Scotland’s Fiscal Framework
David Mowat Excerpts(8 years, 2 months ago)
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David Mundell
Yes, as is the other element of the Smith commission consideration of no detriment, which is taxpayer fairness—not just in Scotland, but across the UK.
David Mowat (Warrington South) (Con)
The vow was very clear that Barnett would be retained. That has been done, and rightly so. The starting point for public spending in Scotland now is 115% of the UK average. Can the Secretary of State tell the House, in terms of his modelling, what that percentage per capita will be at the end of this Parliament?
David Mundell
As my hon. Friend asks for complex calculations, I will certainly be happy to write to him in that regard. Although I respect his strongly held views in relation to the Barnett formula, I have to say that the Government’s clear position is that the Barnett formula is being retained.
Public Finances: Scotland
David Mowat Excerpts(8 years, 3 months ago)
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Ian Murray
I am grateful to my hon. Friend for that intervention, because what we have seen this afternoon in Scotland is a Scottish Labour party determined to use the current powers of the Scottish Parliament to try to do something different from Conservative austerity. The result of that is a Scottish Finance Minister and a Scottish Government just managing that Conservative austerity. As I said earlier, when faced with the choice of managing the Tory austerity or creating a different future for Scotland, we have chosen to create that different future.
I was explaining the principles behind the Scotland Bill. However, before the Scotland Bill can be enacted they must be underpinned by a new fiscal framework for Scotland. That runs alongside the legislative process, which is slightly different from what happened with the Scotland Act in 2012.
It is crucial to state that the Smith commission stipulated that the Barnett formula would be retained as the mechanism for determining Scotland’s block grant. That is not in question in this debate. However, Scotland’s block grant will need to be adjusted to reflect both the new tax-raising powers and new expenditure responsibilities that are being devolved, and that is at the heart of today’s debate. Until that revised framework is agreed by the UK and Scottish Governments, the Scotland Bill cannot be enacted and the new powers and responsibilities it transfers cannot be implemented. We need a negotiated agreement in order to move on, otherwise the new powers will lie dormant and Scotland’s financial position in the future will remain very uncertain.
David Mowat (Warrington South) (Con)
The hon. Gentleman mentioned the Barnett formula and the vow, and of course he is right that the Barnett formula will be retained, but he will also be aware that it is not based on relative need and therefore is not fair to England, and in particular to Wales. Will he therefore, as a member of a party of the left, support reform of the Barnett formula to make it more progressive for the whole island?
Ian Murray
There is consensus across the entire Chamber that the Barnett formula should stay in place. It was in the vow signed by all the major party leaders who went into the general election. The Smith agreement has been signed by all five political parties, and that includes the maintenance of the Barnett formula. The hon. Gentleman, from the Conservative Back Benches, wants to renew and review the Barnett formula, which means only the Labour party in this Chamber will defend it. It would seem that the policy from the Conservative Back Benches is to do away with Barnett and that the Scottish National party wants full fiscal autonomy, which would also do away with the Barnett formula. We will defend the Barnett formula, because it is in the interests of our constituents to do so.
Ian Murray
I am happy to give way to the hon. Gentleman again, while bearing in mind that this debate is very much curtailed.
David Mowat
I do not want to do away with the Barnett formula. I would just like to see it revised so it is based on relative need, because that seems to me to be a very fair way forward.
Ian Murray
The Barnett formula is based on that need. It was designed in the 1970s to take into account not only the contribution that Scotland makes to the United Kingdom but its public service requirements and geographical nature. It commands broad political consensus and I do not think we should break that. That would be a very difficult message to send out.
The message from today is that it is the job of the Scottish and UK Government Ministers to get a deal. We heard today that the Chief Secretary to the Treasury, who I am delighted is in his place, will be in Edinburgh for talks all day on Monday. The people of Scotland will expect nothing less than a final deal that is signed, sealed and delivered. We support the Scottish Government in their efforts to reach an agreement that is fair, equitable and consistent with the Smith agreement. Again that is not in question, but reach an agreement they must.
Stewart Hosie
No. The hon. Lady is absolutely wrong; we are not having second thoughts about the powers. We want the powers—indeed, we want more powers—but the agreement that is reached must deliver a Scotland Bill in line with the Smith commission principles, in particular that of no detriment.
