Treasury Spending: Grants to Devolved Institutions

– in the House of Commons at 5:30 pm on 3rd July 2018.

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Motion made, and Question proposed.

That, for the year ending with 31 March 2019, for expenditure by HM Treasury, so far as it relates to spending decisions and their consequences for grants to the devolved institutions:

(1) the resources authorised for use for current purposes be reduced by £294,563,000, as set out in HC 957 of Session 2017–19,

(2) the resources authorised for use for capital purposes be reduced by £6,293,934,000 as so set out, and

(3) the sum granted to Her Majesty to be issued by the Treasury out of the Consolidated Fund and applied for expenditure on the use of resources authorised by Parliament be reduced by £4,632,925,000.—(Jo Churchill.)

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 5:33 pm, 3rd July 2018

I thank the Backbench Business Committee for agreeing to schedule this debate, and I thank my hon. Friend Stewart Malcolm McDonald for making the application and all the Members from across the House who agreed to back it. My hon. Friend is unwell today, which is why I am here in his place; I hope that Members understand.

As the House would expect, I shall mainly focus my comments on the Scottish context, but I wish first to touch on the other devolved institutions. My Welsh colleagues have often expressed their concerns about how the Barnett formula applies to Wales. The issue was further compounded by the recent cancelling of the Swansea tidal lagoon project, which would have generated significant income for Wales. The reality is that Wales has been badly served by the UK Government.

On Northern Ireland, the main estimates include £410 million arising from the confidence and supply agreement. The SNP has stressed on numerous occasions how shocking it is that the Prime Minister has entered into this grubby deal, giving huge amounts of cash to Northern Ireland just to keep herself and her Government in power. But the biggest problem about the whole deal—apart from the fact that the Tories, with whom we fundamentally disagree, are being propped up by the Democratic Unionist party, with which we have even more fundamental disagreements—is that the money does not generate Barnett consequentials. If Northern Ireland is receiving £1 billion, Scotland should receive £2.9 billion and Wales £1.6 billion. Given that Scotland’s discretionary budget has been cut by 8.1%, or by £2.6 billion, between 2010-11 and 2019-20, I hope that the UK Government will understand why the people of Scotland and of Wales are so deeply unimpressed by their behaviour.

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons)

In addition to the provision of the DUP bung, Wales has lost £1.2 billion, or 7%, since 2010, so we are talking about a 7% real- terms cut. Despite that and despite the myths peddled by the Government, health and social care spending in Wales is still higher per head of population than in England. Does the hon. Lady agree that we should talk in facts and that the real-terms cuts happening in Wales and Scotland are having a real impact on people’s lives?

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I agree. What we should be doing in this debate, and what I will try to do in this debate, is to lay out what the real-terms cuts actually are. We cannot have constant fudge from the UK Government, whether on the Wales budget or on the Scotland budget. We need to be accurate about how much is being cut from these budgets.

Scotland’s fiscal resource budget has seen a cut of 9.1% over this period, and our total fiscal budget will be cut by 8.4% in real terms. The UK Government have been talking about the Barnett consequentials that are coming to Scotland, but the reality is that most of that money is financial transactions money. Financial transactions cannot be spent on normal day-to-day spending. They cannot be spent on resources for our NHS, for example, because they have to be paid back. This is not real money that the Scottish Government can spend.

We are also seeing a £230 million resource cut in 2018-19, but despite that, the SNP Government at Holyrood continue to protect public services and to invest in measures to unlock innovation and drive increased productivity. On policing, unlike the UK Government, we have not cut the numbers of police. At this point, I would like to congratulate the new Scottish Justice Minister, Humza Yousaf. It is possible that Donald Trump will visit Scotland. I am certainly not a big fan of Donald Trump coming to Scotland, but I am pleased that Humza Yousaf has managed to convince the UK Treasury—I thank the Minister for doing this—to provide an extra £5 million to cover the cost of rolling out the red carpet. I do not want Donald Trump to come here anyway, but he has had the hand of welcome extended to him by the Prime Minister, so it is completely reasonable that the UK Government should cover this cost.

Photo of Bill Grant Bill Grant Conservative, Ayr, Carrick and Cumnock

In reference to Donald Trump, the President of the United States, does the hon. Lady not agree that he is one of the single biggest investors in Scotland, whether in the north-east in Aberdeen or in Turnberry in my constituency, where he employs 300 people and has invested more than £200 million? I would welcome Donald Trump to my constituency. Does she agree?

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I do not give a stuff how much Donald Trump has invested in Scotland, because he is separating families, and that far outweighs any good that he has done with the investment that he has made.

Photo of John Lamont John Lamont Conservative, Berwickshire, Roxburgh and Selkirk

The hon. Lady has criticised the financial transactions as the means by which the UK Government are delivering extra funding to Scotland, but does she not agree or accept that the Scottish Government have used financial transactions to invest in housing, in vital infrastructure projects and in other business support? It seems to me that she is happy to criticise the UK Government for using this model but is not prepared to accept that the Scottish Government use exactly the same model for their investments.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I am pleased that the Scottish Government are receiving the financial transactions money. However, the UK Government cannot say that this is money that can be spent on day-to-day spending, because it cannot. The Resolution Foundation has specifically said that it cannot be spent in that way.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I will not give way, because I want to make some progress.

That money cannot be spent on day-to-day services such as our NHS.

On the NHS, our Scottish Government have invested an additional £550 million in health and social care. We have increased the health and sport budget by 9.6% in real terms between 2010-11 and 2018-19. In addition, our NHS Scotland staff will be offered a 9% pay rise over the next three years. That is the highest NHS pay uplift offered in the UK, and I am pleased that we can recognise our NHS workers in this way, particularly in the 70th year of the NHS.

At Treasury questions this morning, the Chancellor confirmed that Scotland’s share of the NHS uplift will be £2.27 billion in 2023-24, but the Treasury has not yet confirmed how this uplift will be paid for. Will it require devolved tax hikes, or will there be a cut to Barnett consequentials coming from elsewhere to fund this additional revenue? The people of Scotland need clarity, and it would be most welcome if the Treasury provided that clarity at the earliest possible opportunity.

The Scottish Government are investing more than £3 billion during this Parliament to deliver 50,000 affordable homes, including 35,000 for social rent—an area that had sadly been neglected by the UK Government. Although it is important that there is enough supply so that people can buy homes, it is also important that those who cannot afford to buy homes have secure rents at levels that they can afford.

In my maiden speech, I said that the Scottish Government’s scrapping of the right to buy was one of the most monumental moves that has been made. I was a local councillor for eight years before I did this job, and a phenomenal number of people were waiting for council housing at that time because of the amount of housing stock that had been sold off. The number of people waiting has now reduced in my constituency and in Aberdeen in general, but this has only happened because Aberdeen City Council is now able to invest in building homes without the fear that they will be sold off immediately.

Photo of Kirstene Hair Kirstene Hair Conservative, Angus

Will the hon. Lady condemn the parents of her party’s leader—the First Minister—who took advantage of the right to buy?

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Many people took advantage of the right to buy, because it was the rule that they could do so. I do not think that people should be allowed to do that, which is why I have supported the Scottish Government’s move. I will not criticise the UK Government for doing this south of the border, but I urge them to look at what is happening in Scotland—particularly with council housing, but also more generally with social rent. This move has improved people’s quality of life, because they are now able to have long-term rentals, secure tenancies and a roof over their heads. I think that that is more important than being able to buy their own homes.

Photo of Ian Murray Ian Murray Labour, Edinburgh South

I am glad that the hon. Lady and her colleagues have been successful in getting this important estimates day debate, but I do have to pick her up on something. I represent a city that has a waiting list for social and council housing of 26,000 people. The Scottish National party has now been in power for over 10 years, during which time that list has doubled, not halved.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

The Labour party was in charge in Holyrood before and could have cancelled the right to buy then, but it sadly did not. Unfortunately, we are trying to undo the legacy of Margaret Thatcher, who put in place the right to buy. We are trying to undo the legacy of the decimation of our council housing stock. The reality is that we can only build houses so quickly, and we are doing our very best. I would like to see the Labour party do a better job, to be honest.

