Scotland Act 2016

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Wednesday 20th April 2016 Lords Chamber

[Lord Dunlop]

In all issues the two Governments will seek to work constructively. There was a specific review to see how passengers who travelled to Scotland could get the benefits of HS2—that is an example of how the two Governments have been working together.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that the Scotland Act 2016 leaves the power to call a second referendum on independence in Scotland here at Westminster and not in Scotland, and that it is utterly irresponsible for any unionist to argue that a vote to leave the European Union would justify a second referendum when the vast majority of people in Scotland regard this matter as now settled?

[Lord Dunlop]

I very much agree with my noble friend. The people of Scotland voted very clearly and decisively in 2014 to remain part of the United Kingdom, and at the time Nicola Sturgeon, now First Minister of Scotland, said that this was a “once in a generation” issue. It is incumbent on the SNP to respect the decision that the people of Scotland took and to focus on jobs, prosperity and high-quality public services in Scotland.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Monday 29th February 2016 Lords Chamber

[Lord Forsyth of Drumlean]

I entirely accept the Minister’s argument that if we were to move to a needs base, or whatever, there would have to be transitional arrangements. However, what about the point that this fiscal framework has given the Scottish Government a veto on any new settlement, which means that the transitional arrangements would become permanent?

[Lord Dunlop]

I am coming to that point. The idea that it would be easy or straightforward to replace the Barnett formula with a needs-based one—or seek to do so—does not stand up to scrutiny. I have read, with great interest, the report of the House of Lords committee on the Barnett formula, published in 2009. John Swinney, now Deputy First Minister of Scotland, gave evidence to that committee’s review and made it absolutely clear that he did not support the move to a needs-based formula. There has been lots of talk about a veto. Another way of putting that is that if you do not have a veto then the UK Government unilaterally imposes something on Scotland. In that situation, we would have to proceed as we have done in this fiscal framework agreement—by negotiation and agreement.

The no-detriment principles have been raised several times in this debate. I have talked directly to people who sat on the Smith commission including the noble Lord, Lord Smith, himself. The commission recognised that these were high-level principles. It was always accepted that the two Governments would have to sit down and decide how those principles were applied in practice. It is not surprising that there is a greater level of detail and a lot of talk about the direct effects, which we want to capture mechanically in the agreement. However, the indirect, spillover effects are very difficult to capture, because of the causality. It is the direct effects which we are seeking to capture in this agreement. Although there is a backstop power to deal with the spillover effects, it will be used rarely. One needs to draw a distinction between the review, where we need to proceed and get an agreement, and the dispute resolution mechanism, which is very much attached to specific issues regarding how spillover effects actually work.

I turn to the review itself. It is obvious and self-evident that this is five years away. The details of the review have still to be determined. I am not going to stand here today and say otherwise, because noble Lords would not accept it. The Government would positively welcome the House of Lords Economic Affairs Committee feeding in its views about how the review should be structured. That would inform the deliberations we will have with the Scottish Government about constructing that review.

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[Lord Dunlop]

I think I am right in saying that it does require this Parliament to establish the Scottish Fiscal Commission as a statutory body but I am happy to clarify that in more detail, perhaps in succeeding debates that will deal with this issue. That is certainly my understanding.

[Lord Forsyth of Drumlean]

Presumably my noble friend is anticipating using the Henry VIII clause for that purpose. Can he just explain to me how it can be right that the Scottish Parliament—in my view, quite rightly—and the Scottish Government have insisted that the fiscal framework should be available to the Scottish Parliament before it gives approval to this legislation but he is maintaining that that should not apply to the House of Commons?

[Lord Dunlop]

I am not sure that is what I am maintaining. The fiscal framework is available to this House and to Parliament and we are having a debate about it now.

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[Lord Dunlop]

I think that we are debating the fiscal framework at this moment. As to whether there will be debates on the annual reports, it will up to each House to decide what debates it wants to have on them and what scrutiny it wants to give. Given the interest in the subject, I anticipate that there will be detailed scrutiny.

[Lord Forsyth of Drumlean]

I am sorry, but my point to my noble friend is this. The Scottish Parliament will decide whether it is going to give legislative consent to this Bill, which will have the effect of making the Bill reach the statute book. It has the opportunity of discussing the fiscal framework because we now have one.

[Lord Forsyth of Drumlean]

Yes, it has the opportunity of approving it, whereas the House of Commons has not had the opportunity to do that. What possible justification can there be for not giving the elected Members of the House of Commons the opportunity to consider the fiscal framework, which has implications for the whole of the United Kingdom, when the Scottish Government have quite rightly insisted that they would not give legislative consent without the Members of the Scottish Parliament having an opportunity to consider it? I honestly think that my noble friend has to concede that there has to be an opportunity for the House of Commons to be treated in exactly the same way as the Scottish Parliament.

[Lord Dunlop]

That is a matter for the House of Commons; it is not a matter for the House of Lords. The House of Commons has decided to pass the Bill through its stages, in full knowledge of what the state of play was on the fiscal framework.

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[Lord Forsyth of Drumlean]

Will my noble friend allow me one more time?

[Lord Dunlop]

I will give way one more time but throughout the passage of the Bill, I think that I have taken every intervention and I really need to make progress.

[Lord Forsyth of Drumlean]

We are all extremely grateful to my noble friend and very sympathetic to the position in which he finds himself. However, he says that it is a matter for the House of Commons. If we were to pass my amendment then it would go back to the House of Commons, so it is a matter for the House of Lords whether the House of Commons will get the chance to consider it.

[Lord Dunlop]

For the reasons that I have explained, the Scottish Parliament is giving its legislative consent to the Bill and this House is being asked to approve the provisions of the Bill, so we are absolutely on the same footing.

Turning to the review of the fiscal framework, this is an agreement between Governments and it will be operated by Governments. Ultimately, therefore, the formal review should be conducted by Governments. However, as I have said, there is plenty of room for independent contributions. We have built an independent report into the review process for the first time for Scotland’s fiscal framework and, as I have said, I hope that the House of Lords Economic Affairs Committee will contribute its views on how this report should be structured. In addition, there is nothing to prevent other independent voices giving their views to either Government at any stage.

Let me reassure the House on one final aspect of Amendment 57AA. It is already our stated intention to have an independent report for the end of 2021. My expectation is that report will be published, although it will be for the Government of the day to determine that.

Finally, I turn to Amendment 57AC, tabled by my noble friend Lord Forsyth. I fully support the principle behind this amendment, as Governments should be accountable for all the public money that is spent, in whatever context. However, the Scottish Parliament already has an important scrutiny role over more than £30 billion-worth of spending. I therefore think it is primarily for the Scottish Parliament to monitor how the Scottish Government use the funds they will have to implement devolution following the Smith commission. I hope and expect that it will fulfil this role vigorously.

To reassure the House, I point to the scrutiny afforded to implementation of the Scottish rate of income tax following the Scotland Act 2012. The Scottish Parliament has taken on a significant role here, holding the Scottish Government to account. However, this does not mean that the UK Government and this Parliament are without a role. As I have said, we have committed to report annually to Parliament on the operation of the framework. I know those reports will receive full scrutiny. I therefore ask my noble friend to withdraw his amendment.

