Scotland: Devolution

Lord MacGregor of Pulham Market Excerpts

Wednesday 29th October 2014 Lords Chamber

[Lord MacGregor of Pulham Market (Con)]

My Lords, I am hugely relieved by the clear decision of the Scottish voters against independence. The consequences if the vote had gone the other way would have been severe indeed for the Scottish economy, but also for the rest of the UK in terms of the economic implications, currency, the division of assets and liabilities, debt, defence, the EU and international bodies and the need to tackle all these issues when we have so many other issues to deal with, not least the continuation of the economic recovery. It would have been severely disruptive and difficult.

We must all confine ourselves to a small number of issues, and I wish to concentrate on two: English votes for English laws, and issues around tax and expenditure, including the Barnett formula. As the Prime Minister, the Government and my noble friend on the Front Bench today have made clear, this is fundamentally a question of fairness. It has nothing to do with “morally wrong”. What is morally wrong about fairness? Frankly, we all know that it is not about morals; it is purely about politics. I believe that that is a very important point.

I shall speak first about English votes for English laws. I have just looked up the Hansard of one of the earlier debates that we had in the House of Commons on devolution shortly after I entered Parliament in 1974, a Scot representing an English constituency. It was in January 1976 on the then Labour Government’s proposals for devolution in Scotland and Wales. A number of colleagues who are now in your Lordships’ House spoke then, and it is interesting to see how many of the points made then are still fresh today. I shall give just one quote from my own speech. I said then:

“Although I accept the list of subjects which”,

the Government,

“have put forward for devolution to the Scottish Assembly … it seems that there will be a growing demand, which is right in logic and fairness, for the same devolution to be given to England. That is a demand that must grow. We have already seen much evidence of that during this debate … There is the feeling that the Scottish people will have a power over the subjects that are devolved to them that is almost total and complete … whereas Scottish Members will be totally involved at Westminster in the discussion of issues that affect England”.

I went on to suggest two possible solutions, and concluded:

“Let us remember that the English also have their rights”.—[Official Report, Commons, 15/1/76; cols. 676-77.]

Tam Dalyell was listening intently throughout that debate and henceforward argued constantly about what became known as the West Lothian question. It must be solved now. We surely cannot continue with a situation in which a Scottish Parliament can have total control over health, education and so many other crucial issues in Scotland—transport, et cetera—while in England, Scottish MPs can continue to vote, sometimes conceivably having the crucial deciding votes, on these same issues in England. It is relevant in this context to note that the Scottish population is 5.2 million while the English population is 53.1 million. In a vote where the Scottish MPs voting on a purely English matter could be crucial, what is fair in that for the 53 million?

I believe that the solution to this lies in the proposal for the Speaker to be able to denote a bill in the UK Parliament as an English Bill and that only English MPs would be able finally to vote on that matter.

[Lord Lea of Crondall (Lab)]

The noble Lord is discussing a very interesting point. Would it be fair to characterise it as a UDI for England approach, although he might not like that phrase? Would that make UDI for Scotland less likely or more likely?

[Lord MacGregor of Pulham Market]

It is really quite simple. If the Scottish people have Scottish issues, as delineated now, voted upon entirely in the Scottish Parliament, then the same ought to apply to purely English issues in the English Parliament, and it should be English Members of Parliament who should vote on them.

I entirely agree with the Leader of the House in the other place when he said:

“We must establish the principle that when this House makes decisions affecting only the people of England, or only the people of England and Wales, those decisions should be made only by, or with the consent of, the MPs elected to represent them”.— [Official Report, Commons, 14/10/14; col. 176.]

It is high time that we did this.

I turn now to tax and spending, both complex and crucial issues. I have just a few quick points. I hope that we can soon have a full debate on all this. First, there are good arguments in favour of more devolution of various tax measures, provided that tax and spending are taken together. In principle, having the possibility to raise or lower taxes, while at the same time recognising that there are spending consequences, is attractive. Borrowing limitations must also be taken into account, as should the consequences for UK tax revenues.

