United Kingdom Internal Market Bill

Lord Dunlop Excerpts

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd November 2020 Lords Chamber

[Lord Dunlop (Con) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Humphreys, and to participate in the debate on Clause 48 and the financial assistance power in the Bill. I want to offer a further Scottish perspective.

I welcome the intent of Clause 48. The UK Government should be able to invest in all parts of the UK on initiatives that support and strengthen the union. I also recognise the anxiety that, if such an ability did not exist, the danger is that the UK dimension in devolved nations would become squeezed out or diminished as a relevant part of the lives of people for whom Scotland is home. So, as ever, the question with the Bill is, for me, not about its aims but about the best way in which to achieve them.

Let us not forget that, as the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Bruce, pointed out, the UK Government already invest in areas which, strictly speaking, fall within areas of devolved competence. For example, in government I was a very active proponent of the UK Government investing in both a comprehensive network of city and growth deals across Scotland and Scottish cultural assets important to our shared British heritage. The then Chancellor, George Osborne, was persuaded to open the Treasury’s cheque book and the Scottish Government were persuaded to come on board and invest alongside.

Today, the UK Government are investing £1.5 billion in UK city and growth deals in Scotland, with the Scottish Government co-investing a similar amount. The wide range of Scottish cultural institutions supported by UK Government cash includes the Glasgow School of Art, the Burrell Collection, V&A Dundee and a new Edinburgh concert hall. Of course, the UK Government do not get the credit they deserve for these investments, but in my view that is because there has been a tendency to “fund and forget”, just as successive Governments have over the years slipped into a habit of “devolve and forget”.

Clause 48 is a widely drawn power. It has caught many, including the devolved Administrations, by surprise. The internal market White Paper said that the Government would

“consider which spending powers it needs to enhance the UK internal market”.

However, the power in the Bill permits a potentially broader incursion into areas of devolved competence, including, as we have heard, health, housing, education, prisons and sport, and certainly beyond what is strictly necessary to support the internal market. The Government have provided very little detail on how they intend the power to be used. Like others, I hope that my noble friend, when she responds, will fill in some of the missing detail.

It may be that what the Government have in mind is, as the noble Lord, Lord Stevenson, and others have surmised, to replicate, through the UK shared prosperity fund and other initiatives, the range of EU funds that will disappear at the end of the transition period—funds in which the devolved Administrations are of course involved now in deciding how resources are allocated in their areas. The lack of clarity is problematic because the scope for misunderstandings becomes greater. Uncertainty creates a breeding ground for suspicions and scare stories, with predictable but no less unhelpful, consequences.

A month ago, the UK Government announced the union connectivity review to be chaired by Sir Peter Hendy, the chair of Network Rail. In my view, this is an excellent initiative to bring communities across the UK closer together and to support the levelling-up agenda. It is just the sort of initiative the UK Government should be promoting and leading. In response, the Scottish Government have refused to co-operate and taken away their ball. Their response is profoundly unhelpful and not, I would suggest, an example of how to look after the best interests of people in Scotland, so I very much hope the Scottish Government will reconsider their stance. However, while I do not condone in any way the behaviour of the Scottish Government, I cannot help but wonder if their unco-operative approach to the Hendy review might have been avoided if the Government had adopted a more consultative and collaborative approach to the financial assistance power in this Bill.

In fleshing out how the power will be exercised in practice, I hope that Ministers will be guided by three important considerations, which, if addressed properly, will help to ensure that this financial assistance power does not inadvertently destabilise devolution itself. First, on additionality—and here I apologise for getting a bit technical—the block grant allocations for the devolved nations are worked out by reference to a population share of any change to Whitehall departments’ expenditure limits adjusted by a comparability factor, depending on the extent to which a policy area is or is not devolved. So, for example, the comparability factor for education and justice is 100%, for health it is 99.4% and for transport it is 91%. If the power in the Bill is not to undermine the existing funding arrangements, the financial assistance provided by it should be additional to the normal block grant allocations. Can my noble friend explain what effect directly spending more at a UK level in areas of devolved competence will have on the block grant comparability factors, and thus for the devolved Administrations’ budgets?

Secondly, on financial accountability, a core purpose of the Scotland Act 2016, and the fiscal framework that accompanied it, was to make the Scottish Government more financially accountable by making them responsible for raising a significant proportion of the money they spend. The Scottish Government should rightly be held accountable by people in Scotland for the policy choices they make—good and bad. Therefore, the wide scope of the Clause 48 power really does matter and should matter to the Government, too. It should most certainly matter to the Treasury, which will have to fund it. If democratic accountability in Scotland is to flourish in the years ahead, it is important that the allocation of responsibilities between the UK and Scottish Governments is clear and better understood. I suggest to Ministers that, in exercising the financial assistance power in the Bill, they will need to take care not to blur the lines of accountability in a way that lets the Scottish Government off the hook.

Thirdly, on co-operation, if the power in the Bill is to be fully effective, it will be important for the UK Government to work in partnership, not conflict, with the devolved Administrations and representatives of local communities throughout the devolved nations. It would be a retrograde step indeed if Ministers sought to substitute local priorities with the priorities of the centre, uninformed by local views. In my experience, the maxim “The man in Whitehall knows best” is never a popular one, and certainly will not cut much ice in Scotland.

There is one very good practical reason for involving the devolved Administrations in how the power is exercised: many of the delivery mechanisms are ultimately in their hands, from the planning system through to the agencies that have the responsibility for managing and improving, for example, local transport networks. Therefore, I would commend to your Lordships the Constitution Committee’s report on the Bill, which concluded that:

“to ensure practical cooperation around the use of the power, the Bill should be amended to include a requirement that ministers, in exercising their power to spend directly in devolved areas, consult with the relevant devolved administration.”

I want to make a broader point. In a week’s time, we will complete Committee Stage. I sense that the mood of the House is to make changes to the internal market aspects of the Bill, not in order to frustrate it, but in a genuinely constructive bid to advance its aims in a way sensitive to devolution. I suspect the votes will be there at Report to make those changes. Ideally, I hope that, prior to Report, the Government Front Bench will play an active and willing role in working with all parts of the House to improve the Bill. But if Ministers in this House do not have the latitude to respond substantively to suggested improvements, I would ask the Government to consider when the Bill returns to the Commons this simple point: the health of our union is, and always should be, a constitutional issue to be carried forward on a cross-party basis.

As we heard earlier from my noble friend Lord Cormack, in 2021 the union may face some very choppy waters. It will be important that, as we navigate those choppy waters, the Unionist parties in Parliament are able, on this issue at least, to present a united front. For that reason, I hope the Government will think long and hard before overturning in the Commons, on the back of Conservative votes alone, any sensible changes to bring about a better reconciliation within the Bill of the twin aims of UK free trade and respect for devolution. After all, just because you can do something does not mean you should.