Scotland Bill

Lord Forsyth of Drumlean Excerpts

Monday 22nd February 2016 Lords Chamber

[Lord Kerr of Kinlochard (CB)]

I rise to speak to Amendment 75A. I was in meetings in Glasgow this morning and came in during the earlier debate on the amendment to the Motion in the name of the noble Lord, Lord Forsyth of Drumlean. I heard his rousing peroration; I agreed with it. Had I been in the Chamber in time, I would have wished to speak in support of it. I agree with his “sunrise” Amendment 79H, which I guess he will speak to in a moment.

Mine is a much more mundane matter. My amendment concerns borrowing limits. I find that one of the difficulties of handling the Bill in the absence of the fiscal framework is not so much dealing with what is in the Bill as understanding why things are not in it. I do not know why no provision or regime for borrowing is set out. That is why my amendment proposes the principles for such a regime. It is a key element of the Smith commission report that there should be enhanced borrowing powers for the Scottish Government, and I agree with that. The core of Smith is paragraph 95, where the fiscal framework is discussed. The most crucial element for me, apart from indexation, is the borrowing limits—how is borrowing to be done?

We discussed this in the Economic Affairs Committee, and the report of the noble Lord, Lord Hollick, brings out that the committee did not believe that anybody would believe a no bail-outs rule. The committee firmly believes that it is necessary to be seen to stand behind Scottish borrowing. Scottish borrowing will be cheaper. It is clear to all that the United Kingdom Government stand behind it. The clearest way of spelling that out is to have a provision on borrowing in the Bill. I do not argue that we should set out specific limits in the Bill—that, clearly, is a matter for subordinate legislation, as my amendment suggests. However, it seems clear that we must set out the two categories of borrowing in the Bill, that they will be subject to ceilings, and that these will be negotiated and agreed in consultation with the Scottish Government but will be set by Her Majesty’s Treasury. That seems practical and commonsensical. It makes for cheaper borrowing for Scotland, which is, of course, also cheaper for the United Kingdom, since the United Kingdom will stand behind the borrowing.

If the borrowing is properly conducted, it will be as part of the United Kingdom’s programme. It will get slots in the programme if the United Kingdom wishes to issue bonds. I have no idea how big the increases needed are and what the current limits on Scotland’s borrowing powers are, and the Smith commission does not help a great deal on that. It states that,

“to reflect the additional economic risks, including volatility of tax revenues, that the Scottish Government will have to manage when further financial responsibilities are devolved”—

I agree with that—

“Scotland’s fiscal framework should provide sufficient, additional borrowing powers to ensure budgetary stability and provide safeguards to smooth Scottish public spending in the event of economic shocks, consistent with a sustainable overall UK fiscal framework”.

That is clearly true, but it does not help to define what “sufficient” means. I do not know whether this is a matter of controversy in the current fiscal framework talks, but I think we should be told. Is it agreed that there should be ceilings on Scottish borrowing? Is it agreed that that level should be set by the United Kingdom Government in consultation with the Scots? Has that level been set; that is, has it been agreed?

This is talking about current borrowing, but I must say that I think there will be the need for a considerable increase. My view is that “sufficient” is going to be quite a lot more than the Scots now have, although it is inconceivable that it would be sufficient to deal with ensuring “budgetary stability” and providing,

“safeguards to smooth Scottish public spending in the event of economic shocks”.

Let us remember that the oil price on Scottish referendum day was $115 a barrel. That is quite an economic shock, and borrowing in the markets is not a credible way of dealing with it. However, there is a common-sense case for a large increase because of the seasonality of tax income and the need to smooth over the year. That element is clear, but there could be controversy about what the level is, in which case I think we should be told because transparency does matter.

The second kind of borrowing, also covered in my amendment, is borrowing to support capital investment consistent with the sustainable overall UK fiscal framework. I agree that that makes sense. There will be public investment which should be financed by the markets, but I do not know whether that is controversial for Her Majesty’s Treasury. I do not know whether the UK Government buy that bit of Smith, or whether there has been a discussion about how much. I do not know whether this is one of the reasons for the hold-up on the fiscal framework, and I think we should be told.

