Scotland: Draft Legislation

Lord McFall of Alcluith Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord Wallace of Tankerness]

My Lords, my noble friend is right to say that we had a very narrow escape. I dread to think what kind of discussions we would be having now if the vote had gone the wrong way on 18 September. There have been indications of support across parties with regard to a constitutional convention, although I do not think that there is any concrete proposal in place, or any plans at the moment to set one up prior to the election. I endorse my noble friend’s comments about the speed involved. I pay particular tribute to officials in many departments of government, not least in the Scotland Office and in my own office. They were given 37 working days. When the pledge was made with the deadline of Burns Night no one had worked out that it was a Sunday, so that de facto reduced the number of days that were available. They did a tremendous amount of work, and I am very conscious too that there is more work to be done.

[Lord McFall of Alcluith (Lab)]

My Lords, like other noble Lords I voted by post, and I voted for the fiscal integrity of the United Kingdom. I was very pleased to see that the Smith commission unanimously endorsed that fiscal integrity, whereby there would not be two classes of Members of Parliament, and said explicitly that all Members should vote on the Budget. I am asking the Minister a simple question: is that the case? Will all Members vote on the Budget: yes or no?

[Lord Wallace of Tankerness]

My Lords, I cannot say what will happen in a future Parliament. All Members will vote on the Budget that will take place in this Parliament, for which I have collective responsibility as a member of the Government. I do not know what will happen in a future Parliament. There is a debate, but the noble Lord is right to point out what the Smith commission said on that. The noble Lord knows as well as anyone just how difficult it would be on—for example—income tax. That is a shared tax because, while rates and bands will be devolved, personal allowances will remain a matter for the United Kingdom Parliament. The definition of income and what constitutes a tax base will be a matter for the United Kingdom Parliament, and I do not know how to disentangle that.

Scotland: Devolution

Lord McFall of Alcluith Excerpts

Wednesday 29th October 2014 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, in the referendum, no has won the battle, but it has not won the war of words. Those words were pretty ugly, divisive and depressing throughout the referendum campaign. What we saw was an intolerant streak, demonstrated in the social and political debates; so much anger, venom and sneering contempt directed by individuals and groups at one another. The social media mirrored this throughout the referendum.

To have a decent debate you have to have a good tone at the top. That is where the First Minister and his deputy were lacking. They were lacking in the area of business. I was engaged with businesses for many months on this issue and they were afraid to put their heads above the parapet. I was engaged with academia, and that was a mirror image. The only one who stood out against that was Dr Louise Richardson of St Andrews University. In a personal call with Alex Salmond, she told him, no, she was going her own way. We also saw that with the SNP-inspired demonstration against the BBC for Nick Robinson asking a hard question—the sort of hard question that he asks politicians in Westminster day in and day out. Alex Salmond took exception to that.

What has happened is that Westminster has become a toxic term as a result of this debate. Both Alex Salmond and, indeed, Nigel Farage in his own way, have enhanced that toxicity. What does that mean? That means that Westminster is to be very much involved in ensuring that we progress this devolution debate. We need to ensure that we correct our politics and ask the question: how do we contain and how do we eliminate the disturbances that we have seen? There is something unnerving in the air—witness the social and political fragmentation. Westminster needs to reassert its authority and produce a confident voice in this debate; one that respects the constituent parts.

EVEL has been mentioned. If we go down this line as a primary consideration, we will not achieve that. Let us reflect on the situation. The English voice is alive and well in the mother of Parliaments: 650 constituencies with 533 English ones. That voice is alive. England remains the dominant nation. There is no need, as Vernon Bogdanor, the Prime Minister’s Oxford tutor, says, to beat the drum or blow the bugle. If we beat the drum and blow the bugle too much, that will strain the devolution settlement to breaking point—as will the 100% tax devolution to the Scottish Parliament. This is a slow way to independence. Why? If there is 100% tax devolution, Scottish MPs will not vote on the Finance Bill or indeed debate it as we do here. There will be no Scottish Chancellor and, given that the Prime Minister is the First Lord of the Treasury, there will be no Prime Minister from Scotland.