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[Lord Forsyth of Drumlean]

My Lords, I will speak briefly in support of Amendment 60, tabled by the noble Lord, Lord Kirkwood of Kirkhope. I am sure the Minister will be advised that it is not necessary to include this in the Bill but it would be excellent if he were to give an undertaking at least to produce a draft Bill. I am not a lawyer, but I have certainly found it extremely difficult to cope with the piecemeal changes that have been made over the years and to follow the cross-references back to the 1998 Act. The noble Lord has made probably the most sensible suggestion of the evening.

I presume the noble Lord, Lord McAvoy, will not press his amendment to a Division or anything of that kind. The Labour Party is in its debating society mode at present. When the Minister responds to the amendment, which is about setting up this welfare monitoring joint committee, will he answer a question I asked earlier, arising from the fiscal framework? Paragraphs 16 and 17 appear to contradict each other. Paragraph 16 says:

“For welfare, and all other spending unless stated otherwise in this agreement, the chosen method will be the Barnett formula”.

However, paragraph 17 says that,

“whilst achieving the outcome delivered by the Indexed Per Capita (IPC) method for tax and welfare”.

This is very important, because it makes a considerable difference to the amount of money that is available for welfare purposes in Scotland. Will the Minister indicate which I am to believe: paragraph 16, which would involve a substantial cut in the current budget, or paragraph 17, which appears to contradict it?

[Lord Dunlop]

My Lords, I thank the noble Lords, Lord McAvoy and Lord Kirkwood, for their amendments. I turn to Amendments 56F and 57B, moved and spoken to, respectively, by the noble Lord, Lord McAvoy. We had a good debate in Committee on similar amendments and I hope I was able to provide much detail on the joint working and scrutiny that will govern the transition and implementation of the new welfare powers. The Government are clearly sympathetic to the intent behind the amendments and the importance of a seamless transition that makes sure that the ultimate clients for welfare services are not in any way disadvantaged.

At the heart of the UK and Scottish Government scrutiny and implementation of these welfare powers is the Joint Ministerial Working Group on Welfare, which, as I said in Committee, has met four times since February 2015 and will meet again soon after the Scottish parliamentary elections. I have also given the assurance that I will explore how we can make the work of the Joint Ministerial Working Group on Welfare more visible in this place. I am already acting on that promise. Scottish and UK government officials will discuss the issue tomorrow at the next meeting of the joint senior officials group before it is then raised at the next joint ministerial group, which will take place after the Scottish parliamentary elections.

Beyond the range of work I have already outlined, there are other committees, both in the UK and the Scottish Parliament, which will have a role in the scrutiny of the new powers being devolved. For example, the Minister for Employment will be appearing in front of the UK Parliament’s Scottish Affairs Committee on 9 March to give evidence on the welfare and employment powers that are being devolved through the Bill. Ministers also often appear before committees in the Scottish Parliament to aid the scrutiny of Scottish Government proposals. Most recently, the Secretary of State for Scotland appeared before the Scottish Parliament’s Devolution (Further Powers) Committee just seven days ago to discuss issues such as the fiscal framework and the role of the Joint Ministerial Committee on welfare.

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[Lord Dunlop]

For example, we have worked to build a strong relationship with the Convention of Scottish Local Authorities to ensure that universal credit is implemented and delivered in a way that best reflects the views of Scottish local authorities. Citizens Advice Scotland is another organisation that we have engaged with. This has been a genuinely joint approach to improve delivery in Scotland and is just one example of many.

As I said in Committee, I am sympathetic to the noble Lord’s intention in what his amendment proposes to achieve but we believe that robust, strong and effective mechanisms are already in place. We will absolutely put the customer at the heart of any change and will work with the Scottish Government to ensure that the transition and implementation of powers is simple, clear and effective. This will protect the delivery of existing benefits and customer interests, and ensure a great future for all the people in the UK, including those in Scotland.

Turning to Amendments 58 and 59, spoken to by the noble Lord, Lord Kirkwood, Clause 29 gives the Scottish Parliament legislative competence to establish employment programmes to support disabled people and those at risk of long-term unemployment. It devolves power over support for unemployed people through employment programmes currently centrally contracted by the DWP; this is mainly but not exclusively the Work Programme and Work Choice. These two programmes represent virtually all funding across these contracted employment programmes and therefore, in our view, provide the Scottish Government with a significant policy space within which to operate.

The powers are very broad in scope and concurrent with the UK Government’s powers. Any claimant on a reserved benefit at risk of long-term unemployment can be addressed in this way, so the Scottish Government have the ability to create schemes, programmes or grants in this space as the UK Government can. It gives the Scottish Government the ability to better align with the employment support they already provide through the devolved skills system. That is a very substantial package of powers which the Scottish Government can already use. I think the estimated annual spend in this area is some £600 million.

Support for those at risk of long-term unemployment must last for at least a year. The three restrictions seek to define the space which Smith said that the Scottish Government should have in designing new programmes. This creates clear lines of accountability between what the Scottish Government are able to do and what Jobcentre Plus is required to do. It is also important for there to be a clear handover point, so that Jobcentre Plus and Scottish Government programmes do not try to deliver different support to the same claimant at the same time. Jobcentre Plus will continue to deliver smaller-scale support, with the Scottish Government delivering more significant interventions.

The amendment of the noble Lord, Lord Kirkwood, would remove the limitations that assistance should be for persons claiming reserved benefits and be for at least a year. These limitations are necessary safeguards to ensure that those who need support over and above that provided by the enhanced Jobcentre Plus offer receive assistance for an intense period. Smith was clear that Jobcentre Plus and the conditionality regime “will remain reserved”. As I have said, there needs to be a clear handover point so that Jobcentre Plus and the Scottish Government’s programmes are not overlapping in that sense.

It is vital that the Jobcentre Plus work coaches have the right tools to support claimants into work and smaller-scale employment programmes at their disposal, such as mandatory work activity or locally commissioned support via the flexible support fund. If responsibility is split, the result could be people spending longer on benefits and employment support, and if we remove these restrictions, it will in the Government’s view create a confused, muddled system of support which claimants and third sector organisations would struggle to understand or navigate. That would be a much worse system and have unintended consequences. We have sought to strike the right balance: enabling the Scottish Government to provide employment support for people who are at risk of long-term unemployment, and giving the Scottish Government the opportunity to take clear responsibility over a substantial portion of the claimant journey.

Finally, I turn to Amendment 60, which concerns “Consolidation of the Scotland Act 1998”. We addressed points in Committee about the scope of the powers in the Bill related to welfare. Once the Bill is passed, it will be available on legislation.gov.uk, alongside the Scotland Act 1998 and the Scotland Act 2012. In the Government’s view, it would not be a good use of Parliament’s time to bring forward another Bill simply to repeat what is included in previous Scotland Acts. The dynamic nature of the devolution settlement means that the two Governments work together on Section 30 orders, which adjust the terms of Schedule 5 from time to time, so any consolidated version would quickly be out of date. That is no bad thing; it is testimony to the devolution settlement working responsively.

However, the points made by the noble Lord, Lord Kirkwood, raise an interesting question about knowledge of the devolution settlement more generally. I think that the noble Lord, Lord Smith, referred to it in his personal recommendations. The Government very much support the objective and have taken steps to improve the knowledge in UK government departments and beyond. For example, in March 2015 the UK Government published a leaflet explaining the changes to devolution in Scotland. The Secretary of State has also undertaken visits to local authorities and is keen to ensure that they know what powers are coming to the Scottish Parliament. The Scotland Office communications directorate’s work will also seek to make clear the Scottish Government’s existing powers—powers coming into force from the Scotland Act 2012 and those being delivered by the Scotland Bill. Its work raises awareness not just of the debate on what powers may or may not be devolved in future but on where the existing powers are today. With that, I ask the noble Lord to withdraw his amendment.

