Scotland Bill

Lord Maclennan of Rogart Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Maclennan of Rogart]

If the noble Lord does not get the response that he is seeking and he is right in divining that others are seeking, then he should not rely on his intuition about coalition around his point. I think he can have the assurance that a number of noble Lords on these Benches are of the same mind as he is.

[Lord Browne of Ladyton]

I am extremely grateful to the noble Lord for his contribution. I know where the key to success in a vote in this House lies: it is on those Benches. I am fortified in my resolve to try to improve this legislation.

The noble and learned Lord, Lord Wallace of Tankerness, will confirm that at all stages of this process I have endeavoured to be constructive and helpful. This provision has to be improved, although not necessarily directly in the way I have proposed. I am happy to be flexible but my suggestion passes my only test: it improves the ability of the Bill to contribute to the betterment of the Scottish people while, at the same time, strengthening the union. It gives us an argument that is owned across the union which we can deploy in the future.

I say to the noble Lord, Lord Lyell, that, as far as the amendment is concerned, this parrot is very much alive; this parrot is not no more and it is not deceased. It may not fly today, but it is very much alive.

I gave the Minister advice about Scottish football on a previous occasion. He scorned it, and he got himself into an argument in the House about Scottish football which he could have avoided. I give him this advice now: do not tempt the noble Lord, Lord Forsyth, to go away and come up with better criteria. I am almost certain that we will return to this issue at Third Reading. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, I do not want to speak at length as I spoke about this in Committee, but I will make a couple of points. I agree with everything that my noble friend Lord Lang has said about this apart from one thing. I am not sure that I would have pressed for a needs-based system to replace Barnett. Indeed, the briefing I got from the Treasury officials was, “Whatever you do, do not agree to a needs-based assessment”. In those days, they said that it would cost us £2.5 billion off the block. Given the evidence we had in the Barnett committee—which, incidentally, was unanimous—we were lucky to have on the committee the noble Baroness, Lady Hollis, who understands the needs-basis system that is applied in local government in other parts of the public service.

If my noble friend Lord Steel is right, the Barnett formula will be replaced by a new one which will be called the cold Steel formula. That is because, if my noble friend has his way, there would have to be huge reductions in the Scottish budget. The idea that by 2016 Scotland can be responsible for raising all the income it spends would mean catastrophic reductions in expenditure or huge increases in tax. This is not alarmist: the figures are all there in the report; the work has been done by people such as Professor Bell at Stirling University.

For historical reasons, Scotland is probably funded to the extent of about £4.5 billion more than it would be on a needs basis. It is not sustainable to argue against the needs-based system for funding the Scottish Parliament when the Scottish Executive distribute the bulk of the money they receive to local government and the health boards using a needs-basis system of funding. The idea that this is somehow alien to Scotland is wrong.

We have a huge political problem in that the overfunding is probably of the order of £4.5 billion. My noble friend Lord Sassoon said earlier that the product of putting 10p on income tax in Scotland would raise about £4.5 billion. So we are talking about the equivalent of half the income from the basic rate and 10p of the income from the higher rates being the additional grant that Scotland enjoys over and above that which would be provided on a needs basis. This is why the amendment of the noble Lord, Lord Barnett, is so important and why, I regret to say, the report produced by this House under the excellent chairmanship of the noble Lord, Lord Richard, has not been implemented and why it needs to be implemented.

If we are going to make this change, it will need to be phased in over a long period. That was the key recommendation of the committee. We need consensus and agreement on this. It is no good this Government or another Government saying, “This is what needs to be done” because everyone will say that they have done it for political reasons. We need an independent and objective group of people to look at the issue and make recommendations, which we then need to implement over time.

It is particularly—I keep saying this—irresponsible to introduce a system of funding which relies on putting up tax while not dealing with the underlying problem. We are heading for a train crash. We will reach a position where the Scottish Parliament will say, “Well, you can raise income tax if you want to spend more”, while they find not only their baseline for income tax but the whole of the element of the block grant which relates to Barnett disappearing as the pressure for moving to a needs-based system of funding becomes impossible.

