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 Hope of Craighead Lord Hope of Craighead Convenor of the Crossbench Peers 6:45 pm, 29th February 2016

My Lords, I would like to pursue the points made by the noble Lord, Lord Forsyth, and the noble and learned Lord, Lord Wallace of Tankerness, about dispute resolution. As a lawyer, one tends to look to the dispute resolution bits, because they are the things that matter to us, to see that there is actually an effective mechanism for that, rather than at the fiscal parts, which I am content to leave to others.

Would the Minister care to look at paragraph 46, which the noble Lord, Lord Forsyth, identified? It contains the definition of “policy spillover effects”, which is where either Government make a policy decision that affects the tax receipts or expenditure of the other. If that happens then there is a spillover and a spillover effect. In paragraph 98 we enter the dispute resolution system, which applies to, among other things,

“All disputes arising from the consideration of direct and behavioural spillover effects, including both gains and losses”.

So this particular group of paragraphs deals with the resolution of the dispute. We can see how it works: first, if it cannot be settled at working level then it becomes a disagreement and is referred to senior officers at director level or above, including consideration at Joint Exchequer Committee official level too. If that does not work, the matter becomes not a disagreement but a formal dispute. It is then referred to Ministers to be raised and discussed at a meeting of the JEC.

We then move to paragraph 100, and so far we are working down the line of complete impasse:

“If … there is a dispute that cannot be resolved between Ministers, there is an automatic pause placed on the disputed finances, i.e. no decisions … can be taken by either government in relation to the disputed amount until the dispute is resolved”.

That seems a strange system, given that revenues either way are crucial to the running of the country. To have a dispute simply frozen in that way is very strange. The formula goes on a little further, because if that happens then the Governments are to draw up a statement of fact on the dispute, and technical input may be sought to ensure that the facts are correctly stated. It will then be considered by both Governments, who commit to using their best endeavours to resolve the dispute.

However, the agreement says in paragraph 103:

“If no agreement can be reached then the dispute”,

fails—or rather “falls”—and, as the noble Lord, Lord Forsyth, pointed out,

“there would be no specific outcome from the dispute and so no fiscal transfer between the Governments”.

What puzzles me further is paragraph 104, and maybe the Minister can help here:

“If either Government wishes to pursue the dispute further”— let us imagine that the UK Government are anxious to do that—

“it can be referred to the ‘Protocol on the Resolution and Avoidance of Disputes’ attached to the Memorandum of Understanding between the UK government and the devolved administrations”.

I do not know where the memorandum is—it is not in the Printed Paper Office, as far as I know—and it is also said to be subject to review. So there is a cloud of uncertainty over exactly what paragraph 104 means and how fixed it is as a system for resolving these disputes.

If one is entering an area like this where it is plain that there will be political arguments on either side that may lead to a complete impasse, it is crucial that there should be a system for the resolution of disputes; otherwise one is left with a situation where no transfer takes place although one side is calling for it and the other is not. How can the system be left in that situation, hanging in the air without anyone to decide it? Can the Minister inform the House about that? It has a direct bearing on the amendment by the noble Lord, Lord Forsyth.