Draft Scotland Clauses

Lord Tyrie Excerpts

Thursday 22nd January 2015 Commons Chamber

[David Mundell]

I could not disagree more with the hon. Gentleman, but he would not expect it to be otherwise. Some of the questions that he has raised today and on other occasions need to be addressed to John Swinney and Linda Fabiani, who were the SNP members of the Smith commission. If these powers were so important to them, why were they not deal-breakers in reaching the Smith agreement? Instead, they signed an agreement at 8 o’clock one night and at 8 o’clock the next morning, they set about deriding it. This agreement is what the people of Scotland voted for by a significant majority. More than 2 million people in Scotland voted for a Scottish Parliament with more powers, and that is what the draft clauses deliver.

[Mr Andrew Tyrie (Chichester) (Con)]

It is right to honour the vow and I warmly welcome the Minister’s announcement. Does not the big increase in devolved powers from this place to Scotland that is embodied in the announcement highlight the need finally to address the West Lothian question? It cannot be right that Scottish MPs should continue to vote on English-only issues and laws in such circumstances. The English and the Welsh need more than a say. Is it not necessary, in order to buttress the Union as a whole, that they have the power to decide whether such a measure is acceptable to them?

[David Mundell]

I absolutely agree with my hon. Friend, and I think that most people in Scotland would agree with his sentiments. However, it is always important to make it clear in such discussions in this Parliament, in case they are misrepresented, that this is a stand-alone package of measures that will be implemented regardless of where the debate in England, Wales and Northern Ireland goes.

Smith Commission

Lord Tyrie Excerpts

Thursday 27th November 2014 Commons Chamber

[Mr Carmichael]

I congratulate the hon. Gentleman, as I suspect that that is the first time that Hansard will have been required to record the word referenda-ising. It is novel and creative. I am not entirely sure whether the growth of nationalism in the different parts of England will be a consequence, but having sat through a six-hour debate just a few weeks ago in this House on the subject of devolution across the whole United Kingdom, I would say the one thing that was clear at the end of the debate was that there is not yet consensus—[Interruption.] It might well need leadership, but leadership alone will not be enough to build consensus. The hon. Gentleman would do well to listen to the words of his own Front Benchers on the question of a constitutional convention. That is not a delaying tactic, as he seems to think. In my view, it is the only feasible way of building consensus to get the change that is wanted.

[Mr Andrew Tyrie (Chichester) (Con)]

The report is a welcome first step towards stabilising the Union, redressing a Scottish grievance, and the Treasury Committee will consider it as part of its inquiry into fiscal devolution. Does the Secretary of State agree that another crucial step must be to redress an English grievance: that Scottish MPs vote on English laws? That must end, notwithstanding the curious wording of paragraph 75 of the agreement. Does he further agree that the English must have a veto on all laws that largely or exclusively affect them, and that the case for that is all the stronger with full devolution of income tax? Nothing less will do.

[Mr Carmichael]

It is because we understand the need for change—as I have said already, I and the whole Government are sensitive to that wish for change—that we have set up the process that is being led by my right hon. Friend the Leader of the House, which is aimed at building consensus to bring about that change.

Scotland’s Place in the UK

Lord Tyrie Excerpts

Thursday 6th February 2014 Commons Chamber

[Mr Andrew Tyrie (Chichester) (Con)]

Unusually, I agree with just about every word I have just heard from the Opposition Benches.

In the short time available, I want to say a few words about the consequences of independence for currency arrangements in the rest of the UK and Scotland, but I ought first to make it clear that the Scots are not without options: they could create their own currency, whether pegged or free floating, they could create a currency board or they could join the euro. All these options are available. But the frontrunner in some quarters seems to be the creation of a formal single currency with the rest of the UK. In the current economic and political circumstances, this should not be attempted, and in the four minutes now available to me, I will try to explain why.

The primary reason is that a British monetary union would need something dramatically tougher than the eurozone rules—so tough that, on both sides of the border, if it was fully explained, I am confident our respective electorates would not want it. And they would be right. It would amount to a common fiscal policy between independent countries, which would be a massive undertaking to design and sustain.

