Scotland Bill

Lord McFall of Alcluith Excerpts

Monday 29th February 2016 Lords Chamber

[Lord McFall of Alcluith (Lab)]

My Lords, even if one were dozing during this debate, there would be no doubt how the House felt on the issue. I note the comment of the noble Lord, Lord Kerr, that the debate on the Barnett formula is lost. We must realise that situation. I shared a flat near Joel Barnett for many years. Joel never tired of telling me that the Barnett formula was introduced in 1978 to settle a relatively minor dispute in devolution so that he would get “them” off his back. He used a profane word that I will not use in this House. However, since 1978 that formula has stuck.

When I was in the other place, the noble Lord, Lord MacGregor, manfully defended the Treasury but still was very generous with the Barnett formula. The noble Lords, Lord Lang and Lord Forsyth, as Secretaries of State for Scotland, skilfully manoeuvred the Barnett formula in Scotland. I had to sit on the Opposition Benches and admire their chutzpah on that particular issue. That is the politics of the situation now. Sadly, in many ways the political bandwagon has moved on but the analytical one is behind it.

At the end of last week, the First Minister said that there was not a penny of detriment to Scotland. She spat that out but every Scottish party in the Scottish Parliament agreed with her. The noble Lord, Lord Forsyth, mentioned in adulatory terms Professor Jim Gallagher. I looked at Jim Gallagher’s blog at the weekend. I mentioned that every Scottish party was involved but he said that, in the event, with the fiscal framework,

“the politicians have come to a compromise: one suggested first, publicly at least, by the Scottish Conservative leader Ruth Davidson”.

She proposed this, and then the Chancellor, George Osborne, intervened and offered the Scottish Government a safety net for the first five years. That effectively delivers what the SNP Ministers asked for: namely, protection for their tax income in the event that Scottish population declines. That is the reality, so perhaps I am not being ungenerous in saying that maybe the right hand of the Conservative Party does not know what the left hand of the Conservative Party is doing.

[Lord Forsyth of Drumlean]

Speaking very much for the right hand of the Conservative Party, I think that perhaps the noble Lord did not hear the quote from Jim Gallagher. He said that the compromise the Treasury gave is that it handed over the money. That is what we are talking about: it is not a compromise.

[Lord McFall of Alcluith]

My Lords, the noble Lord tells us nothing new. I looked at that issue as well. I think I made the point in the last debate here that the two no-detriment principles are irreconcilable. We must try to work out the politics of that at a later date but there is absolutely no doubt of that. Professor David Bell in his submission and the work he did for the Economic Affairs Committee illustrated that very much. In fact, I sat for about three hours looking at that report from the IMF with David Bell and I thought I was back at university. After those three hours, I understood maybe 15% of the whole issue. It is hugely complex—we all agree on that.

I mentioned the issue of the safety net. This is a good deal from Her Majesty’s Treasury but after the five years there will be the review. What will the Treasury do at that time? That will depend on how the population looks then and what other political and economic factors are going on. I agree with individuals who say that this is a five-year or six-year proposal. At the end of the day, negotiations must start again. One thing I am interested in here is to see that we develop a narrative as a result of this fiscal framework which will ensure that the grievance mentality is abandoned. Some would say it will not be but there is a possibility of that happening. I will mention that later on in my speech.

For clarity’s sake, we see that the Scottish Parliament is supported by, as we said, shared UK resources from Barnett, its own tax revenues levied in Scotland, and a cash supplement from UK resources. That could possibly force all the parties in Scotland to go into what they are offering the Scottish electorate in terms of tax and spend. We have seen it already; today I read it in the Scotsman as I was coming down in the plane. For the first time, in many ways, we are getting on to the reality of devolution and have moved on from the process. Sadly, the Labour Party was very much involved there because it was mentioned that devolution was a process rather than an event. That got it wrong. As my old friend Tam Dalyell said, it was like a motorway without exits. Let us try to build the exits as a result of this fiscal framework.

We can go on indefinitely in asking who won the fiscal framework battle. Yes, the Treasury model is being used. We call it levels reduction. Yes, the UK is reimbursing Scotland for any money it would have received under the indexed per capita deduction in place. In effect, one side is happy saying, “The Treasury model is being used”. The other side is happy saying, “Yes, it is being used but we ain’t going to be disadvantaged because at the end of the day the per capita will be involved”. How far has that taken us? It has taken us five years down the road in terms of politics. We will have to come back and see how far it takes us down the road in terms of finance.

There is a big picture here as well, which nobody has mentioned. This will be the biggest ever transfer of powers to the Scottish Parliament. In fact, it will have as much autonomy as it had in 1707. It has demanded both good will and compromise to reach that position.