Secondly, what cannot be accepted is the freedom to lower taxes and decrease revenue, with the expectation of consequential upward adjustments in the block grant from the UK Exchequer at the same time.

Thirdly, this raises the whole question of the block grant and the Barnett formula. I well remember the discussions on the Barnett formula in 1976, when the noble Lord, Lord Barnett, was under great pressure to reach conclusions on the expenditure settlement. He has said that, because of that pressure, he had to find a solution to one particular part of the expenditure arrangements and that it was a temporary expedient, never expected to last; he is strongly opposed to its continuation. There is a strong feeling in the country—I have long felt this in East Anglia—that the formula is unduly favourable to Scotland. Current figures show that public expenditure per head in East Anglia, where I come from, is £7,865, in England £8,529 and in Scotland £10,152. I believe that this issue must be addressed.

Fourthly, many have argued that the formula should be adjusted to a needs basis. I have long argued that myself. A committee of this House reporting in 2009 argued that,

“the Barnett Formula should no longer be used to determine annual increases in the block grant for the United Kingdom’s devolved administrations … A new system which allocates resources to the devolved administrations based on an explicit assessment of their relative needs should be introduced”.

I actively believe that this should be introduced and that there should be a transitional arrangement.

In conclusion, I believe that this must all be tackled in the negotiations and that the Barnett formula should go at last. This will be a critical part of the negotiations; I hope that this House will have another opportunity to debate it before they are completed.

Scotland: Independence

Lord MacGregor of Pulham Market Excerpts

Tuesday 24th June 2014 Lords Chamber

[Lord MacGregor of Pulham Market (Con)]

My Lords, my noble friend Lord Strathclyde referred to the Scottish Conservatives’ Commission on the Future Governance of Scotland report. I understand that it has had widespread coverage in Scotland but very little down south. That is a pity because it is well worth reading. It sets out proposals for a strengthened Scottish Parliament in the context of a no vote in the referendum, based on the strong Conservative principles of responsibility, transparency and accountability. It is particularly interesting in the context of accountability, with its proposals in relation to income tax and the closing of the fiscal gap.

I want mainly to concentrate on the Select Committee report. There have been many reports over the past year or more from the UK Government, the Scottish Government and both Houses of this Parliament on the many crucial economic, fiscal, defence, currency and international issues that the referendum involves. How much I agree with all the excellent points so well expressed by my noble and learned friend Lord Wallace and his opening comments on that. This report is the first proper analysis of the constitutional and parliamentary issues, as my noble friend Lord Lang made clear in his outstanding speech. It is clear from the report how crucial they are. The report is a riveting and impeccable analysis and I warmly congratulate the noble Baroness, Lady Jay, and her committee on it.

I wish to stress three points. First, if there is a yes vote, it is extremely unlikely that the negotiations can be completed by May 2016. It took our Economic Affairs Committee nine months to complete its early analysis of the economic implications. Since then it has taken both Governments about a year to do the detailed reports on all the issues that need to be covered.

It is clear that on the currency issue Scotland will not be able to retain the pound, but much flows from that for the negotiations. It is clear that Scotland will have to negotiate on entry to the EU and the eurozone. That will take time, with an uncertain outcome. The noble Lord, Lord Robertson, has just made clear the position on NATO. On everything else the negotiations will be massive and complicated, as the noble Lord, Lord Richard, pointed out. They are far-reaching in their implications and with parliamentary approvals required. Meanwhile there will be a UK general election in the middle and no certainty as to the outcome of that, possibly involving a change in the UK Government’s negotiating position on key issues, as paragraph 93 points out. There is therefore the possibility of reopening parts of the negotiations already working towards agreement; paragraph 116 of the report makes the points on that very well. I agree with the report and my noble friend Lord Lang today that any negotiations should take as long as necessary and should not be foreshortened in order to meet a deadline set by one party to those negotiations.