Photo of Hugh Gaffney Hugh Gaffney Labour, Coatbridge, Chryston and Bellshill

Does the hon. Lady agree that if people cannot buy council housing, they need to get social housing? Let us give our young people a chance to have a start in life with a new house. Let us start building social housing and creating jobs.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

Of the homes that the Scottish Government are building, 35,000 are for social rent. The reality is that the Scottish Government have put in place a huge number of schemes to allow first-time buyers to get into the housing market, including joint purchase schemes, whereby people go into joint purchases with the Scottish Government. These measures have been incredibly successful in ensuring that people can get a foot on the housing ladder.

At Westminster, politics gets bleaker by the day. As the Tories hark back to the 19th century, our Scottish Government are pressing on with a forward-looking, 21st century agenda to boost innovation and the economy’s productive base. The Scottish Government have set aside resources of £340 million to provide initial capitalisation for the Scottish Investment Bank. Our Scottish Government do not have power over all the levers to generate economic growth, but we are doing what we can to ensure that our economy can keep pace.

In Scotland, 70% of taxpayers are paying less in income tax this year, assuming that their income has not changed. Some 50% of taxpayers in England—those who earn the least—are paying more income tax than they would if they were in Scotland. Despite all the cuts from Westminster—[Interruption.] I am being queried on this, but these are Library figures—I can send them on to Stephen Kerr if he is interested in seeing them. Despite all the cuts from Westminster, Scotland is the fairest-taxed part of the UK.

I want to touch briefly on oil and gas; as an Aberdeen MP, most people would expect me to do so. We welcome the UK Government’s move on transferable tax history. We pushed for that for a very long time—I have been raising it for about two years in this place—but it is coming along too slowly. The more quickly the transferable tax history changes can happen in relation to oil and gas, the better. I understand that they are intended to be in place in November this year. I very much urge the Government not to extend that deadline further back, because the quicker this can happen, the better. The changes ensure that new investment can be made in late-life assets in the North sea. It is really important that we ensure that this comes forward.

On investment in the North sea, I would very much like the UK Government to ensure that they are fully behind the Oil and Gas Authority’s “Vision 2035”. This is absolutely vital not just for the north-east of Scotland but, more widely, for any companies that are involved in oil and gas and for all the jobs that are supported by that. To be fair to Scottish Conservative Members, they have been very supportive of “Vision 2035” as well, but the more people who talk about it in this place and outside it, the better. We need to be talking about anchoring our supply chain in the north-east of Scotland and throughout the rest of the UK far into the future, so that even once there is no oil and gas left in the North sea, we continue to have that world-class, recognised supply chain and can continue to generate the tax revenues from it.

It would not be a debate in this Parliament if I did not raise Brexit. The threat of leaving the customs union and the single market is undoubtedly the biggest threat to Scotland’s economy, and so to the Scottish Government’s spending power. For the period 2014-20, Scotland received €476 million in European regional development fund money and €465 million in European social fund money. There has been no commitment from the UK Government that they will plug this gap in spending in Scotland after Brexit. In 2016, the EU common agricultural policy supported payments of £490 million in Scotland. Will the Government guarantee this money beyond 2022? Our farmers need to plan long term about how best to manage their land, and they need clear guarantees.

The convergence uplift moneys of €220 million—as I said, this was mentioned this morning—were supposed to go to people like Scottish hill farmers who are receiving the lowest levels of support in the EU. Unfortunately, because of the way that the UK Government decided to distribute the money, instead of more than 80% coming to Scotland, only 16% came to Scotland. I am very clear that that money should have come to our farmers in Scotland, yet it did not.

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

The hon. Lady is talking about farmers’ payments. Does she not recognise that over £150 million has been spent on an IT system that has had no benefit to hill farmers and that farmers’ debt in Scotland is at a record high, not because of Westminster but because of the SNP in Edinburgh?

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I am very sad that the hon. Gentleman does not recognise that £160 million of EU funding should have come to Scotland. It is important that Members across the House push for this money to come. It is also really important that it is guaranteed in future years as well and not lost now and therefore lost in future years. It is very important that we get that money. [Interruption.] The Minister asks where we will get this money from. What about the Brexit dividend that we are apparently supposed to be getting? The Brexit dividend could be spent on the EU convergence uplift money. I am very clear that there is not a Brexit dividend, but the Government seem to think that there is, so it would be great if some of could go to places where the EU would have spent it.

Scotland’s universities are world-leading. They generate wealth for our economy, support innovation and increase productivity, but they rely on close links with EU countries. Changes to their funding and collaboration structures could have a devastating effect and wide-ranging economic consequences.

But there are further threats from Brexit, and I want to highlight two. The first is the reduction in immigration from EU citizens that is likely to hit us. This is not just a problem in that it will reduce our cultural diversity and the richness of our society, but in that it will have a direct impact on tax generation. If we cannot attract migrants to live and work in Scotland, we cannot grow our tax base, and we will not have enough workers to support our ageing population.

Every week in my office, I speak to people from outside the EU who have been hit by the UK Government’s immigration policies. Many of them are particularly high earners and have paid a huge amount of tax into the UK Government’s coffers over the years, yet they are being denied the right to stay in the UK. The loss of the post-study work visa also means that the brightest and best cannot stay in Scotland. I am concerned that the system for EU migrants will become as bad as the system for non-EU migrants and that we will exclude highly skilled workers from outside the EU—I will get towards the end of my remarks shortly, Mr Speaker; I can see you getting a bit antsy.

I am really concerned about this. I am constantly shocked that the UK Government believe that making it more difficult to move here will help. They need to be honest with the general population about the fact that migration brings benefits in terms of tax revenues, and more Conservative Members could do with standing up and saying that more often, so that we can take better decisions about immigration. We expect to discuss the Trade Bill and the customs Bill in this place before the summer recess. I cannot make it any clearer to the UK Government: leaving the single market and the customs union is an economic catastrophe. Tariff barriers and non-tariff barriers will have a drastic effect on any company that exports to not just the EU but countries that the EU has trade deals with.

The UK Government are mismanaging Brexit, just as they are mismanaging grants to the devolved institutions. Scotland would be far better off if we were an independent country. If we had the levers to close the per capita income gap with small advanced economies by focusing on productivity, population and participation, we would have an additional £22 billion in GDP and a potential additional £9 billion in tax revenues. That is £4,100 per person. Being part of the UK is holding Scotland back. The UK is not working for us.

Several hon. Members:

rose—

Photo of Kirstene Hair Kirstene Hair Conservative, Angus 5:51 pm, 3rd July 2018

I am grateful for this opportunity to address grants to devolved Administrations. This week we celebrate the 70th birthday of our NHS, which is incredibly timely as we see how the SNP have talked the talk but failed to deliver for health services in Scotland. Even though over a third of Scottish Government spending is dedicated to health and sport, Nicola Sturgeon’s mismanagement of healthcare has had a devastating impact on local services across Scotland, which accounts for a large proportion of my constituency casework. That is down to not just poor workforce planning on the SNP’s part but a refusal to deliver the funding needed by health boards to ensure that everyone across Scotland can access top-quality care when they need it.

While it is common to hear nationalists in this place and Holyrood paint a picture of a perfect NHS in Scotland, that is simply a smokescreen for their own failings and is unidentifiable to many Angus residents. Whenever the SNP Government have benefited from increasing budgets thanks to the UK Government increasing spending, they have been reluctant to pass that on to Scotland’s health service. For all their condemnation of the Conservative party, it is Nicola Sturgeon’s party that has not served our health service well. NHS spending in England increased in real terms by 10.9% from 2010-11 to 2016-17, whereas Scotland only saw a 5.4% increase—less than half. Health spending increases in Scotland failed to match those in England in 2012-13, 2013-14 and 2014-15. Nicola Sturgeon’s new ministerial team—once she finds a replacement for those with records of the most despicable remarks—has a clear opportunity to put that wrong right.

The Prime Minister has rightly promised an additional £20 billion for the NHS—a commitment that I welcomed, along with all Conservative Members—but there has been silence from the SNP. Why? Because they are not interested in extra funding from the UK Government to Scotland. They would rather focus on stoking up grievance and division. The NHS funding commitment will help to deliver improved services and higher quality care and is a clear demonstration of this Government’s determination to support our much-valued public services. That commitment means that the Scottish Government will receive an additional £2 billion by 2023-24.

