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Scotland Bill

Volume 769: debated on Monday 22 February 2016

Committee (3rd Day) (Continued)

Amendment 74 not moved.

Clause 19 agreed.

Amendment 75

Moved by

75: After Clause 19, insert the following new Clause—

“Non-budget expenditure and the Scottish Consolidated Fund: further provisions

Before the end of the first month of each financial year, the Secretary of State must lay before Parliament a full record, including minutes of meetings and Ministerial correspondence, of discussions between the Secretary of State, the Treasury and Scottish Ministers relating to the non-budget expenditure to be voted by Parliament authorising the payment of grants to the Scottish Consolidated Fund for that financial year.”

My Lords, Amendment 75 provides for the process leading to annual settlement between the Treasury and Scottish Ministers of the block grant to Scotland, to the Scottish Consolidated Fund. In tabling the amendment, we focus on transparency and accountability.

I will also speak to Amendment 75A, in the names of the noble Lords, Lord Kerr and Lord Turnbull, on borrowing powers. They may already be in place for all we know and I would like the Minister to enlighten us on that.

Amendment 79F in the name of the noble and learned Lord, Lord McCluskey, seeks the publication of the fiscal framework within 30 days of the Act being passed, if not before. Amendment 79G would expand the role of the Scottish Fiscal Commission, which is welcome, and Amendment 76 in the name of the noble and learned Lord, Lord Wallace, establishes the commission as per the recommendation by the Scottish Affairs Select Committee and the need to review the fiscal framework at least every five years. For that, we need a timetable and we ask: why is a review needed?

The Joint Exchequer Committee, chaired by the Chief Secretary to the Treasury, Greg Hands, has met 10 times already. It has been clouded in secrecy and we have heard already this afternoon about the need to lift the veil on that, particularly on the area of the sticking points. Up to this weekend, there was a daily, unattributed briefing from the Scottish Government, which was largely negative and unspecific in tone, but nothing from the UK Government, for which they should be commended. But that highlights the problem raised by the Economic Affairs Committee, which is that nobody knows what is going on. We need a deal securing Barnett because the powers that are being given to the Scottish Parliament are too important to walk away from. If I have one message for the Minister, it is that we cannot down tools at the moment.

We have had artificial deadlines, the latest being Valentine’s Day, or 14 February. This side is telling the Minister to negotiate right up to the end—to 23 March if need be. The powers that the Scottish Parliament will receive are without parallel elsewhere. Keep in mind that the Scotland Act 2012 devolved income tax, stamp duty, land tax and landfill tax, established Revenue Scotland and provided the Scottish Parliament with borrowing powers. Smith has now added income tax, with unrestricted power to set rates and thresholds for tax on non-savings and non-dividend incomes. There is also the receipt of the first 10% of the standard rate of VAT. If the Scottish Government grow the economy, the extra revenue coming from that will be for the Scottish Government and Scottish people alone, and we must not forget the aggregates levy and the airport duty tax.

The income tax that has been devolved is £11 billion. The VAT generated will be, as I mentioned earlier, for the Scottish economy alone, so Smith will result in the amount of revenue that the Scottish Parliament is responsible for being raised to double the amount that it has at the moment, from £8 billion to £16 billion, with an extra £5 billion in VAT revenue. Together, those revenues will account for more than half of the Scottish Government’s annual budget and around 40% of all revenue raised in Scotland.

The question that is still pertinent for the Joint Exchequer Committee is: how do we adjust the block grant to take account of the devolution of tax and spend powers? The Scottish Affairs Committee’s report, which was excellent, stated that Smith’s unanswered question, which we all agree with, was how to index the adjustment to the block grant so that the principle of no detriment and taxpayer fairness is satisfied. That question is unanswered at the moment.

Amendment 75 has to be seen in such a context, where transparency and accountability should be the primary considerations. On transparency and accountability, borrowing is extremely important, as was mentioned in the amendment of the noble Lord, Lord Kerr. Dr Angus Armstrong said in his evidence to the Scottish Affairs Committee that the question of Scottish borrowing powers is perhaps the most important in the whole debate. In that regard, we support the amendment of the noble Lord, Lord Kerr.

Let us remind ourselves of the capital borrowing powers, which are currently £200 million per year with a £500 million cumulative ceiling. It would be helpful, as the Scottish Affairs Committee recommended, if a prudential capital borrowing regime were introduced and put on a statutory basis. We are mindful that the Scottish Government can borrow from the UK Government, the National Loans Fund and commercial lenders, and can issue their own government bonds. That is important as the bedrock because the National Loans Fund allows the Scottish Government to borrow on very favourable terms. If the Scottish Government can find even more favourable terms, they can go there, but the bedrock is the National Loans Fund. Again, the Scottish Affairs Committee asked for a specific limit on current capital borrowing to be set and for the criteria on which that limit is based to be published. We agree with those recommendations completely.

The amendment in the name of the noble and learned Lord, Lord Wallace of Tankerness, asks for the establishment of a commission, which is another recommendation of the Scottish Affairs Committee. Therein, the need for transparency and independence is essential. We thought a number of weeks ago that the Scottish Government were going along with that line of independence when the Finance Committee under the chairmanship of its convener, SNP member Mr Gibson, said,

“we are strongly of the view that not only should the Scottish Fiscal Commission be independent, but it is vital that it is perceived to be independent. That is why we are calling for the Bill to be amended to strengthen the Commission’s role and to give it responsibility for producing the official forecasts”.

Only a month later in the Scottish Parliament, the Scottish Government reversed their view on that issue and Mr Gibson did not fulfil that cross-party recommendation from the Finance Committee. The need for a Scottish fiscal commission to be given responsibility for setting the finance and the forecast that the Scottish Government budget is based on is hugely important. We ask the Minister to look at that issue again.

We should remind ourselves of today’s report from the Treasury Committee in the House of Commons, which secured, under a freedom of information request, emails from the Treasury to the Office for Budget Responsibility. There is a perception that the Government were leaning on the OBR to ensure that the wording in the terminology was changed to favour Her Majesty’s Treasury. I made that point a number of weeks ago in this Chamber when the Chancellor of the Exchequer found £30 billion behind the sofa and the OBR came up with that particular figure. I said then that it was important for Robert Chote and the OBR to underline its independence. If trust in the statistics is questioned at all, trust in the whole of government also crumbles. What applies for the Treasury must apply for the Scottish Parliament, and when we are starting afresh with the Scottish Parliament, the need to underline that independence is really crucial.

Amendment 79G, tabled by the noble and learned Lord, Lord McCluskey, is also crucial because it asks for the independent scrutiny of the public finances. That recommendation by the noble and learned Lord was preceded by an article he wrote in the Herald a number of weeks ago, for which I commend him. It was an excellent article. From what we have heard today and from what the noble and learned Lord, Lord McCluskey, has proposed, it is clear that the scrutiny that we are giving the Bill is happening only in this House; it is not happening elsewhere. Therefore, the article by the noble and learned Lord, Lord McCluskey, and the amendments have to be taken very seriously.

The Minister presented us with the letter from the Chief Secretary to the Treasury, Greg Hands, at 1 pm today. I commend the Government and the Chief Secretary for that letter, but we were rather disappointed to receive so late in the day such a detailed letter, which we have had insufficient time to scrutinise. We welcome the fact that it tackles the thorny issue of Scotland’s population growth and possible disadvantage to Scotland’s revenues if its population grows more slowly than in the rest of the United Kingdom. However, the population in Scotland will grow more slowly than in the rest of the United Kingdom because—and the historian, the noble Lord, Lord Forsyth, can correct me here—it has been doing so since the very date of the Act of Union, and it will continue to do so. That needs to be looked at and therefore we commend the Government for doing so.

I refer to paragraphs 13, 14 and 15 in the letter, which tackle this issue. Paragraph 14 is very clear that, using the Scottish Government’s own forecast, Scotland would benefit from around £4.5 billion of growth in taxes from the rest of the United Kingdom in the next decade alone if the proposal that the Chief Secretary to the Treasury put to the Deputy First Minister were accepted. Paragraph 14 also states that if the Scottish Government grow the economy then Scotland will keep those revenues. Paragraph 15 states that the proposals offer a fair deal for taxpayers in Scotland; they are fair for taxpayers in the rest of the United Kingdom; and, to use a Clydeside expression, they are built to last. If that is the case, the only thing missing is the Scottish Government’s response. Why are they not agreeing that proposition? I ask for the veil to be lifted a little today. Regarding paragraph 15, given the short notice and the cursory examination we have had of it, it is important that the Minister responds to this.

Logic dictates that we need everything to be cleared up today, and that was argued very skilfully by the noble Lord, Lord Forsyth. However, in this area logic is not everything. There is political reality, and the political reality is that we must encourage this process in every way possible. That is why the Labour Party has bent over backwards to be helpful to the Government over the past few months and, even today, will provide no impediment or give any hint that it will delay or obstruct the Bill. We have a fractured union. That was expressed in the report by the Select Committee on Economic Affairs, very skilfully chaired by my noble friend Lord Hollick. Therefore, we do not wish to add even one iota to any further cleavage in that area.

The UK in its present form is not an old state, but it is a state comprising ancient nations. We have to be very sensitive to that. I mentioned political reality. An article in the Daily Record last Friday by a good friend of mine, Professor Jim Gallagher, looked at the second aspect of no detriment—namely, taxpayer fairness—but the headline for the article was “sleight of Hands”, obviously a play on the name of the Chief Secretary to the Treasury. Hopefully, that gives Members an insight that there is a grievance mentality, and it is something we must be very sensitive of. In particular, as an unelected Chamber we must do everything to be positive. That is why, in moving Amendment 75 and supporting other amendments, we hope that the Minister makes progress. As the noble Lord, Lord Forsyth, said, if that progress is to be made before Report then we would welcome the information being put in the public domain as soon as possible. In that spirit, I beg to move.

I rise to speak to Amendment 75A. I was in meetings in Glasgow this morning and came in during the earlier debate on the amendment to the Motion in the name of the noble Lord, Lord Forsyth of Drumlean. I heard his rousing peroration; I agreed with it. Had I been in the Chamber in time, I would have wished to speak in support of it. I agree with his “sunrise” Amendment 79H, which I guess he will speak to in a moment.

Mine is a much more mundane matter. My amendment concerns borrowing limits. I find that one of the difficulties of handling the Bill in the absence of the fiscal framework is not so much dealing with what is in the Bill as understanding why things are not in it. I do not know why no provision or regime for borrowing is set out. That is why my amendment proposes the principles for such a regime. It is a key element of the Smith commission report that there should be enhanced borrowing powers for the Scottish Government, and I agree with that. The core of Smith is paragraph 95, where the fiscal framework is discussed. The most crucial element for me, apart from indexation, is the borrowing limits—how is borrowing to be done?

We discussed this in the Economic Affairs Committee, and the report of the noble Lord, Lord Hollick, brings out that the committee did not believe that anybody would believe a no bail-outs rule. The committee firmly believes that it is necessary to be seen to stand behind Scottish borrowing. Scottish borrowing will be cheaper. It is clear to all that the United Kingdom Government stand behind it. The clearest way of spelling that out is to have a provision on borrowing in the Bill. I do not argue that we should set out specific limits in the Bill—that, clearly, is a matter for subordinate legislation, as my amendment suggests. However, it seems clear that we must set out the two categories of borrowing in the Bill, that they will be subject to ceilings, and that these will be negotiated and agreed in consultation with the Scottish Government but will be set by Her Majesty’s Treasury. That seems practical and commonsensical. It makes for cheaper borrowing for Scotland, which is, of course, also cheaper for the United Kingdom, since the United Kingdom will stand behind the borrowing.

If the borrowing is properly conducted, it will be as part of the United Kingdom’s programme. It will get slots in the programme if the United Kingdom wishes to issue bonds. I have no idea how big the increases needed are and what the current limits on Scotland’s borrowing powers are, and the Smith commission does not help a great deal on that. It states that,

“to reflect the additional economic risks, including volatility of tax revenues, that the Scottish Government will have to manage when further financial responsibilities are devolved”—

I agree with that—

“Scotland’s fiscal framework should provide sufficient, additional borrowing powers to ensure budgetary stability and provide safeguards to smooth Scottish public spending in the event of economic shocks, consistent with a sustainable overall UK fiscal framework”.

That is clearly true, but it does not help to define what “sufficient” means. I do not know whether this is a matter of controversy in the current fiscal framework talks, but I think we should be told. Is it agreed that there should be ceilings on Scottish borrowing? Is it agreed that that level should be set by the United Kingdom Government in consultation with the Scots? Has that level been set; that is, has it been agreed?

This is talking about current borrowing, but I must say that I think there will be the need for a considerable increase. My view is that “sufficient” is going to be quite a lot more than the Scots now have, although it is inconceivable that it would be sufficient to deal with ensuring “budgetary stability” and providing,

“safeguards to smooth Scottish public spending in the event of economic shocks”.

Let us remember that the oil price on Scottish referendum day was $115 a barrel. That is quite an economic shock, and borrowing in the markets is not a credible way of dealing with it. However, there is a common-sense case for a large increase because of the seasonality of tax income and the need to smooth over the year. That element is clear, but there could be controversy about what the level is, in which case I think we should be told because transparency does matter.

The second kind of borrowing, also covered in my amendment, is borrowing to support capital investment consistent with the sustainable overall UK fiscal framework. I agree that that makes sense. There will be public investment which should be financed by the markets, but I do not know whether that is controversial for Her Majesty’s Treasury. I do not know whether the UK Government buy that bit of Smith, or whether there has been a discussion about how much. I do not know whether this is one of the reasons for the hold-up on the fiscal framework, and I think we should be told.

I wonder whether the noble Lord could help me. When he talks about setting a limit on borrowing, are we starting with a new baseline or is it assumed that the existing level of debt has part of it somehow imputed to the Scottish Government, so that we then start from that baseline?

I hope that the noble Lord, Lord Dunlop, knows, but I do not think that any of the rest of us knows what this means in the Smith report. Alas, the noble Lord, Lord Smith of Kelvin, is not here today to tell us.

It could be argued that there is no need to have any of this in the Bill, and I would like to hear from the Government whether that is their view. After all, they could have brought forward a Bill which said nothing about borrowing, despite the fact that it was a key part of paragraph 95 of the Smith report covering the fiscal framework. If it is their argument that there is no need to say anything about borrowing, I want to know why. As I said at the start, I believe that borrowing will be cheaper for Scotland and therefore better for the United Kingdom and Scotland if it is clear beyond doubt that the United Kingdom stands behind it. If it does, it is then clear that the United Kingdom has the right and the duty to set limits on that borrowing. I repeat that those limits should not be in the Bill. They should be set by affirmative resolution of both Houses, but the provision to require that should be in the Bill, and that is why I have tabled Amendment 75A.

My Lords, I shall speak to Amendment 76. The points made by the noble Lord, Lord Kerr of Kinlochard, beg questions which I am sure the Minister will seek to answer in terms of the Government’s understanding of how the Scottish Parliament’s borrowing powers will operate after the passage of this Bill. The Scotland Act 2012 also contained borrowing provisions and I would be interested to know what the dynamic between them is and how they will fit together. This is an important part of the overall arrangement because specific borrowing limits might not necessarily appropriately appear in statute. It is therefore important that the Committee be made aware of what is in the Government’s mind.