We want to avoid a potential additional cut of £3.5 billion over a decade.
Stewart Hosie
Not at the moment.
What is remarkable is that the motion does not talk about public finances or the impact of getting the fiscal agreement wrong. It is almost exclusively focused on the process of negotiating a formula—a formula that, of course, must deliver no detriment, which was one of the key principles identified by Lord Smith. Although fairness for Scotland is recognised in the motion, many other drivers of Scotland’s public finances are not.
Stewart Hosie
Not at the moment.
There was a cursory passing reference to Labour’s plan, which was announced yesterday, to make Scotland the highest-tax part of the UK. That has a bearing on the public finances. It is a Labour plan to add to the tax burden of half a million Scottish pensioners. It is a plan to add to the tax burden of 2.2 million taxpayers. In essence, it is a plan to change the public finances by taxing Scots more to pay for Tory cuts. That is the weakness in Labour’s plan.
David Mowat (Warrington South) (Con)
My remarks will be very brief. I take note of the comment just made on independence and the concern about the Labour income tax. My understanding in terms of what has happened to North sea oil is that independence would require income tax to go up by approximately 20p in the pound. The point I want to make, however, is that we are talking about two terms: “fairness”, which has been mentioned a lot, and “no detriment”, which has also been mentioned a lot. I am not at all sure, having heard the dialogue, that those two things are reconcilable.
My right hon. Friend the Member for Wokingham (John Redwood) said that we accept that the Barnett formula has been conceded and that it means that per capita expenditure in Scotland is 115% of that in England. That was what was agreed and it will presumably be the cornerstone of the agreement. However, it would not be right if, as a result of the agreement currently being negotiated, “no detriment” means that, whatever happens in Scotland and whatever decisions are made by the Scottish Government, the 115% ratio will stay the same indefinitely. I shall have a great deal of difficulty with that, as will my constituents. I should add that my constituents entirely agree with the concept of a Scottish Parliament. They agree that it is right for the people of Scotland to be able to choose their priorities, whether it is a question of prescriptions or tuition fees.
George Kerevan (East Lothian) (SNP)
In all his years of learning, has the hon. Gentleman not grasped the fact that the Barnett formula is specifically designed to bring per capita levels of spending in every region and nation of the United Kingdom to the same level?
David Mowat
In all those years, I stayed away from the Barnett formula, but since the hon. Gentleman has raised the point, I will respond to it. No one who has seriously considered the Barnett formula thinks that it is an attempt to be a proxy for relative need; nor is it true that the Barnett squeeze to which the hon. Gentleman has just referred really happens. I note that no Welsh Members are present, but the Barnett formula has caused a massive problem in Wales.
It strikes me that the formula presented an opportunity to the Scottish national party to show how progressive and internationalist it was. It seems to me that a progressive party of the left, an internationalist party, would not say, “We in Scotland want every single penny that we can get.” The approach of such a party would take account of need in Wales, in England, in my constituency, and elsewhere.
I ask the Chief Secretary, in the negotiations that he is currently leading, to bear it in mind that, however we interpret the phrase “no detriment”, the ratio of increased expenditure in Scotland—the figure should be higher than it is in England on the basis of need, but not as much higher as it is now—should not be allowed to continue and be built on, no matter what decisions are made in respect of the relative economies over the next few years.
Scotland Bill
David Mowat Excerpts(8 years, 11 months ago)
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David Mundell
What I think it suggests is the requirement for responsibility. If the Scottish Government believe that benefits are not at the level they should be, they will be able to ask the Scottish taxpayer for the funds to increase them. That is what I would regard as responsibility within a Parliament.
David Mowat (Warrington South) (Con)
A few minutes ago, my right hon. Friend described the fiscal framework of the Barnett formula as long-lasting and fair. Surely that would be the case only if the Barnett formula were based on need rather than on a historic anomaly. It is a formula that results in my constituents getting £1,600 less per person per year than they would get if it were based on need, which one would think a progressive party would wish to be the case.
