Scotland Bill

Lord Lang of Monkton Excerpts

Monday 29th February 2016 Lords Chamber

[Lord Hope of Craighead]

My Lords, I would like to pursue the points made by the noble Lord, Lord Forsyth, and the noble and learned Lord, Lord Wallace of Tankerness, about dispute resolution. As a lawyer, one tends to look to the dispute resolution bits, because they are the things that matter to us, to see that there is actually an effective mechanism for that, rather than at the fiscal parts, which I am content to leave to others.

Would the Minister care to look at paragraph 46, which the noble Lord, Lord Forsyth, identified? It contains the definition of “policy spillover effects”, which is where either Government make a policy decision that affects the tax receipts or expenditure of the other. If that happens then there is a spillover and a spillover effect. In paragraph 98 we enter the dispute resolution system, which applies to, among other things,

“All disputes arising from the consideration of direct and behavioural spillover effects, including both gains and losses”.

So this particular group of paragraphs deals with the resolution of the dispute. We can see how it works: first, if it cannot be settled at working level then it becomes a disagreement and is referred to senior officers at director level or above, including consideration at Joint Exchequer Committee official level too. If that does not work, the matter becomes not a disagreement but a formal dispute. It is then referred to Ministers to be raised and discussed at a meeting of the JEC.

We then move to paragraph 100, and so far we are working down the line of complete impasse:

“If … there is a dispute that cannot be resolved between Ministers, there is an automatic pause placed on the disputed finances, i.e. no decisions … can be taken by either government in relation to the disputed amount until the dispute is resolved”.

That seems a strange system, given that revenues either way are crucial to the running of the country. To have a dispute simply frozen in that way is very strange. The formula goes on a little further, because if that happens then the Governments are to draw up a statement of fact on the dispute, and technical input may be sought to ensure that the facts are correctly stated. It will then be considered by both Governments, who commit to using their best endeavours to resolve the dispute.

However, the agreement says in paragraph 103:

“If no agreement can be reached then the dispute”,

fails—or rather “falls”—and, as the noble Lord, Lord Forsyth, pointed out,

“there would be no specific outcome from the dispute and so no fiscal transfer between the Governments”.

What puzzles me further is paragraph 104, and maybe the Minister can help here:

“If either Government wishes to pursue the dispute further”—

let us imagine that the UK Government are anxious to do that—

“it can be referred to the ‘Protocol on the Resolution and Avoidance of Disputes’ attached to the Memorandum of Understanding between the UK government and the devolved administrations”.

I do not know where the memorandum is—it is not in the Printed Paper Office, as far as I know—and it is also said to be subject to review. So there is a cloud of uncertainty over exactly what paragraph 104 means and how fixed it is as a system for resolving these disputes.

If one is entering an area like this where it is plain that there will be political arguments on either side that may lead to a complete impasse, it is crucial that there should be a system for the resolution of disputes; otherwise one is left with a situation where no transfer takes place although one side is calling for it and the other is not. How can the system be left in that situation, hanging in the air without anyone to decide it? Can the Minister inform the House about that? It has a direct bearing on the amendment by the noble Lord, Lord Forsyth.

[Lord Lang of Monkton (Con)]

My Lords, we all slightly feeling our way in the dark in this debate, and that is very unfortunate because the fiscal framework is crucial to the future not just of the Government of Scotland but of the Government of the United Kingdom, and indeed to the stability of the UK and holding it together in the face of the assault coming from the Scottish nationalist Government in Scotland.

One would not have thought that we were feeling our way in the dark, though, from the absolutely masterly exposition by my noble friend Lord Forsyth of Drumlean, who laid out the issues with great clarity and considerable force and raised a number of very important points to which we have not yet had an answer. I share his view on almost everything that he said, and he has helped me to share it more clearly than I did before.

I shall focus on one fairly simple issue as I understand it—although here, too, we are in the dark—namely, the way in which the implementation of the financial assistance that is to be given to the Scottish Government over the next five years on the population issue will be put into force. I should start by saying that, yes, I welcome the fact that a deal has been done because it is a political situation that we also have to consider, as well as the proprieties, the economics and the constitutionality. Having a deal done means that the Bill can come into force and the Scottish Government can be put in the position of becoming accountable to a greater degree for their actions, possibly exposing themselves to the shortcomings of their policies and attitudes.

As I look at it, in the context of the Scottish block and the Barnett formula, there seems to have been a finesse of a somewhat insidious nature and we need to try to get to the bottom of it. I am perhaps thought pedantic because I do not like to hear the whole financial settlement in Scotland referred to as “Barnett”. Barnett is a very small part of it which simply deals with the annual increases that are added to the very substantial Scottish block, and the effect it has on those increases is, by an infinitesimal and unreliable amount, to reduce what comes to Scotland from what it otherwise would have been under the old Goschen formula, when the Barnett formula did not exist. I will not bore the House with the reasons why; I could do so but it has never had much impact on people before so I will ask your Lordships to take my word for it.