[Lord Forsyth of Drumlean]

Before my noble friend sits down, could he possibly answer the question I asked him about the welfare funding and the two paragraphs in the fiscal framework? If he does not have that information now, perhaps he could write to me.

[Lord Dunlop]

We have agreed that welfare will be funded through the Barnett formula and that tax deductions will be calculated through the comparable model. However, during the transition period, we will reconcile both to index per capita.

[Lord Forsyth of Drumlean]

Perhaps my noble friend could help me. Does that mean that if the Barnett formula model resulted in a shortfall in the resources available in Scotland for welfare, it would be topped up?

[Lord Dunlop]

It means that if you look across the total Scottish budget, it would deliver the outcome that we discussed earlier. It is up to the Scottish Government to decide how to use the resources within that: it is not ring-fenced within that total figure.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Wednesday 24th February 2016 Lords Chamber

[Lord Dunlop]

I particularly thank the noble Lord, Lord Faulkner. He always speaks on railway matters with such authority. I thank noble Lords for the other informed and authoritative contributions we have heard during this debate.

I think one thing is clear: all sides of the House are agreed that the British Transport Police does an excellent job of policing our railways. That is not in doubt. However, the issue this evening is whether this House will agree to devolve to the Scottish Parliament the functions of the British Transport Police in Scotland. As has already been said, the Smith agreement says:

“The functions of the British Transport Police in Scotland will be a devolved matter”.

The functions of the British Transport Police in Scotland are the policing of the railways in Scotland. The Smith Commission also stated in paragraph 19:

“Where the agreement provides that powers or competence in relation to a matter will be devolved, this is intended to mean a transfer of full legislative competence to the Scottish Parliament along with that of the associated executive competence to the Scottish Government”.

Clauses 42 and 43 devolve legislative competence in relation to railway policing in Scotland and designate the British Transport Police bodies as cross-border public authorities. This is devolution. It has been argued tonight that this aspect of the Smith agreement could be implemented in a different way by retaining the BTP as a single body but making it jointly accountable to Scottish Ministers and the Scottish Parliament. There is nothing in this Bill to prevent that outcome being achieved. The Bill does not dissolve the BTP. It does not mandate that the BTP should no longer operate in Scotland. It does not prescribe a model by which policing of the railways in Scotland should be carried out in future.

What the Bill does do is ensure that the BTP continues to operate in Scotland as now, unless and until the Scottish Parliament decides to pursue an alternative approach, and it ensures that Scottish Ministers are consulted on appointments to the BTP bodies. It will be for the Holyrood parties to set out in advance of the elections what their approach to the BTP in Scotland will be. The Scottish Conservative manifesto for the Holyrood elections will contain a clear commitment to retain a single nationwide British Transport Police—not absorbed into Police Scotland—but a BTP made more accountable to Scottish Ministers and the Scottish Parliament.

[Lord Forsyth of Drumlean]

I very much hope that the Scottish Conservatives will win more seats at the election but I am not anticipating them becoming the Government of Scotland. My noble friend must know that Scottish Ministers have made it clear that they intend to break up British Transport Police if they have the power to do so, and to amalgamate it into Police Scotland. Therefore, is it not a little disingenuous to imply that what the Bill provides will not threaten the integrity of the British Transport Police? It will indeed.

[Lord Dunlop]

I can assure my noble friend that I will not turn myself into Mystic Meg tonight and make a prediction about the Scottish elections. I am making a broader point because I think the real point is that embracing devolution means trusting the Scottish Parliament to act responsibly with the powers it is given, and respecting the ability of people in Scotland to hold its representatives to account. I fear that for this House to decline to support this provision would send out a clear message to Scotland that we do not trust its Parliament and the ability of people in Scotland to hold it to account. Should the Scottish Government and Scottish Parliament press ahead to legislate for, and implement, a different model for policing the railways in Scotland, and to integrate the functions of the BTP with Police Scotland, I believe it is reasonable to expect the two Governments, working together, to be able to put in place the necessary arrangements to ensure that the service remains as effective as it is today, that the transition is seamless and protects the interests of people on both sides of the border, and that there is no detriment.

Counterterrorism has been specifically referred to. I want to address that directly. The BTP currently undertakes counterterrorism policing of the railway. This includes a range of operational measures and deployments designed to mitigate and manage the terrorist threat. General policing is already devolved and arrangements already exist between Police Scotland, the BTP and Home Office police forces to ensure the effective delivery and co-ordination of policing, and we would clearly expect these to continue under any new model. The Scottish Government already work with a range of partners, including the United Kingdom Government, Police Scotland and the British Transport Police, to ensure that Scotland is protected from a range of threats, including terrorism. There are well-established national procedures in place for policing across regional and functional boundaries, and these will certainly continue to apply.

Going back to what I was saying about ensuring that the service remains as effective as it is today, that is what has happened with every act of devolution since the Scottish Parliament was set up in 1998. Officials are meeting regularly and both Governments are committed to working constructively and effectively on the detailed arrangements needed to enable the transfer of functions to take place. A senior-level joint programme board to lead and oversee the work to integrate the BTP in Scotland into Police Scotland, should the Scottish Government decide to press forward after the election in May, has been established by the two Governments and includes representatives of the two police authorities. The terms of reference for the joint programme board will be formalised following the Scotland Bill receiving Royal Assent, and I will be happy to share these with noble Lords. Once the Scottish Government have finalised their plans for the future model of railway policing, I will be happy to update the House on implementation plans. Before this, the Scottish Government have made clear their intention to engage with key partners and staff representatives to ensure that the specialist railway policing skills and expertise of British Transport Police officers and staff in Scotland are maintained.

I hope noble Lords will not press their amendments and will allow this provision to proceed. Of course, I will reflect on the discussions that have taken place but I cannot undertake to commit to any amendments.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Monday 22nd February 2016 Lords Chamber

[Lord Dunlop]

I thank all noble Lords who have taken part in the debate for their contributions. Before I address some of the points that have been raised, may I first make a correction? It came as something of a surprise to me to hear that I had not responded to the noble Lords, Lord Lang and Lord Hollick. I certainly signed lots of letters and I understand that those were sent off in early February, and copied to the leaders and Chief Whips of the main political parties and the Convener of the Cross-Bench Peers.

[Lord Forsyth of Drumlean]

I apologise to my noble friend if that is the case, but I asked the Clerk to the Economic Affairs Committee if we had received a reply to the letter from the two chairmen and was told last week that we had not. Certainly, it has not been circulated to committee members.

[Lord Dunlop]

Well, it was certainly signed off by me, and my understanding was that the letters had gone off, but we will check that.

We want to secure the passage of the Bill and reach agreement on the fiscal framework. We can all agree that we want the focus at the Holyrood election to be on how the powers in the Bill are used. A number of noble Lords said that this House’s holding up consideration of the Bill would hinder the outcome that we all want and put the Bill’s timetable at unnecessary risk.