The amendment I have tabled with my noble friend Lord Stephen seeks a review of the fiscal framework. We tabled it some time ago, perhaps even before the Scottish Affairs Committee came up with a similar recommendation. That was done on the basis that, by the time we reached it and could debate it, the fiscal framework would have been published. Noble Lords will remember that even at Second Reading there was much concern about the fact that we did not have any detail on the fiscal framework. There is a recognition that however much work goes into this—I do not dispute the good will that the Minister has indicated on a number of occasions—there is a possibility, I put it no stronger than that, that it might not actually be perfect. It therefore makes sense that somewhere down the line there should be a review of how the fiscal framework is operating. We say that it should be given at least four years to run, but not much longer. We also propose that this should not be done by one Parliament or the other. In fact—although it is probably quite a novelty, we should not be scared of that—it should be reviewed by a committee that involves Members of the Scottish Parliament and of both Houses of the United Kingdom Parliament. A report should be published with recommendations that are submitted to both Houses of the UK Parliament and the Scottish Parliament. Quite simply, this tries to ensure that once the fiscal framework has had an opportunity to operate, a better judgment can then be made of how well it is living up to expectations.

I do not want to repeat all the points made earlier by my noble friend Lord Stephen in the debate on the amendment to the Motion moved by the noble Lord, Lord Forsyth, but it is absolutely right to talk about transparency. For example, the First Minister of Scotland released a letter to the press in which she set out the Scottish Government’s view of the no detriment principle, but we do not have a clue about the United Kingdom Government’s view. Anyone who knows the workings of the Scottish Government and the Scottish National Party knows that they are very adept at this. They will get in first so that their definition of no detriment suddenly becomes the currency. The United Kingdom Government will then try to come up with a different definition, but they will be told that they are selling out, and because the Scottish Government got in first and have defined the terms of the debate, that puts everyone else on the back foot. That is why we have been arguing both privately and in the Chamber with Ministers that we need far more information and that the Government need to be much more transparent—not necessarily about the nitty-gritty, small-print detail of where they are at any particular moment but about what they understand by the no detriment principle, for example.

An amendment in this group from the noble and learned Lord, Lord McCluskey, also provides for the fiscal framework by way of a Scottish fiscal commission, modelled on the Office for Budget Responsibility. It is a very worthwhile idea, which the Scottish Parliament has been looking at. However, it falls short of the independence of the OBR that we would like to see, although the noble and learned Lord does seek to address that. Indeed, paragraph 16 of the letter we received at lunchtime today from Mr Greg Hands, the Chief Secretary to the Treasury, to Pete Wishart MP, the chair of the Scottish Affairs Committee, indicates that, “All elements of the fiscal framework are being discussed with the Scottish Government, including the important recommendation of the Scottish Affairs Committee that there is a clear consensus that forecasting should be done by a body independent of Government. We agree with the conclusions of the Finance Committee of the Scottish Parliament and recommend that an enhanced Scottish Fiscal Commission be made responsible for forecasting in Scotland”. Perhaps the Minister would care to elaborate on that and how he sees it developing.

As we move forward on fiscal arrangements for Scotland, Wales and Northern Ireland and on fairness for the whole United Kingdom—including England and its cities and regions—what we probably ultimately need, which is beyond the scope of this Bill, is an independent body, akin to those operating in other federal countries such as Canada and Australia, which tries to take an objective view of how resources should be fairly shared among the constituent parts. I admit that we are not quite at a federal position yet—it is what my party aspires to—but even before we get there, there is a very strong case for an independent body that would be able to examine such issues.

It may be beyond the scope of the Bill, but it would be good to think that some thought is being given within government to how these longer-term issues may be addressed. Although we are focusing on Scotland and the rest of the United Kingdom and that particular fiscal framework, there is no doubt that, whatever is agreed and whatever position is reached, there will be implications for Wales, Northern Ireland and the cities and regions of England. The sooner we start examining how we can get a more independent body that will try to ensure fairness between all the constituent parts of the United Kingdom, the better. In the mean time, a review of whatever the present negotiations produces four or five years after it becomes operative is surely a very modest proposal.

My Lords, I shall speak to Amendments 79F and 79G. I have in my hands substantial notes. They were designed to enable me to present an elegant speech full of witticisms, insights and—though I did not realise I needed the permission of the noble Lord, Lord Forsyth—even some political comments. I took part in 1978, from the Front Bench, then occupied by a Government of a different hue, in the first Scotland Bill. I have had a long and lasting interest in these matters. Since I prepared this speech on 13 January much has happened. The field which I hoped to plough has become a dustbowl—so many people have walked through it, including in these debates today.

I shall try to keep my comments short, in light of the well-developed arguments, but clearly the fiscal framework has not been resolved. People have alleged that that is because of the complications. I do not believe that for one second. The civil servants involved are highly skilled and competent and have resolved all the complications. The difficulty is that there is a chasm between the UK Government and the Scottish Government in relation to a simple matter: how much? How much is the UK taxpayer going to have to provide to win the approval of the Scottish Government and, secondarily—the point raised by the noble Lord, Lord Kerr—in relation to borrowing powers? That is also very important.

As has been pointed out, the Smith commission report recorded that the representatives of five Scottish Holyrood parties had agreed the devolution of certain powers. Very well. It also said, at paragraph 95:

“Barnett Formula: the block grant from the UK Government to Scotland will continue to be determined via the operation of the Barnett Formula”.

That is not entirely surprising, considering the make-up of the Smith commission. Turkeys do not vote for Christmas. The members were voting for a continuation of the Barnett formula. The report also contained what was plainly a compromise, namely the so-called no-detriment principle in two manifestations, the first of which is vaguely comprehensible and the second of which is certainly not.

The Scottish representatives on the commission—and they were all Scots—were voting in favour because the Barnett formula was plainly very favourable to Scotland and everyone was afraid of the needs test. In fact, noble Lords who have read John Swinney’s evidence to the committee of this House on the Barnett formula in 2009 will know that that committee tried to pin him down on that. He would not answer, but simply kept repeating, “We want full fiscal autonomy”.

Yes—that was, of course, part of the purpose of the article I wrote for the Herald, which the noble Lord, Lord McFall, was good enough to refer to.

Plainly, the Scottish Government were perfectly entitled to try to secure the most favourable deal they could. It was they who created this timetable that we are being asked to stick to. The timetable was to enable them to go to the electorate in May and present themselves as having achieved a great victory. They created the timetable and we are all supposed to bow to it. I just wonder about that. In relation to the rush to get it through, it also puzzles me that John Swinney is so anxious to get his hands on extra tax powers because, when the Labour Party in Scotland proposed an extra penny on income tax, he replied, “Over my dead body”. Now, we would not wish any harm to the Deputy First Minister, but he has obviously no intention of exercising these tax powers, so what is the rush? It is all to do with the electoral process of the Scottish Government.

Even the devolution of a minor thing, such as the introduction of air passenger duty, could turn out to be worth nothing because, as was pointed out very widely at an earlier stage of the passage of the Bill, Newcastle Airport is going to suffer considerable detriment if all the Scots in the north of England flock to Prestwick, Glasgow, Edinburgh or even further north to take advantage of reduced prices. They are going to suffer a detriment and that detriment is going to have to be met by whom? By the Scottish taxpayer. In other words, the Scottish taxpayer is going to have to find the money to send to Newcastle that has been saved by whom? By the airlines. It is bizarre. The whole thing is slightly mad.

If I remember correctly, the Chancellor of the Exchequer appeared before the Treasury Committee in January 2015 and, asked about the no-detriment principle for Newcastle and Manchester airports, said it did not apply to them. He pointed to the fact that in the previous year Newcastle Airport had increased its traffic by 12% and Manchester Airport had increased its traffic by 3%, so there was no problem whatever. So we are all in the dark yet.

I fully accept what the noble Lord says; however I argue that there is room for argument as to whether there is a detriment to Newcastle. I just do not know. The Select Committee on Economic Affairs said, as has been quoted already by the noble Lord, Lord Forsyth:

“We agree … that the second no detriment principle is unworkable. It is a recipe for future disagreement”.

The only problem is the word “future”. It is a recipe for constant disagreement, including future disagreement.

My Amendment 79F includes the provision that the new fiscal framework should be published in full. That is very important. The noble Lord, Lord McFall, mentioned that we have to face political reality: I would not challenge his judgment on that, but I add something else. We also have to face the truth—not just the truth but the whole truth—in relation to the fiscal agreement. We need to know the background and I am sure that if it is not published in full, as it should be, then various means can be found, whether in debate here, by means of questions or by freedom of information requests, to discover the full background. What were the people bargaining about? What was the cause of the delay? My guess is that the cause of the delay was what I suggested before—namely, that they could not agree on amounts of money, so the complications are not real complications but deep disagreements.

As I mentioned in the article to which the noble Lord was kind enough to refer, lying behind these discussions and the problem for the Scottish Government is the following. If the present discussions about the fiscal framework reveal, as I suspect they will, that Scotland needs a substantial subsidy from the taxpayers in the rest of the UK—or at least in the rest of Great Britain—that is a demonstration that Scotland cannot exist without such a subsidy. Therefore, the economic case for independence, which was so bizarre in the original White Paper by the Scottish Government, disappears. In other words, we now know, because of the discussions going on—although we do not know the detail—that the economic base in Scotland is such that the tax yield will be very disappointing. The Barnett formula would, of course, disappear on independence and the oil bonanza confidently predicted at the time of the referendum campaign will continue to prove to be a mirage.

As I say, events have perhaps rather overtaken this amendment but it is time that the Scottish electorate were told the whole truth about the Barnett formula. That is part of this amendment. I have read with great care, and more than once, the proceedings of the Lords committee on the Barnett formula. It was a very powerful committee and the questioning was extremely good. The witnesses who gave evidence were of the highest quality and the lesson of that has to be that if we want to move to a just and fair system, we ought to move to one which is not based on a formula that was never invented for the long term but rather as a device to get through a problem existing in the midst of an economic crisis. We should move to a system based on need in terms of welfare and other things. It is time we were told the truth about that. That is the purpose of the second part of this amendment—proposed new subsection (2).

Detriment is said to be a principle in the Smith commission report. I am afraid that I do not recognise it as a principle. The principle that underlies public expenditure should in my view be the question of need. Public expenditure in different regions should be determined largely in relation to need. It is not a straightforward matter and I need not discuss the difficulties involved in that; we are all well aware of them. Therefore, the information that I seek is to give people the truth. The truth is more important than the political reality.

I can deal briefly with the other matter relating to Amendment 79G. The noble Lord, Lord McFall, has already referred to this and I simply adopt what he said. It is vital in Scotland that we have independent scrutiny of, and reports on, economic forecasts. One of the problems with the referendum campaign was that the government White Paper had some very dodgy statistics and forecasts and the Opposition did not question it sufficiently. In a sense, the Government got away with what they said. We need an independent body. I have suggested the model of the Office for Budget Responsibility. It is not ideal but it is the best model that we have. I deal with the question of independence in the way set out in the amendment. I do not pretend that this is an ideal way to amend the Bill, but the ideas here are such that the draftsmen could with ease convert this into a workable amendment.

The Smith commission talked repeatedly about strengthening the Scottish Parliament. One of its principles was strengthening the Scottish devolution settlement and the Scottish Parliament within the UK, including parliaments’ levels of financial accountability. The commission referred repeatedly to independence. I need not quote all the relevant paragraphs. As the noble Lord, Lord McFall, pointed out, the Bill which was before the Scottish Parliament—the Scottish Fiscal Commission Bill—contains a clause which states:

“In performing its functions, the Commission is not subject to the direction or control of any member of the Scottish Government”.

However, the Bill declines to give the commission responsibility for providing independent assessments and forecasts for the Scottish economy. So if they are not made by an independent commission, who makes them? The Scottish Government make them.

Kenny Gibson was cited, but it is worth doing so again. He was the SNP chairman who expressed the unanimous view of the committee:

“We are strongly of the view that not only should the Scottish Fiscal Commission be independent, but it is vital that it is perceived to be independent. That is why we are calling for the Bill to be amended to strengthen the Commission’s role”.

Those who want to read the detail of this will find it in an article in the Scotsman of 11 February by Bill Jamieson. When the vote came, the SNP people voted down that proposal by four votes to three. Bill Jamieson’s article in the Scotsman drew attention to North Korea. I think the SNP is more like a North Korean drill squad: if a commander says, “Do a backward somersault”, the words are hardly out of his mouth before they are back on their feet, having done a backward somersault. It is a classic example of the exercise of this rigid discipline within the SNP. If we do not have an independent fiscal commission, we are in trouble.

We have had enough talk of dodgy dossiers and I have had enough of reading out my notes. I hope that I shall move these amendments in due course.

My Lords, I wish to speak briefly to my Amendment 79H, which I hope provides a way out for my noble friend on the discussions which we have had this afternoon, in so far as it suggests that the Bill, when enacted, should not commence until we have had the fiscal framework laid before both Houses of Parliament and there has been an opportunity to debate it. If I were the Minister, I would grab that because the prospect of moving another amendment proposing that we should not proceed to Report but should reconvene the Committee stage on Wednesday is something that I do not relish, as I am sure he does not either. However, if we get the fiscal framework tomorrow, there will be an opportunity for us to discuss it and therefore there will no need for this amendment. I very much hope that we will have it.

When I was Secretary of State and the noble and learned Lord, Lord McCluskey, was a very distinguished judge, he gave me a bit of a hard time on the reforms which we planned for the criminal law, which I am delighted to say the Labour Party subsequently implemented when it was in power in the Scottish Parliament. He said that I chided him about getting involved in politics—however, I would encourage him to get involved in politics. He has made a brilliant case for why we need clarity on the fiscal framework. I am prepared to support all the amendments that have been suggested because I have no idea what the Government’s position is on what the fiscal framework will be. As regards the proposal to have no detriment, it is the only time in 30 years in Parliament that I have seen witnesses reduced to laughter in giving evidence when they tried to explain what the no detriment principle actually means. Ministers cannot tell us what it means. The noble Lord, Lord Smith, cannot tell us what it means. My noble friend Lady Goldie was on the Smith commission. Perhaps she could tell us what she thinks the no detriment principle means. Without having the fiscal framework and without having a definition of that no detriment principle, it is meaningless.

However, my right honourable friend the Secretary of State for Scotland hit the nail on the head when he said that the Scottish Government want to have their cake and eat it. Perhaps that is what the no-detriment principle means. Perhaps during the recess, instead of negotiating and getting agreement in time for us to discuss it, they have all been off to see Mary Berry so that they can produce more than one cake. The difficulty is that you cannot produce more than one cake. When we were in government a long time ago and, faced with an onslaught from the Labour Party, we struggled to find a way of making devolution work, I had two problems. The first was that I could not solve the West Lothian question. I could not find a way of doing English votes for English laws that would not threaten the union and create all kinds of problems about voting on income tax and the Barnett formula. My second problem was that my officials said that if we were to create a Scottish Parliament and give it these powers, it would have to be responsible for raising its own money. That would mean it would have to be funded on a fair basis, compared to the rest of the United Kingdom, which would mean having a means-based system of funding of the same kind that we use to distribute money to local government, the health service and so on. That would mean the Secretary of State’s budget being cut by £4.5 billion.

