Scotland Bill — House of Lords, 2015-11-24
Topic: Macroeconomics
John Kevin Sharkey (Liberal Democrats, Centre to centre-left): My Lords, I can save some time by saying right away that I cannot explain the second no-detriment principle, even though I am a member of your Lordships’ Economic Affairs Committee under the very able chairmanship of the noble Lord, Lord Hollick, whose amendment I support. I believe that it is impossible to properly debate this Bill unless we have before us the details of the fiscal framework. I believe it is impossible because those details will be critical in determining the nature of the relationship between the rest of the UK and Scotland, and the fiscal framework may well have implications for the future arrangements for Wales and Northern Ireland. If the framework is flawed, as it could easily be, it could lead to friction and to regular disputes. Such friction and regular disputes would weaken the union—the exact opposite of the purpose of this Bill As the noble Lord, Lord Hollick, said, our committee identified seven problems that need to be addressed. They are all important but the first is the absence of the fiscal framework and the timetable for the Bill. As things stand, it is not certain that your Lordships will have the opportunity to examine the fiscal framework, and it is entirely unclear, this Bill having been through the Commons, how MPs could have any opportunity to debate any proposed fiscal framework in any meaningful way. This matters because the fiscal framework will determine the funding that the devolved Administration will receive from the UK Government. Our report discusses, for example, the question of the adjustment of the block grant for Scotland after the initial settlement There are many ways of making that adjustment and we examined three in detail. All three showed significant differences in the size of the block grant received by Scotland. For example, in the longer term, there was an annual difference of £1.3 billion between two of the methods we discussed. Without a statement of underlying principles and without being clear what risks the Scottish Government should take responsibility for, it is not possible to argue coherently in favour of one method over another, but the argument needs to be had. The funding differences can be very, very significant. Without the fiscal framework, we do not know which adjustment method is proposed; we do not know on what basis it is proposed; and we do not know its revenue consequences. Your Lordships’ Constitution Committee, in its report on the Bill of last Friday, commented on the situation, as the noble Lord, Lord Hollick, noted. It said: "In the absence of any information about the fiscal framework, it will be impossible for the House to assess whether or not the Bill will cause detriment to all or part of the United Kingdom" The word "detriment" of course appears in the discussion of the Bill in another guise. The Economic Affairs Committee concluded, after hearing evidence from experts, that this second no-detriment principle was not workable and that it was in fact a recipe for an unending series of future disagreements about what constituted detriment and about its value. This needs to be dealt with in any fiscal framework. The Government need to explain how they intend to interpret and to implement the second no-detriment principle There is also the issue of what borrowing powers will be granted to Scotland. This is obviously a vital question: getting this wrong would put the whole deal at risk. Even framing it in the wrong way would be very damaging. For example, any no-bailout provision would, I think, look like a repudiation of Scotland as a part of the United Kingdom and would, in any case, almost certainly be ignored by the markets. The Constitution Committee quotes the Government on providing the fiscal framework for parliamentary scrutiny. It says that the Government have said that they, "aim to complete work on the fiscal framework ‘as soon as possible in order to give respective Parliaments time for due consideration of both the Fiscal Framework and the Scotland Bill’" It goes on to say: "It is not clear how the Government expect the House of Commons to give ‘due consideration’ ... when the Commons has already passed the Scotland Bill to the House of Lords" No, it is not clear. Perhaps the Minister can explain how the Government intend to allow the Commons this "due consideration" and whether it will include the opportunity to amend. As things stand, it is entirely possible that the only legislature to have an opportunity to scrutinise the fiscal framework will be the Scottish Parliament. This is obviously wrong and completely unacceptable As the Constitution Committee and the Economic Affairs Committee suggest, we should consider delaying parts of the Committee stage until after the publication of the fiscal framework. I look forward to hearing the Minister’s plain-English and unequivocal response, making a commitment to arrange matters so that this House can examine the fiscal framework in Committee.