Scotland Bill

John Redwood Excerpts

Monday 15th June 2015 Commons Chamber

[John Redwood (Wokingham) (Con)]

Does my hon. Friend agree that there will not now be the automatic application of the Barnett formula to solve all the many money issues between Scotland and the rest of the United Kingdom, but there has to be a fundamental renegotiation of the block grant and an attribution to Scotland of revenues by some formula? In practice, the whole financial settlement is in the melting pot anyway, so it will be very interesting to see how the SNP respond to his proposed further development.

[Sir Edward Leigh]

Absolutely; we are a united kingdom. For instance, Lincolnshire gets more money in its educational grant because of the sparsity factor. All these things can be worked out in a constructive manner between the United Kingdom Government and the Scottish Government so that there is a fair support mechanism based on need that takes account of issues such as declining oil revenues, the sparsity factor that I mentioned, declining heavy industries, or an ageing population. The grant should be determined by these matters, not by some ageing formula based on what the United Kingdom spends.

--- Later in debate ---

[Sir Edward Leigh]

I will make a bit more progress, because I want to get to my hon. Friend the Member for North East Somerset (Mr Rees-Mogg). He has been very patient, and I will get to him eventually.

Like then, everything is different now. What will happen if Smith stays? Can we sustain a permanent settlement that prevents Scotland from setting the initial threshold for income tax or from changing universal credit? What will happen when the Scottish Conservative party promises in its election manifesto to cut taxation? How credible will that be if it affects the block grant available from the United Kingdom? All these issues have to be discussed.

Under the Smith proposals, universal credit will remain a reserved matter. Holyrood will be able to vary the frequency of payments and the way it is paid, while the power to vary the remaining elements of universal credit remain reserved, but I would ask why. I have read the Smith commission. Why?

[John Redwood]

Universal credit has been reserved because if Scotland decided to make it more generous, the issue would arise of how it would pay for that. What we find with fiscal independence is that we have to delegate both sides of the equation—the raising of the money and the spending of it—and then it can decide how much it wants to spend.

[Sir Edward Leigh]

Full fiscal autonomy results in full responsibility. That is what real Parliaments do.

Responsibility for bereavement allowance, bereavement payment, child benefit, guardian’s allowance, maternity allowance, statutory maternity pay, statutory sick pay and widowed parent’s allowance will all remain reserved and administered by the Department for Work and Pensions. Why? The Smith commission further proposes a complex system for sharing responsibility for income tax. Why? That is all affected by an oscillating block grant. As I have said, how can SNP Members promise lower taxes in an election or higher spending unless they are masters of their own fate?

What are the objections to full home rule? What are the real objections to full fiscal autonomy, apart from the fact that we appointed a Lord Smith—with lots of no doubt very worthy people—to produce a report, which has been overtaken by events? We are told that full fiscal autonomy will result in tax competition within the Union. What is wrong with that? That is what keeps the American states vibrant and competitive with one another and continually innovating. Do we not insist that our taxes in Britain compete with those of Europe? We are told that tax competition would create downward pressure on taxes. Well, I am sorry about that. Why should the Scottish Parliament not be able to lower or raise air passenger duty? It can do whatever it likes. I know it has had that power and it will be allowed it under Smith, but if that power is allowed, why not powers for other things?

On Second Reading, my hon. Friend the Member for North East Somerset said that a single currency requires fiscal and monetary union, with the implication that that is proved by the Greek experience. Surely he is not suggesting that the Scots are Greeks, or that the Scottish economy is as different from England’s as Germany’s is from Greece’s. No; Scotland can thrive with full fiscal autonomy because Scotland has the will and the skills to do so. It has universities, research, manufacturing, logistics, light manufacturing, oil and gas, food and drink and a flourishing creative sector. [Hon. Members: “Hooray!”] Vote for my new clause.

--- Later in debate ---

[John Redwood]

I have always been a Unionist, but my idea of my country, the United Kingdom, is that it must be a democracy at peace with itself, and can only proceed as a happy and successful democracy if it has the consent of most of the people most of the time to the Union institutions and the powers of those institutions.

I am pleased that, because we proceed democratically and understand the need for consent, this Parliament listened to Scotland and, quite recently, granted a referendum to establish whether it was the settled will of the Scottish people to leave the United Kingdom altogether and set up their own arrangements. We discovered two things as a result of that democratic exercise. We discovered that the Scottish National party itself was not arguing for full independence: it wanted to remain part of the currency union, for example. I do not see how it is conceivably possible for an independent country to be part of a currency union.