We were pretty unpopular in Scotland, thanks to the efforts of the Labour Party, which presented us as anglicising Scottish education et cetera—but we will not go there. I thought that coming up with proposals which gave Scotland the ability to pass its own laws and raise its own revenue, but which would result in a reduction in the budget of 25% or so—£4.5 million—would not be particularly popular. I think the Smith commission and others have played around with ideas which seem politically attractive but they have not actually done their homework on the impact these would have. Amidst the language of fiscal frameworks and everything else, it is all very simple: the tax base in Scotland is slightly lower than that in England. Therefore, if you are going to raise your money from the tax base in Scotland you are going to have less to spend. The Barnett formula provides 20% more per head for Scotland than England. It was 25% in my day, but there has been some narrowing. If you take a grant that is 20% higher and replace it with a tax which is 20% lower, there will be a gap. It has suddenly dawned on the Scottish nationalists that their proposal will actually result in less money for services.

It has also dawned on the nationalists that if you give welfare services and the like to Scotland, they have to administer them. They are demanding £600 million to administer welfare services. My goodness, the Labour Party wants to get rid of the bedroom tax; so do the nationalists. There are all kinds of welfare benefits that people would like to see improved. The plan is to spend £600 million on administration, instead of on the benefits. That is crazy, and for what? So that we can say that it is misery made in Scotland because we are spending it on civil servants and a bureaucracy. That is what is being proposed here.

I hope the noble Lord, Lord Forsyth, will forgive me for interrupting him. It sometimes happens the other way round. Does he appreciate that the £600 million is more than twice the amount that the Scottish Government indicated, in the White Paper, as the cost of running the whole of Scotland after independence on 24 March 2016?

I do love the noble and learned Lord, Lord McCluskey, as a politician making these penetrating points. He is absolutely right; it is real. I am relying on what I read in the newspapers, but that is what they are asking for welfare, behind closed doors. They would rather spend the money on superannuated civil servants, just for the sake of saying, “This is being done in Scotland”. The money is the issue.

By the way, why is the Secretary of State not doing these negotiations? I was going to ring him up last week to talk to him and he was in Africa on Friday while these negotiations were going on. They are being run by the Treasury. If you are in a spending department like Scotland, the very last thing you want is the Treasury running your negotiations. Unusually, the Treasury appears to be being very generous. It is suggesting that the Barnett formula, which gives Scotland 10% of any increase in expenditure in England, should be extended to income tax and that Scotland should get, as of right, 10% of any increase of income tax that is raised in England. How is that going to go down in England? While the Scottish nationalist Government—who want to put up the top rates of tax—force all these top-rate taxpayers to move south and reduce the size of the tax base, the English are expected to send them a cheque to compensate them for the loss of revenue resulting from people moving out of Scotland. They run the benefit system for the disabled and unemployed. If they fail to get people back into jobs or to provide the support, England has to pick up the cost because those benefits are based on performance. No wonder they cannot reach agreement on no detriment or a fiscal framework. This is an argument about having a cake and eating it.

As the noble and learned Lord pointed out, if it agrees the fiscal framework, the SNP is now faced with the horrible prospect of going into a Scottish election and saying either, “We are going to have a bit more independence but we are going to have to make cuts in public services and put up taxes”, or, “We could not get these terrible people at Westminster to give Scotland a fair deal”. The truth is that there were years of lies when people said that Scotland got a bad deal out of the union and that the Barnett formula was unfair: those same critics now cling to that formula like a life-raft. All those people said that Scotland would be better off if it had more powers. By the way, that is not everyone in the Labour Party or elsewhere. All those people turned a deaf ear when people like Gordon Brown and the noble Lord, Lord Darling, who is in his place, warned that if you move to a system which is completely dependent on income tax—an idea which was, incidentally, produced by the Tories to overstep the Labour Party and the Liberals, but was not thought through—you create a situation where you are dependent on a lower tax base and there is no real electoral connection with defence and other UK-based expenditure. Throw in English votes for English laws and you are damaging the United Kingdom.

The fiscal framework, and how it is agreed, is central to whether or not we get a glue, a cement—a fair and balanced system. That is why the Bill should not become an Act and come into force until both Houses have had an opportunity to discuss it openly and fairly, with people in Scotland—who are entitled to fair dealing—seeing what the realities are and being able to make their choice. It is utterly wrong to go into an election pretending it will be all right on the night. If, at the end of the day, the SNP is able to say, “We got a fantastic deal out of Mr Greg Hands. We got extra money over and above Barnett. Vote for us again”, when what matters is long-term future stability, I do not know how long that deal will last; I do not know how it will operate. The Barnett committee, which I served on, and to which the noble and learned Lord, Lord McCluskey, has referred, suggested that, because there is a gap, there should be a 10-year transitional relief and we should move to a needs-based system of funding. I do not know whether that is being proposed or not, but it is essential that we have the opportunity to discuss it.

Why would my noble friend not agree to Amendment 79H, which prevents the commencement of the Bill until we have agreement? What possible reason could he have? The noble Lord, Lord McAvoy, will say that it will be misinterpreted in Scotland and we will be presented as wrecking the Bill. I say to him that it will be proceeding in parallel with the consideration by the Scottish Parliament which is, quite rightly, insisting that it should look at the Bill in the context of the fiscal framework. What is wrong with us proceeding in parallel with it and having a proper debate on both sides of the border? I beg to move.

My Lords, in the earlier procedural debate we touched on many of the issues regarding whether we should consider the proposals of the fiscal commission. In some ways I am surprised that a number of your Lordships who have spoken tonight have talked almost favourably of the Barnett formula. There is something notable about the Barnett formula. One of the reasons that no one has ever touched it, from 1978 when it was first conceived until now, is that, despite its imperfections and despite the fact that many people in different parts of the UK might have said that it was unfair, it actually worked, because it was designed to pool and share resources across the United Kingdom. One of the major arguments that I and others made during the referendum campaign over the last few years is that one of the strengths of the United Kingdom is that you could make sure that when things turned against one part of the UK, because of its workings, in particular the Barnett formula, you could compensate for that. The Bill, which is soon to be an Act, will fundamentally change that because devolving to the Scottish Parliament the power to raise income tax will require a major adjustment to how Barnett has worked in the past.

One of the problems of reaching an agreement between the parties to change the constitution of our country over a four or five-day period is that it will inevitably result in unforeseen consequences as well as the foreseeable ones. One of the reasons that I want to see this fiscal framework as quickly as possible is that we are going into a completely new era. The Scottish Parliament will have more powers than most other devolved parliaments anywhere in the world. However, in many ways we are going into this new era with our eyes closed, because the debate that ought to be taking place about the consequences of what we are doing in Scotland as well as in other parts of the United Kingdom is simply not taking place. Part of the reason that it is not taking place is that the very framework on which all this will hang will not be published until possibly later this week, or possibly next week, when, as I said earlier, we will be in the equivalent of the 11th hour of the debate here.

I will touch on three areas covered by the amendments. One is income tax. I can see that in year one you can do a calculation that shows how much money will be raised by income tax in Scotland and therefore by how much the block grant is reduced. That is easy, give or take £1 million or £2 million. I pose the obvious question: what happens in five or 10 years’ time? How do you apply this no-detriment rule, or try to work out to whose credit it is or whose fault it is that the tax take was not quite what was expected, because Scotland collected either more or less? Any idea, such as that suggested in the White Paper published last year by the previous Government, that somehow you could do this mechanistically and it would not be subject to any politics or anything nasty like that is just for the birds. If we are not careful, what we produce will provide fodder for all those who want to feed off grievances and find grudges for years to come. As I said earlier, I struggle to see how that is going to be resolved.

The noble Lord who will reply for the Government will probably know the answer to this because presumably he has seen the fiscal document. The rest of us have not seen it. This is pretty fundamental. If you are going to say, as we have agreed, that the Scottish Parliament should have all the money that it raises by income tax and there is a consequence on the ground, what is that consequence?

I make one further point. I do not know the ins and outs of this argument about indexation for ageing. I have every sympathy with concerns about the fact that Scotland’s population is ageing faster. Being a supporter of the United Kingdom, I believe that we should pool and share resources. If the Scottish population is ageing more quickly than that of the rest of the UK, the whole point of the United Kingdom is that you can compensate for that. I hope the present Conservative Government are not taking the view that they will devolve and Scotland can live with the consequences.

If you had complete independence, which the noble and learned Lord, Lord Wallace, said would have happened in about three weeks’ time if we believed in the nationalist timetable, then we should be in a situation where Scotland was cut off from the rest of the UK and consequences would follow. However, we have not left the United Kingdom. That is why it is important that we continue to maintain the principle that we pool and share resources, but we should be clear as to the basis on which that is done.

This brings me to the point on borrowing on which the noble Lord, Lord Kerr, touched. I agree with him that we need to be clear about under what circumstances and in what amount the Scottish Parliament can borrow. There is a further point. Borrowing to invest is well understood. That is not problematic. The Scottish Government have the power to do that at the moment if they want to. It is borrowing to fund a shortfall in current expenditure that will cause a problem. There is nothing wrong with the Government borrowing when there is an economic downturn, as I know. The present Government know that as well, since they have had to do exactly the same thing. However, suppose the situation was that the Scottish Government had the power to borrow and, as now, there was a shock to the oil price system. If you believe the shock to be temporary—if it is only going last for a year—as the nationalists maintain when you ask them why oil is not, as they told us it would be in the White Paper, $113 a barrel but around $30 or $40 a barrel, it makes perfect economic sense to borrow to make up that shortfall. That is what you would do. However, if it is a structural change—and many people believe that it is a structural change that will go on for maybe five or 10 years—does borrowing then make sense? Under what conditions could the Scottish Government continue to borrow to cover that shortfall as opposed to making other more difficult decisions, such as putting up taxes or cutting spending?

This also begs the question that the noble Lord, Lord Kerr, raised, as to on whose account do you borrow? Are you borrowing on your own account? With the best will in the world, a new Scottish Government are bound to start with a lesser credit rating than the UK simply because they are a new kid on the block and have no track record. Again, being in favour of the United Kingdom I am quite happy that borrowing ought to be done on a UK basis, but if that is to be the case the consequences need to be spelled out. None of these things can be left in the hope that it will all work out okay on the night.

The White Paper published last year assumed that there was good will. You have to bear in mind here that the Scottish National Party exists to make Scotland independent. That is what it is for. That is what it is looking at all the time. Therefore, if you have something that is opaque, where there will inevitably be difficulties, you are simply storing up problems—I should like to say for the future, but no, it is not for the future; they will be there from day one.

Exactly the same points are being made on welfare. As I said during the referendum, I have never understood the argument that Scottish taxpayers, of whom I am one, would want to pay money to people to administer a benefit system, a lot of which is, ironically, being administered in Scotland for the rest of the United Kingdom and providing useful employment. Why do I want to pay more for someone to do that or, for that matter, to collect my taxes?

Leaving aside the collection cost, if you take the actual expenditure on mainstream benefits, a lot of benefits have been devolved to the Scottish Government and that is absolutely fine. However, again, it is unclear to me who in five or 10 years’ time would bear the cost if, for example, the policies north and south of the border were different. It is entirely acceptable that they should be different. We are bound to have, as we do now, Governments of different political complexions. However, if, for example, you have an ageing population, all other things being equal, your disability benefits will start to go up. Is that okay? Is that built into the settlement or will taxpayers in other parts of the United Kingdom have something to say about it? I am sure these problems are resolvable, although I note that Professor Bell of Stirling University said recently that no one else in the world has done this.

As an aside, my own preference, having got to the stage that we have, is that we should look at countries such as Canada—big countries that have a federal settlement in many senses but have provinces with different powers. One of the advantages is that when you pay your income tax you can see that some of your tax is going to pay for things such as health and education, but you pay tax to the federal Government for things such as pensions or defence and so on. It is then easier for other things to slot into place—borrowing to fund various activities and so on. We have not looked at that.

It is often said that the British are good at compromising, but what we have here is not devolution being done to any overall template—it is being done on the hoof. When you do things on the hoof, sooner or later you trip up. As I said earlier, this is not just a matter between one political party and another. If this fiscal framework had been published, others from outside could have looked at it and said, “There is a better way of doing this”, or, “Have you thought of the consequences of that?”. Instead, the public north and south of the border have been kept largely in the dark. That is simply going to cause considerable difficulties.

Other issues have been raised as well, such as bailouts and the question of no detriment, which we will need to come to. Equally, the White Paper published last year had examples of what would happen if the UK Government were to raise or decrease expenditure. What would the consequences be? Could you have a situation where more taxes are being paid in one part of the United Kingdom to fund expenditure somewhere else? Again, these are problems to which I have not yet seen the answers.

I heard people say in the earlier exchanges that having an EU referendum campaign lasting some four months was an awfully long time. Having lived through a referendum campaign that lasted some two and a half years, frankly, I would have killed for four months. I fully accept the right of the Scottish National Party to campaign for independence but what I bear in mind is that the majority of people in Scotland were clear that they wanted to stay as part of the United Kingdom. What worries me about this, and until I have seen the fiscal framework I cannot pass a final judgment on it, is that rather than resolving the matter and saying, “That is the settled will of the Scottish people”, we have put something in place here that will lead to opacity, confusion and eventually grievance. That is not a way to get a secure settlement. Perhaps the Minister will have words that reassure us on all these points. So far I have not heard them but I look forward with great interest to what he has to say.

The noble Lord said that the Barnett formula works. I doubt that anyone would contradict that. It works, and does so from the point of view of the Treasury for the reasons given: it is simple and clear, and so on. First, does the noble Lord suggest that it works fairly throughout the United Kingdom? Secondly, because of the future governed by this Bill, does he support subsection (2) of the new clause that I propose in Amendment 79F? It calls for the Secretary of State to publish,

“a full description of any agreement whatsoever reached between the … Governments relating to the future of the Barnett Formula or its application, amendment or replacement in the future”.

We need to know not whether it worked in the past but whether it worked fairly and how it will work in the future. Does he support that amendment?

In relation to the Barnett formula, I chose my words carefully. I said that it worked; I did not go on to say “terribly well” or “extremely well” or “without any complaint”. If you look at the north-west of England, there is a legitimate complaint there that Barnett treats it the same as it does the south-east of England, when their economies are clearly very different. I know that successive Chancellors looked at the Barnett formula. I looked at it in the halcyon period of the three weeks between taking office and discovering that Northern Rock was on the horizon, which presented me with rather more pressing problems that I had to deal with. But I can see why, it having been there for so long, no one has touched it. I am sure that others in this House will know that the late Joel Barnett often said that he never intended it to last. It was a fix but it worked. However, where I agree with the noble and learned Lord—I will confess to not having studied his proposed new subsection (2) in the detail I perhaps should have done—is that if we are having a new system, we really need to know how it works. What we do not want is what happened in the aftermath of the Smith commission, when everybody signed up to it and the next day it was denounced. That will not work. If we have something that does not work, let us find out now rather than coming to that awful realisation over several months and years to come.