Secondly, there is the position of the Scottish MPs prior to independence. It is, as the Secretary of State for Scotland stated in paragraph 101 of the report, blindingly obvious that no Scottish MPs could be part of the negotiating team for the rest of the UK, nor could MPs from Scottish constituencies be involved in voting on any measures concerning the outcome of the negotiations, nor indeed in holding the negotiators for the rest of the UK to account. As paragraph 135 of the report makes clear, and this is worth repeating:

“We conclude that MPs for Scottish constituencies should not be involved in holding the negotiators for the rest of the UK to account, nor in voting on any measure which ratifies the outcome of the negotiations. In the event of a ‘yes’ vote”—

this is the key point—

“we recommend that the Government put before Parliament a proposal that would put this matter beyond doubt before the 2015 election”.

I agree with that.

This brings me to my final point. It is clear to me that Scottish MPs elected to the UK Parliament cannot continue to serve in that Parliament after independence day, so I agree with the report on this point. I note the observations in paragraph 66 by the noble and learned Lord, Lord Hope, who will be speaking later, that under current legislation all MPs are elected to serve a full term and that:

“Previous changes to representation, the franchise or the distribution of seats have come into force at the subsequent general election”.

In this case, I believe that that would not be tolerated by voters in England, Wales and Northern Ireland. As my noble friend Lord Lang pointed out, it would be the West Lothian question—although I would put it as “the West Lothian question in spades”. Legislation to remove these Scottish MPs after independence would be essential. What would the SNP Government say if there were many MPs from English constituencies in a Scottish Parliament, perhaps even holding the balance? This could have profound implications for the rest of the UK Government at that time and involve the possible disruption of another early election at a time when, given all the economic, world and security issues facing us, we would least want it.

We have tended to focus on all the other substantial issues of an independence vote so far. We owe a debt of gratitude to the Select Committee for bringing out so clearly and so compellingly issues that are just as important as the economic and defence ones. I was born and brought up in Scotland and I owe so much to the values, benefits and attitudes that my Scottish education gave me. At a time of such turbulence and challenge in the world today, given the huge constitutional upheaval and parliamentary changes of a yes vote so well identified in this report, and given especially the benefits to Scotland and the rest of the UK that have been so well articulated by the Minister today, I profoundly hope that the United Kingdom will stay united.

Scotland: Independence Referendum

Lord MacGregor of Pulham Market Excerpts

Thursday 30th January 2014 Lords Chamber

[Lord MacGregor of Pulham Market (Con)]

My Lords, I, too, thank my noble friend Lord Lang for an excellent introduction to this debate. In fact, he said so much of what I had wanted to say that I hope not to repeat it, but it was an excellent contribution.

I intend to be as brief as I can be on the issues and to consider them under three headings. The first is the economic implications. The Select Committee on Economic Affairs in the House of Lords produced a report on The Economic Implications for the United Kingdom of Scottish Independence in April 2013. We did so because we believed then that all the issues of an economic nature were not being put before the British people, including the Scots. We believed that voters in Scotland deserved the best evidence-based assessment of all the economic issues before they exercised their votes.

Since then, we have come a long way. We have had various government reports on various economic issues and, of course, we have had the Scottish Government’s paper, Scotland’s Future. In all that paper’s 648 pages, it lists many of the goodies that could come Scotland’s way and makes many commitments and promises, but it gives no price tag. It reminds me of the Labour Party’s 1987 election manifesto where it made many spending commitments—until we added up the bill for the taxpayer. I happened to be Chief Secretary to the Treasury at the time, so I remember it very well. As a consequence, Labour lost the election heavily. I say that by way of comment on the Scottish Government’s paper, because it does not address many of the real issues but simply says, “This will be so and that will be so”, with no argument.