[Peter Grant (Glenrothes) (SNP)]

Is the right hon. Gentleman seriously suggesting that Germany is not an independent nation?

[John Redwood]

That is exactly the problem: Germany is not an independent nation. No member of the eurozone is an independent nation, and that is why those countries are experiencing such trouble. The trouble is not just for Greece, which is very visibly not independent, because it is being told how to conduct its economic policy. Germany is not independent either. Germany did not wish to lend Greece huge sums of money, but the European Central Bank, acting in the name of Germany, has advanced huge sums of money, which it will find very difficult to get back, but which Germany has to stand behind.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

rose—

[John Redwood]

If SNP Members will allow me a little time, I will say things that they will like. I am not trying to make life difficult for them.

This is my analysis. In the referendum the SNP went for something more akin to home rule than what I would regard as full independence, but at that stage the Scottish people said no even to that. They seemed to say yes to the rather larger devolution of powers that the three main Unionist parties were then offering. However, we are now experiencing new circumstances.

Like my hon. Friend the Member for Gainsborough (Sir Edward Leigh), who has tabled a very interesting amendment, I think that this Parliament must listen to the new voice of the Scottish people. It is clear that there has been a shift of opinion towards more home rule than the Unionist parties were offering at the time of the referendum. That is why we are here today, listening very carefully to what the SNP has to say, and that is why I think it extremely important for us to have this debate on full fiscal independence, or fiscal autonomy. It would be one way for our Parliament to respond when the Scottish people have said, “We do not want to be completely independent as a separate country, but we want much more self-government—or home rule—than was envisaged by the Unionist parties at the time of the referendum, because we can see that that was not very popular.”

The Unionist parties collectively did rather badly in Scotland come the general election. [Interruption.] Well, between them, they received just under half the vote, while the Scottish nationalist party received just over half the vote. Because the Unionist vote was split, practically no Unionist Members of Parliament were elected, but it is still the case that Scottish opinion is fairly evenly balanced. The Scottish nationalists did not get 70% or 80% of the vote. If they had done, then, as far as I am concerned, they would really be in a position to tell us the answer, but, as judged by the vote, they speak for only about half the Scottish people. However, as representatives, they speak for practically all the Scottish people because they have most of the Members in this place.

I am listening very carefully and will want to hear more about what SNP Members want, but I am also very conscious that, in parallel with this exercise on powers as set out in this Bill, in some way far more important negotiations are already under way on what the new financial settlement will be, and those are not yet being reported to this House. That is crucial not just to the SNP and its representation of the Scottish people, but to the people of England. I find the more home rule that is on offer and the more we hear the Scottish voice, the more I have to be an advocate not of the Union, but of England, because someone needs to speak for England and to say that the consequences of much enhanced Scottish devolution, and some fiscal devolution as well, are serious for England. England needs to be in the discussion just as Scotland does, as this is our joint country and a major change in its arrangements will have a fundamental impact on England.

While I am very attracted to the idea of my hon. Friend the Member for Gainsborough that it would be a shrewd move to, for once, get ahead of the Scottish appetite for home rule and on this occasion to grant full fiscal devolution, we need to ask how feasible that is and what the consequences will be for Scotland and England. If Scotland wishes to be part of common welfare and pension guarantees, some limitation is already imposed on the spending side of full fiscal devolution. We have to think about the position of England if cross-guarantees are being offered for some part of that welfare package. If we are going to proceed in the way the Government currently plan and the way the negotiations are currently being undertaken—as I understand it, there is an attempt to find a way of adjusting the block grant for Scotland to take into account the new Scottish responsibilities, as some items of spending will have to be added in as a result of the devolution of new functions, and there will be a reduction in the block grant to take account of those taxes that are now Scotland’s to fix and collect—therein lies an immediate problem.

[Mr MacNeil]

Would not an easier solution be for Scotland to collect its own tax, as Catalonia does, and then pay into the centre, rather than the centre paying out? The taxes should be raised by the Government of the territory paying the taxes and paid into the centre rather than giving them to the centre for it to then pay out. In that way, the centre will have to stop saying it is subsidising people when it returns their own taxes.

[John Redwood]

But if Scotland wisely decides to have lower tax rates to make itself more popular, the Union will be losing out if those lower tax rates collect less money.