On that particular point, I commend the Government for their work in this area. However, in terms of the reporting of the fiscal framework, it could be helpful if the Government teased this issue out. The fiscal framework states that the Government will be required to produce reports on the implementation and operation of new powers in line with those produced under the Scotland Act 2010. Will this be done on an annual basis? If not, when will such reports be published? If we are to have an independent review, it should be set up very quickly and should not wait until the last minute, as we had to do with the fiscal framework now, where eight weeks of Smith translated itself into a secret cabal deciding it and then presenting it to us. We should have that transparency so that that independent commission can report to Parliament on an annual basis. By doing so, there will be transparency and individuals can look at it from the two no-detriment principles—particularly the second, of fairness to UK taxpayers.

This is a solution. Is it a neat solution? We can argue about that until the end of the day but there is a political momentum on this issue with the political parties in Scotland. The Government have responded to that. We wish them well in the negotiations.

[Lord Higgins]

I am most grateful to the noble Lord for giving way. We have had an extremely interesting debate on various aspects of the fiscal framework, but that is not actually what the amendment is crucially about: it is whether or not each House of Parliament should have an opportunity to approve it. That is what we are voting on. Despite all the technical discussion and so on which has been admirably set out and considered, the crucial issue is that the other place must have an opportunity to debate this. It would be absurd if the whole thing goes through without the House of Commons having debated it at all.

[Lord McFall of Alcluith]

My Lords, I take the noble Lord’s point on that but right at the beginning of my speech I made reference to all political parties in Scotland and to the leader of the Conservative Party in Scotland, whose idea this was, which was adopted by the Chancellor of the Exchequer, according to Professor Jim Gallagher. Some people are waiting to say that the unelected House of Lords is stopping a Bill which is in Scotland’s interests. So do we go with the intellectual case, which always appeals to me, or do we understand the politics in Scotland at this time? If we have a gap in this fiscal framework where this House can understand what is happening on a year-by-year basis, we should give the Government the benefit of the doubt on that issue because the political force is with all political parties in Scotland. I commend my speech on that point.

--- Later in debate ---

[Lord Dunlop]

I am coming to that point. The idea that it would be easy or straightforward to replace the Barnett formula with a needs-based one—or seek to do so—does not stand up to scrutiny. I have read, with great interest, the report of the House of Lords committee on the Barnett formula, published in 2009. John Swinney, now Deputy First Minister of Scotland, gave evidence to that committee’s review and made it absolutely clear that he did not support the move to a needs-based formula. There has been lots of talk about a veto. Another way of putting that is that if you do not have a veto then the UK Government unilaterally imposes something on Scotland. In that situation, we would have to proceed as we have done in this fiscal framework agreement—by negotiation and agreement.

The no-detriment principles have been raised several times in this debate. I have talked directly to people who sat on the Smith commission including the noble Lord, Lord Smith, himself. The commission recognised that these were high-level principles. It was always accepted that the two Governments would have to sit down and decide how those principles were applied in practice. It is not surprising that there is a greater level of detail and a lot of talk about the direct effects, which we want to capture mechanically in the agreement. However, the indirect, spillover effects are very difficult to capture, because of the causality. It is the direct effects which we are seeking to capture in this agreement. Although there is a backstop power to deal with the spillover effects, it will be used rarely. One needs to draw a distinction between the review, where we need to proceed and get an agreement, and the dispute resolution mechanism, which is very much attached to specific issues regarding how spillover effects actually work.

I turn to the review itself. It is obvious and self-evident that this is five years away. The details of the review have still to be determined. I am not going to stand here today and say otherwise, because noble Lords would not accept it. The Government would positively welcome the House of Lords Economic Affairs Committee feeding in its views about how the review should be structured. That would inform the deliberations we will have with the Scottish Government about constructing that review.

[Lord McFall of Alcluith]

Will the Minister take up the point I made earlier about an annual report on this issue to both Houses, and the Scottish Parliament, so that we get transparency and accountability?

[Lord Dunlop]

I am very happy to make that commitment. The Government intend to make an annual report to Parliament that will cover how the powers under the Smith agreement are being implemented in practice. That is fundamental to our approach. Regarding the review, I can confirm what has already been confirmed: there is no default position for it. All the evidence that will be built up over the succeeding five years will be on the basis of the Government’s comparable model.