On the economy, we are a still a long way from getting the issues properly assessed by the public at large. There is the big issue of the loss of access to the single market, which we went into in great detail. The Barnett formula will no longer apply, which I welcome because I have long thought that it is well out of date—it was meant to be temporary anyway and should have gone a long time ago. However, it will be compensated for as far as Scotland is concerned by the revenue from North Sea oil—that was one of the analyses that we made. On the other hand, the revenue from North Sea oil is highly volatile and is not permanent, so it cannot be depended on in the same way as Scotland originally depended on the Barnett formula. The costs of financial regulation, regulators and many other separate institutions will have to be taken into account. The sharing of the UK’s public debt, including PFI, public sector pensions and many other liabilities is crucial. I was struck by one figure that we came across which showed that the total support extended to RBS during the financial and economic crisis was the equivalent of 211% of Scotland’s GDP. Scotland simply could not sustain that sort of support and one questions whether some of the banks would have to move their headquarters elsewhere because of that.

Defence is a particularly important issue—I shall leave it to others to talk about aspects of that—because it has huge implications for the rest of the UK’s citizens and taxpayers. The cost to the rest of the UK of the proposals from Scotland on defence could be huge, and that will have to be a major issue in any negotiations that take place.

I turn to the EU. At first, Scotland indicated that it would join the eurozone and then said that it would not. It then indicated that there would be no technical problems with being a member of the EU and now it acknowledges that membership will have to be renegotiated. In particular, as I understand it, one of the commitments required of new members is that they will have to join the eurozone, so there is a big issue there. Of course, there is absolutely no guarantee that Scotland’s membership will be accepted, because a single vote from any other member state could exercise a veto. There will be many who will be very worried about the implications for them, so that is a big issue for Scottish voters.

The proposal for Scotland to use sterling as its currency and all the issues that that involves—lender of last resort and all the Bank of England issues—have been widely exposed overnight by the new Governor of the Bank of England’s excellent speech in Scotland. It means that I do not have to comment too much on it, but what he has said is highly timely and salutary, and will certainly require a lot of further follow-up.

One concern that our Select Committee had was that these issues were not being put fully before the British people—as I said a moment ago. However, we wanted to go further, so that not just the issues were put forward but the red lines of negotiation were established before the vote took place. That is fundamentally important, because those red lines and some of the issues that I have talked about—defence implications, currency and all the rest—should be spelt out beforehand so that voters understand what will follow in the negotiations. It is no good just waiting and saying that these are all issues for the negotiations because we do not know what the outcome of the negotiations will be, and I think that the outcome in many cases will not exactly be very popular to a Scottish voter at the end of the day. It is very important that the red lines are established at the beginning and, yesterday, the governor made a very good start.

So much for the economic implications; I want to say a word about the political implications. Ironically, for the Conservative Party in the rest of the UK—if I have to put it that way—we benefit from a vote for yes, because we have only one single Scottish MP in the House of Commons. None the less, a vote for yes is an outcome that I profoundly hope will not happen. Of the political implications I want to mention just one. I have seen the Answer given to yesterday’s Oral Question relating to the position of Scottish MPs in Westminster if there is a yes vote and whether they would still be eligible to sit in this Parliament after the date of Scottish independence in 2016. Obviously, that could happen, because the general election will be in 2015, the Scottish vote will precede that and then, in 2016, if it is a yes vote, there will be an independent Scotland. It is no good to say, “Just wait and see what happens”. The Advocate-General for Scotland replied yesterday that it would be a matter for negotiation. I do not think that it is; it is absolutely clear that we cannot have Scottish MPs with no constituencies, no constituency interests and no wider interests in the Westminster Parliament if Scotland votes yes and becomes independent. That should be established and worked out now and not left to a negotiation.

Finally, on the wider issues, I am a Scot, born, brought up and educated in Scotland; I have many Scottish ties still. I have of course been an MP for an English constituency for many years. I often thought that the two reasons why I was selected for adoption there were, first, that I had a lovely wife and, secondly, that there were many Scots in Norfolk, many of farming backgrounds. Due to this, I profoundly believe that, although I do not have a vote, all parts of the United Kingdom will continue to gain as a result of being part of the wider kingdom. One key implication of Scotland leaving the UK is that all parts of the United Kingdom, not just Scotland, would be the poorer, and that is why I profoundly hope that it will not happen.