[Mr MacNeil]

The right hon. Gentleman should realise that it is not lower taxes that have made the SNP more popular; it is better public services in Scotland—that has given us 50% of the vote versus his party’s 37%.

--- Later in debate ---

[John Redwood]

If Scotland wishes to impose higher taxes, the Union has less of a problem with that—unless it chooses to impose higher tax rates which collect less revenue, because those could be a problem for the Union as a whole—but it would be a problem for Scotland if it had to collect higher tax levels and it did not get all the money back; I would have thought it would want to get all the extra money back that it was collecting. Full fiscal autonomy means it would take responsibility for both raising the money and spending it. If Scotland wishes to spend more under fiscal autonomy, she can do so if she has a magic way of getting more money off people through either higher or lower tax rates, whichever work in the particular fiscal circumstances.

We need to have working papers on how full fiscal devolution might work and whether it is truly full fiscal devolution, because if we are going to full fiscal devolution, England will want guarantees that we are no longer acting as a buffer or subsiding the Scottish settlement, just as Scotland will want guarantees that she has got a fair deal and is capturing the benefits of her fiscal independence. If we go for a mixed system, which is where we currently are with the real debate between the Smith commission, the pro-Union parties and the SNP, there is a lot to be worked out, and I hope that at some point those on the Treasury Bench will share some of their thinking with the Committee.

[Andrew Gwynne]

I find myself in the unusual position of agreeing with much of what the right hon. Gentleman is saying. Do not these arguments illustrate the asymmetrical nature of the devolution settlement across the four nations of the United Kingdom? Does he agree that whichever funding model we go for in relation to Scotland, there will be implications for the finances of the other three nations? Does he not think that we need a constitutional convention to put that right?

[John Redwood]

No, I do not think that we need a constitutional convention, because that would create endless delay and complications. I agree with previous comments that we are here to try to solve this problem for our respective constituents. I spent quite a lot of my time during the election speaking for England and saying that I wanted to ensure that England got a reasonable deal out of this. SNP representatives clearly did the same in relation to Scotland, and we both achieved similar levels of success in attracting lots of votes for what we were saying.

[Mr MacNeil]

The right hon. Gentleman talks about getting good deals for the various parts of the UK, but let us look at the wider British Isles. Does he think that the aggregate GDP of the British Isles would be as high as it is today without the full fiscal autonomy that the Republic of Ireland, the Isle of Man and the United Kingdom all enjoy? If the aggregate GDP of the British Isles is higher for those reasons, does he not agree that it will be higher still when Scotland achieves its full fiscal autonomy?

[John Redwood]

I start from the point of view of democracy. A democratic state has to have the full range of powers, including fiscal autonomy and its own currency. That is different from asking: what is your state? I would still rather have the United Kingdom as my state, but I have just explained that if it is the will of the Scottish people that the UK is no longer their preferred state, they must leave—of course they must.

[Mr MacNeil]

The right hon. Gentleman is being very kind in enabling our dialogue to continue. I am sure he would acknowledge that the UK functioned between 1603 and 1707, when the Parliaments were independent.

[John Redwood]

Well, it functioned after a fashion, but I would not have wanted to live through that time. The nations were clearly not nearly as rich as they are today. Labour Members sometimes try to pretend that we have gone back to an ancient age, but I am sure that none of them would willingly go back in time and live in that era, because we are obviously so much better off now.

[Mr Kevan Jones]

I do not want to divert from the subject, but was not the reason for the Scots’ enthusiasm in going forward in 1707—[Interruption.] It was not an economic blockade; it was speculation in the colonies of central America.

[John Redwood]

Yes, it was a kind of early version of the banking crash, which also reminds us that Scottish banks can sometimes get into trouble, and that the Union’s insurance can be quite helpful to them.

[George Kerevan]

May I return the discussion to the here and now? I should like to clarify something that the right hon. Gentleman said, because I think I agree with him. Is he saying that there was a clear desire in the debate that took place in Scotland post-Smith for a fuller measure of complete domestic fiscal control within the UK, but that achieving it would require serious discussions about how it would work in Scotland and how it would affect the fiscal arrangements in the rest of the UK? Does he agree that it could be done reasonably quickly, but would require transitional arrangements? It cannot be done overnight, but it is the way to go. If we do not do this, we will end up having endless piecemeal discussions, which would produce more friction than light.

