Scotland: Devolution

Lord Forsyth of Drumlean Excerpts

Wednesday 29th October 2014 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

I am most grateful to my noble friend. None of these arguments is new. They were gone through in great detail in the 19th century at the time of Irish home rule. The conclusion then was that the way to deal with this fairness was to reduce the number of MPs coming from Ireland. Why can the same not be applied in the case of devolution to Scotland?

[Baroness Stowell of Beeston]

Certainly—and I speak for the leadership of my party—we are clear that the best way in which to deal with this is through English votes for English laws within the House of Commons. That is something that we can tackle and deal with quickly.

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[Lord Turnbull (CB)]

My Lords, in my 35 years in Whitehall, I spent more time on public spending than on anything else, so the Barnett formula was never far from my thoughts. It was therefore with some alarm that I heard that “The Vow” by the three party leaders referred to continuing the Barnett formula. If that means continuing it as it operates now, that is an outcome that I would strongly oppose.

However, the actual text of the vow may offer some reassurance and a hint of a way forward. The front page of the Daily Record of 16 September says:

“And because of the continuation of the Barnett allocation for resources, and the powers of the Scottish Parliament to raise revenue, we can state categorically that the final say on how much is spent on the NHS will be a matter for the Scottish Parliament”.

Thus, if Scotland has a significant control over its revenue, it will ultimately control what the level of spending is on any devolved service. That condition can be satisfied by a wide range of Barnett formulae. It does not commit us to precise figures or method of calculation.

Note also a reference earlier in the vow to,

“sharing our resources equitably across all four nations”.

There is no way that the Barnett formula, as currently operated, can be regarded as “sharing our resources equitably”. Its main flaws are, first, that it adjusts the population proportion with a long lag. If, as is the case in Scotland, the growth of population is slower than in the rest of the United Kingdom, Scotland is always over-rewarded. Secondly, this flaw is compounded by the fact that, when eventually there is an adjustment to the population ratio, it applies only to the increment of spending in England at the next spending review; no attempt is made to correct past overpayment.

The best analogy I can produce is from income tax. Someone sends in a tax return and the inspector finds that the coding has been too generous. But instead of recouping the error in the next year, the inspector applies a new, less favourable coding, but only to the change in income from this year to the next. In this way, all the previous errors, which in the case of Scotland are all in the same favourable direction, are allowed to accumulate. They have now reached grotesque proportions.

Scottish public spending is now £1,600 per head greater than in England and £500 per head greater than in Wales. These are huge sums in relation to income per head, of the order of £20,000 a year. This disparity funds policies in Scotland, such as care for the elderly, university fees and prescription charges, which are simply unaffordable elsewhere in the UK. To put it another way, a Scottish family of four receives the same social security benefits as an English family, but on top receives an extra £6,000 per year in what we used to call the social wage.

What is the explanation for this? The answer, in a word, is appeasement. Over 30 years, neither Conservative nor Labour Governments wanted to confront voters in Scotland. When the House last considered this in the committee chaired by the noble Lord, Lord Richard, in 2009, it was suggested that the way forward was to relate the transfers to needs. But, as Mr Salmond—not Lord Salmond—frequently boasted, Scotland is a prosperous nation. Scottish Government figures claim that Scotland has a GDP per head 11% higher than that of the United Kingdom as a whole. Wales, on the other hand, has a GDP per head of about 25% lower than the UK average.

Had I served on that committee in 2009, I might well have signed up to the recommendation to move to a needs basis. In my time at the Treasury in 1993, we investigated that, although it came to nothing. However, I draw noble Lords’ attention to the analogy of the rate support grant, which is a needs-based thing, which turned out to be a statistical nightmare. I no longer think that this needs basis is necessarily the right answer when the freedom for Scotland to raise taxes is being expanded. Instead, we could move to a much simpler system under which all nations get a block grant of the same per capita amount and the devolved Assemblies are given the freedom to top that up, or not, as they please. In the process, as the noble Lord, Lord Empey, mentioned, they would assume a proper accountability.