Nicola Sturgeon now has a responsibility, after seeing standards slip and confidence fall, to invest every single penny of that increase in Scotland’s NHS. For far too long, she has starved the Scottish health services of money, overseeing closures of centres across the country. In Angus, she has allowed the excellent Mulberry ward to close, the Montrose maternity unit to be shut down and Brechin infirmary to go and at every turn has prioritised centralisation over local services; my list could go on. The SNP are experts at shouting from the sidelines, but this extra funding is a test of their commitment to our NHS. I urge them to show the people of Scotland that they can act in the national interest by committing £2 billion to Scotland’s health service.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy) 5:54 pm, 3rd July 2018

Diolch yn fawr iawn, Mr Speaker. I cannot promise to be equally brief, but I will endeavour to stick to the six-minute limit. It is a pleasure to speak about bread and butter issues—the Barnett formula, Barnett consequentials, Welsh funding—considering that we seem to have been talking entirely about Brexit for the past two or three years.

The Welsh Government total departmental expenditure limit budget sought for 2018-19 is £15.827 billion, a reduction of 3.3% in both resource and capital budgets compared with last year’s final budget. I understand that this reduction has primarily arisen because last year’s revised budget included £300 million of additional funds for student loan impairments, and £278 million carried over from the previous year, neither of which has been repeated. It is also down £269 million because of the block grant adjustments arising from the devolution of stamp duty and landfill tax.

I acknowledge the fact that some significant adjustments have been made, but compared with the original spending review settlement plans for 2018-19, which include £18 million extra for the Cardiff and Swansea city deals, I would argue that the estimates in front of us are symptomatic of a negligent Westminster Government, with a comatose Secretary of State for Wales. Where is the money for the Swansea Bay tidal lagoon project, which was mentioned by my hon. Friend Kirsty Blackman? Where is the money for rail electrification? Rail experts calculate that it would now cost only £150 million to electrify the line between Swansea and Cardiff, Wales’s two largest cities, in a stand-alone project. This compares with a cost of £400 million per mile for HS2, so the whole project in south Wales could be delivered for less than the cost of a third of a mile of HS2.

When it comes to the Swansea Bay city deal, 90% of the money is Welsh public and private money, yet the British Government are propagandising in the west of my country about how they are about to spend £1 billion in our communities. As it happens, that project is being delivered by Plaid Cymru-led Carmarthenshire County Council, definitely not by the British Government. The excuses given by the Secretary of State for Wales when delivering the bad news centre on the projects not being good value for money for the taxpayer. It is very disappointing that the Secretary of State believes that, and some might really question whether the £4.6 million investment for the Wales Office, which is included in the estimates, is value for money.

There is an adjustment of £16 million because of the 5% uplift on the Barnett consequential in the Welsh fiscal framework. For the first time—this is to be welcomed—a needs-based factor has been added to the calculation in these estimates with the aim of ensuring that Welsh funding converges to a level based on the needs of our country. However, we are still left languishing compared with Scotland and Northern Ireland. Welsh public funding per head will be about £10,076, but in Scotland the figure is £10,651 and in Northern Ireland it is £11,042, which is before we start talking about the £1 billion bung for Northern Ireland. Welsh funding per head also languishes behind that for London, where the figure is £10,192. Wales is certainly getting the bad end of the stick. As David Phillips of the Institute for Fiscal Studies argues:

“Although the inclusion of a need-based element in the Barnett formula is to be welcomed, the agreement makes no provision for updating the assessment of relative need in future. Even at the point of introduction the calculation will be based on an already decade old assessment. This could become a source of tension, if it emerges Wales’ relative need is changing, and the agreement is therefore unlikely to end debate around Wales’ fiscal framework.”

Following the devolution of stamp duty and landfill tax this year and the partial devolution of income tax in April 2019, the Welsh Government and our local authorities—through business rates and domestic rates—will control nearly £5 billion of tax revenues, which equates to about 30% of the combined spending of the Welsh Government and local authorities. However, this is far less than the fiscal power available to Scotland and Northern Ireland. While the Welsh budget will be largely protected from UK-wide economic shocks, by means of the block grant adjustment mechanism agreed in the new fiscal framework, devolved revenues will need to keep pace with comparable revenues in the rest of the UK to avoid a shortfall in the Welsh budget. As Guto Ifan recently wrote in relation to his report for the Wales Governance Centre:

“Increased transparency and budgetary information on the underlying block grant, devolved revenues and the adjustments made for tax devolution will be crucial in boosting fiscal accountability and aiding understanding of annual changes to the budget.”

I welcome the fact that we have got to the point where the Welsh Government now have to raise their own revenue to spend on public services; that will incentivise them to consider programmes that develop the Welsh economy—at the moment, of course, they are merely a spending body.

However, if the formula is to be based on population growth, there is going to be an issue. Even if we turned around the Welsh economy so that it was performing better than the UK economy, which should result in better revenues, there might be no net benefit because our population would be likely to lag behind. That cannot be right: we cannot be running a population-based revenue-related risk. We must look at that again, and I would be grateful if the Treasury agreed. This comes back to the argument made by the hon. Member for Aberdeen North: in the post-Brexit environment, if the formula is to decide the funding available to our respective nations, devolved power over immigration will be important for Wales and Scotland.

The lack of transparency and accountability in Welsh funding could be a problem in the long term. The promised boost in funding to NHS England is a case in point. The British Government have set out their estimated Barnett consequentials for the Welsh Government as a result of the extra £20 billion per annum for NHS England by 2023-24. However, those are yet to be finalised and we are none the wiser as to exactly how the uplift will be funded in England by increases in tax—and how that will impact on Wales, once income tax is devolved in April 2019. I hope those on the Treasury Bench will explain exactly how that is going to work.

Although partly devolving income tax is an important step towards fiscal accountability and responsibility, Plaid Cymru has always advocated for the full powers over income tax that are being made available to Scotland—especially the power to set our own bands. Following the UK’s departure from the European Union, there will be no legal or legislative barriers to the Westminster Government’s devolving taxation powers that would allow each nation of the British state to have the fiscal arrangements that suited its needs—not those of domineering London and the south-east of England.

We need to consider devolving three key taxes following Brexit: VAT, corporation tax and air passenger duty. VAT is particularly important to the Welsh economy. Welsh VAT revenues have been far more resilient than any other major taxes, with about £5.2 billion raised in 2014-15. VAT has become the largest fiscal source of revenue in Wales and performed far higher than the UK average; in contrast, income tax remains the dominant tax in the rest of the UK. VAT would be a very good tax to devolve to Wales.

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

The hon. Gentleman is talking about VAT. Given that VAT is a regressive tax, is his party’s position to increase VAT in Wales?

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

The hon. Gentleman has brought to mind my recent visit to the United States: in every state there, sales tax is devolved. The argument is clear. If a tax is performing well in the UK context, it would be good to devolve it to Wales.

The Holtham commission recognised the immense benefits of devolving corporation tax in its 2010 report on finances in Wales. It argued that corporation tax devolution could be a critical part of the transformational change that the Welsh economy needs. Corporation tax has been devolved to Northern Ireland, and the Silk commission said in its report that there was no reason why that should not also apply to Wales. Our problem is that whereas Scotland and Northern Ireland have a range of fiscal powers, the Welsh fiscal portfolio is far weaker, which means that Wales is going to be at a competitive disadvantage within the UK.

Long-haul air passenger duty, of course, is another tax that has been devolved to Scotland and Northern Ireland. That means that the competitiveness of our publicly owned airport in Wales is being held back. Bristol airport opposes the devolution of the tax to Wales and that trumps what is in the best interests of the Welsh economy. The Welsh Government, of course, have no say over the ability of Bristol airport to build a second terminal. That will have a devastating effect on Cardiff airport.

Across the British state as a whole, devolved funding arrangements look increasingly asymmetric and ad hoc. There will now be significant differences in the scale and composition of devolved and reserved taxes across each country: how their block grants are determined and adjusted over time, and the borrowing and budget management capacity of each devolved Government. The British state is changing quickly and we will have to have new structures to manage those changes. With Brexit on our doorstep, the case has never been greater for an independent commission, similar to the Australian Commonwealth Grants Commission, to carry out an assessment of relative need, undertake periodic reviews, arbitrate between tax disputes, and collect and publish information on an annual basis about the allocation of finances and funding to the devolved Administrations. We cannot have a situation where the Treasury is judge and jury.