I support Amendment 76 but I have sympathy with all these amendments. I think the noble Lord, Lord Darling, has just touched on the value of a federal system, which I suspect the UK will have to come up with if it is to find a stable solution. In the context of Canada, where I spent some time last summer, I was well aware that for years the Albertans complained that they were subsidising Quebec. But right now the Albertans are grateful to have the support of Ontario, as the oil price has collapsed. That is the benefit of being part of a union with the ability to move fiscal transfers around, as the shocks hit different parts of the economy. I suspect that the majority of people in Scotland voted to stay in the United Kingdom because their heads told them that was the reality.

Apart from simple practice, the other issue with the Barnett formula is that, as the noble Lord, Lord Forsyth, said, as a formula it has narrowed the gap between Scotland and the rest of the UK. That is why while it was 25% when he was Secretary of State, it is now 20%. When people talk about the Barnett formula, they are not really talking about that but about the historical difference in spending in Scotland, which predates the formula and has arrived for a variety of reasons. Again, the noble Lord, Lord Forsyth, mentioned the difference in per capita spending but I am sure he would recognise that the whole point of a needs-based formula, if that is what we move to, is that it is not based simply on per capita spending but on needs. We should reflect on the fact that Scotland has 40% of the land area of Great Britain and less than 10% of the population so, for example, the unit costs of delivering services such as small schools to remote islands and highlands are inevitably higher. Any formula must at least acknowledge that.

It might be worth having a look at the committee report that was done on the Barnett formula, which includes a full analysis of these issues. What is traditionally said about Scotland’s broad geography does not actually justify it. The conclusion was actually that Wales gets a rubbish deal, while Scotland is oversupported. But of course, that cannot be changed overnight and it therefore said that we should move towards a transitional system and that funding should be based on needs, in the same way as the Scotland Office—and later the Scottish Parliament—has distributed money to local government, the health service and the rest.

I certainly do not repudiate that point, but it is still worth acknowledging the fact because it is often presented in a glib way—by saying that there are not legitimate reasons why some expenditure in Scotland is significantly higher. I have represented a rural constituency and seen the rural schools which people want to keep open, for example. The unit costs for those are much higher than for urban schools, and such examples need to be taken into account.

We are all frustrated by the fact that we are asked to enact the Bill without the fiscal framework being in place. In the earlier debate the noble Lord, Lord Hain, made the point that some 40% of the UK’s wealth is concentrated in the south-east. In the run-up to the referendum, when the oil price was very high, the SNP was keen to say how much oil had sustained the United Kingdom, but it conveniently forgot the extent to which the United Kingdom had had to bail out the Royal Bank of Scotland and the Bank of Scotland, which an independent Scotland simply could not have done. The SNP’s response was that they were of course no longer Scottish banks, but it would have found some difficulty in arguing that case, had Scotland been independent and those banks been headquartered within their system. There are inequalities of argument in that context.

There is another point that needs to be made absolutely clear. If, in future, taxes fund a significant proportion of what was previously provided by the block grant, and if there is a divergence and different circumstances arise, the reality is that a Scottish Government can do only one of two things: put up taxes or cut services. In fact, they could do both those things. It is right that the people of Scotland should recognise that if they vote for independence, they will find it difficult to maintain what they have at the moment, never mind what the Scottish nationalists promise them, on the basis of the current tax-and-spend regime, and I suspect that that is why the majority voted no. The implications of that are significant.

There is one argument that I find really confusing. I am in favour of the European Union and of the United Kingdom, which I find a very consistent argument, and I am puzzled by people who are in favour of the European Union and against the United Kingdom, or vice versa. At least I and my party have a fairly consistent view on these things: they both involve compromise and negotiation, and both require some form of treaty agreement or contract to settle them. The Minister has to acknowledge that we are getting very close to voting through an Act of Parliament literally in the dark—one that has serious implications for the people of Scotland and is not being properly debated in Scotland. I completely understand the position taken by Labour Front-Benchers—I would not have supported the amendment of the noble Lord, Lord Forsyth, for the same reason—but we are in danger of allowing the argument to be run by one side; we need to hear a balanced argument. We need to hear generosity from the United Kingdom, because the people of Scotland have said that they want to be part of the United Kingdom. I think the UK will say to the people of Scotland, “We want you to stay; we want to find a settlement that works for both of us”. It is not good enough simply to say, “You are going to get that tax. It is up to you what you do with it. If it falls short, that is your problem”. That is why I support Amendment 76, and the other amendments in the group have a similar intention. Never mind no detriment: we have to recognise that we need a basic, practical, working arrangement that says, if there is clearly an unsustainable disadvantage to the people of Scotland from a formula that has been openly and honestly agreed, we are prepared to revisit it. Amendment 76 gives a framework for doing that.

It is essential that the Minister address two issues. First, he must explain how we can enact this legislation without having formally acknowledged the formula written in both Houses of Parliament and the Scottish Parliament. Secondly, and more to the point, if we are not able to deal with the matter here and these amendments are not accepted, that leaves the Scottish Parliament as the only arbiter of whether this goes ahead. We all know that it is likely to say, “We couldn’t get a deal so you have to vote for us, because nobody else will give you a decent deal”. However, the truth is that it was offered a pretty generous deal that would have protected Scotland’s position in the United Kingdom and given it more powers and control, which it rejected for the simple reason that it was terrified of the responsibility of having to take these issues up with the people of Scotland and explain the reality of the resources it had and how it was going to balance them out. That is the everyday debate of politics everywhere—except, at the moment, Scotland. We are debating this issue in a vacuum, without facing the fundamental reality that Scotland benefits from being part of the United Kingdom. Scotland wants more control over its own affairs. We have an agreement in principle to deliver that, but we do not have a fiscal framework. Whatever framework is introduced, we need to make sure that we have a mechanism for reviewing it genuinely to reassure the people of Scotland and ensure that it will be fairly and independently assessed, and that if there is a clearly unacceptable and unsustainable disadvantage, as determined by independent commissioners, action will be taken to put that right. If we can get that right, we can win the argument.

My Lords, I support Amendment 75A moved by the noble Lord, Lord Kerr, on debt and borrowing. The amendment is founded on the principle that the UK is a union, constitutionally and financially. There is a common currency, single monetary policy, single exchange rate and a banking union. We have some banks that pretend their headquarters are in Scotland, but they are not really. The public finances of Scotland and the rest of the UK are inextricably intertwined. A large part of public services has been financed—even under the new arrangements, when they are unveiled—by grants from the UK or assignment of revenues. Departments of Her Majesty’s Government have large budgets that they spend directly in Scotland.

The SNP may not like the fact that the union exists, but it does, and certain consequences follow. When the Economic Affairs Committee took evidence on post-referendum arrangements, there was little appetite by then for full fiscal autonomy. It was always an illusion, but it was thoroughly punctured by the gaps in the oil price. Some witnesses argued that, in addition to sensible arrangements to deal with short-term fluctuations, Scotland could operate a separate borrowing regime, financed by borrowing in its own name. In effect, that would be policed by financial markets and underpinned by a no bail-out rule. As noble Lords have mentioned, debt issued by the Scottish Government would have its own credit rating with its own risk assessment, and if debt issuance was thought to be excessive its cost would rise and the Scottish Government would be forced to respond. However, most witnesses did not believe this model, given the extent to which the two economies are interlinked, and no one really thought that a no bail-out clause was plausible. Most notably, the noble Lord, Lord Darling, told the Committee that the eurozone has a no bail-out rule that we can see “works very well”. I think he was being ironic, but I cannot be absolutely sure. He thought that a no bail-out rule would be,

“unnecessary and downright provocative and actually sound very patronising … I am part of the UK as well; do not tell me I cannot be bailed out by a country that I happen to be a citizen of”.

That was strongly endorsed by the Committee.

During the course of the referendum, there was some loose talk that said, in effect, “Vote for us and we will put an end to austerity”, but even now in Holyrood there is a recognition that although borrowing policy does not have to be identical to that of the UK, it nevertheless has to be consistent with it and supportive of policy for the UK as a whole. Two things follow from that. First, the amount of borrowing year by year cannot be such as to undermine the Government’s overall borrowing objective. Secondly, the stock of debt, relative to some measure of capacity to repay, cannot be such as to raise the spectre that the UK Government might have to intervene. As the noble Lord, Lord Kerr, stated, this amendment does not seek to specify what those various ratios should be. They should rightly be in secondary legislation. Why, then, is the amendment needed? It is needed to entrench the principle that Scottish fiscal and debt policy cannot be decided unilaterally in Scotland. It has to be related to the policy of the UK as a whole and the limits must be set by the Treasury, after consulting the Scottish Government, and should be approved by Parliament. In that way, the amendment fills one of the holes in the Bill, although many are left.

The noble Lord, Lord McFall, mentioned an article, “Sleight of Hand”, by Jim Gallagher, who, as many noble Lords will know, is a former Scottish civil servant and is now a professor. However, the noble Lord did not read the last paragraph:

“So I wonder if this is less about fiscal formulae and more about nationalist politics. It’s becoming pretty clear that the SNP won’t promise another referendum after the next Holyrood election. They think they’d lose. But without it they’ll have nothing to talk about. So maybe their aim is to reject the fiscal framework, whatever is offered and so derail the new powers in the Scotland Bill. Then they can spend the next five years arguing about power, not exercising it”.

My Lords, I feel obliged to intervene for Wales for a moment, because there is a very solid Welsh dimension in this. I also feel that I can do so because I was married for 39 years to a lass from West Lothian and I have always known the answer to the question—which is, “Yes, of course, dear”. The point that really concerns me is that a deal is being done in secret in Scotland, involving the fiscal framework, which will have implications in Wales. As the noble Lord, Lord Forsyth, said, the Welsh deal on the Barnett formula is rubbish. Every political party in Wales recognises that. The Welsh Labour Government refuse to exercise their tax-raising powers until that formula, or some formula, is revised. I fear that this secret formula or framework that is being arrived at in Scotland will be used as a precedent in Wales when we come to deal with tax-raising powers under the draft Wales Bill, and that we will be stuck with the same sort of system, arrangements and mechanisms as there are in Scotland—but it will be entirely different.

Therefore, I urge Ministers, as my noble friends have done, to allow transparency, so that we may actually have some input. Many speakers in this debate have said that it is unfair on other parts of the United Kingdom. Certainly, it may very well be unfair on Wales: the impact of this fiscal framework in Scotland could devastate Welsh funding for the future. I hope that your Lordships will excuse me for putting in a Welsh voice.

My Lords, I support Amendments 76 and 79G. Like many other noble Lords, I have found much that is attractive in many amendments in this debate, but I am confining my remarks to those two. I note that all the amendments and speeches have been wholly consistent with the Smith commission report.

I support Amendment 76 totally, of course, but I fear that it is something that is needed more than once; in fact, I would repeat it every five years. I see it as part of what, in commercial terms, one would call a feedback loop, which I think one needs to set up for every single devolved Administration. It could be well-structured and formal and allow for a frank examination of every aspect of devolution between Westminster and those devolved Administrations. If we do not set up a feedback loop now, as sure as eggs are eggs, when things go wrong we will set one up in the future. I feel strongly, and I think this will come back in further debates, that a feedback loop is required.

Secondly, I was much attracted by the thinking behind Amendment 79G. However, I would not in fact set up a Scottish fiscal commission; rather, I would expand the OBR to include this. As we expand the number of devolved deals, the problem is that we could potentially end up with a massive number of these commissions, all of which would essentially be umpires and all of which, one assumes, would umpire according to slightly different rules. There would be a great advantage to having one umpire in the UK—it has been pleasing to read today in the press how the OBR has resisted political interference in the recent past—which used one set of rules to examine figures and to report generally to the United Kingdom.

My Lords, I add support to my noble and learned friend Lord Wallace of Tankerness’s amendment in this regard. It was Baldwin who said that democracy was government by explanation but, as we discussed in the previous debate, there has not been much explanation of the development of the fiscal agreement. We need to ensure that when it comes to two broadly competing interests—the Scottish Government and the UK Treasury—there are mechanisms for the agreements and their operation to be reviewed in future.

I was a member of the finance committee in Holyrood for five years when it did not have the role of scrutinising the revenue powers of the Scottish Parliament, and I think it will be a positive thing for it to have those powers. In many regards, though, the processes that exist in Holyrood are not fit for the purpose of the powers that are coming its way. The operation of this power, especially and most importantly in the first five years of operation, will therefore be critical. That is why the amendment is of value.

Of course, I agree with the noble Earl about the benefit of building longer-term structures; my party has proposed one potential option for that, which is what the Canadians would recognise as a federal fiscal commission. When there has been a protracted process of discussions between the Scottish Government and the Treasury, not wholly because of a difference in fiscal policy or a different approach to budgetary discipline but because of a political imperative, that is not going to disappear once agreement has been reached. Indeed, it may be compounded once it is in operation, given the difficult situations that may arise.

This afternoon we have all been reading at pace from the Chief Secretary’s letter, and I think we have all registered with the Minister our complaint that we should not be having to do that as well as discussing the relevant legislation. However, the recommendation to take forward the Scottish Fiscal Commission into a more independent body is worth while, and I would be interested to hear what the Scottish Government’s position is. The problem is that it has already been legislated for in Holyrood, and we will be asking the Scottish Parliament to go back on what it has just agreed to establish a structure that this Parliament will perhaps argue is not fit for purpose. It makes for an interesting dynamic that the SNP chair of the Scottish Affairs Select Committee is proposing this to the SNP chair of the Holyrood committee, which has a different view on this, but that is for them to resolve and we will be interested in their conclusion. Ultimately, as has been referred to before, the experience of the referendum is that the people are asked to believe figures and facts that are put forward by one Government and those that are put forward by a competing one. That puts civil society and the public in an invidious position. If we are locking this into a long-term approach, that does not bode well for the future.

My final comment is that I know it has been hard to separate the politics from the constitutional practice in this. It has been very hard for those who argue for independence, because this is the final aspect of their arguments. They have lost their argument through the people of Scotland voting for Scotland to stay part of the UK, and in many respects they have lost the argument for full fiscal autonomy. The only argument that is left on the table is the long-term form of devo-plus that we have with this Bill. It is quite hard for those who are passionately in favour of independence to recognise that there are structures that could be long-term and stable and could work for the union, because if they accept it then they are undermining their own fundamental approach, so we are asking them to do something that is exceptionally hard for them. So I am not surprised that, to some extent, there has been this to-and-fro.

However, do we want that to be a permanent feature of our constitution and of the relationship with the Scottish Parliament, of which taxpayers on both sides of the border will be the victim? In common with all colleagues in this House who are resident in Scotland, I have received my letter from the Inland Revenue saying that we are now designated Scottish taxpayers and that this is now a real process that is under way. If we want to move away from the situation where the two blocs perpetuate this interest, then we need a regular review mechanism, combined with joint working between the Parliaments, not the Governments—the critical part of my noble and learned friend’s amendment. In addition, by taking out the only bodies that are responsible for making the forecasts for revenue and population growth being the two respective Governments, we will be locking in the kind of difficulties that we have been seeing over the past nine months. I hope that the House endorses my noble and learned friend’s amendment.