A number of noble Lords, including my noble friend, raised substantive points about the fiscal framework. One strong reason for proceeding today into Committee is so that we can have a debate and consider these matters in more detail. I very much agree with the noble and learned Lord, Lord Hope, that Report gives us an opportunity to consider these matters further. I was particularly interested in the suggestion by the noble Lord, Lord Hollick, which was also made by the noble Lord, Lord Turnbull, about using Committee rules at Report. I undertake to ask my noble friend the Chief Whip, who has been listening very closely to this debate, to speak to the usual channels to see if using Committee rules at Report can be agreed.

The Government are working flat out to get a fiscal framework agreement. As I said in my opening speech, there has been intensive discussion, which continues today. I remain optimistic that a deal can be reached soon. But today is not the day to speculate about what happens if we do not reach agreement and what options we might have to consider in that scenario. I therefore ask my noble friend not to press his amendment.

[Lord Forsyth of Drumlean]

My Lords, was that it? We have had a splendid debate with a lot of suggestions. I think there was a consensus that we could not put this Bill on to the statute book without having discussed the fiscal framework. It is interesting that former judges such as the noble and learned Lords, Lord Hope, Lord McCluskey and Lord Mackay of Clashfern, are advising us on the politics of the situation in Scotland and I am arguing about the constitutional implications. I feel that my expertise is more limited than theirs on both counts.

Of course, I understand why the noble Lord, Lord McAvoy, feels that if we were to delay consideration of the Bill, the SNP would complain that unelected Peers were interfering in the democratic decisions of the Scottish people and the Prime Minister’s vow—which, incidentally, was the Daily Record’s vow—had not been delivered. The noble Lord questioned my motives and said that I wanted to kill the Bill. I understand that the Bill will go on to the statute book; that will happen. But I want a stable, lasting framework that will end this business of the nationalists pretending that Scotland gets a bad deal out of the union and, at the same time, the other parts of the United Kingdom to feel that they are treated fairly. That is the objective, and the fiscal framework goes to the heart of that. Far be it from me to give advice to the Labour Party, but perhaps it should stop running away in Scotland and confront the nationalists for what they are and on what they say.

My noble friend said that the fiscal framework may be agreed before Report. The noble Lord, Lord Darling, for whom I have considerable admiration and respect, suggested that perhaps we might consider it on Report, but Report is the day after tomorrow is it not? Is the fiscal framework going to be agreed tomorrow? If so, perhaps it might have been sensible to delay Committee until Wednesday and then we could have had Committee with the fiscal framework. If my noble friend is right that the fiscal framework is imminent, clearly, it would be silly to delay Committee today and to accept my amendment—I am still speaking in favour of it, by the way—I can see that.

However, it was then suggested by the noble Lord, Lord Turnbull, and others, that perhaps we could change the rules. It is perfectly open to me or any other Member of the House to bring forward a Motion on Report to say that we should recommit the Bill to Committee. Therefore, there is no reason for me to press my amendment today if, indeed, we are going to get the fiscal framework on Report. If we are not, and if the view of the House is that the Bill ought not to reach the statute book without an opportunity for the House of Commons particularly, as well as ourselves, to consider the fiscal framework, then it is open to my noble friend to accept an amendment in Committee today. There are several amendments—I have one of them—stating that there should be a sunrise clause whereby the Bill will not come into effect until the fiscal framework has been agreed by both Houses of Parliament.

The noble Lord, Lord McAvoy, thinks that that would provoke hysteria in Scotland. I do not see why. The Bill will get on the statute book and they will get what they want. If it does not get on the statute book, it will be because of the intransigence of the SNP in agreeing the fiscal framework. One of the most important speeches was made by the noble Lord, Lord Stephen, who talked about the importance of transparency. We have also had speeches from a former Chancellor of the Exchequer, a former Permanent Secretary to the Treasury, a former Cabinet Secretary—they are both the same person—and all have advocated that we look at this issue.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Monday 22nd February 2016 Lords Chamber

[Lord Forsyth of Drumlean]

Before my noble friend does that, will he actually answer the question? It was: how do you tell which is a direct effect and which is an indirect effect?

[Lord Dunlop]

One is a direct consequence of a policy decision, so in the example I gave of personal allowances, that is a direct consequence of a policy decision that is outwith the control of the other Government. It is not the behavioural or indirect effect, which is about how people react to a decision that is taken. That is the distinction that we are making.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. May we just take the example that he gave—that was raised by the noble and learned Lord, Lord Wallace—of people leaving Scotland? If we have an SNP Government who decide to put the top rate of tax up to 60% and a lot of the WILLIEs and other people decide, “We are going to move south” and they tell their neighbours, “Actually we are moving south because we want to be closer to our children”, how will the Government know how much of the tax base has been reduced as a result of the Scottish Government putting up tax and how much as a result of domestic or other normal movement? There is no way that you can tell that effect. Why would it be appropriate to compensate in those circumstances?

[Lord Dunlop]

My noble friend misunderstands what I am saying. I am not necessarily saying that those should be compensated for. In the evidence that the Chancellor of the Exchequer gave to the Treasury Select Committee, he said:

“My personal view is that tax competition is something that we should allow”.

He is effectively saying that if there are different tax rates north and south of the border, that is something that we should not automatically try to compensate for. Another example relates to childcare. We all remember that at the time of the independence referendum White Paper, central to the retail offer being made by the SNP was its childcare policy. It was a matter of complaint that, were that policy to be successful and increase income tax revenues, the benefit of that would actually flow to the Treasury and not to the Scottish Government. Under the Smith package, if such a policy succeeded in increasing participation by women in the labour market, the benefits of that would flow to the Scottish Government.

[Lord Dunlop]

No, I do not believe that that would be a detriment in the sense that the UK Government would have to compensate the Scottish Government. The situation would apply; the Barnett formula would apply; the equivalent departmental spending from England would flow through to Scotland. I do not think that this package changes that at all. Although the ownership structure north and south of the border is different, the cost of this on both sides of the border is met in water bills.

[Lord Forsyth of Drumlean]

The Smith commission report says in paragraph 4a:

“Where either the UK or the Scottish Governments makes policy decisions that affect the tax receipts or expenditure of the other, the decision-making government will either reimburse the other if there is an additional cost, or receive a transfer from the other if there is a saving. There should be a shared understanding of the evidence to support any adjustments”.

On my understanding of what these words mean, with the precise example of the water industry, which I have repeatedly asked about in the past, how can my noble friend say what he has just said from the Dispatch Box when the words have a different meaning? Are we to understand that the Government are departing from the meaning of the no-detriment principle as set out there?

[Lord Dunlop]

No; we are not departing from the Smith agreement at all. It is the function of the negotiations. As I say, these are high-level principles, and the two Governments have to work out how these principles are applied in practice. That is what we are doing. The Barnett formula will continue to operate and determine departmental spending and how that flows through in Barnett consequentials. That will not change.

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[Lord Dunlop]

The Committee will understand that at a very delicate time in the negotiations I do not want to comment on the state of the negotiations in detail. It is clear from the Chief Secretary’s letter that we have indeed tabled what the noble Lord described as a hybrid model.

I shall pick up on a point made by the noble Lord, Lord Forsyth. We are seeking to avoid—I think the Secretary of State for Scotland put it this way in a recent debate—the Scottish Government wanting to have their cake and eat it and have a slice of everyone else’s cake while they are at it.