[Lord Forsyth of Drumlean (Con)]

I wonder whether the noble Lord could help me. When he talks about setting a limit on borrowing, are we starting with a new baseline or is it assumed that the existing level of debt has part of it somehow imputed to the Scottish Government, so that we then start from that baseline?

[Lord Kerr of Kinlochard]

I have not the faintest idea.

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[Lord Forsyth of Drumlean]

Neither do I.

[Lord Kerr of Kinlochard]

I hope that the noble Lord, Lord Dunlop, knows, but I do not think that any of the rest of us knows what this means in the Smith report. Alas, the noble Lord, Lord Smith of Kelvin, is not here today to tell us.

It could be argued that there is no need to have any of this in the Bill, and I would like to hear from the Government whether that is their view. After all, they could have brought forward a Bill which said nothing about borrowing, despite the fact that it was a key part of paragraph 95 of the Smith report covering the fiscal framework. If it is their argument that there is no need to say anything about borrowing, I want to know why. As I said at the start, I believe that borrowing will be cheaper for Scotland and therefore better for the United Kingdom and Scotland if it is clear beyond doubt that the United Kingdom stands behind it. If it does, it is then clear that the United Kingdom has the right and the duty to set limits on that borrowing. I repeat that those limits should not be in the Bill. They should be set by affirmative resolution of both Houses, but the provision to require that should be in the Bill, and that is why I have tabled Amendment 75A.

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[Lord McCluskey (CB)]

My Lords, I shall speak to Amendments 79F and 79G. I have in my hands substantial notes. They were designed to enable me to present an elegant speech full of witticisms, insights and—though I did not realise I needed the permission of the noble Lord, Lord Forsyth—even some political comments. I took part in 1978, from the Front Bench, then occupied by a Government of a different hue, in the first Scotland Bill. I have had a long and lasting interest in these matters. Since I prepared this speech on 13 January much has happened. The field which I hoped to plough has become a dustbowl—so many people have walked through it, including in these debates today.

I shall try to keep my comments short, in light of the well-developed arguments, but clearly the fiscal framework has not been resolved. People have alleged that that is because of the complications. I do not believe that for one second. The civil servants involved are highly skilled and competent and have resolved all the complications. The difficulty is that there is a chasm between the UK Government and the Scottish Government in relation to a simple matter: how much? How much is the UK taxpayer going to have to provide to win the approval of the Scottish Government and, secondarily—the point raised by the noble Lord, Lord Kerr—in relation to borrowing powers? That is also very important.

As has been pointed out, the Smith commission report recorded that the representatives of five Scottish Holyrood parties had agreed the devolution of certain powers. Very well. It also said, at paragraph 95:

“Barnett Formula: the block grant from the UK Government to Scotland will continue to be determined via the operation of the Barnett Formula”.

That is not entirely surprising, considering the make-up of the Smith commission. Turkeys do not vote for Christmas. The members were voting for a continuation of the Barnett formula. The report also contained what was plainly a compromise, namely the so-called no-detriment principle in two manifestations, the first of which is vaguely comprehensible and the second of which is certainly not.

The Scottish representatives on the commission—and they were all Scots—were voting in favour because the Barnett formula was plainly very favourable to Scotland and everyone was afraid of the needs test. In fact, noble Lords who have read John Swinney’s evidence to the committee of this House on the Barnett formula in 2009 will know that that committee tried to pin him down on that. He would not answer, but simply kept repeating, “We want full fiscal autonomy”.

[Lord Forsyth of Drumlean]

Till he found out what it meant.

[Lord McCluskey]

Yes—that was, of course, part of the purpose of the article I wrote for the Herald, which the noble Lord, Lord McFall, was good enough to refer to.