David Mundell
My hon. Friend is a long-standing critic of the Barnett formula, and I acknowledge the point he makes. The Prime Minister, the then Leader of the Opposition and the leader of the Liberal Democrats made it absolutely clear that their parties had no intention of changing the Barnett formula. That certainly remains the position on the Government side.
Angus Robertson
The hon. Gentleman is usually assiduous in his research on these matters, but he has obviously not read to the end of the reasoned amendment tabled by the SNP, which I commend to Members across the House. It proposes that we would move
“to a position in the medium term where the Scottish Parliament and Government are responsible for all revenue raising”.
Clearly the Labour parliamentary research unit overlooked that point when sending round its briefings earlier.
Angus Robertson
I would like to make a bit of progress, and then I will be delighted to give way to the hon. Gentleman, whose interventions thus far have been tremendously helpful to the SNP.
I feel a sense of déjà vu as we discuss the contents of yet another Scotland Bill driven once again by the success of Scotland’s independence movement and party. The previous Bill, now the Scotland Act 2012, was the Government’s response to the Calman commission recommendations; the Calman commission, of course, was a response to the SNP’s first election victory in the Scottish Parliament in 2007, which enabled us to form an historic first minority Government. In 2011, though, the SNP had an even more dramatic and significant victory in Scotland. As Members will be aware, we broke the electoral system, gaining a majority in a proportional representation system designed explicitly to prevent that eventuality.
The constitutional response to the first majority pro-independence Government in Scotland in more than 300 years was the agreement to hold last September’s referendum. That is how we have got here today. The Bill’s genesis was in the referendum, and it flows from the desperate promises of the final few days of the campaign. The legislation before us comes from the vow made then, which was followed by the Smith commission and the five-party Smith agreement, albeit in watered-down form.
David Mowat (Warrington South) (Con)
It is a pleasure to follow the hon. Member for Moray (Angus Robertson), although it would certainly have been more of a pleasure if he had taken my intervention earlier. I will ask the question that I would have asked then. He made the point that the end of the SNP Members’ amendment says that they want full fiscal autonomy “in the medium term”. Would he care to tell the House when the medium term is? They were talking about a period of 18 months when the referendum was taking place.
The hon. Gentleman did say something that was correct: the people have spoken. The people spoke in the general election, and there is absolutely no question but that there is a mandate for the Bill before us. It is absolutely right that Members from both sides of the House move forward with the vow and all it means in a way that shows trust and good faith, and we will do that.
I will make a number of observations about the fiscal framework, and I would be interested to hear Ministers come back on those points. In his initial remarks, the Secretary of State used the phrase that the solution had to be long lasting and fair, which are big words. My concern is that a solution based on a fiscal framework that is not fair will not be long lasting. I do not believe that the use of the Barnett formula, as it is currently envisaged—even with changes through the devolution of certain revenue-raising powers—is fair on my constituents, or indeed those in Wales or in other parts of England. The flawed Barnett formula settlement is unfair on middle England, and as a result, this whole settlement may unwind.
Let me say a few things about the Barnett formula on which we need to be clear. The first is that it does not represent a subsidy to Scotland, or it has not over the past 25 to 30 years. I have never said that it did. Broadly speaking, the extra money that Scotland gets—£1,600 per head—has been paid for by the proceeds of Scotland’s oil. We can look at the analysis year by year, but the Institute of Directors analysis has said that that, roughly speaking, has been the case over the past 25 to 30 years. It is not a question of subsidy, but of fairness and of need. When we are allocating public spending across our state, there should be cognisance of where that money is required to be spent to have the biggest impact. Indeed, a progressive party—we are continually told that the SNP is progressive—should surely be at the forefront of wanting a formula based on need.
Debbie Abrahams
Will the hon. Gentleman therefore explain why he has taken £254 per household from my constituency in Oldham and given it to an affluent area in Surrey?
David Mowat
I have not taken any money from anyone, or given any money to anyone. The hon. Lady’s constituents in Oldham receive roughly £1,600 a year less from public spending than they would receive if they had the same demographic profile and lived north of the border. That is an anomaly, and it is an anomaly that causes a potential risk to a settlement that is necessary and right.
Conservative Members do not question the fact that there is a Scottish Government now, and that that Government have entitlements.
