Scotland’s Fiscal Framework — Statement

Part of the debate – in the House of Lords at 3:43 pm on 24th February 2016.

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Photo of Lord Stephen Lord Stephen Liberal Democrat Lords Spokesperson (Scotland) 3:43 pm, 24th February 2016

My Lords, I thank the Minister for his Statement. It is certainly very good news that an agreement has been reached between the UK Government and Scottish Government on the fiscal framework. This agreement should allow the Scotland Bill to reach the statute book ahead of the Scottish Parliament elections and will introduce a very powerful range of new policy-making and tax powers to Scotland, which have been long supported by the Liberal Democrats on the journey to home rule. All of this delivers on the vow made by the UK party leaders and implements in full the recommendations of the all-party Smith commission.

However, I am sure there will be concern from all sides of this Chamber that we have not yet seen the full, detailed fiscal framework. Some of the arguments from the negotiations—which were of course all conducted very firmly behind closed doors, underneath the veil of secrecy—are still being repeated, most notably by the Scottish First Minister and others on her side of the argument. Nicola Sturgeon claims to have been fighting to defend the Scottish Government from cuts over a five-year period—first, she said of £10 billion, then £7 billion, then £3 billion and then, finally, £2.5 billion. She now claims that this threat—we will never know how real and present a threat it ever was—no longer exists.

What is certain is that under an independent Scotland, or if there was full fiscal autonomy, the cuts that Scotland would now be facing would be £10 billion—not over a five-year period, but each and every year. There would be no safety net or protection from the UK Government under independence. That would mean a cut over five years not of £10 billion, £7 billion, £3 billion or £2.5 billion, but of £50 billion under independence or full fiscal autonomy. What is also certain is that the Scottish Government have accepted the Treasury model for calculating the grant adjustment for each of the first five years.

It is worth quoting Brian Taylor, the BBC’s political editor in Scotland. He asks “who has given ground” in the negotiations and states:

“The Scottish government has had to compromise. They have gained less than they wanted in terms of cash to assist the implementation of the new powers, including welfare powers. They have been obliged to concede that there will be independent scrutiny of Scotland’s fiscal position in the run up to the proposed review which will take place in six years time ... the Scottish government has accepted that it will be, technically, the Treasury model which is used for operating the fiscal framework … Already Liberal Democrats are saying that is an error by Scottish ministers - that it will be difficult to escape the Treasury model, even the reformed version, once it is in place. That it might, in short, prove costly in the longer term”.

So it is clear that this is not the beginning of the end, nor even the end of the beginning. Rather, it all remains to be fought once again in 2021. It is inconceivable that the SNP will not use the opportunity for further grievance and battling with the UK Government.

The political editor of the Courier wrote this morning:

“One dampener to put on this otherwise joyous occasion is the question of what happens in five years when we revisit the terms of the deal? Will we be locked in some kind of 2016 battle re-enactment? Will it be even bloodier if one side decides it doesn’t like the now-agreed system? It’s possible the battles have just begun”.

I trust that the Minister agrees that we should now grasp the opportunity to establish a federal fiscal commission to look independently and objectively at the issues of financing not only Scotland but other parts of the United Kingdom in a fair and well-informed way. We do not have to wait until 2021.

The spin of one Government against the other in these negotiations has not been helpful, and it will, I predict, be repeated in 2021. However, the Minister is right: the big issue is now delivering the new powers and for Scotland to make proper use of them.

In conclusion, and crucial to this Chamber, I hope that the Minister can give us a cast-iron assurance that the detail of the fiscal framework will be published in time for proper scrutiny ahead of Report next Monday. I suspect that he will readily give us such a reassurance, as he is acutely aware of the strength of feeling on this issue on all sides of the Chamber. He has also been very directly involved in the negotiations and has put a considerable amount of his own acumen and effort into reaching resolution. He has also put a great deal of effort into dealing with the representations and frustrations of the Members of this House, which have also been considerable. For all of that, he should be considerably thanked.