The other change is that the population ratios—

[Lord Forsyth of Drumlean]

I am grateful to the noble Lord, and I agree with everything that he has said. Is not the problem with his recommendation that there would be a huge gap in the Scottish budget, which would mean that Scotland would end up as the highest taxed part of the United Kingdom and worse off in terms of public services?

[Lord Turnbull]

Not necessarily. Scotland would have to bring its spending into line with England and it would be getting the same grant from the centre as England. My recommendation corrects a favourable anomaly; it is not impoverishing Scotland compared with England.

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[Lord Forsyth of Drumlean]

My Lords, it is a great pleasure to follow the noble Lord, Lord Bew. The great weakness in the McKay report was that it addressed only the West Lothian question and not the much bigger one of the imbalance that arises because of the Barnett formula. I am sure he would agree with that.

Anyone listening to Nicola Sturgeon, who is the sort of First Minister designate in Scotland, on the “Today” programme this morning demanding a Scottish veto on any European referendum result could be forgiven for thinking that the nationalists had not been comprehensively defeated on a massive turnout on 18 September. Not content with one referendum on Europe, she wants to have four. Alex Salmond was absolutely convinced that he was going to win the campaign, where he used the patronage of the Scottish Government ruthlessly—and, by the way, is still doing so, ringing people up and saying he is going to get them because they did not support his side of the argument. Intimidation reared its ugly head at every level, inspired by these nationalists, causing unionists to be fearful about acknowledging their support for their cause.

In the end, Alex Salmond failed because of economic uncertainty. His support, however, came from an electorate, as the noble Lord, Lord McConnell, pointed out, utterly disillusioned with the political system and still hurting from the consequences of the financial crash of 2008. The nationalists, just like Mr Farage and UKIP in the south, offered hope and easy answers, and many hard-pressed voters thought that things could not get worse for them and they could risk taking a chance on separation. The separatists exploited the consequences of poorly thought-out constitutional change and complacency and lethargy in their opponents, as the noble Lord, Lord McFall, pointed out earlier. The Prime Minister allowed Alex Salmond to choose the question, the timing and even the franchise for the referendum, despite it being the United Kingdom’s constitutional responsibility. The result was that we had a two-year long campaign during which all the levers of the Scottish Government were used to advance the nationalist cause and promote a grievance culture. The question on the ballot paper demanded a negative answer to maintain the status quo. Instead of, “Should Scotland remain part of the United Kingdom?”, Salmond insisted on, “Should Scotland be an independent country?”. As my noble friend Lord Cormack pointed out, the unionists were thus forced to campaign for a no vote while enduring attacks from Salmond that the campaign was negative. Of course campaigning for a negative is negative. He deliberately set it up that way.

He promised that this referendum would be a once-in-a-generation event. He said that because he thought that he would win it. His word has proved to be worthless; it turns out that he had the lifetime of a butterfly in mind. He resigned as First Minister in defeat, leaving his left-wing successor—she is left wing—to renege on the nationalist promise and refusing to rule out a further referendum. It is clear that a vote for the SNP is now a vote for divisive, disruptive and damaging neverendums. Salmond himself will almost certainly fight the general election, hoping to win a seat at Westminster, in the Parliament he so despises, and lead a ragbag of disruptive latter-day Parnellites. That is his plan.

The United Kingdom has been put at risk by tactical misjudgments and constitutional tinkering for political advantage. The Conservatives, Labour and the Scottish nationalists have all been opposed to the creation of a Scottish Parliament in my lifetime. They have changed their positions for reasons of political expediency rather than principle and have sought to amend the constitutional position to suit themselves. Alex Salmond was opposed to devolution and the creation of a Scottish Parliament with limited powers but changed his mind when he decided that it could be a Trojan horse to destroy the United Kingdom. Sadly, my Labour opponent is not in his place. As a friend, I have great respect for the noble Lord, Lord Robertson of Port Ellen. When I was Secretary of State, he was my shadow. He predicted that devolution would kill nationalism stone dead. Labour thought that it would enable the left to keep the Conservatives out of power in Scotland and that they could devise a complex voting system which would ensure that no one party could dominate the Scottish Parliament. They adopted the language of nationalism, branding the Conservatives as anti-Scottish, arguing that the Conservatives had no mandate to govern in Scotland and denouncing our policies as Anglicisation. Even today, Labour MSPs have not learnt the foolishness of their actions because I see them in the newspapers contemptuously referring to their Scottish colleagues as Westminster Labour.

