Scotland’s Fiscal Framework — House of Commons, 2016-02-24
Topic: Macroeconomics
Ian Murray (Labour, Centre-left): I thank the Secretary of State for advance notice of his statement, and indeed for coming to the House yesterday to indicate he would be making it today. I begin by welcoming unequivocally the news that an agreement has been reached on the fiscal framework, and I would also like to echo the thanks to both Governments, the Deputy First Minister, the Chief Secretary to the Treasury, who is in his place, and of course the Secretary of State himself for working so hard to secure this historic deal. Our heartfelt thanks also go out to the officials of both Governments, who we all know are the people who do the real work in these negotiations Yesterday’s agreement marks the removal of the final obstacle to the transfer of significant and substantial powers to Scotland, and, as Lord Smith himself has said, the agreement "sees the recommendations of the Smith commission delivered in full." Importantly, the vow stipulated clearly that the Barnett formula should remain the key mechanism for calculating Scotland’s budget. That has now been agreed and Barnett has been secured I note the Secretary of State’s commitment to publishing details of the agreement by the end of this week, and I welcome that commitment, but can he indicate whether this House will have time to scrutinise the agreement in detail? I have been saying for some time that greater transparency is required in the way these deals are negotiated. This process has highlighted the fact that future intergovernmental relationships must be improved to make these powers work for Scotland. Lord Smith’s recommendations that both Governments need "to work together to create a more productive, robust, visible and transparent relationship" and that the Joint Ministerial Committee "must be reformed as a matter of urgency" echo in this process. Can the Secretary of State confirm that this will be done We all know that the major stumbling block was the indexation method used for the block grant adjustment. Under the compromise reached, there will be a five-year transitional period, which will cover the full term of the next Scottish Parliament. Towards the end of that period, an independent review and recommendation will be published that will form the basis of a more permanent solution. When he gave evidence to the Scottish Parliament’s devolution Committee last night, the Secretary of State suggested that the period between the review being published and the transitional period ending at the end of March 2022 could be as little as 12 weeks. If no agreement is reached, what happens then On the transitional period itself, it is my understanding that the Scottish Fiscal Commission will carry out the necessary forecasts of Scottish GDP and tax revenues. Can the Secretary of State confirm that, under the terms of the fiscal framework negotiations, those forecasts will be fully independent of the Scottish Government? Last week, the Scottish Finance Committee voted against allowing for that independence There also seems to be some confusion over the block grant adjustment during the transitional period to 2022. The First Minister said it would be done according to the Treasury’s favoured method but with the Scottish Government’s favoured outcome. Can the Secretary of State confirm what method will be used? Will it be the catchily named tax capacity adjusted levels deduction, which I understand was the Chief Secretary to the Treasury’s latest offer Further clarity is also needed on the timeframe for the devolution of powers. The Secretary of State has said that the new income tax powers will be available by April 2017. However, the Deputy First Minister has said he does not agree that that timeframe is realistic. Is the Secretary of State able to confirm that the new tax powers will be transferred by April 2017 Today the Scottish Government are passing the Scottish budget. Twelve months from now, at the time of the next Scottish budget, we want them to have full control of income tax and air passenger duty and the deployment of 50% of Scotland’s VAT revenues. We also want them to have the considerable powers over welfare, which will allow us to design a new social security system for Scotland I welcome the review and the fact that it will be fully independent. I have stated several times that impartial oversight and, if necessary, arbitration should be an established part of intergovernmental relations. Will the Secretary of State tell us how the review body will be chosen, and can he confirm that it will be done in a spirit of consensus with the full agreement of both Governments? Will he also tell us to what extent the recommendations of the review will influence the decision taken on the long-term solution for block grant adjustment I close by welcoming once again the agreement that has been reached. Today marks an historic date in Scotland’s devolution journey: the creation of one of the most powerful devolved Parliaments in the world. The promises made to Scotland in 2014 have been met—the Smith agreement implemented, Barnett protected, powers transferred, the vow delivered. Scottish politics will never be the same again thanks to these new powers. We have entered a new and exciting era of devolution. What an opportunity to transform Scotland for everyone—an opportunity that my party will grasp with both hands.