There is one element of the Calman commission which all the enthusiasts for its recommendations conveniently forget to notice; that is, the recommendation —my noble and learned friend Lord Wallace will remember it well—which acknowledges that this issue of funding will have to be addressed and that we will have to move, in time, to a formula based on needs. That is one of the points made in the Calman commission report. The noble Lord, Lord Barnett, is saying, “Look, accept this amendment and set up the commission. It will take two or three years to work out the methodology and to get agreement on it. Get consensus and then, if the noble Lord, Lord Steel, wants to get to a position where the Scottish Parliament raises all its own revenue, recognise that it will take 20 years if it is not to result in a huge gradient between Scotland and England and huge damage to our public services”.

Who is going to make capital out of that situation and who is going to get the blame? It will be meat and drink, even if Alex Salmond loses his referendum. If you have just won the referendum for the union but then whip away the money and introduce a tax-raising power that makes Scots pay more tax than others, do we really believe that will settle this constitutional question once and for all?

The noble Lord, Lord Barnett, took a large part of a year of my life when I sat on what was a very interesting and fascinating committee. In pressing this matter now, we should listen to this sage advice and not run away from it. The argument put forward by the Government that we cannot deal with Barnett because we are concentrating on budget deficit reduction is a non sequitur if ever there was one. What has dealing with the deficit got to do with putting in place arrangements for funding, not only for Scotland but Wales and Northern Ireland, that are fair to all?

That is the other aspect of this—Wales is suffering quite considerably as a result of the inequity of this formula. If we are to maintain the United Kingdom, which appears to be under great pressure and will be under even more severe pressure because of the economic circumstances in which we find ourselves, it is important that we have a baseline that is seen to be fair and cannot be challenged. There are arguments about marginal seats and all the rest but, broadly speaking, when we distribute money to local government, health and so on, we use a well trodden path of formulas based on need. The Barnett formula, if I may say so, was a fix that followed great anxiety about the SNP winning elections in Scotland. We have been going down this track of appeasing the nationalists in a haphazard and piecemeal way.

It is important, as the Government embark on the huge constitutional change that is contained in this Bill, that we understand the importance of the finance. When my noble friend Lord Steel says, “We will do this”, he is saying what many people in Scotland and endless editorials say—that we must have more powers for the Scottish Parliament. However, I do not think they have looked at the numbers. If you do an opinion poll and ask people whether they would like more powers for the Scottish Parliament, of course the overwhelming majority say yes. However, if you ask them whether they would like to see public services having less money, higher taxes in Scotland or a financial crisis in public services in Scotland, you get a very different answer. The noble Lord, Lord Barnett, in proposing this amendment, is giving us a pathway that, over the next 20 years, will avoid that kind of dysfunction and dislocation within the United Kingdom.

[Lord Maclennan of Rogart]

My Lords, I add my words in support of the general view expressed in this short debate that the time has come for the Government to make clear their attitude to Barnett. However, I do not agree with the proposed amendments, since they are insufficiently explicit about the process that would need to be established to implement the Richard report effectively and fairly. Amendments 30 and 31, which are grouped together, speak of assessing Scotland’s needs. However, if you are to implement the Richard report then you have to assess the needs of the whole of the United Kingdom. Setting up a commission to look solely at Scotland will not necessarily produce a proper outcome.

I would strongly recommend therefore that the Government come forward with their proposals and do not postpone until the Greek kalends grasping the important issue of fairness, which is exacerbating the bad feeling between the different nations of this country; and recognise that it will take some time to establish the fair basis for making these calculations. Consequently, I cannot support the amendments in the form in which they have been drafted, but none the less believe that, as a backdrop to the constitutional developments we are seeing, we need to know that the Government firmly intend to recognise the validity of the principles enunciated by the Richard report.