and work.

Let me conclude as I began. We are negotiating in good faith to deliver on the Smith commission principles, and I am confident that a deal can be reached. I give an absolute undertaking to this House that I will do everything in my power to achieve a deal that is fair to Scotland and fair to the whole United Kingdom. I remain optimistic that we can get such a deal, and that our debates can move on to how those new powers and the existing powers of the Scottish Parliament can be used to improve the lives of the people of Scotland.

[Several hon. Members rose—]

Smith Commission Agreement

David Mundell Excerpts

Monday 11th January 2016 Written Statements

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

On 27 November 2014 the Smith Commission published its heads of agreement on the devolution of further powers to the Scottish Parliament. The Smith Commission agreement was the first time that all five of Scotland’s major political parties came together to agree the constitutional future of Scotland and was an historic achievement.

In addition to the provisions requiring legislation which are being taken forward in the Scotland Bill, the Smith Commission agreement identified a number of areas for further consideration between the UK and Scottish Governments. In the period since the Smith Commission, the UK and Scottish Governments have held discussions on these matters. The attached table provides information on work in these areas.

The agreement also identified a number of areas where non-legislative action was required. Discussions on the agreement of a new fiscal framework for Scotland and work to strengthen intergovernmental working are on-going. The attached table provides an update on other such areas, including the agreement of memorandums of Understanding in relation to the BBC and the Maritime and Coastguard Agency.

Attachments can be view online at:

http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statements/

[HCWS458]

Scotland Bill (Programme) (No.2)

David Mundell Excerpts

Monday 9th November 2015 Commons Chamber

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

I will not detain the House, because I do not want to eat into the time available to debate the Bill. I acknowledge the anger of the hon. Member for Perth and North Perthshire (Pete Wishart). He is always angry at something. Each time we have dealt with the Bill, we have had this sort of stunt. In the newspapers in Scotland at the weekend, the hon. Gentleman called on other Members of the House of Commons to be nicer to him. We will try, but he does make it a bit difficult.

It is clear to me that the hon. Gentleman’s anger is not directed at me or at this House, but directed at the people of Scotland because they voted decisively to remain in the United Kingdom, and that is something he just cannot accept.

Question put and agreed to.