There is another way of getting independence. Members of Parliament and parliamentarians here have to realise that. If Westminster is to maintain its voice, there has to be no dereliction of duty by the Prime Minister in the future. A dereliction of duty was undertaken with the Edinburgh agreement. There was a casual treatment of the Edinburgh agreement by the Prime Minister. It was way in the future, so the timing, giving a two-year timescale, was given away—just like that. Also, the wording of the question was given away. The wording, style and tone of a question are crucial in determining the value and quality of the answer received. As one who campaigned, I can tell the House that it is very hard to enthuse people if one is proposing a negative. That should have been looked at at the very beginning. The constitutional debate since 1999 has been all about process; what further powers can be devolved to the Scottish Parliament or the Welsh Assembly? There has been little focus on the effectiveness of the delivery of politics. The concept of devolution as a process of events needs to be re-examined.

I have some very close friends who voted yes. I challenged them on why they were voting yes. I put it to them about the currency union, “Do you agree with Jim Sillars about stupidity on stilts?”. “Yes”. I asked about Trident and NATO. “Can you get rid of Trident while simultaneously getting in to a nuclear club? Do you think that is consistent?”. “No”. “What about EU admission? Do you think there will be problems about that? Will there be automatic entry?”. “No. There will be problems, but we are voting yes”. One highly sophisticated friend said to me that he voted yes and hoped that the result would be no. That illustrates the disconnection that there was. When I asked them why they were voting yes, they said it was for a fairer, more socially just society. But there was no means to deliver that. There is a disconnect and we must appreciate that here.

Arsène Wenger, in the Times this morning, made the point that we are moving from a thinking society to an emotional one. We are losing our sense of perspective on events because of the requirement for instant reactions and opinions. As Nobel laureate Daniel Kahneman said in his bestselling book, instead of thinking fast, we should start to think slow. We have thought fast in the past and we have got ourselves into deep problems. We need a constitutional convention or a royal commission; one which is thought out; one where there is citizen engagement; one where we have to think out the purpose and the terms of reference. A constitutional convention or a royal commission is the way forward. We should do it slowly so that we get wise decisions out of it—wise decisions which can secure a union that is not safe yet and wise decisions which, through reconciliation and good disagreement, can secure the peace.

Scotland: Independence

Lord McFall of Alcluith Excerpts

Tuesday 24th June 2014 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, first, I thank the noble Lord, Lord Lang, and his colleagues on the committee for an excellent report. In particular, I fully endorse paragraph 117 on the proposed timetable for completing negotiations on independence by March 2016. It is a fact that the reorganisation of the police force in Scotland took 19 months—one month longer than for national and international agreements to take place. What a fantasy. Therefore, the weight of decision-making has to be in favour of sorting out these problems, however long that takes. I agree with that.

I was in Barcelona with a number of colleagues a few weeks ago, and I had the opportunity to speak to the mayor, Dr Xavier Trias. They are very European in Barcelona. They want a referendum in Catalonia, but they realise that if there is a vote in favour of independence, negotiations with the European Union will, to use Dr Trias’s phrase, be “very, very, very difficult”. If that is the case for Catalonia, it is also the case for Scotland. The First Minister has indicated that everything has a certainty about it, whereas we are entering a very uncertain world. That was made plain by his former economic adviser, Professor John Kay, when he came to the Economic Affairs Committee. He said that the negotiations will be difficult and will take many, many years.

However, the most important date for us is 19 September, the day after the referendum, because, irrespective of the outcome, nothing will be the same again. If it is a yes vote, the future will be irrevocably changed for England and the rest of the UK. The global reach and authority of the UK will be diminished.

It has been quite sad to see that the rest of the UK has been allowed to almost sleepwalk into this referendum. It is just a matter for Scotland, they say. However, this is not just about Scotland, with only Scots involved. If there is a yes vote, an important part of every one of us will be lost for ever. If there is a no vote, there will be a demand for more devolution and decentralisation. Therefore, my message today is that the entire UK should engage in this debate from now on, and it should be a central participant in any campaign.