I now turn to borrowing, which was raised by the noble Lords, Lord Kerr, Lord Darling and Lord Turnbull. I should say at the outset that we have a lot of sympathy with what this amendment seeks to achieve.

[Lord Forsyth of Drumlean]

I have a question before my noble friend moves on. I accept we have had a good go on this but I am still—perhaps I am just not smart enough to understand this—struggling to understand the Government’s position. It once was that, if Scotland is responsible for particular services, it should be responsible for raising the money and have direct accountability. What appears to be happening now is that the Government are trying to find some kind of Barnett-like top-up to the tax base. How is that going to go down with people in England? How will it take account of changes in England? For example, suppose a large number of migrants come into the country and live in the south-east of England and increase tax revenues and the tax base relative to Scotland, will that mean that there has to be money sent north of the border to maintain some kind of parity? I just do not understand how this will work. Can my noble friend explain?

[Lord Dunlop]

If there is faster population growth in the rest of the UK, that obviously will not just increase tax revenues. It will also increase demand for public services. This negotiation is all about a fair allocation of risk. As I said, at this delicate time of the negotiations I do not want to comment in detail about particular aspects. We will publish this agreement if and when we can get it and I will be very happy at that point to discuss and debate with my noble friend on these matters.

I have great sympathy with what the amendment tabled by the noble Lords, Lord Kerr and Lord Turnbull, seeks to achieve. It is centred on the Scottish Government’s resource and capital borrowing powers and this is an important part of the negotiations. The noble Lord, Lord Kerr, asked whether this is a matter of great controversy. I do not anticipate—if we can reach agreement soon—that this issue will cause great controversy. In detail on resource borrowing, Smith talks about sufficient and additional powers to,

“ensure budgetary stability and provide safeguards to smooth … public spending in the event of economic shocks”.

The current powers of the Scottish Government are that they can borrow up to a total cap of £500 million for this purpose and an annual limit of £200 million for cash management and forecasting error in devolved tax revenues. The rationale for more in this area is the increased risk and volatility from a greater scale of tax devolution, although I again stress that this is a marginal Scotland-specific risk. This needs to be proportionate. Mindful of the need to deliver sustainable UK public finances, as the noble Lord, Lord Turnbull, said, Scottish borrowing is included in UK borrowing.

When we look at these borrowing powers, we need to look at the other tools that are available to help manage the risks—the possibility of building up a rainy-day fund and the block grant adjustment mechanism itself. We also need to cater for Scotland-specific shocks if the Scottish economy is in recession while the UK economy continues to grow. That is a relatively rare event—I think it has happened three times in the last 20 years. We need to do this to protect against relative underperformance leading to worse economic outcomes through higher taxes or lower spending during recession. I pick up on a point that the noble Lord, Lord Darling, made: it is explicitly not a facility for the Scottish Government to borrow to fund current spending in normal times. That would absolutely undermine fiscal responsibility and accountability.

On capital borrowing, Smith talks about sufficient borrowing powers to support capital investment. He asked the two Governments to look at a similar prudential borrowing regime used by local authorities. The current powers involve a total cap of £2.2 billion and an annual limit of 10% of the capital grant, which is currently about £3 billion, so we are talking about £300 million per annum. All borrowing needs to be complemented by fiscal rules to ensure consistency with the overall UK fiscal framework.

The noble Lord, Lord Kerr, specifically asked about legislation. The Scottish Government’s existing borrowing powers are provided for in the Scotland Act 1998 as amended by the Scotland Act 2012. Any changes to the purposes and circumstances for which the Scottish Government have permission to borrow to reflect the transferred risks may require amendments to primary legislation. I assure noble Lords that we will review further what primary and secondary legislative changes may be needed in the light of a fiscal framework agreement, including additional independent scrutiny of the Scottish Government’s public finances, to which the noble and learned Lord, Lord McCluskey, referred. Both Houses of the UK Parliament will have an important scrutiny role.

--- Later in debate ---

[Lord Dunlop]

The difficulty is that you cannot separate out one element of what is an overall package. Both Governments have agreed that nothing is agreed until everything is agreed. Therefore, I do not think it is possible to pluck out just one aspect and to move ahead with it on a different timescale.

[Lord Forsyth of Drumlean]

Perhaps I might get the politics of this right. The proposal is that we absolutely have to get this Bill on the statute book before the Scottish elections but, come those elections, we will be able to say that there is another Bill coming down the track to deal with these matters, and we may or may not have the detail on that. Is that not going to defeat the object? Was not the position of both Front Benches earlier this afternoon that we had to deliver the vow and say that we had delivered it? If another piece of primary legislation is coming and as yet we do not know what it is going to say, does that not undermine the whole strategy?

[Lord Dunlop]

No, I do not believe that it does. My noble friend is asking me to comment on hypotheticals. We are engaged in trying to reach an agreement in as timely a fashion as we can to ensure that we have proper scrutiny of the fiscal framework in the context of the passage of this Bill.

I am conscious that time has been moving on and I shall be very happy to return to some of these topics on another occasion. However, I just want to pick up on a couple of points.

--- Later in debate ---

[Lord Dunlop]

I am happy to take the noble Lord’s point away and reflect on it, and I shall either write to him or discuss it.

[Lord Forsyth of Drumlean]

Can I take my noble friend back to the debate we had earlier when the noble Lord, Lord Turnbull, argued that it was important to have in the Bill specific provisions relating to borrowing powers? I think that my noble friend indicated that more primary legislation would be required; he used the phrase “primary legislation”. Can we take it that these powers would not be used, for example, to put in place a borrowing regime for the Scottish Parliament, taking into account what he has just said now with what he said earlier this evening?

[Lord Dunlop]

I absolutely stand by what I said earlier. There may be some aspects of borrowing that could be done through secondary legislation, and that will be made clear when we agree and publish the fiscal framework.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Tuesday 19th January 2016 Lords Chamber

[Lord Dunlop]

That is a very good question to which I do not know the answer, but I will be very happy to clarify that point for the noble and learned Lord. Noble Lords have raised a range of important issues, and I will try to cover as many of these as I can in my response.

[Lord Forsyth of Drumlean]

Could my noble friend tell the House what he thinks is meant by the words in paragraph 67 of the Smith commission report:

“The functions of the British Transport Police in Scotland will be a devolved matter”?

I read them to mean that the British Transport Police will continue and that its functions will be subject to some kind of oversight by the Scottish Parliament, which is not what the Bill provides for. Does he have a different interpretation?

[Lord Dunlop]

If my noble friend will let me continue, I hope to set out what our approach is here and address some of the points that were raised by the noble and learned Lord, Lord Wallace.

[Lord Forsyth of Drumlean]

Of course I want my noble friend to address the points that have been made, but could he just answer that point? The noble Lord speaking for the Opposition said that whatever the Smith commission report says is written in stone, but what is in the Smith commission is not consistent with that. Can my noble friend explain what he thinks the commission meant?

[Lord Dunlop]

What the Smith commission meant is precisely what it said. If my noble friend will allow me to continue, I will expand upon that. To return to the point that was raised about the Edinburgh trams, I understand that they are not obviously policed by the BTP.