In 2011 the nationalists won an “impossible” overall majority in the Scottish Parliament with 69 seats on a manifesto that pledged an illegal referendum on independence. So much for devolution killing nationalism stone dead. Westminster had no choice but to grant it, but had delayed grasping the issue for too long. Gordon Brown as Prime Minister crushed a proposal to hold a referendum in 2008 from the Labour leader in the Scottish Parliament, Wendy Alexander.

In the final few days of the referendum campaign, after many people, including me, had already voted by post, an opinion poll which had eliminated the “don’t knows”—who turned out to be the “no but won’t says”—put the separatists in the lead. The three unionist party leaders panicked and published a joint statement—not a vow—in an exclusive for a tabloid newspaper, pledging more undefined powers to the Scottish Parliament. This was done by three privy counsellors without consulting Parliament and, we now learn, without even consulting their party leadership in Scotland. Not since Henry VIII have we had laws enacted by proclamation, even by such distinguished figures as Nick Clegg, Ed Miliband and the Prime Minister. There have been several references to a vow during this debate. The statement was turned into a vow by the newspaper’s headline writer. It proclaimed:

“We agree that the UK exists to ensure opportunity and security for all by sharing our resources equitably”—

as the noble Lord pointed out—

“across all four nations to secure the defence, prosperity and welfare of every citizen. And because of the continuation of the Barnett allocation for resources and the powers of the Scottish Parliament to raise revenue we can state categorically that the final say on how much is spent on the NHS will be a matter for the Scottish Parliament”.

It is, of course, complete gobbledygook.

The Barnett allocation, as the noble Lord, Lord Turnbull, pointed out, gives Scotland an extra £1 per person for roughly every £5 spent in the rest of the UK and is not based on need. A commitment, such as in this so-called vow, to share resources equitably would mean ending Barnett and would leave an enormous black hole in Scotland’s block grant. We have just won the argument in the referendum campaign that even if Scotland had all tax revenues she would be utterly dependent on the oil price or very much higher taxes just to maintain the status quo. Similarly, Barnett gives Scotland roughly 10% of any increases in expenditure decided at Westminster, and any allocation in respect of the NHS will be determined there, not in Scotland. When water was privatised in England, the block grant was reduced and the funds required to maintain it in public ownership came from the allocations to other services.

These promised new powers and the funding arrangements are not thought through; nor are the consequences for the rest of the United Kingdom which had no say in the referendum. The reason given for having no devo-max question was that it was a matter for the UK as a whole while independence was for Scotland to decide. With a general election due next May, the necessary legislation cannot be put through Parliament and there is no time to find an agreed solution which will bind the United Kingdom together and ensure fairness for each of its constituent four nations. Once again, political expediency is playing its part in handing the game over to the separatists.

The way forward must command support in every corner of the United Kingdom. The fact that 45% of the voters in Scotland on a turnout of 85% were prepared to abandon Britain cannot be ignored or fixed by more asymmetric devolution. Nor can the remedy be left in the hands of political parties. A constitutional convention drawn from Scotland, England, Wales and Northern Ireland and involving central, devolved and local government as well as civic society could address the issue of funding, the role of the Westminster Parliament, regional issues and the central purpose and benefits of a United Kingdom. This is not just a matter for Scotland but one for the British people as a whole if the United Kingdom is to be secured on sound foundations for the next 300 years.

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[The Advocate-General for Scotland (Lord Wallace of Tankerness) (LD)]

My Lords, the House has heard a very important and comprehensive range of contributions on complex and interlinked constitutional issues. I am pleased that we have had the opportunity to hear such a range of views and perspectives from all parts of our United Kingdom; it has been very important to hear views not just from Scotland but from England, north and south, as well as from Wales and Northern Ireland.