Sadly, devolution for Scotland has, for years, been implemented as a process, not an event. In fact, it is even described as that by one of our former Labour First Ministers. However, if we continue along this path, it will produce such constitutional imbalance that, unplanned, it may implode politically. The ad hoc nature of the approach to constitutional reform has not served any of us well. It has to give way to a systematic, coherent and executed UK programme. Whitehall does not now work in the best interests of the whole country. All of us see that. We should take time—perhaps many years—over how we approach this constitutional change and ask fundamental questions. For example: what is Parliament for? How best do we centralise and ensure that we get symmetric devolution and decentralisation throughout the country so that we strengthen the sinews of the nations of the United Kingdom? Will a royal commission be the way to do this? Will that cede authority and control, or does there need to be a co-ordinating committee to make sure that there is the political charge and political responsibility to ensure that, part by part, we have a coherent approach to our constitutional change?

Mention was made of the former Labour Prime Minister, Tony Blair. I am sure that history will show him as one of the most constitutionally reforming Prime Ministers ever. However, I have yet to find a substantial speech by him on constitutional reform. That is because, in many ways, like the Calman report, it was given away, it was bagged, and we moved on to the next agenda. We should learn from that and ensure that there is change in that respect.

I mention the need for seriousness, and that is very important. I certainly did not see that when, two weeks ago, the Chief Secretary to the Treasury and the First Minister traded fantasy figures on the monetary benefits of voting yes or no in the referendum. Alex Salmond promised an independence bonus of £2,000 per household on voting yes, while Danny Alexander, with absolute certainty, heralded £1,400 per Scot if they voted no. I suggest that snake-oil salesmen could not have bettered these efforts. It was compounded by the disgraceful Scotland Office PR on 4 June outlining:

“12 things that £1,400 UK Dividend could buy”.

Included in the 12 things were:

“An overseas holiday for two with cash left over for sun cream … Experience 636 joyful caffeine highs … Share a meal of fish and chips with your family every day for around 10 weeks, with a couple of portions of mushy peas thrown in”,

or:

“Go for one haircut a month for over 3 and half years … you can go for significantly more if you’re a man”.

That should never have appeared on an official PR document emanating from government. It has trivialised and degraded the economic argument, and that has to be the one message that the Minister takes back so that that approach is disowned in future. As for the First Minister’s figures, to achieve this dividend of £2,000 he says they will transform the economy by increasing productivity by 1%. That has been a conundrum for 40 years, and that too rests in fantasy land.

However, I am worried by the degree of rancour and bitterness in Scotland. I am not just talking about JK Rowling. This referendum will be accompanied by profound psychological wounds, and they will not be restricted to Scotland. How do we prevent a “neverendum” if there is a no vote? I was recently in the company of a senior SNP politician who said that if it is a 60:40 vote—60 no, 40 yes—this story is not finished. We have to ensure that everyone on both the yes and no sides signs up to a declaration that, whatever the outcome, they will respect the integrity of it and work for the benefit of a better United Kingdom or an independent Scotland. Given that present-day politicians and the political process are already held in low enough regard by an increasingly disillusioned public, that is the least we require before 18 September. A serious and co-operative way forward for the common good must start on 19 September.

Scotland: Independence

Lord McFall of Alcluith Excerpts

Wednesday 29th January 2014 Lords Chamber

[Lord Wallace of Tankerness]

The noble Baroness makes an important point. There are important issues about our current constitutional arrangements in all parts of the United Kingdom. The Government have shown by our implementation of the Calman report proposals, through the Scotland Act 2012 and the way that we are taking forward the proposals of the Silk commission in relation to Wales that we are alert to these. But I am certain that a no vote in September will not bring an end to these discussions. All parties and even people without parties have an important contribution to make to those discussions.

[Lord McFall of Alcluith (Lab)]

My Lords, if there is a yes vote, it is important to remember that the rest of the United Kingdom will be diminished as a result; by one-fifth of our land mass, 5 million of our population and 10% of our GDP. The big picture is that both national and international issues are involved. Therefore, the voices of the Scottish diaspora need to be mobilised, and also the voices of the English, the Welsh and the Northern Irish who value an entity that is greater than the sum of its parts.