I would like to finish by talking about the UK shared prosperity fund, which has been a major source of income for investment infrastructure in Wales. Convergence funding between 2014 and 2020 is worth £2 billion. Despite it being two years since the referendum result, there is no clarity at all from the British Government on how that fund will work and how funds will be allocated. That will be a major issue for Wales and we will be pressing the British Government on it.

If the British state is to survive post Brexit, it will require radical restructuring and fiscal policy will be a key element in that. The estimates debate is probably not the right time to make those arguments, but I look forward to putting forward suggestions in the months to come.

Photo of Douglas Ross Douglas Ross Conservative, Moray 6:06 pm, 3rd July 2018

I am shocked—shocked that a debate entitled, “Spending decisions of HM Treasury and their consequences for grants to the devolved institutions” could muster just one Scottish National party speaker. Kirsty Blackman and the SNP Chief Whip sitting in the corner, out of a parliamentary group of 35 MPs, is all they can muster. Jonathan Edwards has just rightly said that this is a debate about bread and butter issues that he is happy to be debating, yet other nationalists in this place seem to be happy to be absent.

I will be looking very closely tomorrow at the SNP Opposition day debate on the claim of right for Scotland: yet another argument in this place about constitutional matters. Will the SNP Benches be so sparsely populated for a debate on the claim of right for Scotland as they are tonight about the money we spend in Scotland and the public services we get? I think my constituents and people across Scotland will wonder why they send SNP representatives down to Westminster if they cannot even turn up to a debate about spending in the devolved Administrations?

This is an important debate that affects all our constituencies across Scotland and Wales. It is about the money we put forward in Westminster to be spent in the devolved Administrations. I want to pick up on points made by my hon. Friend Kirstene Hair. My NHS area is suffering at the moment. NHS Grampian is one of the poorest funded health boards anywhere in Scotland. I continually receive complaints about local healthcare and waiting lists. In fact, I wrote to the acting chief executive today about someone who has to wait up to two years for an ear, nose and throat check for nosebleeds that stop her leaving her home, because she is so worried about having another severe nosebleed. When she went to the NHS in Scotland, they said, “You can go privately and get it done within a week or two.” But NHS Scotland, overseen by the SNP for the past 11 years, says she has to wait up to two years. That is not acceptable to my constituent or to anyone else.

I note that the two SNP Members in the Chamber are not intervening to say that that is wrong. They know that after 11 years, under a First Minister who was previously Health Secretary, another Health Secretary who was her friend, and now a new Health Secretary, health in Scotland is suffering because the SNP is performing poorly in this area despite significant investment by the UK Government. We have already heard that £2 billion extra has been invested in Scotland as a result of last year’s Budget. By 2020, the block grant will have grown to over £31.1 billion: £31.1 billion is going to the SNP Government in Scotland and the way they are spending it is letting us down.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

Will my hon. Friend confirm that because of our hard-nosed lobbying of the Treasury, the £2 billion that was dismissed as not real money is very much real money, and it is investment in Scotland that we badly need?

Photo of Douglas Ross Douglas Ross Conservative, Moray

Absolutely. The Chancellor said at the Dispatch Box during that Budget debate that his ear had been bent by the Scottish Conservatives. It was not bent by the SNP—not surprising, because they do not seem to turn up to debates about the economy in Scotland. It was the work of the Scottish Conservative MPs, working alongside our Ministers within Government, that achieved that for Scotland. The resource budget in Scotland has gone up by almost £100 million in the last year. Those real-term changes are positively impacting on people in Scotland and all we get from the SNP are more and more complaints.

I know that time is short, Madam Deputy Speaker, but I was interested that in the 20 minutes that the hon. Member for Aberdeen North spent introducing the debate, there was no mention of the recent reshuffle. This is important when we talk about the money that goes to Scotland to spend on the devolved Administration. She did not mention that in a decade of the SNP being in power in Scotland, the number of Ministers has gone from 16 to 26. The cost of Ministers in Scotland has gone up by £400 million. That does not include the extra funding that will go to their private offices or on their car hire. I notice that Pete Wishart has just come in. Clearly, a message has gone out—“We must get more people on our Benches.” They have now gone up to three, and it will be interesting to see his contribution to the debate.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian

Is it not also the case that as the ministerial burden has increased with the SNP Government, there has been a 10% cut to our councils in Scotland over the last eight years, which has caused huge problems to individuals and our constituents?

Photo of Douglas Ross Douglas Ross Conservative, Moray

Absolutely, and I want to finish on that point because it is important. My Moray Council has suffered one of the biggest funding reductions of all councils anywhere in Scotland. When the SNP in Scotland gets more money from Westminster, it spends less on our health service. It spends less on our local councils and it spends more on giving 42% of all SNP MSPs a job in Government. If that is what we get after 11 years in power from the SNP, the next election cannot come quickly enough.

Photo of Ian Murray Ian Murray Labour, Edinburgh South

I am grateful to the hon. Gentleman for pointing out some home truths, but could we not sum up his speech and that of Kirstene Hair by saying that the UK Conservative Government is addicted to austerity, and that the SNP Scottish Government is addicted to austerity?

Photo of Douglas Ross Douglas Ross Conservative, Moray

That is amazing from a Member of the party that brought about the collapse in the financial markets, which is why we have had to have good governance of our finances in this country—to deal with the mess left behind by Labour.

Photo of Douglas Ross Douglas Ross Conservative, Moray

No, I will not give way to someone who comes in halfway through a debate. I must finish because a lot of Members on the Conservative Benches want to speak in the debate, even if those opposite do not. This is an important debate. This is where our constituents want to see decisions being taken. They want to see money going from Westminster to Holyrood, but what they are seeing in Scotland at the moment is an SNP Government who are letting them down. What they will hopefully see tonight is a UK Government who are investing in Scotland and investing for the future, and that it is the Scottish Government and the SNP who are letting them down.

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire 6:12 pm, 3rd July 2018

In her opening speech, Kirsty Blackman made a number of assertions about spending in Scotland, and I want to refute a few of those. By 2020—these are facts available from the House of Commons Library, as she quoted—the block grant will have grown to over £31.1 billion, which is a real-terms increase over the spending review period. In the 2018-19 financial year, the devolved Administration’s budget will increase by £500 million. Capital will increase by £566 million—£273 million of which is financial transactions, which I will come back to—and there will have been an overall increase of 17% since 2015-16.

The hon. Lady talked about financial transactions. She said that they were not real money and that they could not be spent on real things. That is interesting, because we took a look at the latest draft budget for 2018-19 and the SNP is planning to use £489 million of financial transactions. The funding includes the following: £40 million for the higher education budget, including innovation, low carbon and energy; £68.5 million for Scottish Enterprise; £26.5 million for the energy budget; and most importantly and specifically, since she talked about housing, £221.3 million for housing programmes, including the Help to Buy scheme and the open market shared equity scheme. If she was being truthful and saying that this money is not real and has to go back, has she told everyone back home?

The hon. Lady also talked about farmers. My constituency being predominantly a rural constituency, I speak to farmers every week, and I can say that under the SNP they have not received the support they need. The IT system does not work, they have not had the right rural funding and, to top it off, they now face record levels of farmers debt. That is the legacy of the SNP Administration in Scotland.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Constitution), Shadow SNP Leader of the House of Commons, Chair, Scottish Affairs Committee

On financial issues, will the hon. Gentleman explain from who the Scottish Conservatives got the £390,000 donated to them over the past few years? It was from a group called the Scottish Unionist Association Trust, which supports his hon. Friends. Where are their addresses, who are their registered shareholders, and are they registered with the Electoral Commission?

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

This debate is about devolved funding for our constituents. If the hon. Gentleman wants to talk about that, he should go somewhere else.

We have just ascertained in the Chamber that Scotland has received more money from the UK Government. It is now important to look at how it is actually spent. As my hon. Friend Kirstene Hair said, about one third of the 2018-19 budget went on health and sport, but one of the next biggest areas of funding is finance and the constitution, where 11.8% of the budget is being spent. Now, finance and the constitution are all perfectly fine and important things, if they want to make those choices, but it is more relevant when we consider the percentage of spending that goes on education and skills, which is 8.4%. The No. 1 priority for the SNP Administration only gets 8.4% of the funding, versus the—wait for it—12.4% from the Westminster Government that goes on education and skills.