Plainly, the Scottish Government were perfectly entitled to try to secure the most favourable deal they could. It was they who created this timetable that we are being asked to stick to. The timetable was to enable them to go to the electorate in May and present themselves as having achieved a great victory. They created the timetable and we are all supposed to bow to it. I just wonder about that. In relation to the rush to get it through, it also puzzles me that John Swinney is so anxious to get his hands on extra tax powers because, when the Labour Party in Scotland proposed an extra penny on income tax, he replied, “Over my dead body”. Now, we would not wish any harm to the Deputy First Minister, but he has obviously no intention of exercising these tax powers, so what is the rush? It is all to do with the electoral process of the Scottish Government.

Even the devolution of a minor thing, such as the introduction of air passenger duty, could turn out to be worth nothing because, as was pointed out very widely at an earlier stage of the passage of the Bill, Newcastle Airport is going to suffer considerable detriment if all the Scots in the north of England flock to Prestwick, Glasgow, Edinburgh or even further north to take advantage of reduced prices. They are going to suffer a detriment and that detriment is going to have to be met by whom? By the Scottish taxpayer. In other words, the Scottish taxpayer is going to have to find the money to send to Newcastle that has been saved by whom? By the airlines. It is bizarre. The whole thing is slightly mad.

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[Lord Forsyth of Drumlean]

My Lords, I wish to speak briefly to my Amendment 79H, which I hope provides a way out for my noble friend on the discussions which we have had this afternoon, in so far as it suggests that the Bill, when enacted, should not commence until we have had the fiscal framework laid before both Houses of Parliament and there has been an opportunity to debate it. If I were the Minister, I would grab that because the prospect of moving another amendment proposing that we should not proceed to Report but should reconvene the Committee stage on Wednesday is something that I do not relish, as I am sure he does not either. However, if we get the fiscal framework tomorrow, there will be an opportunity for us to discuss it and therefore there will no need for this amendment. I very much hope that we will have it.

When I was Secretary of State and the noble and learned Lord, Lord McCluskey, was a very distinguished judge, he gave me a bit of a hard time on the reforms which we planned for the criminal law, which I am delighted to say the Labour Party subsequently implemented when it was in power in the Scottish Parliament. He said that I chided him about getting involved in politics—however, I would encourage him to get involved in politics. He has made a brilliant case for why we need clarity on the fiscal framework. I am prepared to support all the amendments that have been suggested because I have no idea what the Government’s position is on what the fiscal framework will be. As regards the proposal to have no detriment, it is the only time in 30 years in Parliament that I have seen witnesses reduced to laughter in giving evidence when they tried to explain what the no detriment principle actually means. Ministers cannot tell us what it means. The noble Lord, Lord Smith, cannot tell us what it means. My noble friend Lady Goldie was on the Smith commission. Perhaps she could tell us what she thinks the no detriment principle means. Without having the fiscal framework and without having a definition of that no detriment principle, it is meaningless.

However, my right honourable friend the Secretary of State for Scotland hit the nail on the head when he said that the Scottish Government want to have their cake and eat it. Perhaps that is what the no-detriment principle means. Perhaps during the recess, instead of negotiating and getting agreement in time for us to discuss it, they have all been off to see Mary Berry so that they can produce more than one cake. The difficulty is that you cannot produce more than one cake. When we were in government a long time ago and, faced with an onslaught from the Labour Party, we struggled to find a way of making devolution work, I had two problems. The first was that I could not solve the West Lothian question. I could not find a way of doing English votes for English laws that would not threaten the union and create all kinds of problems about voting on income tax and the Barnett formula. My second problem was that my officials said that if we were to create a Scottish Parliament and give it these powers, it would have to be responsible for raising its own money. That would mean it would have to be funded on a fair basis, compared to the rest of the United Kingdom, which would mean having a means-based system of funding of the same kind that we use to distribute money to local government, the health service and so on. That would mean the Secretary of State’s budget being cut by £4.5 billion.

