Scotland: Draft Legislation

Lord McAvoy Excerpts

Thursday 22nd January 2015 Lords Chamber

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for advance sight of his Statement. Today we again mark another milestone in the delivery of the vow made to the people of Scotland before the independence referendum. The timetable set out by my right honourable friend the Member for Kirkcaldy and Cowdenbeath during the referendum campaign has now been exceeded at every stage. A Command Paper on the process towards further powers appeared just 25 days after the referendum. The conclusion of the Smith commission and agreement by all five of Scotland’s political parties happened before St Andrew’s Day, just 10 weeks after the referendum. And today, ahead of schedule, as the Minister said, we see the draft clauses which will form the basis of the next Scotland Bill.

Before I turn to our response to the draft clauses and the Command Paper laid before the House today, I want to provide an absolute guarantee from these Benches. As my right honourable friend the leader of the Opposition has now made clear on a number of occasions, the powers agreed by the Smith commission will be delivered, and the next Labour Government will include a new Scotland Bill in our first Queen’s Speech. Labour created the Scottish Parliament in 1999, we supported more powers for the Parliament in 2012, and we will create a powerhouse Parliament with these new powers when we are in government.

Labour made it clear at the outset of the Smith commission process that we wanted a settlement that: first, respected the decisive outcome of the referendum, with a strong Scotland inside a UK where we pooled and shared risk; secondly, moved the maximum possible power from Westminster to the Scottish Parliament; and finally, did not make Scotland worse off. We are satisfied that the Smith commission delivered this outcome, and we can say with confidence that with these clauses we will be delivering home rule—the full powers Scotland needs.

As the Command Paper notes, the powers that these clauses will confer on the Scottish Parliament mean that it will control around 60% of spending in Scotland and retain around 40% of Scottish tax. This will make it the third most powerful devolved assembly in the OECD.

Before I turn to the detail of the clauses I wish to press the Minister—in a friendly way—on two areas that I hope he can address in his reply. The Command Paper makes explicit reference to the Barnett formula, and the agreement of all five parties during the Smith commission to the continuation of the formula. Can he provide just a bit more clarity about how the adjustment to the block grant will take place, and how discussions with the Scottish Government to agree this are progressing?

I also wish to press the Minister on an item on page 40 of the Command Paper, which reproduces the commitment in Smith that:

“MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax”.

Given the Chancellor’s comments at the Treasury Select Committee on Tuesday, can the Minister provide an absolute reassurance that this part of the Smith agreement will be respected, as it is not addressed in the Command Paper?

I now wish to turn to the detail and the precise powers that the clauses will confer, specifically over job creation, tax and social security. The clauses confer full power over income tax and a number of other taxes. We welcome the clarity provided by the Command Paper on the areas to be devolved.

We welcome the extension of powers over VAT going further than the Smith commission, but will the Minister explain why this change was made? On welfare, the clauses have the effect of transferring extensive new powers to the Scottish Parliament, in the region of £2.5 billion of welfare spending, in addition to the powers to create new benefits. Will the Minister confirm that the clauses as drafted respect the spirit and letter of the Smith agreement and allow the Scottish Government to create new benefits? Will he also explain the process that will now be taken forward to examine in more detail the consequential arrangements to adjust the Scottish block grant to reflect what will now be devolved to the Scottish Parliament?

My honourable friend the Member for Glasgow East has already raised with the Secretary of State, and at Scottish Questions, our desire to see the job-creating powers of the Work Programme passed to Scotland at the earliest opportunity. It continues to be our view that this could be achieved using a Section 106 order to transfer responsibility to the Scottish Government immediately. This would reduce any uncertainty about the effect of continuing contracts in Scotland and would allow others to start to remedy what we regard as a failure of this Government’s Work Programme in Scotland, which sees only one in five people into a job. Will the Minister again consider bringing forward these powers now?

Finally, I would welcome more clarity from the Minister on the devolution of the Crown Estate. Will he clarify the process that will be followed to determine the transfer scheme, and how long this process might take? Will he also explain to the House how the Government will ensure that the Smith commission’s recommendation that the powers are further devolved to our island communities will be seen through? Many in our rural and island communities will want guarantees about the devolution of the Crown Estate and that powers will be passed to the islands, as both the UK and Scottish Governments promised during the referendum.

This is another milestone in Scotland’s home rule journey. Today, we on this side of the House welcome the Command Paper and the draft clauses. I am pleased that the Government have stated their commitment to further consultation with us and with Civic Scotland. There is still work to be done, and we commit to carry this work through if it is not concluded by the election and we form the next Government. On 18 September 2014, the clear will of the people of Scotland was expressed. The Smith agreement was the response to that call for change that we heard. Today, one thing is clear—Scotland will have a powerhouse Parliament.