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

It is the SNP Government’s No. 1 priority and yet our schools are plunging in the international rankings. I give way to my hon. Friend.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

My hon. Friend has pre-empted my point. Will he remind the House what has happened to Scottish education in the last 11 years under this SNP Scottish Government?

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

The performance has been lamentable. Scotland’s schools have fallen in the rankings in reading, mathematics and science. We have gone from No. 1 in the UK to No. 3. Scottish education, which was once a byword for excellence in the world, is now merely ranked as average in most international tables. That is not doing Scotland down; it is recognising a problem because we want to solve it.

I am conscious of time so I will come to my last point. We have all heard of “tax and spend” Governments, but we rarely hear of “tax and underspend” Governments, yet that is what we have in Edinburgh. In 2017-18, the Government underspent by £453 million. The Finance Secretary in Edinburgh says, “This is all part of a plan. It is normal to underspend on your budget.” I think the Chief Secretary to the Treasury would probably say it is not normal for Departments to lobby to underspend on their budgets; in fact, they want to meet or exceed those budgets.

This underspend covers £66 million for volatility; £100 million for a new social security system—instead of actually working with the UK Government to build a better devolved social security system; and £50 million from better tax receipts that they are not refunding or reinvesting in Scottish local authorities. This would be bad in one year, but it is in addition to the £191 million underspend from the previous year. The SNP continues to scream for more powers and spending, and yet when its receives the powers, it does not use them, and when it sees the money, it does not spend it.

My constituents are fed up with the mismanagement of the SNP. That is why we Scottish Conservatives have stood here tonight. Why is it that, despite more money going from Westminster to Edinburgh, we still face cuts to our local council services, in Clackmannanshire and in Perth and Kinross, cuts to music education, cuts to support services for disabled people, cuts in infrastructure, cuts to our roads and paths—[Interruption.] If Pete Wishart wants to make an intervention, he is more than welcome to do so. [Interruption.] Oh yes, I am conscious of time so I will not give way. It is time for the SNP to take account of the money its receives and to take responsibility for the budgets it receives from Westminster; it is not time for my constituents to carry on paying for the mismanagement of the SNP.

Photo of Andrew Bowie Andrew Bowie Conservative, West Aberdeenshire and Kincardine 6:18 pm, 3rd July 2018

I rise to speak as a Conservative MP proud of what my Government are doing and delivering for Scotland. Thanks to this Conservative Government, by 2020, the block grant to the Scottish Government will have grown to £31.1 billion—a real-terms increase over the spending review period; thanks to this Conservative Government, day-to-day spending in Scotland will increase by £500 million; thanks to this Conservative Government, the capital budget, which is used for crucial investment in Scotland, will increase by £566 million; and thanks to this Conservative Government, and their commitment to investing in our national health service, Scotland will now receive an extra £2.27 billion in real terms. A Conservative Government are governing and delivering for the whole United Kingdom, including Scotland.

But what do we hear from my hon. Friend Kirsty Blackman—and I use the word “friend” sincerely? We hear no acknowledgement that Scotland is the second highest per capita-funded nation in the UK; no acknowledgement of the huge spending boost delivered in last year’s Budget; no acknowledgement—and I am surprised at this—of the £18 million delivered for the Aberdeen city region deal, the £20 million delivered for the Edinburgh city region deal, or the £8 million delivered for the Inverness city region deal. No, what we hear instead is the Scottish National party, and the Administration in Holyrood, bemoaning the fact that the extra £2 billion delivered in last year’s Budget is somehow a con, because the money is financial transactions capital funding.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I was very pleased to hear the hon. Gentleman mention the Aberdeen city region deal. I was a huge supporter of it. Indeed, I initiated an Adjournment debate on that very subject during my first few weeks as an MP. Does he not recognise, however, that the Scottish Government are providing more funds for the deal than the UK Government? Will he push the UK Government to match the Scottish Government’s funding?

Photo of Andrew Bowie Andrew Bowie Conservative, West Aberdeenshire and Kincardine

I welcome the contribution of the Scottish Government to the Aberdeen city region deal, but the hon. Lady must acknowledge that the deal would not have happened if the UK Government had not driven it ahead.

For goodness sake, give me strength. The argument about the financial transactions capital funding is ridiculous not only because, let’s face it, the Scottish people do not care what type of money they are getting as long as the Government spend it in a way that can benefit them and their communities, but because the Scottish Government have themselves used that type of funding for affordable housing, business investment and infrastructure projects. But then, consistency has never been the watchword of the Scottish National party.

Indeed, why allow the focus to fall on how the money is being spent? It is much easier to concoct the false narrative that Westminster is doing Scotland down and short- changing it—that the reason NHS Tayside and Grampian are in crisis, the reason Police Scotland is failing, the reason for the state of the management of education north of the border—when are we going to see that education Bill?—is that, somehow, the Tories are underfunding Scotland. That, say SNP Members, is why they are having to raise income tax; that is why they are forcing councils to raise council tax, making Scotland the highest-taxed part of the UK and Aberdeenshire—forever the Scottish Government’s cash cow—the highest-taxed part of Scotland.

In fact, none of the problems facing Scotland in 2018 is due to underfunding from this Government at Westminster. They are all due to the incompetence of the Scottish Government, who could not organise—well, a tea party in a café. While moaning about not getting enough money, and while punishing the hard-working people of Scotland by raising their taxes, the Scottish Government actually underspent their budget by half a billion pounds last year. But that is not the worst of it. Not only are they not spending the money that they already have; not only have they ensured that Scottish workers keep less of their salaries than their English and Welsh colleagues; most disgracefully of all, they are spending money hand over fist on the biggest and most bloated Executive that Scotland has ever seen.

The new SNP Government at Holyrood is truly gargantuan. At present, 42% of SNP MSPs are on Nicola Sturgeon’s payroll. Talk about buying patronage! Please do not do any more of it, or the Government Whips might get some ideas. There are more Ministers than there ever were when Alex Salmond was First Minister, and he was not someone who ever sold himself short. The SNP Government have twice as many Cabinet Ministers drawing salaries as Alex Salmond had in his Government in 2007.

It is clear, at the end of the day, that it is the Conservatives who are delivering for Scotland. The SNP should spend less time complaining, less time giving jobs to the boys and girls, and more time governing. The conversation that we should be having now is about how we can best spend this dividend to improve Scotland’s services. So let us see an end to the grievance politics and the “it wisnae me” narrative. Let us work together and build a better Scotland, inside a stronger United Kingdom.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling 6:23 pm, 3rd July 2018

It seems to me that we often get carried away when we speak about money in this place. We speak about giving an extra couple of billion here, or an extra 10 million there. For most people—and I include myself in their number—such amounts are hard to imagine.

When we examine the figure of £453 million, we can come up with some interesting statistics. If £453 million were paid in pound coins, it would weigh 9.5 tons, and would stack into a pile almost 2 miles high. The total budget for the Forth Valley health board, which covers my constituency in Clackmannanshire and Falkirk, is about that amount, and it is more than twice the budget for council services in my constituency. For that amount, every one of my constituents could be educated, have their bins picked up and have their roads repaired for two years. That is the size of the Scottish Government underspend. I will say that again: this is the amount of money that was allocated to them and was not spent.

The SNP does not like that figure to be discussed and generally disseminated; it resists scrutiny, undermines Scottish parliamentary committees, and has subverted the freedom of information process in Scotland. But it is right during this debate that we speak about the services that could have been provided with the money allocated for the last financial year had it been spent—the healthcare that could have been provided to the sick, the educational equipment that could have been bought for our students, and the roads that could have been fixed or repaired for our motorists by the Scottish Government. The Scottish taxpayer is now the highest taxed of all taxpayers in these islands.

Of course, I defend the right of the SNP Scottish Government to set their spending priorities according to the priorities they have set for that Government. That is their prerogative. The devolved Government can and must reflect the different needs of Scotland. But it is right to throw a spotlight on the mismanagement of the public finances in Scotland and ask questions about the services being cut around Scotland while Derek Mackay runs up a huge Government surplus.