I was delighted to hear the contribution of the noble Lord, Lord Lennie, in his maiden speech. I understand that he is not only a Newcastle United fan but a participant in the Great North Run. No doubt that will allow him the stamina to take part in debates that go on for the best part of six hours. He summed up a recurring theme of our debate when he talked about the disconnect between politicians and voters that needed to be reduced. He entertained us and he informed us, and I know that the House looks forward very much to his contributions to your Lordships’ House in the future.

As noble Lords will have heard, the issues considered in this debate fall into three broad categories. The first relates to Scotland and the fulfilment of the joint commitment by the three party leaders to deliver more powers to the Scottish Parliament in light of the referendum no vote. The second category of issues relates to how to ensure that power is properly devolved and decentralised to all the nations, communities and individuals who comprise all parts of our United Kingdom. The third, separately but rightly—not as an alternative to devolution within England—considers how we might address the so-called West Lothian question, which has come about as a consequence of devolving power to specific parts of the United Kingdom.

I will address first the issue of the referendum in Scotland. It was legal and fair in its conduct and decisive in its outcome. It is important that we reflect on the points made by a number of noble Lords, including the noble Baroness, Lady Liddell, and the noble Lord, Lord Birt, who highlighted the appalling treatment of Nick Robinson in a country which ought to take pride in the freedom of the press and of the media. My noble friends Lord Stephen and Lord Forsyth also highlighted some of the many real problems that were encountered during the referendum. We should not lose sight of these when we think of what kind of Scotland we want to see in the future.

Some noble Lords questioned the fact that the Scottish Parliament devised the referendum. It was important that the referendum was, as it were, made in Scotland. In its immediate aftermath, we heard today of the conspiracy theories that counters at polling stations were filling in blank ballot papers. If the referendum had been devised at Westminster, the view that it was all a trick and a conspiracy would still be echoing loud and clear. The referendum was devised by the Scottish Government—they had everything going for them, and they lost. That is what makes the result decisive.

The people of Scotland expect that the interests of 100% of Scotland within the United Kingdom are taken forward. No one is under any illusion that a no vote was a vote for the status quo or that, somehow or other, we are out of the woods. As the noble Lord, Lord Hennessy, said—I think he spoke for many of us, myself included—our relief has been suffused with anxiety. As the noble Lord said, we are all seeking to achieve a strong and lasting settlement across the United Kingdom.

That is what we intend to do. The vow made by the Prime Minister, the Deputy Prime Minister and the leader of the Opposition has already been put into practice. My noble friend Lord Selkirk of Douglas sought the reassurance that that would be adhered to. Even those who contributed to your Lordships’ debate, who were sceptical about the commitments made, nevertheless all agreed that it was essential that that promise is honoured. It has been honoured. The Command Paper setting out the parties’ positions was due by the end of October. In fact, it was published two weeks ago. It is continuing to be honoured with the work of the Smith commission. It will be honoured because we have undertaken that the heads of agreement, which we look forward to the noble Lord, Lord Smith of Kelvin, announcing, will be taken forward with clauses by Burns Night.

Equally, the Scottish National Party should remember the statements it made ahead of the referendum that it expected it to be a once-in-a generation or once-in-a lifetime event. Nicola Sturgeon, whom I congratulate on becoming, as she will become, the First Minister of Scotland, said one year ahead of the referendum—on 18 September 2013—that this was a once-in-a lifetime opportunity for Scotland. If our parties are expected to honour commitments, the least we can expect is that the Scottish National Party will honour its commitment to the people of Scotland that this is for once in a generation.

The commission chaired by the noble Lord, Lord Smith of Kelvin, was up and running on 19 September. His terms of reference make it clear that the recommendations will deliver more financial, welfare and taxation powers, strengthening the Scottish Parliament within the United Kingdom. Last week, he convened the first meeting of cross-party talks to reach agreement on proposals for further devolution. All 10 nominees from each of the represented political parties attended. The noble Lord has said that they have,

“committed to work together to achieve a positive outcome to this process”.