The Smith commission agreed that the functions of the BTP in Scotland should be a devolved matter and, as the noble Lord, Lord McAvoy, has already said, that was supported by all five of the political parties which took part in the commission, including the parties opposite. Clause 42 devolves legislative competence in relation to railway policing in Scotland to the Scottish Parliament by adding an exception to the Scotland Act 1998 for the policing of the railways and railway property. Clause 43 specifies the BTP bodies as cross-border public authorities. The designation of the BTP bodies as cross-border public authorities will result in functions relating to those bodies being modified so that future appointments to the BTP bodies will be made in consultation with Scottish Ministers. Other functions with regard to the BTP bodies will similarly be exercised in consultation with the Scottish Ministers unless their effect on Scotland would be wholly in relation to reserved matters.

The designation of the BTP bodies as cross-border public authorities is to ensure continuity before the Scottish Parliament legislates for policing of railways in Scotland. Enacting the clause will not impact on the current operational arrangements for policing of the railway. The BTP will continue to police the railways in Scotland until such time as a transfer of functions is effected. If and when the Scottish Parliament exercises the new legislative competence conferred by Clause 43, it would be necessary that the BTP bodies be designated cross-border public authorities so as to facilitate the appropriate transfer of BTP property, staff, liabilities and contracts in Scotland.

The noble and learned Lord, Lord Hope, asked for other examples of cross-border authorities; one that comes to mind is the Forestry Commission, although I will write to him with other examples.

Upon the completion of the transfer of policing of railway functions to the new Scottish model devised by the Scottish Government, the designation of the BTP bodies as cross-border public authorities will be removed and the BTP will exercise functions of policing for railways only for England and Wales.

--- Later in debate ---

[Lord Dunlop]

I am saying that these clauses provide the framework that allows us to go forward, but the Scottish Government have to decide what operating model they want for the policing of the railways in Scotland. I said that I anticipated that it would take two to three years before these functions were devolved, and that is because all sorts of contracts with third parties are involved here—the noble Earl, Lord Kinnoull, talked about pensions. I do not underestimate the complexity involved and I hope the Committee will understand if I do not have specific answers to all the questions; we will be working with the Scottish Government to clarify them over the next two to three years.

[Lord Forsyth of Drumlean]

I do not understand why the Government are bringing proposals to this House which have not been thought through. It is no good saying, “Oh well, the Scottish Government will need to work this out over the next two years”. Does my noble friend not recognise that this matter affects the rest of the United Kingdom? This is about maintaining a perfectly adequate system of policing upon which the larger proportion of the population depends. My noble friend is a Minister in the United Kingdom Government. If he brings forward legislative changes, surely he has a responsibility to explain to us how they are going to affect the United Kingdom. It is a case of the tail wagging the dog if we say, “This is a matter for the Scottish Parliament to decide. You just pass the legislation and we’ll try to work something out”. Surely my noble friend can see that he is not responding to the points that have been made, which concern the security of the United Kingdom and England in particular.

At the beginning of his speech I asked him a specific question, which has been asked again by the noble and learned Lord. It was whether he thinks that these clauses provide for what is contained in the Smith commission report, which says simply:

“The functions of the British Transport Police in Scotland will be a devolved matter”.

It does not say that there will be legislative control over the British Transport Police or that the British Transport Police will be broken up and there will be a separate Scottish force—it does not say that at all. The noble Lord, Lord Empey, indicated earlier that it would be perfectly possible to give the devolved Parliament some involvement in the British Transport Police without breaking the BTP up.

The clauses we are being asked to support tonight are completely vague as to the outcome. Does my noble friend recognise that he has not responded to the debate and has not dealt with the fundamental question that is being put: what will happen to England and Wales and the rest of the country, and why is it necessary to break up a perfectly efficient organisation in order to meet the requirements of paragraph 67 of the Smith commission report? As the noble Lord, Lord Empey, said, the Smith commission report is not a treaty; it is advice to Parliament and we are discussing a Bill.

[Lord Dunlop]

In answer to my noble friend, the function of the BTP is the policing of railways, which is the subject matter of these clauses and what we are devolving in this Bill. That is what the Smith report stated and we are committed to delivering that agreement.

Scotland: Fiscal Framework

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Wednesday 16th December 2015 Lords Chamber

[Lord Dunlop]

The Government want an agreement as soon as we can achieve it. I cannot offer any guarantees as to the end date, because there are two parties to these negotiations. However, I was very encouraged by what the First Minister said on Monday after the meeting with the Prime Minister. She and the Scottish Government want to reach an agreement, and she is optimistic that a deal can be done and is very keen that we should get on with it. That is absolutely what the UK Government want as well. Clearly, the fiscal framework will be a very detailed public document when it is agreed, and obviously, it will be made available to this House. We welcome full scrutiny of that agreement.

[Lord Forsyth of Drumlean (Con)]

My Lords, has it occurred to the Government that a sturgeon might be playing them like a salmon?

[Lord Dunlop]

I know that my noble friend is suspicious of the Scottish Government’s motives. We are entering and taking part in these negotiations in good faith. The discussions we have had so far have been constructive, and we are confident that a deal can be reached.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Tuesday 1st December 2015 Lords Chamber

[Lord Dunlop]

That it be an instruction to the Committee of the Whole House to which the Scotland Bill has been committed that they consider the bill in the following order:

Clauses 1 to 12, Clauses 34 to 41, Schedule 2, Clauses 42 to 64, Clauses 13 to 18, Schedule 1, Clauses 19 to 33, Clauses 65 to 70, Title.

[Lord Forsyth of Drumlean (Con)]

My Lords, I thank the Minister for agreeing to take Parts 1 and 2 of the Bill at the end, but could he give us an assurance that we will have the fiscal framework by the time we get to Parts 1 and 2, as recommend by both the Economic Affairs Committee and the Constitution Committee of this House?

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

I know that this is a matter of great importance to my noble friend and the whole House. We debated the fiscal framework very fully at Second Reading, and there is nothing further that I can add. However, I can confirm that the relevant parts of the Bill will not be taken in Committee until after the new year, and that gives us space to make progress with the fiscal framework negotiations.

Scotland Bill

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Tuesday 24th November 2015 Lords Chamber

[Lord Dunlop]

Fundamentally, I think it was the economic arguments that were decisive in the referendum. When the country is at stake, you want to do everything possible to maximise the no vote. That was what was done.

[Lord Forsyth of Drumlean (Con)]

Could my noble friend confirm that, according to the article written by the editor of the Daily Record, the vow was all his idea and was put together by Gordon Brown and the editor of the Daily Record as a publicity stunt?

[Lord Dunlop]

I am not quite clear whether he is saying that it was my idea or Gordon Brown’s. The key point about the vow is that three UK party leaders agreed it.

On the night of the referendum, as I waited for the results to come in, I listened carefully to what my noble friend Lord Forsyth of Drumlean had to say on the BBC’s “Scotland Decides” programme. He cut straight to the chase, as he so often does:

“The three party leaders made a promise—which I think they’ll find very difficult to deliver—but it has to be delivered”.

I agree with him—no one said it would be easy. Indeed, I can safely say to this House in all humility that, today, I am gaining some appreciation of what my noble friend foresaw. This Bill is the fulfilment of that promise. It has to be delivered. Yes, there has been scepticism. Would all parties come to the negotiating table? Would they stay? Would someone walk out before a deal was struck? Could all the milestones be met? For the first time in the history of devolution, all five of Scotland’s main political parties came together, stayed and reached a unique agreement. Every one of the milestones have been met on time.