[John Redwood]

I am making an even more urgent point than that. I am saying that that discussion is going on in parallel with our debates on this Bill. I hope that its content will be shared with Members at some point, because it is a matter of great importance to the United Kingdom, to England, to Scotland and so forth. As I understand it, those taking part in the negotiations are up against these very issues. If, for example, too much independence is given to Scotland on spending patterns, would there be a Union guarantee to pay for it all? How would it be fair to other parts of the Union if Scotland could increase her spending without having to take responsibility for raising the money for it? If Scotland starts to raise more of her own money, how do we adjust the block grant? In the current negotiations, nobody is suggesting getting rid of the block grant and saying that Scotland can have all her own money and just spend her own money. I am not even sure that is what the SNP wants. Negotiation is going on about how far—[Interruption.] If the SNP genuinely wants all that, that is fine. We then have to have a serious discussion, before it could be agreed to, over the borrowing. I will call it “borrowing”; I do not think “black hole” is a terribly useful term.

--- Later in debate ---

[Patricia Gibson]

Does the right hon. Gentleman not agree that successive Westminster Governments could learn much from the economic management of the Scottish Parliament, which has balanced its budget, in a fixed budget, every year, while Westminster has run up successive debts?

[John Redwood]

That is because all the time that it is a subsidiary Parliament of the Union, and part of our public expenditure and borrowing plans, it has to abide by the remit. The hon. Lady is right in that it has been given a tougher remit than the Union gives itself, but it is not fair to say that that is of no interest or benefit to Scotland, because of course much of the Union expenditure is also being committed proportionately in Scotland and so it is Scotland’s share of the debt as well. I am making a factual statement; I am not trying to make party political points, wind up the SNP, rerun the referendum or anything like that. I am just trying to get this Committee to understand that grave and big issues are being hammered out elsewhere, we are not hearing about them and they impinge very much on this crucial debate that we are now having.

I have intervened in the debate because I want an opportunity to talk about this financial settlement, which matters to England as well as to Scotland. The proposal put forward by my hon. Friend the Member for Gainsborough brings things centre stage. If we went down his route and had full fiscal autonomy, I would want to know what that meant; how much responsibility Scotland would take, for example, for pensions as well as welfare; and what the borrowing settlement would be. The residual is the borrowing, and unless we know what the answer is on that, we still will not have a happy Union or stable expenditure.

[Ian Blackford]

I thank the right hon. Gentleman for his most gracious speech and his thoughtful remarks about the future of the constitutional arrangements between Scotland and the rest of the UK. It is perhaps worth remembering that when Gordon Brown spoke on behalf of the three Unionist parties prior to the referendum, what was offered was as close to federalism as we could get. What was talked about was home rule in the spirit of Keir Hardie. It is akin to the remarks that the right hon. Gentleman is making. It is perhaps worth remembering that the manifesto commitment the SNP stood on was delivering powers for a purpose to the Scottish Parliament. He is right: that is what the Scottish people voted for in returning 56 Members of Parliament to this Chamber.

[John Redwood]

Then I think we need to have another debate, on another day, which looks at what is going on in these important financial discussions. Although my constituents are interested in what powers Scotland gets, they are far more interested in how the money works between the different parts of the Union. We have no papers before us today to elucidate that.

[Ian Murray (Edinburgh South) (Lab)]

For the second time in five and a bit years, I agree with the right hon. Gentleman. On the complicated nature of the fiscal framework, which I believe he is trying to unpack, does he not agree that the Labour new clause, which will be debated at some point, to set up an independent commission on the costs and implications of full fiscal autonomy provides a much more reasonable and sensible approach?

[John Redwood]

We are where we are. Promises were made, I thought in good faith, by the three Front-Bench teams. They were not my chosen promises; they were made on behalf of the three Unionist parties. They did the job for the referendum, but they then did not do much of a job for the Unionist parties at the general election. However, we cannot now be seen to be delaying for any great length. There needs to be proper work—and I am sure that proper work is going on in the Government at the moment as they try to work out a financial settlement in parallel to this Bill. I am just suggesting that perhaps this Parliament needs to have some of that thinking shared with it.

Today is the first opportunity, within the clear parameters of new clause 3, to try to expose a bit of the thinking on how a limited amount of fiscal autonomy will work, and on how many of these taxes Scotland will not only collect, but be responsible for and have knocked off the block grant. As I remember it, when the leaders came up with this promise, Gordon Brown was a big voice—obviously, he was not one of the leaders at the time—for rather less fiscal autonomy. He was trying to stop Scotland controlling her own income tax revenues, so I do not entirely share the interpretation of the Labour Front-Bench team of what Mr Brown was trying to do at that point.