We were pretty unpopular in Scotland, thanks to the efforts of the Labour Party, which presented us as anglicising Scottish education et cetera—but we will not go there. I thought that coming up with proposals which gave Scotland the ability to pass its own laws and raise its own revenue, but which would result in a reduction in the budget of 25% or so—£4.5 million—would not be particularly popular. I think the Smith commission and others have played around with ideas which seem politically attractive but they have not actually done their homework on the impact these would have. Amidst the language of fiscal frameworks and everything else, it is all very simple: the tax base in Scotland is slightly lower than that in England. Therefore, if you are going to raise your money from the tax base in Scotland you are going to have less to spend. The Barnett formula provides 20% more per head for Scotland than England. It was 25% in my day, but there has been some narrowing. If you take a grant that is 20% higher and replace it with a tax which is 20% lower, there will be a gap. It has suddenly dawned on the Scottish nationalists that their proposal will actually result in less money for services.

It has also dawned on the nationalists that if you give welfare services and the like to Scotland, they have to administer them. They are demanding £600 million to administer welfare services. My goodness, the Labour Party wants to get rid of the bedroom tax; so do the nationalists. There are all kinds of welfare benefits that people would like to see improved. The plan is to spend £600 million on administration, instead of on the benefits. That is crazy, and for what? So that we can say that it is misery made in Scotland because we are spending it on civil servants and a bureaucracy. That is what is being proposed here.

[Lord McCluskey]

I hope the noble Lord, Lord Forsyth, will forgive me for interrupting him. It sometimes happens the other way round. Does he appreciate that the £600 million is more than twice the amount that the Scottish Government indicated, in the White Paper, as the cost of running the whole of Scotland after independence on 24 March 2016?

[Lord Forsyth of Drumlean]

I do love the noble and learned Lord, Lord McCluskey, as a politician making these penetrating points. He is absolutely right; it is real. I am relying on what I read in the newspapers, but that is what they are asking for welfare, behind closed doors. They would rather spend the money on superannuated civil servants, just for the sake of saying, “This is being done in Scotland”. The money is the issue.

By the way, why is the Secretary of State not doing these negotiations? I was going to ring him up last week to talk to him and he was in Africa on Friday while these negotiations were going on. They are being run by the Treasury. If you are in a spending department like Scotland, the very last thing you want is the Treasury running your negotiations. Unusually, the Treasury appears to be being very generous. It is suggesting that the Barnett formula, which gives Scotland 10% of any increase in expenditure in England, should be extended to income tax and that Scotland should get, as of right, 10% of any increase of income tax that is raised in England. How is that going to go down in England? While the Scottish nationalist Government—who want to put up the top rates of tax—force all these top-rate taxpayers to move south and reduce the size of the tax base, the English are expected to send them a cheque to compensate them for the loss of revenue resulting from people moving out of Scotland. They run the benefit system for the disabled and unemployed. If they fail to get people back into jobs or to provide the support, England has to pick up the cost because those benefits are based on performance. No wonder they cannot reach agreement on no detriment or a fiscal framework. This is an argument about having a cake and eating it.

As the noble and learned Lord pointed out, if it agrees the fiscal framework, the SNP is now faced with the horrible prospect of going into a Scottish election and saying either, “We are going to have a bit more independence but we are going to have to make cuts in public services and put up taxes”, or, “We could not get these terrible people at Westminster to give Scotland a fair deal”. The truth is that there were years of lies when people said that Scotland got a bad deal out of the union and that the Barnett formula was unfair: those same critics now cling to that formula like a life-raft. All those people said that Scotland would be better off if it had more powers. By the way, that is not everyone in the Labour Party or elsewhere. All those people turned a deaf ear when people like Gordon Brown and the noble Lord, Lord Darling, who is in his place, warned that if you move to a system which is completely dependent on income tax—an idea which was, incidentally, produced by the Tories to overstep the Labour Party and the Liberals, but was not thought through—you create a situation where you are dependent on a lower tax base and there is no real electoral connection with defence and other UK-based expenditure. Throw in English votes for English laws and you are damaging the United Kingdom.