[Lord Wallace of Tankerness]

My Lords, I could not agree more with the noble Lord. It is important that people not only from the diaspora but from other parts of the United Kingdom speak up and say how valued Scotland is as part of a family of nations, which is one of the great success stories of modern history. Scotland is obviously better within the United Kingdom, but the United Kingdom is also better with Scotland in it.

Scotland: Independence

Lord McFall of Alcluith Excerpts

Thursday 5th December 2013 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, it is a privilege to reply to this debate from the Opposition Front Bench, and I congratulate the noble Lord, Lord Forsyth, on introducing it, as my noble friend Lord Foulkes said, in a witty and elegant way. I also appreciate the contributions made by all Members today. Their range and profound quality has been impressive, and the points made regarding a Joint Committee are very important; it is something that we need to take up.

The White Paper is almost 700 pages long. I am always suspicious when I am given a long document. Why is it so long? It is to allow the SNP to duck the questions, not to answer them, so we must see the paper as an elaborate ruse to duck them. When President Barroso and Mariano Rajoy, in responding to the Economic Affairs Committee of which I am a member, state that Scotland must reapply for EU membership, which will need the unanimous approval of the 28 member states, what that indicates is not that Scotland will not get into the EU some day but that the negotiations ahead may be protracted.

The ground chosen by the First Minister is the economic one. He has said clearly that the Scots will be better off if they are not part of the union, so the most important economic decision of the referendum is the currency one. Jim Sillars, the former deputy leader of the SNP, has talked about,

“the mistaken policy of using sterling in a currency union”.

with the rest of the UK. He went on:

“That will require a treaty between two countries, ours and theirs, and just as it takes two to tango, so it takes two to make a treaty. If SNP policy is seen as damaging to”,

the rest of the United Kingdom’s,

“state interests, and that of its allies, why should they sign a treaty giving us seats on their central bank, and a say in monetary policy? Alex Salmond says Osborne cannot stop us using sterling. True, but there is a world of difference between using it as one’s currency, and being in a currency union”.

On Mr Sillars’s point there I say: precisely.

We could have dollarisation along the same lines as Montenegro without RUK consent, but that would not be a viable option because we have large Scottish financial services firms that rely on access to UK central bank services. The Economic Affairs Committee took evidence from Standard Life, which told us that 94% of its products are sold on the other side of the border and 6% to Scotland. What will it do if there is an independent Scotland and it wants recourse to a central bank? It is obvious: Standard Life will move its headquarters. John Swinney said in his evidence to the committee that he wanted a,

“formal monetary union … with the Bank of England operating as the central bank for sterling”.

But we cannot have a monetary union if we do not have a fiscal union, and therefore the implications for tax and spending policies are enormous. As Gavin McCrone, the former respected chief economist at the Scottish Office, said, monetary union will only work if there are broadly similar inflation rates. If the SNP persists with the sterling option, it will require Bank of England approval.

I suggest that it would be foolish for a central bank, after the RBS and HBOS debacles, to extend central bank services or be the lender of last resort to a foreign country over which it does not have any control or exert any real influence on tax and spending policies. On the proposal to exert influence over the Bank of England, let alone the rest of the UK Exchequer, the EAC said clearly in its report that that is devoid of precedent and entirely fanciful. Nowhere in the White Paper are these difficulties and uncertainties addressed.

Whether we are talking about the EU, NATO, pensions and benefits or the future of the Scottish financial industry, they all have to be examined very carefully. We also need to examine whether independence will deprive Scots of the benefits of pooling resources and bringing down real costs. John Kay, an eminent economist at the Financial Times and an adviser to Alex Salmond, has said:

“For the degree of economic independence a small European country can enjoy in a global marketplace is inevitably limited. Nothing that happens in Scotland in September 2014 will change that reality”.

Let us make a decision on independence only after a proper debate. The 670 pages of the SNP’s White Paper is its very own brand of poetry. It has taken 19 months for Scotland to reorganise the Scottish police forces into one force, but the White Paper envisages an independent Scotland being up and running in less time than it took to reorganise the police. What a fantasy that is. It illustrates the fanciful nature of the proposition. It is an insult to the seriousness of the Scottish question which people will have to address in September 2014. It is a wish list with no price list, and this House needs to examine it further and forensically. We need a Joint Committee and further debate because if we do not do so, all of us—the rest of the United Kingdom and Scotland itself—will be losers, and we cannot afford that.