The Economic Implications for the United Kingdom of Scottish Independence

Lord MacGregor of Pulham Market Excerpts

Wednesday 26th June 2013 Lords Chamber

Moved by

[Lord MacGregor of Pulham Market]

That this House takes note of the Report of the Economic Affairs Committee on The Economic Implications for the United Kingdom of Scottish Independence (2nd Report, Session 2012–13, HL Paper 152).

[Lord MacGregor of Pulham Market]

My Lords, we launched our inquiry in February 2012, when it seemed likely that there would be a referendum on independence in Scotland in autumn 2014. Since then this has, of course, been confirmed. We did so because we were concerned that, on what was widely recognised as an issue of momentous consequences not only for the people of Scotland but for the rest of the UK, it was vital that such a vote should be based not only on sentiment and patriotic fervour but on a full understanding of all the implications. At that time, these consequences had simply not been fully analysed, let alone widely exposed to public debate. We did not make the case for or against independence. We did not go into the constitutional or legal issues on the referendum process. We focused entirely on the economic implications, primarily for Scotland, but which are just as important for the rest of the UK as well.

The need for a properly informed debate before the referendum seemed to us to be all the greater as it became clear that if there were a yes vote for independence, it would probably take years to separate the Scottish economy from the rest of the UK and for it to negotiate entry into the EU as a new state. This would cause great economic uncertainty and possibly damage to Scottish businesses in the mean time. In our view, all the key issues and consequences needed to be fully explored beforehand, and not left to negotiations afterwards.

We heard from 44 witnesses in all, including British and Scottish Ministers, academics, trade unions and local authorities, with a wide range of opinions on business, finance and politics. We heard evidence in Glasgow and Edinburgh, a first for the committee. One disappointment was that some Scottish companies from which we would have liked to have taken evidence declined to do so. One witness described there being a possible “climate of fear”, with witnesses having fears about the impact on their business of speaking out. Another disappointment was the First Minister’s declining to give evidence himself before the Committee, much as we pressed him to do so.

I would like to stress yet again that our report is based on the evidence that we received. I thank all our witnesses, and on behalf of the committee express especially warm thanks to our specialist adviser, Dr Angus Armstrong of the National Institute of Economic and Social Research, for his most helpful contribution to our deliberations. As always I thank Bill Sinton, clerk to the committee, and his staff, for the huge amount of work they undertook. I am also most grateful to all my colleagues, who gave a great deal of their time to this inquiry and contributed greatly to the lengthy discussion that we had on the final report.

As our inquiry progressed, it helped to shine increasing light on the economic implications of a yes vote and what they might entail. As we reached the drafting stage of our report, the British and Scottish Governments have each started to publish their own analyses of the various economic implications, which we warmly welcome. Much more needs to be done, however, if the Scottish voters are to make a fully informed choice in October 2014, and the wider British public—and I do mean the wider British public—are to understand the implications for them. As the UK Government say in their response to our report:

“It is crucial that the referendum debate is properly informed”.

I turn to some of the main issues and, given the time available, can only highlight the key ones. Some are already much clearer than when we embarked on our report. For example, it became apparent during our inquiry, not least because of the exchanges that we had with the President of EU Commission, President Barroso, and then of the UK Government’s own analysis, that in the event of a yes vote Scotland would become an entirely new state and that the continuing UK would retain the rights and obligations of the UK as it currently stands. This is important particularly in the context of the EU, but, for Scotland, it would also apply to many other international bodies and treaties. Indeed, it was during our visit to Scotland that the Scottish Government’s claim to have legal advice to the contrary was blown apart.

Given the complexities in particular of negotiations with the EU and the need for unanimity of all member states in the EU in accepting a new member, it must be extremely unlikely that these negotiations would be completed by the spring of 2016, as some hope, and there is no certainty of outcome. Meanwhile, there would among other things be great uncertainty for Scottish companies operating internationally, for inward investment to Scotland and for other sectors of the Scottish economy.