[Lord Wallace of Tankerness]

My Lords, I thank the noble Lord very much for his comments and for his welcome of these clauses, which, as I think he acknowledged, implement ahead of time the spirit and letter of the Smith commission agreement. It is also particularly welcome that he indicated that any future Labour Government would take these clauses forward in the Queen’s Speech. It is important to note that that has been said today by all three parties which signed the pledge prior to the referendum, so those who might try to cast doubt on the commitment are just mischief-making. There is a very clear commitment on the part of all the parties that that should be done.

The noble Lord asked about the Barnett formula and the adjustment to the block grant. There is within the Command Paper, in the section dealing with the fiscal framework, an indication as to how the block grant will develop. As tax will be the responsibility of the Scottish Parliament, the amount of tax generated will be deducted from the block grant. The Smith commission said that there had to be some means of indexation; it was quite good at saying that, but did not actually set it out. However, this will be discussed. The Command Paper sets out how it is intended to be done with regard to the devolution of income tax agreed in the Scotland Act 2012. There clearly will have to be discussions and I am pleased that the Deputy First Minister, Mr John Swinney, has already indicated to my right honourable friend the Secretary of State a willingness on the part of the Scottish Government to engage in these discussions on the fiscal framework. Whereas at the moment roughly 90% of the Scottish Parliament’s funding comes from the Barnett formula, once the 2012 Act arrangements and the Smith proposals are implemented it will reduce to 35%.

The noble Lord also asked about MPs’ voting and accurately quoted the passage from the Smith commission. There clearly is an issue, which has been raised, not only in regard to tax but on a number of issues. He is aware that the Government published a Command Paper on 16 December that looks at those issues. It is very difficult sometimes to disentangle what is devolved and what is not devolved. I certainly remember when—I was the Minister responsible for higher education in Scotland—this Parliament passed laws in relation to tuition fees in England and Wales, which had very direct consequences for Scotland. Sometimes it is too simplistic to say that just because it is not devolved it does not have implications for Scotland. But there is a legitimate debate to be had.

The White Paper sets up a number of options that the Conservative Party put forward and ones that my own party put forward. I am sure that the noble Lord’s party has its own view on this. The important point to make on this, however, is that the proposals that we are discussing today stand alone. They are not contingent—as we have made abundantly clear on a number of occasions—on any arrangement or Motions that might come forward with regard to “English votes for English laws”, as it is sometimes referred to.

With regard to VAT, the noble Lord asked why we went beyond the Smith commission—as well as the first 10% of the standard rate we will also assign 2.5% of the reduced rate of VAT. The answer is that, obviously, if the reduced rate is 5% one cannot assign 10%. We did, however, think it was in keeping with the spirit that we would assign half the revenue that comes from the reduced rate of VAT.

The noble Lord asked about welfare and it is certainly our belief that we have honoured the spirit of the Smith commission. In this, he is quite right to say that some £2.5 billion of welfare spending will be devolved to the Scottish Parliament. He asked about the detail of that, which is clearly considerable; none of us shies away from that. A ministerial working group on welfare has been established, which will be jointly chaired by my right honourable friend Mr David Mundell, Parliamentary Under-Secretary of State, and Mr Alex Neil, who is the Scottish Government’s Cabinet Secretary with responsibilities in this area.

The noble Lord asked about the Work Programme. There have been discussions between his honourable friend the shadow Secretary of State for Scotland and my right honourable friend the Secretary of State on this. We take the view that this is a package. The only measure we have accelerated is the Section 30 order in relation to votes for 16 and 17 year-olds because of the necessity of getting that on the statute book in good time for the 2016 election. The Government support the devolution of the Work Programme but it must be done in a way that reflects the fact that Smith will mean that we have a shared welfare and unemployment support system between Scotland and the rest of the United Kingdom. That is why we believe it has to be taken forward as a package. We do not know what the Scottish Government would do, and therefore do not think it would be right to take the risk that there would be no alternative programme or adequate transitional arrangements if we were to do it in very quick order. That is why we believe it should go forward as a package.

Finally, we have tried to devise a way in which we can devolve the Crown Estate, as the Smith commission recommended. I certainly share the noble Lord’s view that devolution does not stop in Edinburgh. He might expect me to say that, as I am a former parliamentary representative for the Northern Isles, which had very strong views on the Crown Estate. But, of course, further devolution is a matter for the Scottish Parliament. It is important, however, to put on record and remind the House that in his report the noble Lord, Lord Smith of Kelvin, as well as talking about further powers to the Scottish Parliament, made the point that it was important that the Scottish Parliament looked at ways in which it could devolve further powers to Scotland’s many communities.