Here, I want to pay tribute to the noble Lord, Lord Smith of Kelvin. Hot on the heels of leading the fabulous Glasgow Commonwealth Games, he skilfully steered the process to a successful conclusion. We owe him a debt of gratitude. It is good to see him in his place today and back in rude health.

Much has been said about the Smith commission reaching an agreement of such great constitutional significance after only an eight-week process, yet the agreement was the culmination not of an eight-week process but a four-year process which started in 2011 with the election of a majority SNP Government. So the Smith commission agreement did not emerge from a vacuum. It emerged from four years of lively constitutional discussion and debate in Scotland, which was informed by the body of evidence compiled by the Calman commission, and from a discussion punctuated by the publication of numerous reports from Scottish Labour’s devolution committee, the home rule commission chaired by the noble Lord, Lord Campbell of Pittenweem, and the commission chaired by my noble friend Lord Strathclyde, alongside academic and think tank contributions, such as Reform Scotland’s devo plus and IPPR’s devo more reports. Indeed, I believe the Smith agreement was made possible because common ground had already been established by this body of preceding work.

Delivering the agreement in full is therefore a manifesto commitment of not only the Conservative Party but the Labour Party, the Liberal Democrat party and the Scottish National Party. So this Scotland Bill is not just a manifesto Bill; it is a super-manifesto Bill. Its provisions were agreed in the other place, where the Government listened to the debate, responded to the scrutiny and tabled more than 100 amendments on Report, and where the Bill was passed unopposed at Third Reading.

The Daily Record declares its famous vow met, and Gordon Brown says that the Smith commission recommendations, which arose from the vow, are delivered. The noble Lord, Lord Smith, has confirmed that the Bill honours what was agreed by the five parties. “A promise made is a promise kept” is surely an absolute precondition for earning the trust of the people of Scotland. Ahead of next year’s Scottish Parliament elections, the debate in Scotland is increasingly turning to how the powers are used, as it certainly must.

This Bill is not simply about keeping a promise. It is about bringing a better balance to Scotland’s devolution settlement and strengthening the union as a result. The Scottish Parliament was created with extensive spending powers—its budget today is around £30 billion— but little responsibility for raising the funds it wants to spend. The result is a fiscal gap and an accountability deficit. Before the Scotland Act 2012 is fully implemented, the Scottish Parliament controls almost 60% of public expenditure in Scotland yet is responsible for raising only some 10% of its funding. Once this Bill comes into effect, the Scottish Parliament will be responsible for raising more than 50% of what it spends. Holyrood will be transformed from a pocket-money Parliament, reliant on an annual cheque from the Treasury, to the powerhouse Parliament the people of Scotland want it to be. If the Scottish Government want a higher level of public services than the rest of the UK, they will have first to explain to voters in Scotland how they intend to pay for them.

Of course, some argue this Bill does not go far enough, yet it will make the Scottish Parliament one of the most powerful devolved Parliaments in the world. No amount of devolution is going to be sufficient for those who believe in independence, but a majority of people in Scotland rejected independence and voted to retain the benefits of being part of the UK: the security of our own shared independent currency, backed by the strength and stability of the Bank of England; the job and business opportunities of a deeply integrated single market; our social union, in which risks and resources are pooled; and common defence and security in an uncertain world. Indeed, I am delighted that Scotland is to be home to the new maritime patrol aircraft and another squadron of Typhoon fast-jets. These are the UK benefits that the Smith agreement and this Bill are careful to protect. We have heard a great deal about full fiscal autonomy. I will be clear: full fiscal autonomy ends the pooling and sharing of risks and resources across the UK. It would be bad for Scotland and bad for the UK as a whole, and that is why we rejected it.

I turn to the provisions of the Bill itself. Part 1 takes forward the Smith agreement that the permanence of the Scottish Parliament and Scottish Government be set out in UK legislation, and that the Sewel convention be put on a statutory footing. This reflects the existing political understanding and does not alter the principle of parliamentary sovereignty. The Scottish Parliament will be very largely responsible for how it runs itself, how it is elected and the people who can vote to elect it. Part 2 covers taxation. Maintaining the integrity of our single market and minimising business burdens means that not all taxes are candidates for devolution. Central to the debate is the devolution of income tax on earnings, building on the Scotland Act 2012 tax devolution, which comes into effect in April, and providing the Scottish Parliament with £11 billion of revenues. Income tax is paid by voters and is highly visible; whoever levies it is accountable to those paying it in the most direct way. While the definition of income remains reserved, the Scottish Parliament will have full control over rates and bands of income tax. It will be able to set a 0% rate, if it can afford to do so.

However, the Smith commission agreed that national insurance contributions should be reserved, so Scottish taxpayers will continue to help fund UK-wide services. Alongside income tax devolution sits VAT assignment. Differential VAT rates inside a member state are against EU law. This Bill assigns half of all VAT receipts raised in Scotland: £4.5 billion of revenue. Assigning a share of VAT was first suggested by the Calman commission. The more the Scottish economy grows, the greater the share of VAT revenue Holyrood will keep. That is an incentive to achieve growth. With the devolution of location-specific air passenger duty and the aggregates levy, the Scottish Parliament will have a mix of taxes and vitally important decisions to make.

Part 3 of the Bill means that the Scottish Government will be responsible for welfare provision in Scotland, worth approximately £2.7 billion last year, and able to take decisions for a number of types of social security benefit, discretionary payments, and employment support. Universal credit and its legacy benefits, such as pensions, remain reserved, although Scottish Ministers will be able to vary certain limited aspects. Devolving labour market benefits would undermine their role as automatic stabilisers and potentially put undue pressure on Scotland’s finances in the event of a localised economic shock. What the Bill does devolve are benefits strongly linked to powers already exercised by Scotland, such as social care and health. The Scottish Parliament will have responsibility for benefits to meet extra costs paid to carers, disabled people, those who are ill, and those who require help with winter fuel, funeral, and maternity payments. When people most require help, the Scottish Government will be able to tailor that help to particular Scottish circumstances.

The Smith agreement was also of the view that the Scottish Government should be able to top up reserved benefits: the Bill allows this to happen. On Report, the Commons approved a new government clause enabling the Scottish Parliament to create new benefits in devolved areas of responsibility. We must be clear about these new welfare powers. If the Scottish Government wish to make supplementary payments to people in receipt of a state pension or universal credit, for example, or create new benefits in devolved areas, they should be able to do so. However, crucially, they must be able to pay for it from their own revenues.

[Lord Forsyth of Drumlean]

I am sorry to interrupt again, but can my noble friend explain what the second no-detriment principle contained in the Smith commission report means—the idea that both sides, north and south of the border, should compensate each other for changes in policy—and how that relates to the welfare and other provisions in the Bill?

[Lord Dunlop]

I shall come on to speak about the fiscal framework. The Government of Scotland and the UK Government are negotiating the fiscal framework and exactly how we put those principles, including the no-detriment principles, into practice. I will come back to that.

The Bill also enables the devolution of many other responsibilities, from the management of the Crown Estate’s economic assets in Scotland to the management and operation of reserved tribunals. The Commons also agreed the devolution of abortion policy, which the Smith agreement concluded was an anomalous reservation. There are also significant measures relating to transport and energy.