This comes at a time when councils are increasingly dipping into their reserves, and that is a direct consequence of SNP budget cuts. A recent Scottish Government report reveals that in 2017-18 councils spent £126 million from their reserves and this coming year it is predicted that councils will need to call on an additional £113 million- worth of reserves. These reserves are not being used for landmark projects; it is a last resort to keep day-to-day services going.

This might seem like a small issue, but to my constituents who contacted me it is a big deal. I am speaking now of the Stirling play bus. It is an old bus that many children in Stirling and the surrounding district for the past few decades had enjoyed. It went around Stirling, right into the most remote villages and into the heart of the some of the most deprived communities in my constituency. It was a place to play when the weather was not so good and it gave kids a place to go during the summer. The bus was, sadly, scrapped this year having finally given up the ghost. Stirling Council—an SNP and Labour-run council since last year—took the opportunity to reduce play services and remove all mobile provision of this kind, as a cost saving by a council strapped for cash.

It is shocking that this should happen while the Government of Scotland run up a surplus of half a billion pounds. I know Members from across Scotland will have many hundreds of such examples and I could go into many more myself; this will take some explaining on the part of the SNP Scottish Government.

As has been widely reported, the Scottish Fiscal Commission is forecasting that the Scottish Government are facing a £1.7 billion shortfall in public finances over the next five years, as Scotland’s economy lags behind the rest of the UK, with growth remaining below 1% a year until 2023. As my good friend and colleague Murdo Fraser MSP said:

“Derek Mackay might like to fool us all into thinking this £453 million underspend figure is an insignificant sum. But it’s higher than what the SNP’s independence blueprint”

—the growth commission—

“said it would cost to create a separate state. The finance secretary is having to put money aside to meet a projected shortfall in tax revenues due to Scottish economic underperformance.”

Those are the words of Murdo Fraser, and I concur with them.

In the minute I have remaining to me I would like to raise an issue pertinent to my Stirling constituency specifically: the governance of the Stirling and Clackmannanshire city region deal. I am delighted that my right hon. Friend the Chief Secretary to the Treasury is answering this debate because she played no small part in delivering the city deal for Stirling and Clackmannanshire. For that we on these Benches are indebted and very grateful. But I am concerned about the governance that is prescribed for a city deal. I hope she will be able to reassure us that the approach for the governance of the city deal will be pragmatic—that it will be light touch—and will not be left at the mercy of a bureaucratic system of committees and joint boards. I wonder whether having the deal anchored within a council is the best way to achieve what we are striving to achieve. I do not want the Stirling and Clackmannanshire city region deal to find itself in the category of city deals described in a recent FSB Scotland briefing, which welcomed the city deals but questioned their

“lack of engagement with smaller businesses” and the

“lack of transparency inherent within the deals”.

I look forward to hearing what my right hon. Friend the Chief Secretary to the Treasury—and she truly is a right hon. Friend to Scotland—will have to say in response to that specific concern.

Photo of Patrick Grady Patrick Grady SNP Chief Whip 6:30 pm, 3rd July 2018

I understand that there are hordes of people around London this evening looking for 90 minutes of entertainment on a green playing field, and where better to look than the House of Commons? We have been thoroughly entertained already and I am sure that there is nothing else in this evening’s line-up that could be as interesting. I want to start by congratulating my hon. Friend Stewart Malcolm McDonald on securing this debate, and the Backbench Business Committee and the Liaison Committee on securing the time for him. My hon. Friend unfortunately took unwell morning and is unable to be here. I say gently to Members who criticise people for their absence that they should perhaps not do so from a position of ignorance.

Photo of Douglas Ross Douglas Ross Conservative, Moray

I was fully aware of the illness of the hon. Member for Glasgow South and I understood that that was why Kirsty Blackman took his place. That was perfectly clear to all of us on the Government side of the House. What was not clear was where the other 34 Scottish National party MPs were at the time. The reinforcements have arrived in the Chamber now, so the text messaging system works well, but that is the point that we were making.

Photo of Patrick Grady Patrick Grady SNP Chief Whip

I was watching the parliamentary private secretary passing notes around the back of the Chamber earlier, so I will take no lessons on internal group communications from the hon. Gentleman.

I have spoken in estimates day debates before and been called out of order for daring to actually discuss the estimates, so it is very helpful indeed to be able to have this discussion on Government spending. The reason that we have these debates is that the SNP questioned the estimates process in the context of the English votes for English laws process. We were told by the then Leader of the House, who is now the Transport Secretary, that if we wanted to have a say and a vote on spending as it affected Scotland, the estimates process was the way to do so. As we have been so ably encouraged by Conservative Members to take that opportunity this evening, I am sure that they will look forward to that happening at 7 o’clock and in the time that follows.

In summing up, it would be only fair to address the points that have been raised by Conservative Members. Kirstene Hair was interested in health and in the Barnett consequentials that will allegedly come as a result of the £20 billion increase in expenditure for the health service. It is great to know that they are coming, and the Scottish Government have consistently said in successive manifestos that they will pass on all the Barnett consequentials that they receive for health. The question is: where is the funding coming from? It was supposed to be coming from a Brexit dividend, but it now appears that it will come from increased taxation or perhaps from cuts to other Departments. However, if other Departments are cut to fund health spending, there will be cuts to the Barnett consequentials as well.

Photo of Philippa Whitford Philippa Whitford Shadow SNP Spokesperson (Health and Social Care)

To give the House an example, the NHS in England got £337 million for winter pressures last year, but what finally made it over the border was not the expected £32 million but £8.4 million, for exactly that reason.

Photo of Patrick Grady Patrick Grady SNP Chief Whip

Exactly. I do not know how many Scottish Tories took part in the health estimates debate last night, but I know for a fact that my hon. Friend Dr Whitford did so. Again, we will take no lessons on attendance in this Chamber.

I say to Douglas Ross that if he is so keen to debate the Scottish national health service, perhaps he should go back to where he came from: the Scottish Parliament, which makes the decisions about health. And if he is concerned about the payroll vote, he might want to take note of the fact that the current Prime Minister has the largest Government since 1979. I will take no lessons on bloated Government from Members on the other side of the House.

Photo of David Linden David Linden SNP Whip

Why are there no protestations from the party opposite about Lord Duncan of Springbank, who was defeated at the general election and then stuffed into the House of Lords?

Photo of Patrick Grady Patrick Grady SNP Chief Whip

Precisely. If we want to talk about wasting public expenditure, we have only to look up the corridor.

Luke Graham was quoting from his Whip’s note about what financial transactions money was being spent on, but he neglected to say, as my hon. Friend the Member for Aberdeen North pointed out at the very start, is that financial transactions money has to be paid back, so it is not money that the Scottish Government have the kind of discretion over that they need and deserve.

Andrew Bowie is not in the best position to lecture us about the payroll vote. We salute the fact that he holds a place of greater esteem on the Government Benches than his hon. Friends, but I want to take him back to my modern studies class at the Inverness Royal Academy way back in 1996 and 1997 where we talked about why funding per head is greater in Scotland than in the other parts of the United Kingdom. There are two good reasons, as some of the Scottish Conservatives should know. First, we have higher costs on account of having large rural areas that need to be served. Secondly, the figures are for identifiable public expenditure, and we all know that the vast amount of unidentifiable public expenditure is spent here in the south-east of England in London on Departments and large-scale infrastructure projects that are of no benefit whatsoever to the people of Scotland.

The name that allowed me to tick off my Scottish Tory bingo sheet was that of Stephen Kerr. He said that Scotland is the highest-taxed part of the United Kingdom, which everybody was delighted to hear. Perhaps the Scottish Tories at the Hurlingham Club Tory summer ball last night were weeping into their warm prosecco over the leadership plots and the fact that they now have to pay, like all SNP Members, an extra 60p a month because tax is going up in Scotland. For what we get in Scotland, such as free prescriptions, more bobbies on the beat, investment in education, free tuition and mitigation of the Tory bedroom tax, I think that that is pretty good value for money. In addition, everyone in Scotland earning less than £33,000 a year, which includes squaddies, nurses and teachers at the start of their careers, is paying less. That is the simple fact of the effect of the Scottish Government’s budget, so we do not need to hear any more about that.