The fiscal framework, and how it is agreed, is central to whether or not we get a glue, a cement—a fair and balanced system. That is why the Bill should not become an Act and come into force until both Houses have had an opportunity to discuss it openly and fairly, with people in Scotland—who are entitled to fair dealing—seeing what the realities are and being able to make their choice. It is utterly wrong to go into an election pretending it will be all right on the night. If, at the end of the day, the SNP is able to say, “We got a fantastic deal out of Mr Greg Hands. We got extra money over and above Barnett. Vote for us again”, when what matters is long-term future stability, I do not know how long that deal will last; I do not know how it will operate. The Barnett committee, which I served on, and to which the noble and learned Lord, Lord McCluskey, has referred, suggested that, because there is a gap, there should be a 10-year transitional relief and we should move to a needs-based system of funding. I do not know whether that is being proposed or not, but it is essential that we have the opportunity to discuss it.

Why would my noble friend not agree to Amendment 79H, which prevents the commencement of the Bill until we have agreement? What possible reason could he have? The noble Lord, Lord McAvoy, will say that it will be misinterpreted in Scotland and we will be presented as wrecking the Bill. I say to him that it will be proceeding in parallel with the consideration by the Scottish Parliament which is, quite rightly, insisting that it should look at the Bill in the context of the fiscal framework. What is wrong with us proceeding in parallel with it and having a proper debate on both sides of the border? I beg to move.

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[Lord Forsyth of Drumlean]

It might be worth having a look at the committee report that was done on the Barnett formula, which includes a full analysis of these issues. What is traditionally said about Scotland’s broad geography does not actually justify it. The conclusion was actually that Wales gets a rubbish deal, while Scotland is oversupported. But of course, that cannot be changed overnight and it therefore said that we should move towards a transitional system and that funding should be based on needs, in the same way as the Scotland Office—and later the Scottish Parliament—has distributed money to local government, the health service and the rest.

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[Lord Forsyth of Drumlean]

Before my noble friend does that, will he actually answer the question? It was: how do you tell which is a direct effect and which is an indirect effect?

[Lord Dunlop]

One is a direct consequence of a policy decision, so in the example I gave of personal allowances, that is a direct consequence of a policy decision that is outwith the control of the other Government. It is not the behavioural or indirect effect, which is about how people react to a decision that is taken. That is the distinction that we are making.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. May we just take the example that he gave—that was raised by the noble and learned Lord, Lord Wallace—of people leaving Scotland? If we have an SNP Government who decide to put the top rate of tax up to 60% and a lot of the WILLIEs and other people decide, “We are going to move south” and they tell their neighbours, “Actually we are moving south because we want to be closer to our children”, how will the Government know how much of the tax base has been reduced as a result of the Scottish Government putting up tax and how much as a result of domestic or other normal movement? There is no way that you can tell that effect. Why would it be appropriate to compensate in those circumstances?

[Lord Dunlop]

My noble friend misunderstands what I am saying. I am not necessarily saying that those should be compensated for. In the evidence that the Chancellor of the Exchequer gave to the Treasury Select Committee, he said:

“My personal view is that tax competition is something that we should allow”.

He is effectively saying that if there are different tax rates north and south of the border, that is something that we should not automatically try to compensate for. Another example relates to childcare. We all remember that at the time of the independence referendum White Paper, central to the retail offer being made by the SNP was its childcare policy. It was a matter of complaint that, were that policy to be successful and increase income tax revenues, the benefit of that would actually flow to the Treasury and not to the Scottish Government. Under the Smith package, if such a policy succeeded in increasing participation by women in the labour market, the benefits of that would flow to the Scottish Government.

[Lord Dunlop]

No, I do not believe that that would be a detriment in the sense that the UK Government would have to compensate the Scottish Government. The situation would apply; the Barnett formula would apply; the equivalent departmental spending from England would flow through to Scotland. I do not think that this package changes that at all. Although the ownership structure north and south of the border is different, the cost of this on both sides of the border is met in water bills.