The Economic Implications for the United Kingdom of Scottish Independence

Lord McFall of Alcluith Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord McFall of Alcluith]

My Lords, it is a pleasure to follow the noble Lord, Lord MacGregor, in this debate. I am open to intervention if need be on that issue. I thank him for his chairmanship. Allied to the question asked by the noble Lord, Lord Steel, the committee deliberately visited both Edinburgh and Glasgow, and spoke to the leaders of every party, including the former Chancellor, to the leader of Glasgow City Council and to business people. The only person missing was the First Minister. He would not come along to engage in the debate. That was an omission from the Scottish Government on this very important issue.

The debate in Scotland will centre around two themes: identity and economics. On the issue of identity, there is an assumption that if one feels intensely Scottish one will vote for independence. The paradox is that the debate in Scotland will not be about how Scottish one feels but how British the people of Scotland still regard themselves. That is according to the Scottish Social Attitudes survey. So it is about the degree to which people in Scotland still share some sense of fellow-feeling with those living elsewhere in the United Kingdom. That will be central to the choice that is made. It is important that we highlight that in the debate in this Chamber today. It will come down to whether Scots feel that they can assert their Scottishness by parting with the unionist part of their soul.

Michael Ignatieff, the UK journalist and leader of the Liberal Party in Canada, has a number of cautionary words for us in that area, because he took part in a referendum in Quebec. He said:

“We learnt the strongest argument for leaving countries as they are turns out to be that most people don’t want to choose between different parts of their identity”.

He added that post-referendum in Canada,

“Canadians were able to joke that what Quebeckers really wanted was an independent Quebec inside a united Canada. I suspect a majority of Scots want something similar”.

I was interested to see the Early Day Motion put down in the House of Commons on Dundee’s bid to become the UK City of Culture in 2017. It stated:

“That this House welcomes the decision of Dundee City Council to bid to become UK City of Culture in 2017… and wishes the city of Dundee every success in its bid to become UK City of Culture in 2017”.

It was signed by two prominent SNP Members of the House of Commons. Maybe there was an element of identity confusion there, along with the rest of the Scots.

The conclusion on identity is that both sides need to engage. If this is about a sense of Britishness, we cannot stand back; there has to be full engagement. The letter to which the noble Lord referred was from the Chief Secretary to the Treasury on 10 June. I commend every noble Lord to read paragraph 9 of that letter, because more pressure needs to be put on the British Government. Otherwise they will seem to be complacent, since the evidence shows that we must demonstrate that sense of Britishness.

What has characterised the debate in Scotland and elsewhere to date is the lack of good information. That is why it was wise of the Economic Affairs Committee, under the chairmanship of the noble Lord, Lord MacGregor, to start this debate. At the beginning, there was a sparsity of information, indeed a reluctance to talk, on the part of business. Rupert Soames, the chief executive of Aggreko, which was based in my former constituency and started life as a very small company—a two-man business—and is now a FTSE 100 company, built his new headquarters in Dumbarton. It was the last thing he did before I stood down from the House of Commons. He told the committee that if business opens its mouth, “bile and ire” rains down on people, the language is intemperate and business people feel that there are better things to do than be hauled over the coals.

The situation is now changing, and one thing that we have to remember is that the tone of the debate will matter greatly. Michael Ignatieff said that the referendum in Quebec produced fracture and division. We want to minimise that, because we have to live with each other after this referendum. That tone is still very important, but the uncertainty remains and I am glad to see that the CBI, the Scottish Council for Development and Industry and universities have been participating in this debate in asking the question.

Along with lots of others, I have no doubt that if Scotland decides to become a politically independent nation, it can do that, but the crucial question is how much economic independence Scotland will achieve. Jim Sillars, a former leader of the SNP, says, “Not very much”. That is why he rejects the proposals by the present SNP Government. Professor Gavin McCrone, a most esteemed economist for the Scottish Government over the years, has said that currency choice is the most important economic decision that Scotland will make.