My Lords, we have had a detailed debate with many authoritative contributions, and I welcome the contributions from all parts of the House. We have covered a lot of ground. I will try to do justice to all the issues that have been raised. No detriment, block grant indexation, borrowing, review, scrutiny, commencement—there is a plethora of them, and I hope that the House will bear with me as I try to cover each one. I shall pick up on the points that individual Peers have made on each of those issues.

To start off, I shall remind us of what we are trying to achieve here. We are trying to rebalance the devolution settlement and to give the Scottish Parliament greater responsibility for raising more of what it spends. Currently that is around 10% of the Scottish budget and, once the Bill is in operation, it will be over 50%. That will lead to a Scottish Parliament that is more financially accountable to the people who elect it. The Scottish Government should be able to reap the rewards, and bear the risks and costs, of the policy choices that they make. That is something that the UK Government think is important, and something that John Swinney, the Deputy First Minister of the Scottish Government, has publicly accepted. The noble Lord, Lord McFall, talked about grievance politics. This is an opportunity to move Scottish politics on from the familiar blame game.

Why does the fiscal framework matter? A lot of noble Lords have said that this is central. I certainly agree with the House of Lords Economic Affairs Committee, which said:

“The fiscal framework will be central to future devolution arrangements”.

It is the fiscal framework that provides the financial tools and controls to support the operation of the Scottish Government’s new powers. As with the Smith agreement as a whole, this is about striking the right balance: giving the flexibility to the Scottish Government to take their own decisions, while retaining those fundamental UK strengths. That is what the people in Scotland voted for in September 2014 by a clear and decisive majority. Therefore, it is our duty to deliver a Scottish fiscal framework that is sustainable and consistent, as the Smith agreement says, with the overall UK fiscal framework.

I am sure that noble Lords are on the edge of their seats because we have talked a lot about my next topic: the no-detriment principles. The noble and learned Lord, Lord Wallace, said that he had no idea of what the UK Government’s view was of no detriment. Other Peers—the noble and learned Lord, Lord McCluskey, and my noble friend Lord Forsyth—raised the no-detriment principles. The House of Lords Economic Affairs Committee highlights the importance of principles, and the Smith agreement sets out a range of principles against which the fiscal framework must deliver. I would be the first to recognise that these principles set out in the Smith agreement are high level, and it is for the two Governments to agree on how to apply them in practice. Central to the negotiations that have been taking place is how the Scottish block grant adjusts to account for new tax and welfare powers and meets these no-detriment principles.

The first no-detriment principle is that the Scottish Government and the UK Government budgets should be no larger or smaller simply as a result of the initial transfer of tax and spending powers. As the noble Lord, Lord Darling, said, in many ways this is a very straightforward calculation. We have the data, use actual figures for the final year prior to devolution and apply whatever indexation method is finally chosen.

The second no-detriment principle is that there should be no detriment as a result of Scottish Government and UK Government policy decisions post-devolution. There are two legs to this no-detriment principle. The first is that decisions by one Government that directly affect the revenues or spending of the other should be compensated. What does that mean in practice? It means direct effects: so if the UK Government were to increase the personal allowance, that would obviously have an impact on the tax revenues of the Scottish Government that was totally outwith their control. Looking at it in another perspective, if the Scottish Government used their welfare powers in a way that automatically and in a direct way affected benefit passporting in the reserved welfare system, that would be a direct effect. However, the principle is explicitly not to compensate the Scottish Government for the economic consequences of the policy choices that they make: so, for example, if higher tax rates lead to an increase in net migration from Scotland, that would be a consequence of the decisions that the Scottish Government had taken.

The Smith report is very clear about economic responsibility, saying that,

“the revised funding framework should result in the devolved Scottish budget benefiting in full from policy decisions by the Scottish Government—”

If there was migration from Scotland as a result of higher tax rates, clearly the population ratio would change, and we are being told that there was much discussion around the concept of per capita. How would the United Kingdom Government and the Scottish Government agree on how many of those who have left Scotland have left as a result of higher taxation as opposed to having to look after elderly parents?

As I was saying, that is an indirect, or behavioural effect. It is not a direct effect: that is the point that I was making. What the adjustment mechanism takes into account is these direct effects. They are things that can actually be calculated, but I will come on to talk about behavioural or spillover effects, which is what I think the noble and learned Lord is talking about.

Before my noble friend does that, will he actually answer the question? It was: how do you tell which is a direct effect and which is an indirect effect?

One is a direct consequence of a policy decision, so in the example I gave of personal allowances, that is a direct consequence of a policy decision that is outwith the control of the other Government. It is not the behavioural or indirect effect, which is about how people react to a decision that is taken. That is the distinction that we are making.

I am most grateful to my noble friend. May we just take the example that he gave—that was raised by the noble and learned Lord, Lord Wallace—of people leaving Scotland? If we have an SNP Government who decide to put the top rate of tax up to 60% and a lot of the WILLIEs and other people decide, “We are going to move south” and they tell their neighbours, “Actually we are moving south because we want to be closer to our children”, how will the Government know how much of the tax base has been reduced as a result of the Scottish Government putting up tax and how much as a result of domestic or other normal movement? There is no way that you can tell that effect. Why would it be appropriate to compensate in those circumstances?

My noble friend misunderstands what I am saying. I am not necessarily saying that those should be compensated for. In the evidence that the Chancellor of the Exchequer gave to the Treasury Select Committee, he said:

“My personal view is that tax competition is something that we should allow”.

He is effectively saying that if there are different tax rates north and south of the border, that is something that we should not automatically try to compensate for. Another example relates to childcare. We all remember that at the time of the independence referendum White Paper, central to the retail offer being made by the SNP was its childcare policy. It was a matter of complaint that, were that policy to be successful and increase income tax revenues, the benefit of that would actually flow to the Treasury and not to the Scottish Government. Under the Smith package, if such a policy succeeded in increasing participation by women in the labour market, the benefits of that would flow to the Scottish Government.

Teasing this out, may I give an example that is hypothetical in one sense, because it is historic? During the 1990s, the Conservative Government privatised the water industry in England, and, I think, in Wales. Clearly, the decision was taken by the then Conservative Government not to do so in Scotland. However, after that privatisation had taken place, there were no further consequentials under the Barnett formula for Scotland. The money had to be found to fund the water industry in Scotland in public hands. If the arrangements that we are now talking about had been in place then, and the UK Government had decided to take the water sector into private ownership in England and Wales, which would have led to a decrease in the funding for Scotland, would that have been a detriment for which the Scottish Parliament would have had to be compensated?

No, I do not believe that that would be a detriment in the sense that the UK Government would have to compensate the Scottish Government. The situation would apply; the Barnett formula would apply; the equivalent departmental spending from England would flow through to Scotland. I do not think that this package changes that at all. Although the ownership structure north and south of the border is different, the cost of this on both sides of the border is met in water bills.

The Smith commission report says in paragraph 4a:

“Where either the UK or the Scottish Governments makes policy decisions that affect the tax receipts or expenditure of the other, the decision-making government will either reimburse the other if there is an additional cost, or receive a transfer from the other if there is a saving. There should be a shared understanding of the evidence to support any adjustments”.

On my understanding of what these words mean, with the precise example of the water industry, which I have repeatedly asked about in the past, how can my noble friend say what he has just said from the Dispatch Box when the words have a different meaning? Are we to understand that the Government are departing from the meaning of the no-detriment principle as set out there?

No; we are not departing from the Smith agreement at all. It is the function of the negotiations. As I say, these are high-level principles, and the two Governments have to work out how these principles are applied in practice. That is what we are doing. The Barnett formula will continue to operate and determine departmental spending and how that flows through in Barnett consequentials. That will not change.

The noble Lord mentioned the issue of WILLIEs—people who work in London but live in Edinburgh. If the Scottish Parliament put up the rate of tax and these individuals then decide to pay themselves in dividends, that would be tax competition, and therefore the Scottish Government would not be compensated. Am I correct?

As I said, as regards tax competition, that would not be counted for in terms of compensation. I hope that I have made that clear.

May I ask about a point on the language used by the Minister? He drew a distinction between direct and indirect detriment but I look in vain in the Smith commission report for these adjectives. I know that my noble and learned friend has a copy here, as do I. What is the basis for the Minister drawing a distinction between direct and indirect detriment?

As I said, the Smith agreement is a set of high-level principles. The negotiations are about how the two Governments apply those principles in practice. When, as I hope, the fiscal framework is agreed shortly, the noble and learned Lord will see how the two Governments have reached an agreement as to how these principles will apply in practice. That is what the discussions that have been going on for the past months have been all about.

No; it is the responsibility of the two Governments to work out this package of powers and how the fiscal framework will work in practice, which is what we are doing.

I am anxious to make time before the Minister moves on from this specific aspect of indirect detriment—I know that he will come on to behavioural aspects soon. Will there be one body which will define what these indirect impacts are, with choices north and south of the border, or will we see a perpetual process of two Governments having disputes about how they will define what the indirect consequences are of policy choices north and south of the border?

No; we will not see disputes, because that is the process we are involved in at the moment, which is to reach an agreement on how all these aspects operate. That is what we are doing. When I say that I am optimistic that we will reach an agreement, that is on the basis of the discussions we have had so far and the issues that remain outstanding.

I will move on to the second leg of the second no-detriment principle, which is to do with taxpayer fairness. Changes in devolved Scottish taxes—for example, income tax—should affect public spending only in Scotland, and vice versa for equivalent taxes in the rest of the UK. What does that mean in practice? It means that taxpayers in Newcastle and Liverpool will not fund even higher levels of public services in Scotland not available to them. The noble and learned Lord, Lord McCluskey, touched on some of these issues in his recent Herald article, which has already been referred to. The other aspect is that Scotland does not inadvertently gain a double benefit, via Barnett consequentials and a fixed proportion of any growth in tax revenues from the rest of the UK.

In conclusion, therefore, in this part of what I intend to say, some block grant adjustment mechanisms work better against different principles, and the UK Government’s approach is to find a mechanism that performs well against all of them. Each principle is not perfectly met in every respect, which is what we are trying to deal with in the negotiations that are going on at the moment.

Has the Minister looked at that bit of the Economic Affairs Committee report, where the committee comes to the view that it is easy to understand the first no-detriment principle at the outset—the ab initio principle—but that the attempt to legislate for or to operate a no-detriment principle down the years is a will-o’-the-wisp: it cannot work? If this is what is holding up the fiscal framework, call it off—it will not work. You cannot distinguish over time whether the tax take went down because of the tax measure, a change in the Scottish economy or in the world economy, or in the oil price, so you have a recipe for a continued debate, with the argument going round every time if you are trying to say that there must be no detriment down the years. Abandon it—it will not work. The Smith commission did not say how it would work, and I do not for a moment believe that it thought it would work. It is a lovely principle to get people to agree and then they can go home, but we are doing something different now.

We very much recognise what that report says, which is that if you interpret the no-detriment principle as applying absolutely literally to all effects, whether behavioural or indirect, it is very difficult to arrive at a single solution. However, these are the issues that are being addressed in the negotiations, and when the framework agreement is published the noble Lord will see how the two Governments have addressed those issues.

On the block grant indexation mechanism, Smith says that,

“future growth in the reduction to the block grant should be indexed appropriately”.

There has been much talk about the need to avoid endless wrangling. We are therefore trying to make this process as mechanical as possible. The issue is how much of the growth in relevant taxes in the rest of the UK will benefit Scotland post-devolution.

With new powers come new responsibilities, and, as has already been mentioned this evening, the debate is around appropriate allocation of responsibilities between the UK and Scottish Governments and what is a fair division. The UK Government continue to manage UK-wide risks and the Scottish Government manage marginal Scotland-specific risks. To give an example, if there is a UK-wide recession, there will be a smaller block grant deduction to shield Scotland from UK-wide impacts because the growth in UK taxes will be lower. We have achieved agreement before with the Scottish Government for the Scottish rate of income tax, which is indexed against movements in corresponding UK Government tax.

The key issue, which has been raised in the debate by the noble Lord, Lord McFall, and other noble Lords, is how population change is managed. The UK Government will continue to manage the impact of UK-wide population change in all devolved areas. We are looking for the Scottish Government to manage marginal Scotland-specific changes. The Scottish Government already manage these changes within Barnett, and John Swinney, when he appeared before the Scottish Parliament Finance Committee last summer, accepted this.

The UK Government’s proposal, which is contained in the Chief Secretary’s letter, addresses this population concern and we are prepared to share the risk. The model we have tabled recognises that Scotland’s share of income tax revenue is less than its population share and it ensures that, like Barnett, the tax adjustment takes account of changes in Scotland’s population. So if Scotland’s population share falls then so will the tax deduction.

However, let me be clear: we cannot agree something where the Scottish Government are not accepting their fair share of population risk. Why? If it is right that Scotland retains all the growth in its own tax revenues, then it is difficult to explain as fair that a fixed proportion of growth in the rest of the UK’s own devolved tax revenues is added to the Scottish budget irrespective of how good or bad are the policy choices of the Scottish Government and the relative performance of the Scottish economy as a result.

This is the point I was trying to get at before. The Minister has just said it; he may correct me, and I apologise as it is complex. He said that, if the Scottish population falls and is a lower proportionate share of the population, there would be a lower tax deduction. But if that population has fallen because of the tax policies of the Scottish Government, why should there be a lower tax reduction?

I think we are reflecting at the outset that Scotland produces a lower proportion of total UK income tax. We are applying that comparability factor from the outset. The Scottish Government will still bear population risk. If there is deviation from that initial situation—whether it is a result of their policy choices—that is how they would bear the population risk.

Can the Minister explain another point he raised? I am puzzled how it will ever be possible within a reasonable timescale to properly assess whether a measure taken by either the UK Government or the Scottish Government resulted in higher growth and therefore a higher tax rate or the other way round. The Minister must know that most of these matters are in dispute, sometimes for years, because no one can be really sure why a tax take went up or down. There can be a hunch or a feeling, but these things are contested maybe even decades after they happen. Given that this is a settlement that has to fix the grant every year, I am just wondering how you do it.

As I said, the agreement will set out the mechanism by which these matters are determined, so in that sense we will have reached agreement. That will avoid the perpetual wrangling. If you like, that is one of the complexities that we have been wrestling with and why it is taking time—

I have one more observation. I am just wondering how, in the case of the SNP, perpetual wrangling can be written out of the script.

A good start is if we actually get an agreement that, I hope, we can announce in the not too distant future.

Can I press the Minister on this? We have three models in front of us—the per capita index deduction, the index deduction and the levels deduction. Do I take it that the Minister has ruled out the per capita index deduction because there is too much of a bias to Scotland in terms of its population going down and it being rewarded excessively? Looking at the Chief Secretary’s letter, it would seem that the Government from paragraph 13 onwards have looked at the levels model and the index model and decided to provide another hybrid model to the negotiations for the SNP. Is that what the Government are doing? Given paragraph 13, I asked earlier what the response of the Scottish Government has been. Are they warm to that hybrid model now?

