Scotland’s Fiscal Framework

Debate between David Mundell and Catherine McKinnell

Wednesday 24th February 2016 Commons Chamber

[David Mundell]

There will be no additional cost to England, Wales and Northern Ireland from the powers being transferred compared with if we were not proceeding with this devolution settlement, because the sum being delivered to the Scottish Government is exactly the same as would have been delivered under the Barnett formula.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The Scottish Government have committed to halving air passenger duty in 2018, if still in government. That leaves Newcastle airport, in my constituency, most at risk from cross-border tax competition. Following today’s statement, when can we expect a decision from the Government on support for regional airports, as promised by the Prime Minister? Ongoing uncertainty is very damaging to regional economies, and an approach of “wait and see” is not acceptable.

[David Mundell]

I note what the hon. Lady says. Of course people in Scotland will know that the SNP position used to be to abolish air passenger duty completely, so there is somewhat of a change there. None the less, she makes an important point. There is a review, and I am sure that those issues will be considered as the Budget process goes ahead in this Parliament.

Public Finances: Scotland

Debate between David Mundell and Catherine McKinnell

Wednesday 3rd February 2016 Commons Chamber

[David Mundell]

My right hon. Friend makes an important point, which speaks against those who argued just a few short months ago for full fiscal autonomy. It is quite interesting to look back at the amendment launched by the SNP in November to bring about full fiscal autonomy, which the Institute for Fiscal Studies predicted would create a £10 billion gap in Scotland’s finances. When the SNP asked for that full fiscal autonomy, it did not ask for what they now claim are the levers it needs to grow the Scottish population and offset the risk it is being asked to take on in relation to the Smith commission proposals.

The Government have been as open and transparent as possible in these negotiations, and each meeting has been notified to the House. Just this afternoon, the Chief Secretary appeared before the Scottish Affairs Committee. Last month, we responded in detail to the Economic Affairs Committee in the other place on fiscal devolution, having previously submitted written evidence to that Committee.

[Catherine McKinnell]

It is vital that these negotiations have the confidence of not just the Scottish people, but the people of the whole UK. Does the Secretary of State recognise that there is a significant risk of these negotiations suffering from the same problems as the negotiations over devolution in England, which the Communities and Local Government Committee report published today clearly states have lacked openness?

[David Mundell]

I do not recognise, for the reasons I have just set out, that those circumstances characterise the negotiations we have been conducting with the Scottish Government, and I make the case that a degree of privacy for negotiations of this type is required.

The hon. Member for Edinburgh South mentioned deadlines. I do not think in terms of self-imposed or arbitrary deadlines. Personally—keen though I am to have a warm and supportive relationship with the Scottish Government—I have never felt that the St Valentine’s day date had much relevance to this process. I am willing to continue working towards a deal for as long as that takes and for as long as we can. However, the usual channels have agreed to move the next day of Committee on the Scotland Bill in the other place to 22 February, as discussions on the framework continue to progress, to enable us to give their lordships as full an update as possible.

We have shown flexibility in the negotiations. While I cannot, as I have said, give a commentary to the House, Members will have seen via media reports that the UK Government have put compromise proposals on the table. That is a clear signal of our commitment to reach agreement and of our willingness to be as flexible as we can be, within the Smith principles.

Without commenting on the proposals, I would point out that the House will be aware of some of the tenets of those on the table. There are some suggestions that the Scottish Government should retain all income tax raised in Scotland, as well as a guaranteed share of the growth in income tax in England, Wales and Northern Ireland. Professor Muscatelli, who was referred to earlier, told the Scottish Parliament that such an approach would not meet the test of taxpayer fairness. This seems, once again, to be the Scottish Government wanting to have their cake and eat it—indeed, to have a slice of everyone else’s cake while they are at it. That might be understandable enough politics, and an understandable enough position to adopt at the start of a negotiation, but it cannot really be said to be a credible position.

Once the powers are devolved, Scotland

“should retain the rewards of our success, as we will bear the risks.” —[Scottish Parliament Official Report, 16 December 2015; c. 23.]

Those are not my words, but those of John Swinney. Mr Swinney has been very clear in the past about exactly what he meant by “risks”. He meant the risk that Scotland’s population might decline relative to the rest of the UK’s.

When asked at the Scottish Parliament’s Finance Committee by Malcolm Chisholm MSP if the Scottish Government would seek to be protected from the possibility that the rest of the UK’s population will expand more quickly than Scotland’s, John Swinney was very clear:

“That is another of the wider range of risks that we take on as a consequence of gaining the responsibilities.”

The Daily Record newspaper, sometimes brandished by SNP MPs, set this out clearly, finding it hard to see why

“a tax-raising Scotland should benefit from a growth in tax receipts in England and Wales”

and stating that

“there is an undeniable logic”

to opposing that view.