One particular impact is on international trade. Most of our business witnesses spoke of the importance of being within the EU. One particular advantage was stressed by some chief executives of Scottish-based international companies, who spoke of the benefits of international trading deals done by the EU for their companies. The significance of this is underlined by the launch of the negotiations for an EU-US trade agreement at the recent G8 summit.

I turn next to currency choices. Our analysis is very similar to that of the UK Government. After some toing and froing, the Scottish Government seem to have settled for continuing to use sterling in a sterling currency union. The UK Government state in their Scotland Analysis document:

“A formal … currency union is very different to the current arrangements and would be a profound economic change for both states … the economic rationale for the UK to agree to enter a formal sterling union with a separate state is not clear”.

We in our report are even more specific, as we state:

“A monetary union as advocated by the Scottish Government would require robust and credible limits on borrowing and indebtedness by both member states. So far the Eurozone has found this problem intractable”—

a point acknowledged also by the UK Government in their document. We continue:

“We believe that it would be difficult for any such agreements to be made binding in all circumstances”.

On Bank of England and monetary policy, again our report and the Government’s analysis are similar. The Government’s conclusion is that,

“the economic rationale for the UK to agree to enter a formal sterling union with a separate state is not clear”,

and that it is likely that economic and fiscal plans of a separate Scottish state would be subject to rigorous oversight by continuing UK authorities. We agree with that but are rather more direct. We do not see how the UK Government could extend central banking services to an independent Scotland, since the UK Government would lack control over its tax and spending policies. Crucially, we argued that this, along with the continued use of sterling by an independent Scotland in monetary union with the rest of the UK, could only come about, if at all, on terms agreed by the UK Government and that—a point to which I will return—arrangements should be clear before the referendum. We add that,

“the proposal for the Scottish Government to exert some influence over the Bank of England, let alone the rest of the UK exchequer, is devoid of precedent and entirely fanciful”.

I note that in his letter to me, the Chief Secretary to the Treasury quotes the Chancellor of the Exchequer as saying that,

“it is highly unlikely that the rest of the UK would agree to enter into a formal sterling currency union with an independent Scotland”.

We entirely agree with that and believe that it should be confirmed before the referendum.

I turn now to the other paper that the UK Government have so far produced, published last month, on financial services and banking. Time prevents me from going into detail—others may wish to do so—but, again, we are in broad agreement. We agree on the significance of Scotland’s financial sector to its economy and the fact that 90% of its customers are located in the rest of the UK; on the need for a separate Scottish financial regulator for an independent Scotland, adding to compliance costs and complexity for Scottish financial institutions; and on the fact that the assets of the whole UK banking sector, including Scotland’s banks, are around 492% of total UK GDP whereas, by contrast, Scottish banks would have assets totalling around 1,254% of an independent Scotland’s GDP, with all the implications for financial shocks such as we have experienced in recent years.

All of these are key considerations for the Scottish electorate. As the Chief Secretary points out, that proportion of GDP is massively greater than was the case with Iceland, Ireland and Cyprus. The problems that would face Scottish banks, savers and depositors in the event of a financial crisis in an independent Scotland could be immense and need to be thought through in advance. We await government papers on assets and liabilities in defence, all of which are substantially covered in our report.

On North Sea oil and gas, there is a broad equivalence between Scotland’s gain on North Sea oil revenues and what it would lose from abolition of the Barnett formula. I notice that the noble Lord, Lord Barnett, is in his place, and this is interesting for many of us in your Lordships’ House who have been arguing, one way or another, that the Barnett formula needs to be resolved in the near future. An independent Scotland, curiously, would resolve the question, although we would still have to worry about it if the independence vote did not say yes. However, that is not an answer to the Scottish issues. One of our witnesses, Professor McCrone, said that, on the expected geographical division, which we in our committee accept, about 90% of revenues would accrue to an independent Scotland. On the other hand, there is substantial volatility in oil prices, uncertainty over future oil revenues and the need to deal with substantial North Sea oil decommissioning costs. It is no long-term panacea.