[Lord Forsyth of Drumlean]

The Smith commission report says in paragraph 4a:

“Where either the UK or the Scottish Governments makes policy decisions that affect the tax receipts or expenditure of the other, the decision-making government will either reimburse the other if there is an additional cost, or receive a transfer from the other if there is a saving. There should be a shared understanding of the evidence to support any adjustments”.

On my understanding of what these words mean, with the precise example of the water industry, which I have repeatedly asked about in the past, how can my noble friend say what he has just said from the Dispatch Box when the words have a different meaning? Are we to understand that the Government are departing from the meaning of the no-detriment principle as set out there?

[Lord Dunlop]

No; we are not departing from the Smith agreement at all. It is the function of the negotiations. As I say, these are high-level principles, and the two Governments have to work out how these principles are applied in practice. That is what we are doing. The Barnett formula will continue to operate and determine departmental spending and how that flows through in Barnett consequentials. That will not change.

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[Lord Dunlop]

The Committee will understand that at a very delicate time in the negotiations I do not want to comment on the state of the negotiations in detail. It is clear from the Chief Secretary’s letter that we have indeed tabled what the noble Lord described as a hybrid model.

I shall pick up on a point made by the noble Lord, Lord Forsyth. We are seeking to avoid—I think the Secretary of State for Scotland put it this way in a recent debate—the Scottish Government wanting to have their cake and eat it and have a slice of everyone else’s cake while they are at it.

I now turn to borrowing, which was raised by the noble Lords, Lord Kerr, Lord Darling and Lord Turnbull. I should say at the outset that we have a lot of sympathy with what this amendment seeks to achieve.

[Lord Forsyth of Drumlean]

I have a question before my noble friend moves on. I accept we have had a good go on this but I am still—perhaps I am just not smart enough to understand this—struggling to understand the Government’s position. It once was that, if Scotland is responsible for particular services, it should be responsible for raising the money and have direct accountability. What appears to be happening now is that the Government are trying to find some kind of Barnett-like top-up to the tax base. How is that going to go down with people in England? How will it take account of changes in England? For example, suppose a large number of migrants come into the country and live in the south-east of England and increase tax revenues and the tax base relative to Scotland, will that mean that there has to be money sent north of the border to maintain some kind of parity? I just do not understand how this will work. Can my noble friend explain?

[Lord Dunlop]

If there is faster population growth in the rest of the UK, that obviously will not just increase tax revenues. It will also increase demand for public services. This negotiation is all about a fair allocation of risk. As I said, at this delicate time of the negotiations I do not want to comment in detail about particular aspects. We will publish this agreement if and when we can get it and I will be very happy at that point to discuss and debate with my noble friend on these matters.

I have great sympathy with what the amendment tabled by the noble Lords, Lord Kerr and Lord Turnbull, seeks to achieve. It is centred on the Scottish Government’s resource and capital borrowing powers and this is an important part of the negotiations. The noble Lord, Lord Kerr, asked whether this is a matter of great controversy. I do not anticipate—if we can reach agreement soon—that this issue will cause great controversy. In detail on resource borrowing, Smith talks about sufficient and additional powers to,

“ensure budgetary stability and provide safeguards to smooth … public spending in the event of economic shocks”.

The current powers of the Scottish Government are that they can borrow up to a total cap of £500 million for this purpose and an annual limit of £200 million for cash management and forecasting error in devolved tax revenues. The rationale for more in this area is the increased risk and volatility from a greater scale of tax devolution, although I again stress that this is a marginal Scotland-specific risk. This needs to be proportionate. Mindful of the need to deliver sustainable UK public finances, as the noble Lord, Lord Turnbull, said, Scottish borrowing is included in UK borrowing.