Over the past 25 years, the Scottish National Party has adopted the stance of supporting an independent Scottish pound, then the euro and now the pound sterling, but the First Minister is on record as saying that the pound is a millstone around the Scottish neck. That is a most inauspicious start to a monetary union between Scotland and the rest of the United Kingdom. If we go ahead with this, it will raise the most complex problems of cross-border monetary policy, taxpayer exposure and multiple financial regulators. We have only to remember the crisis in the financial services in Scotland in 2009, when both our major banks, RBS and the Bank of Scotland, were bailed out to the tune of 211% of the GDP of Scotland. That is the extent of the issue if problems arise as a result.

Any monetary union can come about only on terms agreed by the UK Government. The question then will be: who will provide the lender of last resort facilities to an independent country if there is little control over the tax and spending risk to which the larger entity is exposed? The committee put it in very straight language—language with which I agreed—when we said 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”.

We have to go back to square one in how we approach monetary union. It is for the Scottish Government to come up with proposals, vague as they are at the moment.

Another area that affects us is the issue of the single market in both domestic and European terms. If the integrity of the domestic single market has to be maintained, a lot of thought must go into the relationship between manufacturing and the financial sector on both sides of the border. I mentioned Aggreko. The chairman of Aggreko said that for his FTSE 100 company, it would impose a permanent layer of additional complexity, with headquarters and manufacturing in Scotland and listing elsewhere. We received a lot of evidence from the financial services community, particularly in Edinburgh, on that point, because 96% of its financial products are sold elsewhere in the United Kingdom, with 4% being sold in Scotland.

The issue of the single market in Europe will also matter. I know that the noble Lord, Lord Kerr, has written extensively on the subject and made very wise comments on it. We have to assume that there will be a smooth entry, but there are big question marks over whether there will be. That smooth entry might provide some reassurance, but it will not provide much if the EU imposes tougher membership conditions relative to those of the rest of the United Kingdom in, say, financial regulation and employment law. The question that that sparks is: will that weaken Scottish competitiveness with the rest of the United Kingdom?

One could say that that being the case, the Scottish Government might soft-pedal the negotiations on EU entry to delay such problems, but that would be a mistake. It would also be a mistake for the British Government not to come out with further information, as we have required. Professor John Kay, in giving evidence, said that post the referendum, that will entail years of complex negotiations. We must face up to that. We should not minimise the complexity of the negotiations but start to understand what the issues and problems are.

Is there a climate of fear and uncertainty in Scotland today? Yes, there is an element of that. That was articulated by the leader of Glasgow City Council. It is for us to reduce that climate of fear and uncertainty and speak to one another in a civilised tone in this debate.

[Lord Kerr of Kinlochard]

I thank the noble Lord warmly for his reference to me. On the EU angle, does he agree that if an independent Scotland applies for membership of the European Union, the one thing that it cannot possibly obtain as an applicant from outside is a rebate on its budget contribution? Does he agree that if/when an independent Scotland becomes a full member of the European Union, all Scots will pay more into the budget than all English people?

[Lord McFall of Alcluith]

Absolutely. Mention has been made of the letter that President Barroso sent to the committee on 10 December 2012. I will quote two parts of that. First:

“If part of the territory of a Member State would cease to be part of that state because it were to become a new independent state, the Treaties would no longer apply to that territory”.

This means a renegotiation of all these treaties. The letter continued:

“In other words, a new independent state would, by the fact of its independence, become a third country with respect to the EU and the Treaties would no longer apply on its territory”.

The notion of a rebate, on that point, is really out the window.

Secondly, speaking of Article 49, President Barroso went on to say:

“If the application is accepted by the Council acting unanimously, an agreement is then negotiated between the applicant state”.

I ask noble Lords whether we will have unanimity on a rebate for an independent Scotland. That notion not only vanishes; it is non-existent. I agree with the noble Lord on that.

In my peroration I said that one of the chief executives said of the debate that nothing dispels a climate of fear and uncertainty better than the sunshine of information. I thank the noble Lord, Lord MacGregor, for providing that ray of sunshine in this debate on the economic implications of Scottish independence.