The Committee will understand that at a very delicate time in the negotiations I do not want to comment on the state of the negotiations in detail. It is clear from the Chief Secretary’s letter that we have indeed tabled what the noble Lord described as a hybrid model.

I shall pick up on a point made by the noble Lord, Lord Forsyth. We are seeking to avoid—I think the Secretary of State for Scotland put it this way in a recent debate—the Scottish Government wanting to have their cake and eat it and have a slice of everyone else’s cake while they are at it.

I now turn to borrowing, which was raised by the noble Lords, Lord Kerr, Lord Darling and Lord Turnbull. I should say at the outset that we have a lot of sympathy with what this amendment seeks to achieve.

I have a question before my noble friend moves on. I accept we have had a good go on this but I am still—perhaps I am just not smart enough to understand this—struggling to understand the Government’s position. It once was that, if Scotland is responsible for particular services, it should be responsible for raising the money and have direct accountability. What appears to be happening now is that the Government are trying to find some kind of Barnett-like top-up to the tax base. How is that going to go down with people in England? How will it take account of changes in England? For example, suppose a large number of migrants come into the country and live in the south-east of England and increase tax revenues and the tax base relative to Scotland, will that mean that there has to be money sent north of the border to maintain some kind of parity? I just do not understand how this will work. Can my noble friend explain?

If there is faster population growth in the rest of the UK, that obviously will not just increase tax revenues. It will also increase demand for public services. This negotiation is all about a fair allocation of risk. As I said, at this delicate time of the negotiations I do not want to comment in detail about particular aspects. We will publish this agreement if and when we can get it and I will be very happy at that point to discuss and debate with my noble friend on these matters.

I have great sympathy with what the amendment tabled by the noble Lords, Lord Kerr and Lord Turnbull, seeks to achieve. It is centred on the Scottish Government’s resource and capital borrowing powers and this is an important part of the negotiations. The noble Lord, Lord Kerr, asked whether this is a matter of great controversy. I do not anticipate—if we can reach agreement soon—that this issue will cause great controversy. In detail on resource borrowing, Smith talks about sufficient and additional powers to,

“ensure budgetary stability and provide safeguards to smooth … public spending in the event of economic shocks”.

The current powers of the Scottish Government are that they can borrow up to a total cap of £500 million for this purpose and an annual limit of £200 million for cash management and forecasting error in devolved tax revenues. The rationale for more in this area is the increased risk and volatility from a greater scale of tax devolution, although I again stress that this is a marginal Scotland-specific risk. This needs to be proportionate. Mindful of the need to deliver sustainable UK public finances, as the noble Lord, Lord Turnbull, said, Scottish borrowing is included in UK borrowing.

When we look at these borrowing powers, we need to look at the other tools that are available to help manage the risks—the possibility of building up a rainy-day fund and the block grant adjustment mechanism itself. We also need to cater for Scotland-specific shocks if the Scottish economy is in recession while the UK economy continues to grow. That is a relatively rare event—I think it has happened three times in the last 20 years. We need to do this to protect against relative underperformance leading to worse economic outcomes through higher taxes or lower spending during recession. I pick up on a point that the noble Lord, Lord Darling, made: it is explicitly not a facility for the Scottish Government to borrow to fund current spending in normal times. That would absolutely undermine fiscal responsibility and accountability.

On capital borrowing, Smith talks about sufficient borrowing powers to support capital investment. He asked the two Governments to look at a similar prudential borrowing regime used by local authorities. The current powers involve a total cap of £2.2 billion and an annual limit of 10% of the capital grant, which is currently about £3 billion, so we are talking about £300 million per annum. All borrowing needs to be complemented by fiscal rules to ensure consistency with the overall UK fiscal framework.

The noble Lord, Lord Kerr, specifically asked about legislation. The Scottish Government’s existing borrowing powers are provided for in the Scotland Act 1998 as amended by the Scotland Act 2012. Any changes to the purposes and circumstances for which the Scottish Government have permission to borrow to reflect the transferred risks may require amendments to primary legislation. I assure noble Lords that we will review further what primary and secondary legislative changes may be needed in the light of a fiscal framework agreement, including additional independent scrutiny of the Scottish Government’s public finances, to which the noble and learned Lord, Lord McCluskey, referred. Both Houses of the UK Parliament will have an important scrutiny role.

Will the Minister clarify a matter for me? When he talks about additional primary legislation, is he talking about bringing forward an amendment to this Bill or about a new Bill to be brought forward on some other occasion? It really belongs in this Bill.

As I said, it depends on the timing of an agreement. Obviously it would be preferable, if possible, to provide amendments for this Bill, but that depends on our reaching an agreement and the timing of that agreement.

The noble Lord said that this is not the most controversial element. In fact, he implied that it was not controversial at all. In that case, do we have to wait for all the difficult bits of the fiscal framework to be agreed before we see the easy bits coming out if there are outcomes there? My noble friend Lord Turnbull is right that this Bill would be better if there were a provision in it on borrowing. I do not know whether my language is correct but this is different from the 1998 Act. We are explicitly laying down the mechanism for settling these limits because it is a reasonable assumption that there will be much more borrowing. I think it is desirable to amend the 1998 Act and, if we are going to do that, why not do it in this Bill?

The difficulty is that you cannot separate out one element of what is an overall package. Both Governments have agreed that nothing is agreed until everything is agreed. Therefore, I do not think it is possible to pluck out just one aspect and to move ahead with it on a different timescale.

Perhaps I might get the politics of this right. The proposal is that we absolutely have to get this Bill on the statute book before the Scottish elections but, come those elections, we will be able to say that there is another Bill coming down the track to deal with these matters, and we may or may not have the detail on that. Is that not going to defeat the object? Was not the position of both Front Benches earlier this afternoon that we had to deliver the vow and say that we had delivered it? If another piece of primary legislation is coming and as yet we do not know what it is going to say, does that not undermine the whole strategy?

No, I do not believe that it does. My noble friend is asking me to comment on hypotheticals. We are engaged in trying to reach an agreement in as timely a fashion as we can to ensure that we have proper scrutiny of the fiscal framework in the context of the passage of this Bill.

I am conscious that time has been moving on and I shall be very happy to return to some of these topics on another occasion. However, I just want to pick up on a couple of points.

There does not seem to me to be a need for separate legislation on borrowing. It is very important that the Minister clarifies that point now, otherwise we will just be chasing shadows afterwards.

As I said, what we require in terms of legislation for borrowing depends on the final agreement. I do not think I can say more than that at the moment.

I shall conclude on a couple of points. Smith calls for a review and the Government support that idea. We are in a new world and it is right to assess how the fiscal framework and fiscal devolution work in practice and whether they impact fairly and equitably on the finances of Scotland and the rest of the UK.

I have already mentioned independent fiscal scrutiny, and the amendment from the noble and learned Lord, Lord McCluskey, addresses this. It is certainly the case that the UK Government strongly support a robust independent Scottish Fiscal Commission. That would include the capacity for that body to undertake independent forecasts—it would not just, as it were, be marking the Scottish Government’s homework. That is one of the key issues in the fiscal framework negotiations.

Finally, on commencement, my noble friend’s amendment is relevant in proposing a sunrise clause if we are unable to agree a fiscal framework. As we have already discussed, we are working hard to agree a fiscal framework. As I said earlier, I do not think that it is helpful to speculate what options would be open to us if an agreement cannot be reached. My noble friend suggested one option, and other options have been suggested as well. We will take those ideas away and set out our conclusions on Report. I therefore ask noble Lords not to press their amendments.

Amendment 75 withdrawn.

Amendment 75A

Tabled by

75A: After Clause 19, insert the following new Clause—

“Borrowing powers

(1) Section 66 of the Scotland Act 1998 (borrowing by the Scottish Ministers etc.) is amended as follows.

(2) For subsections (1A) and (1B) substitute—

“(1A) Subject to subsection (1B), the Scottish Ministers may borrow by way of loan or by the issue of bonds (but not bonds transferable by delivery) any sums required by them.

(1B) Borrowing by Scottish Ministers shall be subject to—

(a) annual limits; and(b) an overall ceiling. (1C) The annual limits and the overall ceiling shall be set by regulations made by the Treasury, following consultation with Scottish Ministers.

(1D) Regulations under subsection (1C) may not be made unless a draft of the regulations has been laid before and approved by a resolution of each House of Parliament.””

I understand the Minister’s point about nothing being agreed until everything is agreed. That seems to me a very reasonable point to make. However, that applies to the numbers, the levels and the ceilings; it does not apply to the principle of limits and having them in the Bill. If that is not controversial, I really think that on Report we ought to see it, not necessarily in my language but in some language, in the Bill.

Amendment 75A not moved.

Amendment 76 not moved.

Clause 20: Disability, industrial injuries and carer’s benefits

Amendment 77

Moved by

77: Clause 20, page 23, leave out lines 4 to 12 and insert “a disabled person or person with a physical or mental impairment or health condition in respect of effects or needs arising from that disability, impairment or health condition.”

My Lords, I rise to speak to Amendments 77 and 79 in my name and that of my noble friend Lord McAvoy. The focus of Amendment 77 is the current definition of “disability benefit” used in the Bill. The concern is that this may place unnecessary limits on the kind of replacement benefit that the Scottish Government have the power to introduce. The fear is that it may not allow the Scottish Government to introduce a benefit to assist people with very low-level disabilities or those for whom the effect of their disability is largely financial.

We moved this amendment in relation to carer’s allowances at Committee stage in the other place following concerns raised by third-sector organisations. The concern from both Inclusion Scotland and Citizens Advice Scotland has been that the definition of disability might,

“restrict the autonomy”,

of the Scottish Parliament,

“to construct a new system based on empowering disabled people to lead active and productive lives and promoting the human rights of disabled people and independent living”.

Amendment 77 would offer an alternative, broader, more flexible definition of “disability benefit” that would, among other things, allow the Scottish Parliament to introduce a benefit to assist people with low-level disabilities or those for whom the effect of their disability is largely financial.

The Government brought forward an amendment on Report in the other place regarding the “carer’s allowance” definition. However, they do not appear to have done the same in relation to the “disability benefit” definition. True it is that the Ministers, the noble Lords, Lord Dunlop and Lord Freud, have both written to this side of the House trying to clarify the Government’s position. The letter we received from the Minister includes the following,

“by including the phrase ‘normally payable’ at the head of the definition, the provision gives the Scottish Parliament the necessary flexibility to create exclusions or create special categories, for example to enable provision for people who are terminally ill or those with lower needs”.

I do not, of course, doubt in any way the accuracy of the Minister’s statement, but on this side we are still keen to get assurances from the Minister on the Floor of the House and confirmation that the Scottish Government could introduce a benefit to assist people with very low-level disabilities or those for whom the effect of the disability is largely financial. That, in a nutshell, is the position that we adopt in relation to Amendment 77.

Amendment 79 provides for the devolution of the Access to Work scheme. This was an amendment that we moved at Committee stage in the other place. As my honourable friend the Member for Edinburgh South observed in the other place:

“Access to Work provides practical advice and support to disabled people, and their employers, to help them to overcome work-related obstacles resulting from disability”.—[Official Report, Commons, 30/6/15; cols. 1429-30.]

The devolution of the programme to local authorities would certainly allow there to be better tailoring to local needs.

Access to Work is closely aligned with employment support. Several charities, including Inclusion Scotland and the Wise Group, are in favour of Access to Work being devolved to Scotland. ENABLE Scotland observes that the Access to Work scheme is one of the most important elements of the employment support system for disabled people. It gives various examples, such as the British Sign Language interpreters working for deaf employees.

ENABLE Scotland states its position as believing that,

“the devolution of Access to Work is necessary to deliver integrated and accessible Employment Support in Scotland”.

Its position, which we share, is that Access to Work,

“does not currently integrate well with employability programmes”,

that are sometimes not fully delivered by the Department for Work and Pensions. It continues:

“For example, if you are a person on Work Choice you can use Access to Work to get pre-employment support in interviews or agree support whilst transitioning into work. Persons supported by the Employability Fund … do not have access to that support and face increased negotiation and bureaucracy to get the support … Given that post-devolution the employability programmes will not be delivered by the DWP, failure to devolve Access to Work in parallel will limit access for Scottish jobseekers and increase bureaucracy for specialist support organisations and employers”.

The Scottish Council for Voluntary Organisations also supports the devolution of Access to Work. It takes the view that that is necessary to create the integrated accessible form of employment support that it considers, as do we, should be created in Scotland. A women’s charity in Scotland, Engender, has also identified support for devolution of the Access to Work scheme, which it says is necessary for improving overall support for disabled people.

There are four questions that the Minister could assist us by answering. I do not expect immediate direct answers to them all; an answer in writing, in the usual terms, would be fine. These questions are as follows. First an integrated package of employment support measures is essential to ensure the best outcomes for disabled people—I assume that there is no disagreement about that. So what effect will absence of Access to Work in the devolution package have on outcomes for disabled people?

Secondly, will the Minister address the points raised by ENABLE, supported by the SCVO? It says that failure to devolve Access to Work in parallel with the Work Programme and Work Choice will,

“limit access for disabled jobseekers in Scotland and increase bureaucracy for specialist support organisations and employers”.

Thirdly, does he believe that Access to Work complements the employment support programme already being devolved to Scotland? Finally, if the Government are committed to keeping this programme as a reserved matter, does that not make an even stronger case for a Joint Committee on welfare devolution to be set up? That idea is covered in a further amendment, tabled by my noble friend Lord McAvoy.

A number of amendments tabled by the noble Lord, Lord Kirkwood, seem to have a broadly similar intent—to prevent the UK Government from clawing back top-up benefits paid by the Scottish Government through means-testing reserved benefits. We on the Labour side have similar concerns. The Scottish Government should be able to make top-up payments to individuals who have had their payments unfairly reduced, suspended or withdrawn under the UK Government’s sanctions regime.

We accept that Her Majesty’s Government have tabled a significant number of amendments for Report stage that mean that the Scottish Parliament appears to have complete power to create new benefits in devolved areas and top up existing benefits—which, of course, we fully support. However, Labour outlined in the other place our wish for the Scottish Government to be able to make payments to those who have been sanctioned. The Minister may well have already covered that position. Certainly in meetings with him, which were extremely helpful, it has been suggested that the question in relation to sanction is already covered by the legislation. None the less, as with the previous amendment, it would be extremely useful for us if the Government were to confirm that for the record.

We would support Amendment 77J, tabled by the noble Lord, Lord Kirkwood, on definitions of “short-term”. We tabled an amendment in another place, but did not pursue it as we had assurances that the position would be covered by the legislation. Nevertheless, our argument in Committee has been that the inclusion of phrases such as “short-term” would appear to limit the scope of the Scottish Parliament to take action in these areas. In the instance of discretionary housing payment and other discretionary payments, the Government have told us that, in their interpretation, a discretionary payment is a short-term payment. Our argument was that a discretionary payment is just that—a payment made at the discretion of and according to parameters set by the relevant Government. We respectfully suggest that further clarification would be useful from the Minister in that area.

We support the amendments in this group proposed by Her Majesty’s Government, as these are primarily of a technical nature. I beg to move Amendment 77.