Stewart Hosie
The hon. Gentleman is knowledgeable about this matter, and he was right to say that no subsidy is implied by Barnett. Unlike most of his colleagues, he looks at both sides of the balance sheet. However, he spoilt that by talking about a needs-based assessment. Does he recognise that that would imply a £4 billion cut in Scottish funding, right now?
David Mowat
I recognise that a needs-based assessment —that is, an assessment that will result in public money being spent where it is most needed—is fairer. However, I am not saying that it should be introduced immediately, as it would be with full fiscal autonomy, and as it would have been had the hon. Gentleman’s party won the referendum. Such things can be done over a period of, say, 10 or 20 years. There can be a target for the achievement of fairness.
As I was saying, no one questions the right of the Scottish Government to provide free prescriptions and free tuition—if that is their priority—and to make different arrangements for social care. However, if such provision is predicated on a baseline of funding that is unfair and wrong, it is reasonable for us to question it, and not to let the Scottish Government get away with saying that they can take such action because it is progressive. That is neither fair nor right.
We are talking about a formula that is based on need, and a formula that the late Joel Barnett was desperate to get rid of. A House of Lords Select Committee made the position very clear. Moreover—this is not mentioned often enough—the Holtham commission identified the serious underfunding of Wales as a consequence of the Barnett formula. That problem will have to be addressed in Scotland. It is true that public spending must reflect sparsity, and must reflect the fact that Scotland’s population is more spread out. However, it also needs to reflect relative ageing and relative measures of deprivation.
Alex Salmond
The hon. Gentleman is making an interesting speech, but at its heart is something of a contradiction. He says that we must implement the vow, but scrap the Barnett formula. Is he aware that the Barnett formula features in paragraph 6 of the vow?
David Mowat
Yes, I am completely aware of that. My point is that the whole settlement will be at risk if it is not perceived as being fair in, for want of a better phrase, “middle England.” I represent a constituency that is in the north but also in the middle, depending on where you start.
Dr Philippa Whitford (Central Ayrshire) (SNP)
Will the hon. Gentleman give way?
David Mowat
No, I will not. I need to make some progress.
It is not right for my constituents to have £1,600 a year less than those who live north of the border. One solution that has been mooted is full fiscal autonomy, which one imagines is something in which nationalists believe. According to their amendment, they believe in it “in the medium term”, which was not the case when they fought the general election. That is indeed a possible solution, but it would result in a black hole. I think that we should be sympathetic, and deal with the problem in a way that would be fair to my constituents and those of the right hon. Member for Gordon (Alex Salmond).
Another possible solution would be a proper, need-based review of public spending in this country that was fair to Scotland, Wales, Northern Ireland and England. That would take a while to achieve, and I am not suggesting that it would be easy or should be implemented immediately.
David Mowat
No. I have given way twice, and I need to make some progress.
A needs-based review must be something that I would be delighted to accept if I came to Westminster representing a progressive party. Surely my progressiveness would not allow me simply to say, “We will have all we can get in Scotland”—which, as we heard from the right hon. Member for Gordon, is what was on the front page of the Daily Record. A progressive party should say, “We are not going to take all this money, because we are progressive. The settlement needs to be fair to Wales and to parts of England, where there is a great deal of deprivation.”
David Mowat
Indeed. I understand that full fiscal autonomy would take the problem away, which is, of course, why we are now seeking to implement it “in the medium term”, whatever that means.
Of course I support the vow. Of course I support the mandate that SNP Members have achieved through their spectacular election victory. It is right for us to implement this settlement, and I will vote with the Government tonight and in the future to ensure that that happens. However, I must ask the Secretary of State to reflect on the phrase that he used in his speech—“fair and lasting”—and to ask himself whether he really believes that a fiscal settlement that is absolutely and clearly not based on need can ever be described as fair and lasting. That may yet cause us problems.
Oral Answers to Questions
David Mowat Excerpts(9 years, 2 months ago)
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The Prime Minister
The hon. Lady is absolutely right to raise this heartbreaking case, which we also discussed in the House on Monday. Clearly, anyone who saw the parents on the television talking about their children could not help but be moved by their plight.