I will bring my remarks to a close with the simple conclusion that the world has moved on because of the general election result. The debate on money is taking place elsewhere, but we currently have a short debate about money here. I hope that the Front-Bench team will share some of its thoughts on money. Fiscal devolution seems to be attractive to many people in Scotland, but we need to know where it ends and how we sort out all those crucial issues about debt and borrowing as well as about shared policies such as pensions.

[Mr Graham Allen]

Sir David, it is a great pleasure to see you in the Chair this afternoon. Like many colleagues, I had assumed that you would be in your green tights dancing around the maypole with many other dignitaries at Runnymede. [Interruption.] Yes, the thought does bring tears to the eyes. I am talking about a serious occasion, but it is, by necessity, a backward-looking, occasion. Eight hundred years ago, in what was a great leap forward in its time, Magna Carta was sealed, if not signed. What we have been hearing about today—and this has been a really superb debate so far by all parts of the House—is the next 800 years. We are certainly looking at the foreseeable future and at our democracy. One thing we cannot do is go back to business as usual. We have a majority party in the House, and we cannot just ram stuff through the Commons. We must consider all these sorts of Bills seriously.

I mean no offence when I say that the Scotland Bill is not the property of the people of Scotland let alone of the political parties of Scotland. The Scotland Bill is about the Union. Whether we are in a transitional period or whether we have another 800 years of happy family relationships is still to be decided. As we discuss this Bill, the local government devolution Bill, and the European referendum Bill, those colleagues who are new to the House—to all parts of the House—should be excited that they have come here at this moment. It is a time of immense potential. People from all parts of this House have expressed the view that we need to look at this matter seriously. The word “statesmanlike” has been thrown around quite a bit, but it is pertinent to this debate. What we do today and over the next four Mondays will be of great importance to all of us in the Union.

--- Later in debate ---

[Mr Allen]

I think that devolution is so good that it should apply to everybody in the Union. I welcome the breakthrough that has been made in Scotland and hope to see a similar settlement for England, Wales and Northern Ireland. I often say—my hon. Friend will have heard this before—that subsidiarity is the ugliest word in the political lexicon to describe the most beautiful concept.

[John Redwood]

An important part of our Union is that there has been a transfer as well as a fiscal Union, so the richer parts pay in more, relatively, and the poorer parts draw out more. Does the hon. Gentleman feel that that could be sustained with full fiscal autonomy, or is that a problem?

[Mr Allen]

As far as I am concerned, the idea of income tax assignment was applied in the Scotland Act 2012. I think that it is the basis on which devolution can move further forward in Scotland, and certainly on which it can start to move forward more seriously in England so that we have not just piecemeal breakthroughs, as we are having at the moment, but something that can apply to every local authority throughout the whole of England and Wales and, if it wishes, Northern Ireland.

--- Later in debate ---

[David Mundell]

I can give that assurance. If it is to meet the various spending commitments that we hear sprayed around not only in the Chamber, but across Scotland, the Scottish National party will eventually have to tell the people of Scotland how much tax will rise to pay for all its proposed measures. The hon. Member for Dundee East (Stewart Hosie) carefully avoided any detail about tax when he set out the case for full fiscal autonomy. He criticised the proposals in the Bill for the devolution of income tax bands and rates, and he criticised the provision for a 0% rate. In fact, all he argued for was to enable the Scottish Government to reduce the personal allowance. I do not quite understand how that would benefit the less well-off in Scotland or the Scottish economy. The full range of other income tax powers worth £11 billion are coming to Scotland as part of the Bill.

[John Redwood]

When will the Secretary of State be able to share with Members the proposals to adjust the grant formula? Scotland will have higher spending and it will have tax revenues of its own, and my constituents in England are very interested in what the grant formula will look like.

[David Mundell]

I made it clear earlier that we would, in early course, bring forward details of the full fiscal framework as it is being negotiated.

I was not convinced by the arguments for full fiscal autonomy advanced by the hon. Member for Edinburgh East and others. I was not convinced by the red-blooded version that my hon. Friend the Member for Gainsborough (Sir Edward Leigh) set out for delivering the Scottish National party’s manifesto commitments, and I was not convinced by the SNP full fiscal-lite proposals—sometime, somewhere, somehow.