Scotland Bill — House of Lords, 2015-11-24
Topic: Macroeconomics
Brian Griffiths (Conservative, Centre-right): My Lords, I feel very humbled to take part in this great debate, not least after our two maiden speakers, who were excellent and regaled us with their Scottish credentials. I am not Scottish and have only a modest knowledge of Scottish politics. My reason for taking part is that I am a member of the Select Committee on Economic Affairs, which for the past four months has been looking at the issue of the fiscal framework and financial devolution, something that professionally—I hope at least—I know something about. In that context, I would like to say, along with other members of that committee, how much we owe to the noble Lord, Lord Hollick, who did an outstanding job of chairing the committee. His speech today, while in parts quite technical, nevertheless was a very fair assessment of an all-party agreement on the way forward I have three concerns with the Bill but I will preface my remarks by saying that I wholly support the objective of the Bill; namely, to extend devolution in Scotland and, in time, maximum devolution to Scotland, in a way that I hope will become a template for maximum devolution in Wales and Northern Ireland, with its implications for England My first concern—this has been said before but it has to be said again because it is so important—is about our ignorance of the fiscal framework. For some people, the fiscal and financial aspects of the Bill may seem simply technical details best left to economists and Treasury officials to work out together. That would be a great mistake, because hidden in the fiscal and financial details—what taxes you devolve, how you adjust the block grant, exactly what the terms are on which you can raise debt—are political time bombs which, if detonated, will have disastrous implications for the UK. We chose A Fracturing Union? as our title, and I believe that these issues will ultimately lead to the break-up of the UK if they are not dealt with The reason for that is that a new fiscal settlement for Scotland will, after a few years, directly affect the living standards of Scottish people, not least in health and education. It will also affect the living standards of people in Wales, in Northern Ireland and in England. More than that, the terms of fiscal devolution between Scotland and the rest of the UK will almost certainly become a template for devolution in other countries. Therefore, after a few years, if electorates in the various countries which make up the United Kingdom decide that because of the terms of this settlement their standard of living has worsened, either absolutely or relatively, they will almost certainly feel a sense of grievance and betrayal. I believe it would be very difficult to rebuke in any way the Scottish people for saying that the only way forward would be independence. That is not just my personal view. Our committee, having taken evidence from academics, economists, constitutional experts, businesspeople, accountants and politicians, came to a unanimous conclusion. Because of this, until Parliament knows the details of the fiscal settlement and the financial devolution, we should really not proceed to pass the Bill. Publication of the details, with full transparency, is essential My second concern is that the Bill does not start with a clean sheet of paper. We have the referendum result, the vow and the commitments of the main political parties, all of which, crucially, have raised the expectations of the Scottish electorate about the Bill and further devolution. I thought the noble Lord, Lord Reid, hit the nail on the head when he said that we are between a rock and a hard place. However, we have to start from where we are. The Barnett formula, which has been mentioned already this afternoon, attempts to do something very difficult: to reallocate resources between countries and individuals who are in real need. It has its advantages—which we should not neglect—in terms of simplicity, stability and a lack of ring-fencing but, as has been mentioned, after 37 years, it really needs to be modernised. The failure of the Barnett formula is seen, as I am sure the noble Lord, Lord Thomas, will agree, in the fact that because the allocation in Wales is so unfair, the Government—as we shall see tomorrow in the Statement by the Chancellor —has had to put a floor under it. The Barnett formula has not delivered what is necessary The Barnett formula is not, in our judgment, and certainly in my opinion, a solid basis for a sustainable, long-term settlement for adjusting the block grant to Scotland, Wales and Northern Ireland. Because of the commitments that have been made, we have to start with the Barnett formula. But while starting with it, is it not possible, when the fiscal statement comes out, to make a commitment to carry on and say that we need to change it during this Parliament to take account of the things it should if it is to be considered and widely accepted as fair My third concern is that the fiscal and financial framework should not create expectations which cannot be delivered. My noble friend Lord Forsyth has mentioned many times this afternoon the no-detriment principle. To take the example of borrowing in the capital markets, which has been mentioned, Scotland will clearly benefit if it is able to access the capital markets in its own right, particularly for long-term investment. But what if Scotland is unable to repay interest on its bonds or even to repay its debt at all? In that case, Scotland, as other noble Lords have said, must face up to the consequences of its actions. However, including an explicit no-bailout clause in the Bill would be provocative to the people of Scotland and contrary to the spirit of devolution. More than that, it is inconceivable that the capital markets would ever believe it. However, this means strict limits to the amount that Scotland is able to borrow and limits placed on the ratio of Scotland’s national debt to national income. The Bill therefore has to make it very clear, through the fiscal arrangements, exactly what the potential for borrowing is In conclusion, we need an explicit and detailed fiscal framework. We start with the Barnett formula, but it must be amended during this Parliament. We also need rules for borrowing and debt to be set out clearly. All of these are within our reach. I have great confidence in the Minister, having had the privilege of being a colleague of his for some years during the second half of the 1980s in the policy unit in 10 Downing Street. The noble Lord, Lord Dunlop, is a person of great ability and integrity and all I ask for is greater openness, greater clarity and greater transparency. As a result, this Bill, when scrutinised, will be workable and ensure a United Kingdom, not a divided one, which I feel is what all Members of your Lordships’ House would wish.