When we look at these borrowing powers, we need to look at the other tools that are available to help manage the risks—the possibility of building up a rainy-day fund and the block grant adjustment mechanism itself. We also need to cater for Scotland-specific shocks if the Scottish economy is in recession while the UK economy continues to grow. That is a relatively rare event—I think it has happened three times in the last 20 years. We need to do this to protect against relative underperformance leading to worse economic outcomes through higher taxes or lower spending during recession. I pick up on a point that the noble Lord, Lord Darling, made: it is explicitly not a facility for the Scottish Government to borrow to fund current spending in normal times. That would absolutely undermine fiscal responsibility and accountability.

On capital borrowing, Smith talks about sufficient borrowing powers to support capital investment. He asked the two Governments to look at a similar prudential borrowing regime used by local authorities. The current powers involve a total cap of £2.2 billion and an annual limit of 10% of the capital grant, which is currently about £3 billion, so we are talking about £300 million per annum. All borrowing needs to be complemented by fiscal rules to ensure consistency with the overall UK fiscal framework.

The noble Lord, Lord Kerr, specifically asked about legislation. The Scottish Government’s existing borrowing powers are provided for in the Scotland Act 1998 as amended by the Scotland Act 2012. Any changes to the purposes and circumstances for which the Scottish Government have permission to borrow to reflect the transferred risks may require amendments to primary legislation. I assure noble Lords that we will review further what primary and secondary legislative changes may be needed in the light of a fiscal framework agreement, including additional independent scrutiny of the Scottish Government’s public finances, to which the noble and learned Lord, Lord McCluskey, referred. Both Houses of the UK Parliament will have an important scrutiny role.

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[Lord Dunlop]

The difficulty is that you cannot separate out one element of what is an overall package. Both Governments have agreed that nothing is agreed until everything is agreed. Therefore, I do not think it is possible to pluck out just one aspect and to move ahead with it on a different timescale.

[Lord Forsyth of Drumlean]

Perhaps I might get the politics of this right. The proposal is that we absolutely have to get this Bill on the statute book before the Scottish elections but, come those elections, we will be able to say that there is another Bill coming down the track to deal with these matters, and we may or may not have the detail on that. Is that not going to defeat the object? Was not the position of both Front Benches earlier this afternoon that we had to deliver the vow and say that we had delivered it? If another piece of primary legislation is coming and as yet we do not know what it is going to say, does that not undermine the whole strategy?

[Lord Dunlop]

No, I do not believe that it does. My noble friend is asking me to comment on hypotheticals. We are engaged in trying to reach an agreement in as timely a fashion as we can to ensure that we have proper scrutiny of the fiscal framework in the context of the passage of this Bill.

I am conscious that time has been moving on and I shall be very happy to return to some of these topics on another occasion. However, I just want to pick up on a couple of points.

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[Lord Wallace of Tankerness]

The noble and learned Lord makes a very important and perceptive point, and I am glad it is not me who has to reply to it from the Dispatch Box. I certainly see his point that it is a very stark, simple Long Title. To actually extend the ambit of the Bill to Measures or Acts of the National Assembly for Wales or legislation of the Northern Ireland Assembly does seem a bit of a stretch. No doubt the Minister can enlighten us when he comes to reply.

The important point is that we do take seriously the report from the Delegated Powers and Regulatory Reform Committee. At the heart of it, these are extremely wide powers and, in some respects, exceptional powers. With the one exception relating to Part 3, no explanation or justification has been provided by the Government for taking these wide powers.

[Lord Forsyth of Drumlean]

Could the noble and learned Lord, with his considerable experience, give me some legal advice? I wonder whether, if a clause like this had been included in the previous Scotland Bill, it would have been necessary to have this Bill at all.

[Lord Wallace of Tankerness]

That is a good point. As the noble Lord was making it I was wondering whether the phrase,

“any other instrument or document”,

could apply to the fiscal framework—but perhaps that is stretching things a bit too far. Actually, “any document” could include the fiscal framework, so perhaps the Minister can tell us more.

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[Lord Forsyth of Drumlean]

My Lords, when I first saw Clause 68 I was outraged, and my instinct was to take it out entirely. Then I saw the rather more finessed approach of the noble and learned Lord, Lord Hope, so I quickly added my name to his amendments. I very much support those amendments, and the approach taken by the noble and learned Lord, Lord Wallace of Tankerness.