The noble Lords, Lord McConnell and Lord Foulkes, emphasised the importance of this being, as it were, a principles-based approach rather than a horse-trading approach. I believe that that is what the noble Lord, Lord Smith, indicated after that first meeting. The parties have agreed a set of principles which include, but are by no means limited to, forming a substantial and cohesive package of powers, enabling the delivery of outcomes that are meaningful to the people of Scotland, and strengthening the Scottish devolution settlement and the Scottish Parliament within the United Kingdom, including the Parliament’s levels of financial accountability. The noble Baroness the Leader of the Opposition, as well as the noble and learned Lord, Lord Hope of Craighead, and my noble friend Lord Glasgow, sought an express assurance that that would be within the context of the United Kingdom honouring the outcome of the referendum. There is also a principle that it will not cause detriment to the United Kingdom as a whole nor to any of its constituent parts.

However, this process is not just about the parties. The referendum saw an opening up of civic engagement, and the noble Lord, Lord Smith, has made it clear that he wants to hear from all the various groups to ensure that the recommendations that he produces are informed by views from right across Scottish society. By St Andrew’s Day, he intends to publish heads of agreement. As I have indicated, the Government are committed to turning these recommendations into draft clauses by Burns Night 2015. It is a demanding timetable but that is because the demand is there, in Scotland, to see change delivered, and it is a demand that we intend to meet.

Scotland will have further powers but we believe that that must be within the context of Scotland being a part of the United Kingdom. It must not start to unravel the fabric that binds us together, because that would be a denial of the outcome of the referendum. However, I very much share the view expressed by the noble Lords, Lord McConnell and Lord Elder, that the exercise of these powers is vital to the whole range of devolved responsibilities. It would be very refreshing to get the political debate back on to how we improve education, health, transport, agriculture, sport and local government in Scotland.

Not surprisingly, the question of funding was raised. I certainly take the point made by the noble Lord, Lord Empey, who referred to the “ATM approach”—a point reiterated by the noble Lord, Lord Kerr of Kinlochard—where there has been spending by the Scottish Parliament without responsibility for raising the funding. Indeed, my noble friend Lord Purvis of Tweed highlighted that fiscal responsibility gap. One of the objects of those who served on the Calman commission—as I did, along with my noble friend Lord Selkirk of Douglas, and the noble Lord, Lord Elder—was to address that and to ensure that there was greater accountability for spending. Therefore, with the additional tax powers come additional responsibility and accountability.

We have been clear as a Government that the act of devolution in and of itself should not result in a change in the budget, but it is important to note that this is also one of the key principles highlighted by the Smith commission. However, we have been equally clear—this addresses a point raised by my noble friend Lord MacGregor of Pulham Market—that if decisions are taken by the Scottish Government which result in a lower tax yield than the current arrangements, the Scottish Government will have to take spending decisions in line with that reduced tax yield. The noble Lord, Lord Kerr, will put me right on this but I think that the Azores judgment means that where tax is fully devolved and there is a shortfall, it cannot be topped up.

The noble Lords, Lord Blencathra and Lord McAvoy, made the point that, as more tax-raising powers are devolved, the amount of money transferred to Scotland under the Barnett formula will decline.

[Lord Forsyth of Drumlean]

Can my noble friend just deal with the point in the so-called vow where it says that our resources will be shared,

“equitably across all four nations”?

How is that consistent with keeping Barnett? Can he also deal with the notion that, by giving the Scottish Parliament more tax-raising powers, Barnett can be phased out? If the tax base in Scotland is lower than the uplift in the Barnett formula, compared to the average for the United Kingdom, how will that gap be filled?

[Lord Wallace of Tankerness]

My Lords, an important issue which was always there but was articulated well, not least by the former Prime Minister, Mr Gordon Brown, in the latter stages, was the notion of the social union; the equitable arrangement within our United Kingdom where, if one part of the kingdom is thriving, there is a transfer of resources to a part that is not doing so well. That is one of the important things that binds our United Kingdom together and I see that as an equitable distribution of resources within it.