My Lords, it is a pleasure to follow the noble and learned Lord, Lord Davidson of Glen Clova, and support the amendment in his name. I am pleased to take the Minister into the slightly calmer waters of Head F1 of Part II of Schedule 5 to the Scotland Act 1998.

I am pleased to see my favourite Minister, the noble Lord, Lord Freud, who has taken the trouble to observe and listen to these amendments, which I appreciate because this is important. I want to make one preliminary point. The most important thing that the Minister can do for me this evening is to give an undertaking that the new-found spirit of co-operation and good working relations that is now evident between Whitehall departments, the Scottish Government and the community of pressure groups who apply these provisions on behalf of their clients will continue. My perception, which is strong because I have been working with these people all my professional life, for the past 35 years, is that at the beginning people in Scotland thought they were getting short shrift, to put it mildly. This is a DWP issue. The impression—this is their perception, not mine; I am simply reporting it—is that they were getting no proper consideration or understanding in what was being proposed by the Government. I think that has changed. From my experience with the current Minister and his team, I am much assured that the consideration that has now been given to these clauses in this important part of the Bill is much better. But we need to continue to work hard at getting a good relationship with the people who are implementing the provisions north of the border. The presence of the noble Lord, Lord Freud, underlines the fact that the Government have got that message. I have now got that off my chest.

I am speaking to the amendments in my name, beginning with Amendment 77A. I will not, however, move Amendments 77D or 77G. I was getting carried away with my enthusiasm for peppering the Marshalled List with probing amendments and inadvertently misdirected myself. I managed to eliminate the UK’s reserve power for discretionary payments in universal credit. I had no intention of doing that, so I will take away from the Minister the pleasure of saying that I got that substantially wrong because I have just realised that myself.

The best way that we can make progress in the Committee is for the Minister, in dealing with all my amendments and those of the noble and learned Lord, Lord Davidson, to take this opportunity to clarify how the provisions should be interpreted.

The one thing of which we should try to persuade people north of the border is that they need not necessarily be suspicious about everything. Some of this legislation is in quite dense language and a lot of it will have to be spread out into secondary legislation to make it work. The view in Scotland is that people in London are trying to have a narrower rather than a wider interpretation of the deployment of these powers. I do not believe that is true. That is why, as I said, it is important that Ministers give this serious attention.

The people who have been briefing the Committee, such as the Scottish CPAG and the Scottish Federation of Housing Associations, have done a very good job. They are anxious to avoid gaps—that is what they are good at—and they have managed to achieve that by identifying some of the amendments on the Marshalled List this evening. They do not care where the powers lie or who is deploying them. They want to make sure that they can look after their client groups as best they can in the circumstances.

As the noble and learned Lord, Lord Davidson, has already managed to do some of it, I am going to just sketch through some of the amendments in my name. They are all probing amendments. They are designed to capture the Minister’s attention and I think they have successfully done that: he has spent some serious time getting to grips with the concerns. Amendment 77 is a very good example of this. I knew in my heart that winter fuel payments were included because they are part of the regulated Social Fund but it is not explicit in the Bill. At an earlier stage, people in Scotland were not content to take at face value that the words,

“expenses for heating in cold weather”,

would naturally and automatically import the winter fuel payments scheme in Scotland. Therefore, the purpose of the amendment—and it illustrates why I am speaking to these amendments—is to enable the Minister to say on the record from the Dispatch Box that that is the case. If he can do that, I would be grateful.

The amendments to Clause 22 seek confirmation on how top-up powers will be used and clarification on clawback powers. The use of the word “discretionary” in the title of Clause 22 caused some confusion because discretionary by definition means what it means. That could be usefully clarified by the Minister. Could he explain exactly what Clause 22 sets out to do? The amendments to Clause 23 and the two or three subsequent clauses are trying to get an understanding of exactly how the sanction restrictions will effect discretionary payments such as discretionary housing payments, crisis grants, community care grants and top-up payments. If he can help us understand that, the Minister will be doing us a favour.

The amendments to Clause 24 attempt to bottom out what power the Scottish Government currently have under the Welfare Funds (Scotland) Act 2015. It is the view of the people I have talked to that there should be support for families facing “exceptional circumstances”, which the Scottish Government, in spite of the fact that they have the Welfare Funds (Scotland) Act 2015, feel they do not have the competence to cover. I would be very interested—I think the same question was raised by the noble and learned Lord, Lord Davidson—to learn more about that as well.

In Clauses 27 and 28, I am really nervous about concurrent jurisdiction powers. I do not know how these will be implemented. It is a much smaller-scale problem than financial frameworks and so on, but we need a clearer understanding of how these things will work. I understand that the department thinks that they are well dealt with in Clauses 27 and 28, but I do not think that that is necessarily the case. The power to delay is an opportunity cost in terms of access to universal credit. If the Government did decide that they had to take advantage of the delaying power, that might mean, for months if not years, that people in Scotland were denied access to some of the advantages of universal credit—because there are some—and that would not be a cost-free decision for the Government to take.

I want to spend a moment on Amendment 79ZC on the Social Security Advisory Committee. I am genuinely puzzled by the Government’s approach to this because, as I read the Bill as currently drafted, they are excluding any role for the SSAC in relation to social security issues in Scotland. The Minister will know that the primary legislation for the SSAC was a 1980 Act later consolidated into the Social Security Administration Act 1992. Those provisions gave the SSAC an exactly parallel role in relation to the Social Security Agency in Northern Ireland. These two statutory accountabilities have been running in parallel ever since the SSAC was set up. Hitherto in Northern Ireland there was automatic parity with GB, so there was no real issue about any policy matters, but following last year’s fresh start agreement, it is obvious to anyone paying any attention to what is going on in Northern Ireland that the Northern Ireland Executive and the Northern Ireland Assembly now wish to introduce substantive changes to their devolved social security arrangements, so the SSAC statutory role there will now involve providing advice on devolved arrangements in one part of the United Kingdom.

My question is this: if that is appropriate for devolution in one of the nations of the United Kingdom, what is the Government’s rationale for wanting to take a diametrically opposite view for elements of social security now devolved in Scotland. It does not make any sense and I believe that there is a strong case for ensuring that the SSAC is able to take an overview of the way the UK social security system is evolving in the context of some elements being devolved to Scotland and Northern Ireland. It is certainly essential to have a single statutory independent UK body that can provide oversight of the rollout of universal credit in different ways in three parts of the United Kingdom, because that is what is happening, and of the implications of the way the exercise of the fully devolved powers in Scotland and Northern Ireland are impacting on the effectiveness and coherence of the social security system across the whole of the United Kingdom. I would be pleased to have a Government response to that.

Finally, Amendment 79ZD is the “Lord Freud” amendment, which I am now trying to promote everywhere I can because pilot schemes and test and learn have proved their value beyond any doubt in the policy area of universal credit. We should be encouraging Scottish Ministers and the Scottish Parliament to adopt them as they develop some of these important new social security powers. I understand that the government response might be, “It’s up to Scottish Ministers; it’s not up to us to tell them”, but it would be a good idea to make that explicit in the Bill as often and as clearly as we can. Perhaps the Minister will take some time in his response to clarify some of these amendments. That would do a great service to the understanding of the provisions of Part 3 of the Bill north of the border.

My Lords, I thank my noble friend for tabling these amendments, in particular Amendments 77N and 77R. As he has said, these provisions take us in a direction in which we have not travelled so far under devolution. That is quite understandable because this is a very significant transfer of powers.

The use of the phrase “operating concurrently” has the potential to raise not only some constitutional issues, but practical issues in the relationship between the two Parliaments. If my understanding is correct, this will be a novel area where this Parliament is able retrospectively to amend what is in effect devolved legislation. Obviously that would be done in circumstances where agreement has broken down. The Scottish Government will have had a view on the practicability of implementing the powers that have been transferred to them, on who is able to receive universal credit and when. That cannot be done unless with consultation with the Secretary of State.

That is, of course, reasonable: it is an area where there was considerable political disagreement before the Bill came to Parliament, when the Scottish Government claimed that there were veto powers. I think there has been significant movement on both sides, so we have moved away from that political disagreement, but this situation may arise where the Scottish Government have a view, the Secretary of State has another and, in effect, if the Secretary of State believes that the Scottish Government are wrong, it is open to this Parliament to retrospectively amend devolved legislation. That would be a high-profile set of circumstances, so my noble friend is justified in asking the Government for a bit more information as to how the Secretary of State would define “practicable”. An enhanced requirement for the Secretary of State to state why he thinks measures would not be practicable to implement is very reasonable. As my noble friend said, the power to delay implementation is a significant power, in addition to the relationship that it would have with the Scottish Parliament.

Some lack of clarity remains as to whether, if that is amended devolved legislation, there would be a requirement on the Scottish Parliament to change the regulations it had made, or whether it effectively becomes a UK piece of legislation. If that is the case, it is no longer the responsibility of the Scottish Parliament to change it subsequently, if there are to be amendments. Clarification from the Minister on that would be helpful. One unintended consequence may well be that, if there is a regulation from this Parliament to amend a Scottish Parliament regulation, it in effect becomes a piece of UK legislation and not devolved legislation. Further clarification on those points would be greatly welcome.

I thank the noble and learned Lord, Lord Davidson, for raising the amendments in his name and that of the noble Lord, Lord McAvoy. I also thank the noble Lord, Lord Kirkwood, for setting out the areas where he hopes for clarification. I will try to address the points that have been raised.

Turning first to the definition of disability, the purpose of Clause 20 is to devolve the policy space and to provide financial support to meet the extra costs arising from disability. The clause is designed to give flexibility to the Scottish Government to design their own approach with regard to policy, the criteria that are applied and the scope. The way we have done this, and implemented what Smith called for, is to define the main common features of existing benefits and the circumstances in which benefits are “normally payable”. To give the noble and learned Lord, Lord Davidson, the assurance he seeks, this is not intended to impose restrictions or obligations on the Scottish Government; they should be free to set their own agenda.

I understand that stakeholders are concerned that Scottish Ministers will interpret this clause more narrowly—for example, with regard to whether it covers terminal or fluctuating conditions such as cancer or MS. I assure the noble Lord that there is sufficient flexibility in the clause to address exceptional cases—for example, to relax conditions for the terminally ill. The term “significant adverse effect” is designed to be a very broad definition. It is not completely limitless but does not include something that is minor, trivial or negligible, and will be for the Scottish Government to determine. The clause is also drafted to prevent payment of benefit where a person is in receipt of fully funded care in a care home, for example.

Amendment 79 seeks to expand the Scottish Parliament’s employment support powers to include discretionary awards under the Access to Work scheme. The UK Government do not support this amendment for two principal reasons. Access to Work is one of the key tools available to Jobcentre Plus to provide practical support to overcome work-related obstacles arising from disability and is not a centrally contracted programme. As a result of changes made in the last spending review, there will be a real increase in the Access to Work budget that will allow support for an additional 25,000 disabled people nationally.

I will address one of the noble Lord’s further questions and get back to him in writing on some of the others. Access to Work is integral to the Jobcentre Plus offer. It is a grant scheme assisting disabled people in paid employment or with a job or work trial and is awarded for a period of three years. In some cases, the DWP and employers share costs. It is important to have consistency of treatment where big employers have employees receiving support under the scheme in different parts of the country. There is, of course, nothing to stop the Scottish Government choosing to introduce similar forms of support for disabled people in addition to Access to Work, should they wish to do so.

Amendments 77C, 77D, 77E and 77F, in the name of the noble Lord, Lord Kirkwood, concern the topping up of reserved benefits. Again, I recognise the concern that has been expressed that Scottish Ministers will interpret the term “discretionary” too narrowly and apply it on a case-by-case basis rather than this being left to the discretion of the Scottish Parliament. I stress that the Scottish Parliament will have discretion with regard to these payments. As the noble Lord mentioned, this issue applies in the context of a whole range of measures where the Scottish Government are able to fill in any perceived gaps in UK provision and to tailor welfare to specific Scottish circumstances. The range includes top-ups to reserved benefits, discretionary housing payments, other discretionary assistance and the power to create new benefits in devolved areas.

Clause 22 gives the Scottish Parliament power to legislate for top-up payments to people in Scotland entitled to any reserved benefits, including universal credit, tax credits and child benefit. These payments are outwith the UK social security system and all that that entails. The Scottish Parliament does not need to obtain prior permission from the UK Government to make these top-up payments. However, in accordance with the Smith agreement, conditionality and sanctions within universal credit will remain reserved, so the Scottish Parliament will not be able to legislate for top-ups to offset a reserved benefits reduction as a result of an individual’s conduct, whether that is non-compliance with work-related requirements or recovery of benefit overpayment.

I can reassure the noble Lord that just because someone is sanctioned it does not mean they cannot get a payment for other reasons, such as emergencies. That is absolutely clear from what this clause is trying to do. I can also reassure the noble Lord that there is no automatic offsetting of top-up payments with reductions to reserved benefits, as per paragraph 55 of the Smith agreement. The Secretary of State for Scotland has written on this matter and said that,

“the UK Government agrees with the principle of not automatically off-setting new benefits with reductions elsewhere, as set out in para. 55 of the Smith Commission Agreement”.

I turn to Amendments 77J and 77K, about other discretionary payments and assistance. The purpose of Clause 24 is to broaden the exception of the 1998 Act to the social security reservation governing how the social welfare fund operates. There are two new exceptions here: Exception 7, relating to discretionary payments, gives short-term financial or other assistance to avoid risk to an individual’s well-being. Exception 8 gives occasional payments to help vulnerable people establish and maintain a settled home. The difference from the existing exception is that the requirement is only short-term. It does not also have to be immediate and arising from an exceptional event or circumstance. However, the payment could be to meet an immediate need. This is not intended to reduce the powers of the Scottish Parliament. To give a practical example, if a cooker breaks then this would cover the immediate food vouchers that might be required as well as help for repair of the cooker itself. However, the term “short-term” is needed to ensure that this provision does not stray into reserved territory in providing an ongoing entitlement.

I turn to the power to create new benefits in devolved areas, covered by Amendments 77L and 77M. The purpose of Clause 26 is that, under the 1998 Act, the Scottish Parliament has wide powers to legislate in any area of devolved responsibility, including the provision of new benefits. Examples of how this has been used include the provision of educational maintenance grants, free school meals, free prescriptions and the council tax reduction scheme. However, the Scottish Government would have to engage with the UK Government if they wished to create new benefits that strayed into the reservation under F1 of Part 2 of Schedule 5 to the Scotland Act 1998. Clause 26 inserts a new Exception 10 into F1 of the 1998 Act to put it beyond doubt that the Scottish Parliament can create new benefits in areas of devolved responsibility without the need to engage the UK Government. So the Scottish Parliament and the Scottish Government will have freedom to design and deliver welfare provision tailored to meet the needs of the people of Scotland.

Amendments 77N and 77R relate to the operation of concurrent universal credit regulation-making powers. Smith was very clear that universal credit remains reserved. It is, after all, a key part—with pensions—of the social union. However, it provides the Scottish Government with limited powers to vary certain aspects. Therefore Clause 27 gives the Scottish Government regulation-making powers to vary housing costs within universal credit for claimants who rent and to allow payments direct to landlords. Clause 28 gives Scottish Ministers regulation-making powers to change the frequency of universal credit payments to claimants, usually once a month, otherwise twice or four times a month and also to decide in what circumstances a single payment to a claimant couple could be split, for example if one partner has a drink or a gambling problem.

