Scotland Bill - Report (2nd Day)

Part of the debate – in the House of Lords at 6:45 pm on 29th February 2016.

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Photo of Lord Wallace of Tankerness Lord Wallace of Tankerness Liberal Democrat Leader in the House of Lords 6:45 pm, 29th February 2016

My Lords, I shall speak to the amendment in this group in the name of my noble friend Lord Stephen and myself. I am sure the House is grateful to the noble Lord, Lord Forsyth, for raising this important debate on the fiscal framework. It is long awaited. Although we had a very good debate in Committee, it was a bit like “Hamlet” without the Prince of Denmark; it was about the fiscal framework without the actual fiscal framework agreement. At least we can now have a debate on this important part of the architecture of Scottish governance following the Smith commission’s proposals in the light of the agreement which was published at the end of last week.

The amendment which my noble friend and I have tabled is to address the mechanism for the review of the fiscal framework. The Smith commission said that it was important that there was a review, and in Committee we moved an amendment to establish a review. We have tried to revise that amendment in the light of the agreement as we now see it.

When the Minister replies, it would be helpful if he could give us some indication of how the Government understand the review and the mechanisms. The Chief Secretary to the Treasury, Mr Greg Hands, was right to point out that there is a distinction between the review and dispute resolution. I am rather intrigued by the fact that in the agreement the review is referred to in paragraphs 20 to 23 and again in paragraphs 111 to 113, some of which appears repetitious and almost as if there is something uncertain about it. It is as if the more often you say it, it might just happen. Perhaps the Minister will tell us if there is anything we should read into the fact that it was felt necessary to repeat some of the proposals with regard to the review at a later stage.

The First Minister of Scotland in her Statement to the Scottish Parliament last week seemed to indicate—I sat and listened to it—that there could be a veto over the Scottish Government accepting anything which was not to their advantage following the review. Indeed, paragraph 112 states:

“It will be open to either government to propose changes to the fiscal framework from”,

the point of the review or the end of 2021, and:

“The fiscal framework does not include or assume the method for adjusting the block grant beyond the transitional period”.

The Chief Secretary seemed to say today that it was “our model”, which I assume to mean Her Majesty’s Treasury’s model, whereas the transition period was the Scottish Government’s transition period. So—this is a question which the noble Lord, Lord McConnell of Glenscorrodale, asked last week when the noble Lord repeated the Statement—what is the default position? Is the default position the Treasury model, or is there in fact a veto? What happens if there is not agreement following a review? One was left with the impression that it is a bit, “it’ll be all right on the night”. Those of us who have seen the negotiations with the Scottish Government know that it will not necessarily be all right on the night. They may well take things up to the brink.

Under Section 64 of the Scotland Act 1998, the Scottish Consolidated Fund is established, and subsection (2) states that the Secretary of State shall pay sums into the Consolidated Fund, but the sums are not predicated by any agreement or formula, and certainly are not predicated by the statute. I imagine that if all else failed, the ball would be at the feet of the Secretary of State, who has to pay money into the Scottish Consolidated Fund. Perhaps the Minister could indicate how, in the event of impasse and of no agreement being reached, the UK Government, particularly Her Majesty’s Treasury, see that sum to be paid into the Scottish Consolidated Fund being arrived at, given that it is actually the Secretary of State’s decision and, according to statute, is not in any way fettered. It is important that we get some clarity about what should happen.