I was outraged when I saw the clause because—together with the fact that the Government propose to take this Bill, as it has already been taken, through the House of Commons, and then through the House of Lords, without the fiscal framework being in place—it gives the impression of a Government who see Parliament as a rather irritating thing that has to be got through, rather than as the process by which legislation is carefully considered.

It is 20 years since I was in government, but in my day this would never have got past the parliamentary draftsmen. Even if it had, it would have been knocked on the head by L Committee. It is very worrying that a Bill can get to this stage, having gone through the House of Commons, with such completely open provisions. I was not making the point in jest: I genuinely think that with these powers it would have been possible to put the entire contents of the Bill into statutory instruments. That would have been jolly convenient for the Government—would it not?—because they would have been able to say, “We’re simply implementing the Smith commission report. There’s a convention that your Lordships don’t amend or vote against regulations”, and that would have been that. It would have been a very retrograde step indeed—so I hope that my noble friend will simply take the clause out entirely, as he did with a previous clause this evening. If not that, I certainly accept the amendments tabled by the noble and learned Lord, Lord Hope, and possibly make a concession because of the points made to the Delegated Powers Committee.

I will certainly not press removing the clause altogether at a later stage, but the Government need to respond to this and recognise the very considerable feeling in the House, which was illustrated by the debate that we had on the Strathclyde commission proposals. I thought that the Government said that they were going to mend their ways. Certainly, the Strathclyde commission report was balanced in that it suggested that that needed to be done. This would be a great opportunity for the Government to show good will towards the Strathclyde recommendations. Then they might be able to persuade some of us who have doubts about them that it would be sensible to reach a compromise.

[Lord Norton of Louth (Con)]

My Lords, I want to reinforce points that have already been made. It is important to stress that we should not let the late hour mask the importance of the amendments before us. As the noble and learned Lord, Lord Wallace of Tankerness, stressed, this clause has important constitutional significance. It raises fundamental issues and I concur with everything that was said by the noble and learned Lord, Lord Hope of Craighead, and reinforced by the noble and learned Lord, Lord Wallace of Tankerness. He referred to the report by the Constitution Committee on the Scotland Bill and I reiterate the comments made by that committee, on which I served, in respect of this clause.

In its report, the committee drew attention to the clause, saying:

“As has become a trend over the years, the Government has put forward a Henry VIII clause which gives it powers well beyond those which are necessary to achieve this end”—

that is, the end of the Bill. It goes on to say that,

“we once again must express our concern at a Government proposal that would provide Ministers with too much power at the expense of Parliament”.

Here we have a Bill that is giving the Government greater powers than is the norm in these types of clauses, as has already been stressed, without any justification for so doing.

It is amazing that we have got to this stage without the Government providing a clear justification for what is before us. We must take our role seriously in terms of acting as a constitutional safeguard to make sure that the Government do not use these measures to take powers that have not been justified by them and which would put us in a difficult situation in any future measures. The Government must take this very seriously and I hope that the Minister will give some commitment that between now and Report changes will be introduced by the Government themselves.

--- Later in debate ---

[Lord Dunlop]

I am happy to take the noble Lord’s point away and reflect on it, and I shall either write to him or discuss it.

[Lord Forsyth of Drumlean]

Can I take my noble friend back to the debate we had earlier when the noble Lord, Lord Turnbull, argued that it was important to have in the Bill specific provisions relating to borrowing powers? I think that my noble friend indicated that more primary legislation would be required; he used the phrase “primary legislation”. Can we take it that these powers would not be used, for example, to put in place a borrowing regime for the Scottish Parliament, taking into account what he has just said now with what he said earlier this evening?

[Lord Dunlop]

I absolutely stand by what I said earlier. There may be some aspects of borrowing that could be done through secondary legislation, and that will be made clear when we agree and publish the fiscal framework.