What I have done is asked the Home Secretary to look urgently, with the Transport Secretary, at all the protocols we have in place about young people and travelling, and at what airlines do and what we can do. My understanding is that the police did respond relatively quickly in informing the Turkish authorities, and that what the Turkish Deputy Prime Minister has said about a three-day delay is not accurate, but there are always lessons to learn. On this occasion, I suspect the lessons will be not just that we can tighten arrangements on aeroplanes and at our borders, but that we all have a responsibility—schools, parents, families, communities, universities, colleges—to fight this poisonous radicalisation of young people’s minds.
David Mowat (Warrington South) (Con)
Q5. Tomorrow, the Minister for Universities, Science and Cities will be in Cheshire to sign our local growth deal. It is a deal that will deliver two bridges for Warrington—infrastructure that has been much needed for the past 30 years. Does the Prime Minister agree that the fact we are finally addressing such infrastructure needs demonstrates a commitment to the north-west that was completely lacking under the previous Government?
The Prime Minister
I pay tribute to my hon. Friend who has campaigned consistently on this issue. When I visited his constituency, he showed me the difference that those announcements will make to Warrington South. As a result of implementing the Cheshire and Warrington local growth deal, we expect to proceed with the construction of a high-level bridge crossing the Manchester ship canal. A new high-level crossing from the A56 Chester road will open up a substantial area of land for development immediately south of Warrington town centre. That will provide traffic relief, resilience, jobs, homes and livelihoods, which is what our long-term plan is all about.
Scotland within the UK
David Mowat Excerpts(9 years, 7 months ago)
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David Mowat (Warrington South) (Con)
Does the Secretary of State agree that part of this settlement needs to be a public spending agreement that is fair to all four nations of the UK? On that basis, will he be reviewing the Barnett formula to ensure that it continues to reflect relative need and will do so in the future?
Mr Carmichael
Part of the vow made by the three party leaders was that there would be no change to the Barnett formula, and that remains Government policy.
Oral Answers to Questions
David Mowat Excerpts(9 years, 10 months ago)
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David Mundell
Absolutely. The hon. Gentleman will have heard the Secretary of State highlight the importance of the flotation of the aircraft carrier on Friday, which will be a very important moment not only for Scotland, but for our whole United Kingdom.
David Mowat (Warrington South) (Con)
5. What assessment he has made of the potential effect of Scottish independence on energy flows between Scotland and the rest of the UK.
The Secretary of State for Scotland (Mr Alistair Carmichael)
Scotland has a thriving energy sector which benefits from unrestricted access to the integrated Great Britain energy market. That supports jobs, keeps bills lower and spreads the substantial costs over 30 million households and businesses.
David Mowat
The Scottish Government have now decided to generate 100% of electricity from renewables by 2020. The implied subsidy for that is £4 billion a year, or £1,000 per voter a year. Has the Secretary of State had any discussions with the Scottish Government about who would pay for that in the event of independence?
Mr Carmichael
What I can tell my hon. Friend is that at the moment the cost of the subsidy required for the development of renewables is spread across the whole United Kingdom market. In an independent Scotland, that cost would have to be met by households in Scotland, which would mean a difference of between £38 and £189 in Scottish energy bills. We do exceptionally well from the subsidies that come to Scotland as part of the United Kingdom.
Oral Answers to Questions
David Mowat Excerpts(10 years ago)
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David Mundell
What I believe is that we do not take any lectures from Labour on energy issues. Gas bills more than doubled under Labour, electricity bills went up by 50%, the leader of the Labour party was responsible for £179 of additional levies on gas bills and fuel duty went up 12 times. I am proud of this Government’s record on energy and Scotland is doing well under it.
David Mowat (Warrington South) (Con)
4. What discussions he has had with Ministers in the Scottish Government on the potential role of the Bank of England in the event of Scotland becoming an independent country.
The Secretary of State for Scotland (Mr Alistair Carmichael)
I have not had any discussions with Ministers in the Scottish Government on the potential role of the Bank of England. If people in Scotland vote to leave the UK, they are voting to leave the UK institutions that support it, such as the Bank of England, which will continue to operate on behalf of the continuing UK.
David Mowat
I thank the Secretary of State for that answer. The majority of my constituents hope very much that Scotland will stay in the Union, but for the avoidance of doubt, will he confirm that in the event of a yes vote, there are no circumstances under which my constituents will underwrite the borrowing and spending plans of an independent Scotland, whichever currency it uses?