[John Thurso (Caithness, Sutherland and Easter Ross) (LD)]

Was my hon. Friend struck, as I was, by the Treasury output graphs that we saw at the end of Governor Carney’s speech? They showed that banking in Scotland would represent 12.7 times the economy—five points greater than the seven times for Iceland—and that it would be unsustainable without the currency union provisions my hon. Friend is describing.

[Mr Tyrie]

I think it crucial for us to understand that a banking union could well trigger the migration of banks to London, where they would be able to benefit from the “lender of last resort” facilities provided by the Bank of England.

Let me say something about what a common fiscal policy would entail. It would mean, for instance, pre-approval of budget proposals, which would be accompanied by intensive and very intrusive oversight of budgetary outcomes. It would require rigorous powers to insist on overshoots being corrected quickly and reversed, backed up by credible sanctions for non-compliance.

In order to carry credibility, such powers would probably need to be directly applicable in law on both sides of the border. What that means in practice is that the Bank of England and the Treasury would have the power to direct a large part of Scottish economic and financial policy. For example, the Scots would probably be required to seek their approval before they could borrow in order to build schools and hospitals.

Is it realistic to imagine that all those in Scotland who had just voted for independence would readily accept such intensive supervision and direction from the rest of the United Kingdom? I doubt it.

[Stewart Hosie (Dundee East) (SNP)]

The Chair of the Treasury Committee is making an interesting assessment, but what he is saying is not necessarily the case. If the stability arrangements were made at the aggregate deficit or debt level, and if both countries were required to adhere to them, the line-by-line scrutiny of spending plans he describes would not be necessary, would it?

[Mr Tyrie]

Countries in the eurozone were required to abide by the stability and growth pact, and look where that took us. We need something much more robust than that to make a currency union work, and I am pretty confident that it would not be any more acceptable in Scotland than it will be in England.

Let me now say something about the effects of a currency union on the rest of the United Kingdom. It would, after all, have to be a two-way street. Is it realistic to expect the rest of the UK—much the bigger partner, both economically and in terms of population—to accept Scottish oversight of fiscal policy here? Is it realistic to expect the rest of the UK to risk the need for what most durable currency unions have eventually required, namely fiscal transfers? Is it realistic to expect the rest of the UK to sign up to a currency union that could carry the risk that all those rules, albeit tough rules, would fail, and whose failure would trigger the need for bail-outs? I do not think that such arrangements would be acceptable to the electorate. What is more, I doubt that a majority could be mustered for them in the House of Commons.

Of course, the leaders of both countries might try to get a currency union past their respective Parliaments without fully explaining the consequences, but I am on my feet now because I want to try to prevent that from happening. There would be shades of the eurozone in such an attempt, but it would be a fool’s errand.

A currency union created in such circumstances would, sooner or later, be tested by the markets. Either the rules would be tough enough to bite, or, if they were not tight enough, there might be a bail-out. Alternatively, we might experience both the pain and the bail-out, as happened in the eurozone: we might experience the pain of the bail-out south of the border, and the pain caused by the biting of the rules north of the border.

Not enough attention has been paid to the political consequences of botching these currency arrangements. Whatever the economics of trying to create a currency union, I think that it is bad politics for these islands at this point. The eurozone has provided a reminder not just of the economic difficulties of creating durable currency unions, but of the political damage and fall-out that come with flawed arrangements. We need, above all, to put what Lord Lang, in the other place, described as “the politics of grievance” behind us as we make our efforts to renew the relationship between Scotland and the rest of the UK. But it seems to me that a currency union would risk the opposite. As its full implications became clear, it would create the conditions for lasting resentment on both sides of the border, and it is just such resentment that we must do everything possible to avoid in the search for a stable economic and political relationship between those on the two sides of the border.

I urge the Governments on both sides of the border to explain how all the difficulties that I have outlined could be addressed, well before the Scottish referendum. Not to do so would be to deceive our respective electorates into believing that there is some third way, some relatively painless option, enabling the Scots to imagine that they could be fully in control of their own affairs and that the rest of the UK could avoid large contingent obligations. If, as I have concluded, those difficulties cannot be adequately addressed in the current circumstances, the two Governments should rule out a currency union now.