As this is an estimates debate, I want to reflect on a couple of points about how spending decisions are made in Scotland once the grant has been agreed and the tax revenue collected. As Members who have previously served in the Scottish Parliament will know, we have an open and full legislative process to agree Government spending during which Members can make suggestions. The Opposition parties in Scotland are good at explaining the things on which they would like more to be spent, but they are not so good at explaining where they think cuts should come from or what should be reduced. Nevertheless, they have the opportunity.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Constitution), Shadow SNP Leader of the House of Commons, Chair, Scottish Affairs Committee

The one thing that the Scottish Tories did not want to talk about is where they are in control in Scotland. They are in control in Perth and Kinross Council, where they are closing schools and depriving leisure facilities of hard-earned money. That is the reality of the Tories in power. A Tory vote is not consequence free.

Photo of Patrick Grady Patrick Grady SNP Chief Whip

There is no danger of a penalty shoot-out this evening; the goals are quite clearly being scored by Members on this side of the House.

Photo of Patrick Grady Patrick Grady SNP Chief Whip

I do not think that intervening would be wise. The hon. Gentleman should probably take a seat.

We just have to compare the system in this House with the system in Scotland. Here, we have 90 minutes of debate, but the Scottish Parliament has months of decision making. Tomorrow, in less than 30 seconds, the Supply and Appropriation (Main Estimates) (No. 2) Bill, which has not even been published yet, will be nodded through, authorising billions of pounds-worth of expenditure without any real scrutiny whatsoever.

I cannot finish without talking about the other consequence for devolved institutions. It is the elephant in the room, the canary in the coal mine, or whatever metaphor we please: the dodgy deal, the grubby agreement, the confidence and supply arrangement that has propped up this weak Government for over a year in return for £1.5 billion that we cannot scrutinise and is almost impossible to find anywhere in the estimates document. The debates yesterday and today and the Bill tomorrow are literally the supply element of confidence and supply, but getting to the bottom of the deal is almost impenetrable. All the Library briefing note can find is a line about health buried somewhere. If I was in the DUP, first of all I would be here, but I might also be starting to feel slightly aggrieved about whether the money is ever actually going to show.

However, at least that money has been promised. The real disgrace of the confidence and supply arrangement is that Barnett consequentials are not being made available to the other devolved institutions. We have seen the contempt in which the UK Government hold the devolution settlement these days. They ripped up the Sewel convention to pass the European Union (Withdrawal) Bill without a legislative consent motion from Scotland. In fact, that contempt has been clear since they have shown total disregard for the Barnett formula. No matter what vows were made in 2014, it seems that the conventions and formulae that have underpinned devolution for the past 20 years are slowly but surely being undone. There we are.

We have heard the reality of Tory austerity, which has always been an ideological choice, not a necessity. It has meant real-terms cuts to the discretionary budget in Scotland. We heard Jonathan Edwards speak of the struggles in Wales, which has been dealt the double whammy of Tory austerity and Labour incompetence. We wonder where and when there will ever be a proper chance for scrutiny of the confidence and supply deal that is propping up this Government at the cost of £1.5 billion, which has been delivered without the due consequentials elsewhere.

I know that, unaccountably, the attention of other Members might be somewhere else at 7 o’clock, but we in the SNP are left with no choice but to divide the House on the estimates.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 6:40 pm, 3rd July 2018

I am not quite sure whether I need a wee dram after that speech by Patrick Grady. We have moved from the turgid to the ranting in one fell swoop, and it got the point where I was looking forward to the Chief Secretary’s speech, which takes something.

I will not regurgitate what has been said, because I could not make head nor tail of it, quite frankly, and I do not suspect the Members who made those speeches could, either. These debates come on the eighth anniversary of the Conservatives’ first austerity Budget, and we are still seeing the effects of that pernicious and ill-informed policy in these estimates.

Back in 2010, the then Chancellor outlined a package of cuts worth £81 billion, to be rolled out gradually, with many still to take effect during this Parliament. There has been an absolute decimation of the public realm, and the vast contraction in spending has had devastating social consequences. A cash-starved NHS is at crisis point; social care has been forgotten and ignored; there has been the longest fall in living standards since records began; and the Office for Budget Responsibility is saying that wages will stagnate for another two decades. Meanwhile, swingeing cuts to the regions have left the UK more unequal.

Today, the Local Government Association published a report showing that local authorities will have had £16 billion cut from their core funding by the end of the decade, leading to a £7.8 billion funding gap by 2025. When Conservative Members call for special consideration, I remind them that they all supported those decisions, with no dissent, year in, year out. With no codicils and no caveats, they supported every one of those spending cuts. They are now complaining and saying that they need their communities back up and running. Quite simply, they voted for these cuts in their own areas, and they should have the guts and the backbone to admit it.

Those cuts helped to create a sense of hopelessness and destitution in many places across the UK, one which no doubt contributed to the Brexit vote a few years after Mr Osborne’s slash-and-burn Budget. It is very strange that, after pursuing this unpopular and ineffective programme, cutting Department after Department, the Prime Minister managed to find enough cash to buy the support of the Democratic Unionist party. It is regrettable that DUP Members are not here today, but the fact is that the DUP should not have had to ask in the first place.

Yes, ironically, the Prime Minister sprouted the magic money tree in the rose garden of No. 10 on the very spot where the giggling David and Nick shook hands on the austerity deal. Indeed, £410 million of that deal is included in these estimates, with some £590 million left to be allocated. Perhaps the Chief Secretary could tell the House when the remaining millions promised to the DUP will be put before Parliament?

We have no issue with the funding of Northern Ireland. After all, following eight years of austerity, 370,000 people there are now living in poverty. What we object to is the Government telling the public during an election campaign that there is no fiscal headroom for investment, before immediately finding a £1 billion windfall to keep themselves in power. Unfortunately, the other devolved nations have not been privy to similar arrangements, as they could not afford to offer the Prime Minister continued tenure in office in return.

Looking north of the English border, the Scotland Office sees a significant reduction in its departmental budget. I also note that some spending has been allocated for city deals in Edinburgh, Inverness and Aberdeen. Alongside that funding, perhaps the Chief Secretary can tell us how much money the UK Government will invest in the new or recently signed city deals in Scotland, such as the Stirling and Clackmannanshire deal. Will she give us more details on the Glasgow and Clyde Valley city deal by updating us, for example, on whether there will be any additional Government funding for that deal, particularly for infrastructure projects?

Turning to Wales, the cash grant proposed for the devolved Welsh Government is 2% lower than the amount they received last year and comes at a time of unprecedented austerity for Wales. The Welsh Labour Government’s budget will be 7% lower in real terms by the end of the decade than it was in 2010-11 as a result of the UK Government’s cuts. That means there is £1.2 billion less to spend on public services. As with Scotland, this is the first financial year the Welsh Government have been given greater control over taxation. The Wales Act 2017 and the Welsh fiscal framework devolved stamp duty and landfill tax to the Welsh Government. Responding to that, the Government have reduced the block grant by £269 million to reflect changes to the amount of tax revenue the Welsh Government now collect directly.

Although the devolution of Welsh taxes is welcome, Labour is the real party of devolution and wants to ensure that the Welsh Government have a greater level of fiscal autonomy and financial self-determination. However, this also puts Wales in a vulnerable position. Welsh taxes will need to grow as fast as those in the rest of England to keep up with cuts to the block-grant. In the case of stamp duty, which has been replaced by a land transaction tax, Wales has received no agreement from the Government to protect any fall in revenue. That is particularly concerning given the deep-rooted differences in UK property market conditions, especially after Brexit, which risk leaving the Welsh Government exposed to risks that are outside their control. In addition, Wales’s slower population growth may lead to slower revenue growth than in the other nations of the UK.

The Opposition are also concerned by the method that has been agreed upon to determine how the Welsh block grant is cut. The comparable model means that Wales will lose out even if revenues per head grow at the same rate as everywhere else in the UK. When offered the same method, the Scottish Government rejected it outright, and the Welsh Government agreed to it only after the Treasury agreed to a Welsh needs-based factor being included in the Barnett formula.

So although the Government’s recognition of the Welsh population’s higher needs is a welcome step, the uprating of Barnett consequentials to reflect the high need must also be closely monitored. The transitional uprating of 5% and the agreed funding floor of 15% should not be considered a fait accompli by the Treasury. Instead, both rates should be regularly reviewed by this House and the Welsh Assembly, and, where necessary, uprated.