Division of assets and liabilities will be complex, including for PFI and public sector pensions. Indeed, the subject of pensions as a whole needs detailed consideration, including the need for a Scottish pension regulator for private sector pensions, a pension protection fund and a separate financial services compensation scheme for Scottish financial institutions. An independent Scotland will need to handle the difficult questions of the ensuing public sector debate as a consequence of looking at the division of assets and liabilities, with volatile tax revenue, the loss of risk-sharing with the rest of the UK and no record of issuing debt to global lenders. Those are all issues that the Scottish Government will need to spell out for the comfort of the Scottish electorate before the referendum.

I turn next to defence, which is an absolutely key issue, particularly for the rest of the UK. We were disappointed that Defence Ministers refused to give evidence to us and we had to rely on others. We are particularly grateful to the noble Lord, Lord West, who gave some very compelling evidence to our committee. The UK Government’s position is that it is for the Scottish Government to set out for the Scottish people how the defence of an independent Scotland would be arranged and, for the rest of the UK, the UK Government cannot prenegotiate the deals of independence ahead of the referendum. We certainly recognise the security aspects and are clear that any post-referendum negotiation would be huge, lengthy and complex on defence issues. We are also clear that the defence implications, not least cost, are immense for the rest of the UK, and we hope that substantial contingency planning is already under way in the Ministry of Defence. Others may wish to comment on defence in greater detail today. I certainly welcome the fact that the Government are planning a detailed paper on shared defence and security services, and I hope that it will cover the issues that we have raised, on which we have so far not had a proper government response.

This leads me to my final point. There is general agreement that this will be a momentous decision for the people of Scotland, but it is not so well recognised that this will also be a momentous decision for the rest of the UK. There are huge implications for the rest of the UK—over 90% of those affected.

[Lord Steel of Aikwood]

This excellent report is full of questions, some of which are directed to the UK Government—but mainly they are directed to the Scottish Government. As they have known for two years that they will have a referendum, does not the noble Lord find it extraordinary that these questions have not yet been approached?

[Lord MacGregor of Pulham Market]

I cannot speak for my committee as a whole—although I suspect I am doing so—but that exact point occurred to us as we went through all the evidence. Many of the responses that we were getting, or not getting, did not deal with the points that I am raising now. I put my emphasis on the UK Government’s position today because we are in the UK Government’s Parliament, but I hope that many of the issues that we have raised—and, incidentally, that have been raised by Scottish business and some Scottish local authorities, such as the Glasgow City Council—will get a better answer than we have had so far.

As I was saying, we have spelt out many of the consequences of Scottish independence in our report. On defence in particular, there are potentially huge cost implications. Also included are such major issues as the division of assets and liabilities, negotiations on sterling and monetary policy, and so on. That is all very well. On the other hand, so much hinges on the subsequent negotiations. It is not enough, it seems to us, to leave it to those advocating independence to make the case, as the Chief Secretary to the Treasury has argued. He argued the case on our questions on the need to have the negotiations clarified as follows:

“The UK Government believes that people in Scotland will vote to remain part of the United Kingdom and therefore is not making plans for Scottish separation from the UK. This is not complacency but rather based on a strong belief that the UK works, and works well. Scotland contributes to, and benefits from being part of the UK”.

He goes on to say:

“It is for those advocating independence to set out a clear and well evidenced case to people in Scotland about what the implications of leaving the UK would mean for them—including some of the unavoidable choices that will have to be made”.

We do not think that that is a sufficient response because, in fact, the implications for the rest of the UK are very substantial as well. That is why we have argued the particular point that I stress now. We have argued in our report that:

“Scotland needs and deserves a fully informed debate, based on fact and free from rancour, well before the referendum vote”.

It continues with the following key point:

“To help bring it about the Scottish and British Governments should be more open about how they see the outcome of negotiations after a ‘Yes’ vote; each should indicate the ‘red lines’ of its negotiating stance on such crucial issues as currency, defence, division of assets and debts and negotiations with the EU before the referendum so that voters can make an informed choice”.