Mr Carmichael
I thank my hon. Friend for his support for the continuation of Scotland within the United Kingdom. The position on any currency union or central banking arrangements if Scotland were to vote for independence has been made very clear recently by the Chancellor and the Chief Secretary and also by the shadow Chancellor: there will be no such arrangements.
Oral Answers to Questions
David Mowat Excerpts(11 years, 3 months ago)
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The Prime Minister
I am very happy to take up the case that the hon. Lady quite rightly raises in the House. If she gives me the details, I will see what I can do to try to get a better answer from the health authority.
David Mowat (Warrington South) (Con)
Q6. Each year many dozens of my constituents have to sell their houses to pay for social care, which is random and unfair. Does the Prime Minister agree that the proposals announced last week will at last start to mitigate this issue?
The Prime Minister
My hon. Friend makes a very important point. As he says, it is completely random who can end up suffering from dementia and then suddenly find that, because they could be spending five, 10 or even more years in a care home, all the savings that they carefully put away through their hard-working life are completely wiped out. To cap the cost for the first time is a major breakthrough. It is a progressive move, but it will also help hard-working families who want to save and pass on their houses to their children. It will be this Government who will have made that possible.
Oral Answers to Questions
David Mowat Excerpts(11 years, 4 months ago)
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David Mundell
The price of fuel at different petrol stations in different communities has been a matter of long-term concern, and that is why the OFT is conducting an inquiry into it. In my previous answer, I indicated that the results of that inquiry will be available in January, and they will make very interesting reading.
David Mowat (Warrington South) (Con)
3. What discussions he has had with ministerial colleagues and Ministers in the Scottish Government on the continued use of sterling in an independent Scotland.
The Secretary of State for Scotland (Michael Moore)
The United Kingdom Government are undertaking a programme of work to inform the debate ahead of the referendum. This involves looking at a range of issues including the importance of sterling to all parts of the United Kingdom. There have been no discussions with the Scottish Government about the use of sterling by an independent Scotland.
David Mowat
The decision to use sterling after separation means that the Bank of England will be the bank of last resort and the lender of last resort to Scotland. To avoid a repetition of what happened in the eurozone, the UK residual Government must have an oversight role in Scottish spending plans. Has this been sought, and on what time scale will it happen?
Michael Moore
There have been no such discussions. The important point is that sterling has served Scotland and the whole of the UK well for 300 years. We have seen in the eurozone the risk of having a formal monetary union without a fiscal union. A fiscally independent Scotland would create real complications in that regard. All this would have to be negotiated after the referendum vote, and it would take some persuading for people in the rest of the UK to take on the role that the Scottish National party wishes for it.
Referendum (Scotland)
David Mowat Excerpts(11 years, 7 months ago)
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David Mundell
The opportunity for Members in relation to the issue as a whole will be in the debate on the Order, and all hon. Members will have a vote on it. If the Electoral Commission’s proposals were to be rejected—and there has been no formal statement from the Scottish Government to that effect—the Scottish Government would have to be held to account for that by the people of Scotland, by politicians in this House and by the hon. Gentleman’s counterparts in the Scottish Parliament. I have faith in the people of Scotland. If they see the Scottish Government flagrantly rejecting proposals from the Electoral Commission, or any suggestion of trickery in the question, they will not look well on the perpetrators.
David Mowat (Warrington South) (Con)
We seem to have used the piecemeal extension of the franchise as part of a negotiating process. What concerns me is that 16-year-olds will vote on the sovereignty of their country, but six months later they will be unable to vote in council elections. How can that be right or coherent?
David Mundell
The Government do not support the extension of the franchise to 16 and 17-year-olds, and indeed our Conservative colleagues will argue against that proposal when it comes before the Scottish Parliament. It will be for the Scottish Government to make the case for 16 and 17-year-olds voting in the referendum. That debate needs now to go to Scotland, to the people of Scotland and parliamentarians in the Scottish Parliament, so that there can be a full and proper debate. I remain hopeful that the Scottish Parliament will fully scrutinise any such proposals and, if they are defective, reject them.