The day-to-day spending budget for the Welsh Government is yet another casualty in the Government’s continued austerity programme. The Welsh Government this year will see a 3.3% reduction in both their capital and resource budget compared with last year’s final budget. The reality is that the Treasury is pulling the rug from under the Welsh Government by demanding that they do more with less. It is the same old story that we have seen played out time and again, for example, in relation to local government in the UK. Ministers have cynically devolved taxation as a means to also devolve their austerity agenda. That is another case of the Tories not having the courage of their convictions; it is all a charade and an illusion. Financial settlements are dressed up, but in the end Scotland, Northern Ireland and Wales will inevitably find that they have less. Those nations deserve better from the Government; they deserve a better deal, one that is fair. With these estimates, they are not getting that deal and, to use the words of the Chief Secretary, “That’s a disgrace”.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury 6:48 pm, 3rd July 2018

We have had a fantastic debate, in which we have heard from some of our top talents from right across the House. I thank Kirsty Blackman for opening the debate and Peter Dowd for his contributions. Sadly, however, we again heard the tales of doom and gloom, and projections of difficulty, whereas when we look at what is happening around Britain and at the UK economy, we see there is a positive story. We have record levels of employment and of new businesses set up, and exports are going up right across the UK. All that comes while we have had to deal with the legacy of the previous Labour Government, who left this country in crisis. We have managed to reduce the deficit that they left us by three quarters. It is because of our stewardship of the economy that we have been able to make sure that the devolved Administrations throughout the UK received more money in the most recent Budget, which contained £2 billion for Scotland, £1.2 billion for Wales and £660 million for Northern Ireland.

We have heard some absolutely fantastic speeches in this debate, particularly from the Scottish Conservative MPs, who talked about some of the real issues in that country. We heard complaints from Scottish National party Members but, as my colleagues pointed out, it is within the Scottish Government’s power to solve many of the issues that they raised. The Scottish Government have failed to use the money delivered through the Barnett formula to sort out those problems.

My hon. Friend Kirstene Hair talked about the failings in the NHS. My hon. Friend Douglas Ross talked about those failings as well, and asked where the SNP Members were during the debate. No doubt they were getting seats for the England versus Colombia match that we are all looking forward to. My hon. Friend Luke Graham talked about the failures of IT to deliver agriculture payments to Scottish farmers and the lamentable results in English and maths education, which show that Scottish children have been let down by the Scottish Government. My hon. Friend Andrew Bowie talked about how hard-working people are being punished by the raising of taxes on their income at the same time as the Scottish Government are inflating the cost of government and the number of Ministers. My hon. Friend Stephen Kerr talked about the poor management of the budget in Scotland. I am glad that we were able to finalise the details of the Stirling and Clackmannanshire city region deal.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

Will my right hon. Friend take this opportunity to confirm to the House that the UK Government contribution to the Stirling and Clackmannanshire city region deal is £45.1 million? The SNP asked the question, and I think it is worth repeating that it is £45.1 million—thanks in no small measure to my right hon. Friend.

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I can indeed confirm that the money allocated by the UK Government to the Stirling and Clackmannanshire deal is £45.1 million. I thank my hon. Friend for his hard work on that deal. I will be looking at the issues across Government to make sure that we deliver these deals in the best possible way to deliver real value for local communities. That is what MPs have been campaigning for and I will look into that very carefully.

Photo of Pete Wishart Pete Wishart Shadow SNP Spokesperson (Constitution), Shadow SNP Leader of the House of Commons, Chair, Scottish Affairs Committee

Will the Chief Secretary tell us when the Tay cities deal is finally going to be agreed and concluded? Will she confirm that the UK Government will match the funds that the Scottish Government supply to that deal?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

I have already had some discussions about the Tay cities deal with the Secretary of State for Scotland, and we will look at the details. We constantly have to make sure that every piece of Government spending has the best possible value for money. It was significant that in the speeches from SNP Members we heard nothing about value for money or the fact that taxpayers pay for spending.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

Will the Chief Secretary join me in congratulating Stephen Kerr on actually getting an answer out of this Government?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

My hon. Friend the Member for Stirling is an extremely effective Member of Parliament from whom Members from all parties could learn.

Photo of Luke Graham Luke Graham Conservative, Ochil and South Perthshire

I have two questions. First, SNP Members regularly question this, so will my right hon. Friend confirm Scottish Conservative Members’ involvement in the Stirling Clackmannanshire deal and Tay cities deal negotiations? Secondly, will my right hon. Friend push the devolved Administration in Scotland to confirm that the money that they have pledged for the Tay cities deal will be new money, not reallocated money, as has been the case with so many other deals, which have taken money from other local authorities?

Photo of Elizabeth Truss Elizabeth Truss The Chief Secretary to the Treasury

It was very good to meet my hon. Friend to discuss the Clackmannanshire and Stirling city region deal and I look forward to visiting him and his colleagues soon in Scotland to see how things are working on the ground. I can confirm that we will be working further with the Scottish Government on those issues.

I commend the work that is being done on the oil and gas industry by my colleagues in Scotland. That issue was also raised by the hon. Members for Aberdeen North and for Glasgow North (Patrick Grady). As well as visiting Stirling and Clackmannanshire, I will be going up to Aberdeen to hear directly from representatives from the oil and gas industry. [Interruption.] Well, that is a very kind comment, sir, and may I offer Stephen Pound a happy birthday on this great occasion?

A number of Members raised the issue of health funding. As has been explained by the Prime Minister and the Chancellor, we will be presenting the details of how that will be funded in due course and, of course, the Barnett consequentials will be passed to the devolved Administration. It is very important that we ensure that, for every pound of money that we spend, we get maximum value for money. With that money going into the health service, we are making sure that it is improving productivity, improving efficiency and getting the maximum benefit from our hardworking staff on the frontline. That will, of course, be part of the work that we do as well.

On Brexit, we heard the usual contradictions from Scottish National party Members. First, they said that if we were to leave the customs union, which is what we, as a Government, have promised to do, that would be bad news for Scotland. We are, of course, seeking the most frictionless arrangements at the border that we possibly can. They also said that they wanted an independent Scotland, cut off from the rest of the UK. Given that goods worth £46 billion travel from Scotland into the rest of the UK every year, that sounds to me like a highly contradictory statement.

We also heard various comments about Northern Ireland and the additional £1 billion allocated to it. I point out to all Members of the House that, of course, we have the Barnett formula, which is about making sure that consequentials are passed through when there is a change in spending in England, but it is absolutely standard practice that we do fund outside the Barnett formula where it is valid, and we have done so in the past. For example, the Stormont House and Fresh Start agreements were funded outside the Barnett formula. We altered the Barnett formula, as was mentioned by Jonathan Edwards, to make sure that spending levels in Wales are fair, and we have also allocated extra money to city deals across Wales and Scotland, because they have, in many cases, largely devolved purposes.

I am pleased that the hon. Member for Aberdeen North welcomed the funding that we are providing for the potential visit of the American President to Scotland. I confirmed today that we will supply an extra £5 million to cover the cost incurred by Police Scotland. Again, that is outside the Barnett formula. Therefore, we do have the Barnett formula there for the important work that is done across Government, but it is right that we should look at the specific circumstances that we face with respect to Northern Ireland and to getting the right city deals in Scotland and Wales. We need to ensure that we use our funding in that flexible way.

We have heard some fantastic speeches in the House today, but I observe that the champions of fiscal rectitude and enterprise in Scotland sit on the Conservative Benches.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 6:58 pm, 3rd July 2018

I appreciate the chance to have a minute at the end of this debate. On the debate and the way it has been conducted, I appreciate the fact that so many people have taken an interest in the finances that are being granted to the devolved institutions. I really hope that, when it comes to the Budget process later this year, we see the same level of interest.

Finally, the change in the process is welcome to ensure that we can actually debate the estimates, but I suggest that further change is still needed to ensure that the estimates debates can be meaningfully amended and that proper alternatives can be put forward so that we can make it clear what our alternative spending plans would be and that we can have actual meaningful votes on them.

Question deferred (Standing Order No. 54)

The Deputy Speaker put the deferred Questions (Standing Order No. 54).