I want to say something about the fiscal framework, to which my noble friend has alluded, the importance of which is rightly recognised by many of your Lordships. I am particularly grateful for the work done on this by the Economic Affairs Committee. The Government agree with the committee that the relationship between the fiscal framework and the legislative powers in the Bill is critical. It underpins the transfer of tax and welfare powers to Holyrood. The issues raised by the committee’s report are exactly those being addressed in the detailed negotiations between the UK and Scottish Governments. Both Governments have agreed not to provide a running commentary—negotiating in public is not conducive to reaching an agreement.

We are committed to reaching an agreement as soon as we can after tomorrow’s spending review and the draft Scottish budget on 16 December. We cannot guarantee when the negotiations will end—that is not in our gift—and to try unilaterally to set a specific date risks weakening our negotiating position. I hope the House will understand both Governments need time and space to reach an agreement that is right for Scotland and the UK as a whole and is built to last.

--- Later in debate ---

[Lord Dunlop]

To answer the noble and learned Lord’s last point, we absolutely need the Act by the time the Scottish Parliament breaks for the election.

The second point I wanted to make is on ensuring that the fiscal framework receives detailed scrutiny. There has been widespread support around the House for that concept. I reassure noble Lords that both Governments aim to complete the framework as soon as possible to give both the Scottish Parliament and the UK Parliament time for due consideration of it. As mentioned by several noble Lords, the Government will keep updating Parliament after each negotiation session, as we have done. We will invite all relevant committees to look at the framework, including Lords committees and the Scottish Affairs Committee in the Commons. We will welcome their comments.

If legislation is needed to implement the framework, both Houses would be involved in that in the normal ways. There was such legislation in 2012, with primary legislation debated in both Houses. As I said in my opening speech and reaffirm now, the Government’s firm intention is for the fiscal framework to be available to the Scottish Parliament and both Houses of this Parliament before the Bill completes its passage. In response to my noble friend Lord Griffiths, I confirm that the intention is for this to be a detailed written agreement.

[Lord Forsyth of Drumlean]

Forgive me but, as I mentioned in my speech, my noble friend answered a Written Question in July saying that he expected the fiscal framework to proceed in parallel with the consideration in both Houses. He told us that the relations with the Scottish Government are very cordial and doing well. Why, then, is it taking so long to reach agreement? I listened to his words very carefully. Is he saying that he would be prepared for this Bill to complete all its stages without the fiscal framework being known because it is just so politically important to have it on the statute book before the elections? I cannot believe that he is.

[Lord Dunlop]

On my noble friend’s first point, it has been evident from the debate today that the framework is of critical importance. It raises very complex issues that need to be worked through to get it right. That is exactly what we are doing. I repeat what I said: the Government’s firm intention is for the fiscal framework to be available to the Scottish Parliament and both Houses of this Parliament before the Bill completes its passage. Clearly, a range of procedural options are available. We will need to consider them nearer the time in light of how negotiations progress.

--- Later in debate ---

[Lord Dunlop]

The Deputy First Minister has made it clear that, for the Scottish Parliament to give its legislative consent to the Bill, it would have to be satisfied that there was an agreed fiscal framework in place.

I return to the argument that I was making. If, unlike me, you believe that the Scottish Government are not serious about reaching agreement, that is not a good reason to delay the Bill—far from it. Doing so would hand the Scottish Government a get-out-of-jail-free card, which is not right for the people of Scotland, who expect these powers to be implemented.

[Lord Forsyth of Drumlean]

Could the Minister explain to me—perhaps I am being a bit thick—whether he thinks that the Scottish Parliament is right to insist on considering the Bill with a fiscal framework? I do. If so, why does he think that it is okay to have the House of Commons consider it without the fiscal framework and, perhaps, to have this House consider it without the fiscal framework?

[Lord Dunlop]

As has been clear from everything I have been saying, we want to get a fiscal framework agreed so that this House and the House of Commons can look at that agreement. This is what we are working to achieve.

The Smith commission secured the cross-party agreement of all five of Scotland’s political parties. The parties subsequently included manifesto commitments to deliver it and supported the introduction of the Scotland Bill. While there are those in the other place who do not consider the Scotland Bill goes far enough, there is support for it and for further powers for the Scottish Parliament. As the noble Baroness, Lady Liddell, pointed out, the nationalists like nothing better than to talk about process. We want political debate in Scotland to move on to a debate about policy and how the powers in this Bill that rebalance the devolution settlement by reintroducing real fiscal responsibility to the Scottish Parliament will be used. The Government look forward to engaging with this in full and I commend this Bill to the House.

Devolution

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Thursday 2nd July 2015 Lords Chamber

[Lord Forsyth of Drumlean]

To ask Her Majesty’s Government whether they plan to establish a Constitutional Convention to consider the implications of devolution for each part of the United Kingdom; and whether they plan to publish a white paper setting out the consequences for the rest of the United Kingdom of fiscal autonomy for Scotland.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

The Government have no plans to establish a constitutional convention. Our focus must be on delivering the commitments that we made to the people of England, Scotland, Wales and Northern Ireland. The Government do not support full fiscal autonomy for Scotland and have no plans to publish a White Paper on the issue. The Government’s priority is the delivery of a balanced constitutional settlement that is fair and sustainable for all parts of the United Kingdom.

[Lord Forsyth of Drumlean (Con)]

My Lords, that was not terribly helpful. Given that the Barnett formula allocates resources to Scotland, Wales and Northern Ireland on the basis of a set proportion of the amounts voted on English programmes by the House of Commons, how can it be fair, sensible or even democratic to introduce English votes for English laws while retaining the Barnett formula as the means of funding? Is it not high time that Conservatives returned to Conservative principles: that constitutional reform should be careful, cautious and on the basis of consensus?

[Lord Dunlop]

My Lords, the Government will honour the commitment to retain Barnett made by all three party leaders in the run up to the referendum. The fact that Barnett has endured for 40 years and 16 Scottish Secretaries shows that there are no easy alternatives. However, the significance of Barnett will reduce as the Scottish Parliament becomes 50% self-funded. The UK Government and the Scottish Government will agree a new fiscal framework to work alongside Barnett, which must deliver a financial settlement that is fair to both Scotland and the rest of the United Kingdom. There will be more said in Statements in this House and the other place about English votes for English laws but Scottish MPs will continue to take part, as now, in the votes that determine the block grant allocations.

Smith Commission: Implementation

Debate between Lord Forsyth of Drumlean and Lord Dunlop

Monday 8th June 2015 Lords Chamber

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend not agree that, given that the SNP repudiated the Smith commission proposals before the ink was even dry on them, and given that the three unionist parties—the Conservative, Liberal and Labour parties—got only one seat at the subsequent general election, the Smith commission proposals are clearly not going to meet the aspirations of the Scottish people, and that we need a constitutional convention that will provide a solution that meets the needs of all parts of the United Kingdom and provides some stability, so that we can get on with discussing health and education and the things that matter to the people of Scotland?

[Lord Dunlop]

My Lords, it is not a characterisation I would agree with that the electorate of Scotland repudiated the Smith agreement. Every one of the manifestos of all the main parties, including the SNP, included a commitment to take forward the Smith agreement. Of course, there will be discussions, and I know that there are many views within this House about how best to do that, but the main objective—the Government’s main commitment and priority—is to take forward the commitment we made to implement the Smith agreement.