I turn to the prospects of reaching an agreement. This review will be informed by an independent report. We will have had five years of experience of how these powers operate. Instead of seeking to negotiate in the months leading up to an election, this will be a negotiation after an election. Those conditions lead me to believe that an agreement can be reached.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, I wanted to delete this clause entirely in Committee, and was persuaded that the approach being taken by the noble and learned Lord, Lord Hope, was perhaps more forensic and justified. I agree with the noble Lord, Lord Stephen, that half a loaf is better than no loaf. This is a very useful example, both in the original draft and the slightly grudging response from the Government, which we can discuss when we come to debate the Strathclyde review and the Government’s attitude towards the use of secondary legislation.

Our previous debate, when we spent 10 minutes arguing whether the House of Commons ought to be able to discuss the fiscal framework, to my mind underlined an Executive who are increasingly treating Parliament as the ornamental part of the constitution. That is very regrettable.

I thank my noble friend for at least moving as far as he has, but I would not want him to think that the Bill as it stands is in any way acceptable. I hope that on a future occasion we will have more opportunity to discuss the increasing use of secondary legislation. If it is not a Henry VIII clause, perhaps it is now a Queen Anne clause, in deference to the noble Lord, Lord McAvoy, who thinks that this is putting the Scottish Parliament in the same position as it was in 1707.

[Lord McFall of Alcluith]

Yet again, the noble Lord has got it wrong—it was me who said that. However, let us finish on a positive note tonight. First, I would like to thank the Delegated Powers Committee for its report, because it was very clear at the beginning that the Scotland Office provided a delegated powers memorandum, the explanation of which was inadequate. As a result of that, I thank the noble and learned Lord, Lord Hope, for tabling these amendments, and the noble Lord, Lord Norton of Louth, who made an excellent speech last time on the Henry VIII powers.

The Law Society of Scotland was mentioned, and Michael Clancy has been sitting in the box for many weeks, although he is not there tonight. He has been helping us—and I well remember taking over the shadow Home Affairs responsibility in the 1990s for the Labour Party, when Michael was helping one and all political parties. So I thank him, too.

As the noble Lord, Lord Forsyth, said, it is better to have half a loaf than none. It is important to say that the Government have not outlined totally why the consequential powers are required in Parts 1, 4, 5 and 6, in every other respect. Perhaps the Minister will at this stage give your Lordships’ House some indication of the type of saving powers that the Government expect to propose. As the noble and learned Lord, Lord Hope, said in Committee, if we are going to keep faith with what we are trying to achieve, the Government have to go that step further. With those comments, I commend the work that noble Lords have done and the response that the Government have given to the suggestions.

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

I am obliged to your Lordships and particularly grateful to the noble and learned Lord, Lord Hope of Craighead, for his contributions on this matter. As will be appreciated, the powers in question can be used only in consequence of provisions in the Bill. The power to make consequential, transitional and saving provisions of this type are not exceptional or unusual in primary legislation of this ilk. Indeed, Section 105, together with Section 113, of the Scotland Act 1998 provided a similar power. The Scotland Act 2012 also contained consequential powers.

When consequential amendments were identified as necessary during the course of preparation of the Bill, they have been included in the Bill. For instance, Clause 10 makes provision in consequence of the clauses relating to elections. However, given the nature of the Bill, involving significant devolution of legislative and executive powers, it is difficult to anticipate the full extent of the consequential changes required when the provisions are commenced to put them on the face of the Bill. Therefore, it is possible that, following Royal Assent, legislation may be needed to amend and deal with the consequent provisions of the Act. In those circumstances, the Government considered it both necessary and appropriate to include this provision in the Bill.

However, following the views of the Regulatory Reform and Delegated Powers Committee, and those expressed in this House in Committee, we have brought forward an amendment to Clause 68. The effect of the amendment is that the power to amend future enactments, future prerogative instruments, any other future instruments or documents and Welsh and Northern Irish legislation, whenever made, will apply only to Part 3 of the Bill, the only part of the Bill dealing with welfare provisions. Amendments 62A, 62C, 65A and 65B limit the scope of the consequential, transitional and saving power as it applies to Parts 1, 4, 5 and 6 of the Bill. I hope that reassures noble Lords on the proper scope of these provisions.

Amendment 71A provides that Clauses 3 to 12 do not commence automatically two months after Royal Assent, but instead come into force on such a day as the Secretary of State may appoint by regulations. We have identified some consequential and savings provisions that may be required, and they require careful co-ordination with commencement of Clauses 3 to 12. They are largely concerned with electoral law. Commencement by regulations will facilitate such co-ordination. We do not expect to delay commencement for too long after the Scottish parliamentary elections have taken place in May 2016. In these circumstances, I invite noble Lords not to move their amendments and to accept the Government’s amendments.