I regard this as a critical point. The debate is becoming much clearer and better informed, particularly since we took evidence and completed our report. The UK Government have produced very helpful and detailed analyses of some key issues and we look forward to more. However, there is still this issue about not discussing the negotiations in advance of the referendum. One argument has been that that should wait until after the negotiations, but one problem is that could make it very easy for many of the people intending to vote in the referendum to vote “yes”, on the assumption that all the negotiations would take place afterwards and that there would then be a second vote afterwards, once they were completed. That is not satisfactory and it is not the way it should operate. That is why we have urged—

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. Does he not think that the Government are facing two ways on these issues of referenda? On the one hand, on Scotland they say that we should have the referendum and then look at the detail afterwards, whereas on Europe the argument is that we must have the negotiations first so people know what they are voting for.

[Lord MacGregor of Pulham Market]

Well, yes. That is exactly why we must be much clearer about the negotiations before the vote takes place. I have explained the UK Government’s position on this and we do not think that that is sufficient. That is why we made the recommendation for the red lines to be clearly established beforehand so that no one is in any doubt as to where both Governments, but particularly the UK Government, would stand firm on some key issues.

To conclude, since we took evidence and completed our report, the UK Government have produced very helpful and detailed analyses of some key issues and we look forward to more. But it is critical that they also address this issue of the red lines and they should undertake to do so well before the referendum. That is the upshot of our report. There is some very helpful analysis in it and it will continue to stand the test of time as we get towards the end of the negotiations. It is on the point of the red lines, which the Government in their response to our report have so far sidestepped, that I would particularly welcome the views of the noble and learned Lord on the Front Bench in the wind-up. I commend the report to the House.

[Lord Kerr of Kinlochard]

Had I managed to ask the noble Lord before he sat down, I would have asked—

--- Later in debate ---

[Lord MacGregor of Pulham Market]

My Lords, I was very grateful to my noble and learned friend for not including me among the English when he made his opening remarks. I was born, brought up and educated in Scotland, but I have spent nearly all my political life in England and have been proud to represent an English constituency, so I hope I can see both sides of the argument.

As we were debating this issue today, I was reflecting on the fact that we set up our committee in February 2012. We are now halfway towards the vote, and so many of the issues that we debated today are clearly not understood by the electorate outside in either Scotland or England in the way that we have understood them today. I take comfort from the fact that our report has identified very nearly all the key economic issues on which Scottish voters will have to make up their minds before—or when—they vote. I do not yet take comfort from the fact that, certainly among English voters, they still do not realise that there are many issues that will have great implications for them in terms of a Scottish vote. I will come back to that in a moment. I also do not take comfort in the fact that so much more effort still needs to be made to make the voters of Scotland aware of the many implications there will be for them when they vote.

I take comfort from the very robust reply that my noble and learned friend has made. It is quite clear on where he stands on most of these issues, and clearly he will put that case across. I also welcome the fact that we will have more of these lengthy but very helpful analyses from the UK Government. These are all good issues. I slightly differ from him in that I think that English electors need to be made much more aware of the implications for them, and ensure that the UK Government protect them from the serious consequences in relation to defence, currency and the many other issues that we have identified today. That awareness does not yet exist among people in the rest of the UK. I understand his point about not entering into pre-negotiations, but there is a difference between that and identifying the issues that will be crucial for the rest of the UK if the Scots vote for independence. That is what I and my committee are calling for. That is what we meant by the red lines—they are the key issues that affect the rest of the UK.

I welcome the extra papers. This has been a most helpful debate. There has been a large measure of agreement among all of us, who are from all parts of the UK, on the issues that are so important and need to be resolved, and on the need for awareness in Scotland of these issues before they vote. As I said, my noble friend’s wind-up speech has been very helpful in relation to that. I thank all Members who have taken part, in particular the members of my committee for the huge amount of work that they did on this issue. We will continue to take an interest.

Motion agreed.