In terms of the safeguards for effective delivery, Scottish government Ministers are required to consult the Secretary of State for Work and Pensions before making regulations. Examples of the practical issues that this is designed to address include if the IT system requires changes or there are updates to guidance to jobcentre staff or partners such as local authorities, citizens advice bureaux or other stakeholders. Clearly it is important that any changes that are required as a result of the flexibilities that the Scottish Government will have integrate with the overall DWP universal credit delivery plans. The two sets of changes should be made at same time. At the moment we are implementing changes arising from the Budget and spending review. It is important to make sure that everything meshes together.

The Secretary of State for Work and Pensions remains legally responsible and accountable for delivery since universal credit remains reserved, and of course he has power to make regulations to postpone timing. I make clear that this is very much a backstop safeguard in the unlikely event that changes cannot be delivered in the proposed timescale. It is absolutely not a means for the DWP to frustrate what the Scottish Government are trying to do.

The Minister is being helpful but this is important. I do not see any escalation mechanism. I supported some of these universal credit changes that the Scottish Government are now seeking to win back—flexibilities in Clauses 27 and 28. However, if we are to use this mechanism, there needs to be some way of resolving disputes in situations where agreements simply cannot be reached. Postponing the introduction of changes indefinitely is not an answer to that question.

The first thing to say is that we do not anticipate problems. That is why I go back to this being a backstop power. The powers to vary are discrete. We shall come on to talk about the amendments regarding a welfare commission, but already close intergovernmental working has been established both at ministerial and official level and a lot of work is going on through visits and teach-ins and the like. Given where we are with universal credit rollout—it is already fully rolled out in Musselburgh; by June it will be rolled out in Inverness and by autumn in another five centres across Scotland—there is an opportunity to look at how these changes and the flexibilities that the Scottish Government have got might actually work in practice. There is a good dialogue between the two Governments to establish what the Scottish Government want to do with these powers and what draft Scottish Parliament universal credit regulations might look like. In terms of dispute resolution, we have already established a joint ministerial group on welfare. That has already proved an effective mechanism for resolving any issues between the two Governments.

I turn to the government amendments. Amendment 77B is technical in nature and ensures that executive competence will be transferred to the Scottish Ministers so that they can make payments of Sure Start, maternity grants, funeral payments, cold weather payments and winter fuel payments when Clause 21 is commenced. Clause 21 provides the Scottish Parliament with legislative competence to create a scheme that would allow it to make payments or provide other assistance for funeral and maternity expenses, and expenses incurred due to cold weather. Without the amendment to Clause 21, executive competence would not be transferred to Scottish Ministers when the clause is commenced. This would prevent Scottish Ministers being able to make payments in respect of Sure Start, maternity grants and all the other payments to which I have referred. This amendment therefore ensures that people in Scotland can be paid these benefits by Scottish Ministers and that payments will be made out of Scottish funds.

Our amendments between Amendment 77P and Amendment 79ZB are again technical amendments. They deal with the way in which existing social security legislation will apply after the transfer of powers under the Bill. The amendments to Clauses 27 and 28 relate to universal credit and put beyond doubt the intention that where regulations are made by Scottish Ministers under the new powers, the Scottish Parliament’s procedure for negative instruments applies. Clause 31 is a technical provision that requires legislation to universal credit to be read as if references to the Secretary of State were references to Scottish Ministers. After careful consideration and since universal credit will remain a reserved benefit administered by the DWP, this clause is not required.

The noble Lord, Lord Kirkwood, mentioned the Social Security Advisory Committee and its role to advise the Secretary of State on relevant matters relating to social security. The Industrial Injuries Advisory Council advises the Secretary of State on matters relating to industrial injuries benefit and its administration. The roles of the SSAC and IIAC are to remain unchanged. Scottish Ministers, however, will not be able to refer their draft regulations to these bodies for consideration. Once legislative competence has been given to the Scottish Parliament it may, if it wishes, put in place separate scrutiny bodies to consider legislative proposals made by the Scottish Government within the scope of the legislative competence and report back to Scottish Ministers. It is for this reason that we do not support Amendment 79ZC, which seeks to change the role of the SSAC to give it a duty to advise Scottish Ministers. We would of course want to put in place arrangements to facilitate information and co-operation between the two Governments.

Finally, Amendments 79ZE, 79ZF and 79ZG will ensure that UK Parliament procedure is converted into Scottish Parliament procedure in relation to the secondary legislation that Scottish Ministers will be able to make in relation to welfare foods. I will move these government amendments and I ask noble Lords to withdraw or not move their amendments.

I express my gratitude to the Minister for the clarifications that he has given in relation to disability benefit and its definition. In relation to access to work, I will reflect on the answer he has given and eagerly await the Written Answers. In these circumstances, I beg leave to withdraw my amendment.

Amendment 77 withdrawn.

Clause 20 agreed.

Clause 21: Benefits for maternity, funeral and heating expenses

Amendment 77A not moved.

Amendment 77B

Moved by

77B: Clause 21, page 24, line 42, at end insert—

“( ) In section 138 of the Social Security Contributions and Benefits Act 1992 (payments out of the social fund) after subsection (4) insert—

“(4A) This section has effect in or as regards Scotland as if—

(a) references in subsections (1)(a) and (2) to the making of payments out of the social fund were to the making of payments by the Scottish Ministers,(b) the reference in subsection (2) to the Secretary of State were to the Scottish Ministers, and(c) the reference in subsection (4) to regulations were to regulations made by the Scottish Ministers.(4B) Where regulations are made by the Scottish Ministers under this section—

(a) sections 175(2) and (7) and 176 do not apply, and(b) the regulations are subject to the negative procedure (see section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010). (4C) The power to make an Order in Council under section 30(3) of the Scotland Act 1998 is exercisable for the purposes of this section as it is exercisable for the purposes of that Act.””

Amendment 77B agreed.

Clause 21, as amended, agreed.

Clause 22: Discretionary payments: top-up of reserved benefits

Amendments 77C to 77F not moved.

Clause 22 agreed.

Clause 23: Discretionary housing payments

Amendments 77G and 77H not moved.

Clause 23 agreed.

Clause 24: Discretionary payments and assistance

Amendments 77J and 77K not moved.

Clause 24 agreed.

Clause 25 agreed.

Clause 26: Power to create other new benefits

Amendments 77L and 77M not moved.

Clause 26 agreed.

Clause 27: Universal credit: costs of claimants who rent accommodation

Amendment 77N not moved.

Amendments 77P and 77Q

Moved by

77P: Clause 27, page 29, line 3, leave out “43” and insert “43(1)”

77Q: Clause 27, page 29, line 4, leave out “sections 189(3) and 190” and insert “section 189(3)”

Amendments 77P and 77Q agreed.

Clause 27, as amended, agreed.

Clause 28: Universal credit: persons to whom, and time when, paid

Amendment 77R not moved.

Amendment 77S

Moved by

77S: Clause 28, page 29, line 35, leave out from beginning to “not” in line 36 and insert “section 189(3) of the Social Security Administration Act 1992 does”

Amendment 77S agreed.

Clause 28, as amended, agreed.

Amendment 78

Moved by

78: After Clause 28, insert the following new Clause—

“Joint Committee on Welfare Devolution

(1) There shall be a Joint Committee on Welfare Devolution to examine the transfer, implementation and operation of the powers devolved to the Scottish Parliament by Part 3 of this Act.

(2) The Joint Committee on Welfare Devolution shall be responsible for ensuring full co-operation, consultation and information-sharing between the United Kingdom Government, the Scottish Government and relevant stakeholders.

(3) The Joint Committee on Welfare Devolution shall publish a report—

(a) on the transfer and implementation of the powers devolved to the Scottish Parliament by Part 3 of this Act, at least once every three months for the first three years from the date on which this Act is passed, and(b) on the operation of the powers devolved to the Scottish Parliament by Part 3 of this Act, at least once in each calendar year, starting three years from the date on which this Act is passed.(4) Schedule (The Joint Committee on Welfare Devolution), which makes further provision in relation to the Joint Committee on Welfare Devolution, has effect.”

My Lords, I speak to Amendment 78 standing in my name and that of my noble and learned friend Lord Davidson of Glen Clova. The amendment provides for the establishment of a Joint Committee on welfare devolution that would oversee the transfer and implementation of the welfare and employment support powers transferred under the Bill. This cross-party committee would not only examine the transfer, implementation and operation of these powers; it would also be responsible for ensuring full co-operation, consultation and information-sharing between the UK Government, the Scottish Government and, crucially, the relevant local stakeholders. The committee would be established in a spirit of mutual co-operation and transparency. Those principles must lie at the heart of the devolution settlement and, indeed, are what I believe to be the cornerstones of any future intergovernmental discussions.

The creation of the committee would provide an important mechanism through which the Scottish people can engage with the devolution process, and the membership of the committee would make that clear. Before I get on to why I think such a committee is needed, let me first outline how we envisage such a committee working in practice.

The committee would be made up of 10 members, with equal representation from both the UK and Scottish Governments, including the Secretary of State, UK and Scottish Welfare Ministers—presumably the noble Lord, Lord Freud—Back-Benchers from both Parliaments and representatives from Scottish local government. The committee would determine its own proceedings and, acting jointly, the Secretary of State and Scottish Ministers could appoint an advisory panel on welfare reform comprising academics, representatives from third-sector and voluntary organisations, and any other relevant stakeholders. Following the passing of this Bill, the committee would publish reports every three months for the first three years and annually thereafter. The aim is to provide a truly all-encompassing, all-inclusive process.

The very detailed debate that we have just had about welfare benefits and employment support highlights why such a committee is needed. The work of the noble Lord, Lord Kirkwood, is well known and has been demonstrated in the past 20 minutes or so, so the expertise is certainly there. A number of points were raised that show how such a committee could be of value. The amendments proposed by the noble Lord, Lord Kirkwood, recognise the importance of joined-up working, particularly on welfare. These are extremely complex issues, but I have no doubt that the committee would make a positive contribution during the transition of the welfare provisions, with experts from local government and voluntary organisations feeding into discussions. Indeed, the Scottish Council for Voluntary Organisations warmly welcomed this initiative, stating that it is a,

“pragmatic proposal given the need to ensure continuous, timely delivery of social security payments to those who receive them”.

The more positive intergovernmental working that can be fostered is surely to the benefit of all parties involved, and will develop and strengthen the relationship between Scotland and the UK. The committee would be an extremely powerful symbol of exactly the type of working that we should all want to promote; indeed, that broader issue is a powerful motivating factor behind the amendment. With the passing of the Bill, we will enter a new phase in the history of the United Kingdom and a new chapter for Scotland. We should use this as an opportunity to think creatively about how we work together and to renew our commitment to intergovernmental co-operation.

Noble Lords will be aware that we have been pursuing this sort of monitoring since the Bill was introduced in the other place, and since then it has not just been third-sector organisations that have advocated such engagement during the transitional process in the weeks, months and years ahead. I quote from the most recent report from the Scottish Affairs Select Committee, which stated:

“There is a clear risk that a system in which some benefits are devolved and some are reserved will create”—

or have a strong possibility of creating—

“confusion and uncertainty for those who depend on welfare support. Both governments must work together effectively to ensure that claimants are not disadvantaged by the process of transition from one system to another or by the interaction of those separate systems in the future, not least because those claiming multiple benefits are likely to be on the lowest incomes. The needs of those who rely on benefits should be at the heart of the process of devolving spending powers to the Scottish Government. We expect to monitor progress in this area as part of our future work”.

So there is genuine concern as well as the positive contributions being made to this debate, and I believe that that statement from the Select Committee speaks directly to our amendment. I understand that the Government have yet to respond to the Select Committee report. Without pre-empting their response, does the Minister agree with the principle of this sort of co-operation, with particular regard to the welfare measures in the Bill? Are such preparations in place, or are discussions taking place to consider them? Are such processes or tools being considered, and who would carry them out?

The committee would bring together national and local representatives, politicians and voluntary organisations with the sole purpose of making the transition as effective, collegiate and positive as possible. I look forward to hearing the Government’s response, and I beg to move.

I thank the noble Lord, Lord McAvoy, for his amendment. With this Bill we are moving into a new world of two parallel systems, and it is absolutely the responsibility of both the UK Government and the Scottish Government to ensure that there is a seamless transition from the current situation to that new world and that there are no cracks for people to fall between. We have an important duty in that regard. There is very much a common interest in the UK Government and the Scottish Government working together.

The Government are very sympathetic to the intent behind the amendment but we argue that it is unnecessary because there are existing arrangements in place. However, I agree with the noble Lord on the principle of co-operation, and there is a good level of intergovernmental co-operation in this space already.

The first example of that is the joint ministerial group on welfare, which was proposed by the Prime Minister to the First Minister when they first met after she was elected to her post in November 2014. This body is jointly chaired by the Secretary of State for Scotland and the Scottish Government Cabinet Secretary for Social Justice, Communities & Pensioners’ Rights. Its membership includes not just Scotland Office and Scottish Government Ministers, but is also attended by DWP and Treasury Ministers as required and their Scottish equivalents: for example, the Finance Secretary and the Cabinet Secretary for Fair Work, Skills & Training.

Since February 2015, the ministerial group on welfare has met four times and its agenda covered very practical issues that one would expect as a part of inter-governmental co-operation: information sharing, policy issues, operational and transitional issues and, crucially, dispute resolution. To give some examples, two issues that were resolved through this mechanism were the Work Programme contract extensions and the facilitation of the early introduction of UC flexibilities.

That is an important group; I confess that I did not know that it met and dealt with those things. How do people find out about this? Are there minutes on websites of decisions taken? If people are trying to find out about this important work that the Minister is telling us about, how do we find out about it?

The noble Lord raises a good point. One thing that I will take away from this debate is to see how we can promote a better understanding of how this group works and the issues that are being discussed. If I can give him this reassurance, I will certainly take that away.

Along with the ministerial group, there is also a senior officials’ group, which covers very much the same agenda of issues as the ministerial group. It is jointly chaired by the DWP director of devolution and the Scottish Government director of welfare, housing and regeneration. It has a remit to meet quarterly; I think that the next meeting is coming up very shortly, on 1 March. As other examples of co-operation, the DWP has seconded officials to the Scottish Government and, as I mentioned earlier, there is a programme to brief Scottish Government officials and get them up to speed on how the existing system works, so that the Scottish Government are in a much better position to determine how they are going to develop the powers that are coming to them.

In terms of parliamentary scrutiny, DWP Ministers and officials obviously appear before the Scottish Parliament Welfare Reform Committee and are available to appear before the committees of this Parliament. On local authority and other stakeholder engagement, the DWP runs three stakeholder forums in Scotland per year to provide operational updates and improve joint working. It engages with a range of stakeholders from CoSLA, Citizens Advice Scotland, the Scottish Federation of Housing Associations, the Prince’s Trust and the Scottish Council for Voluntary Organisations. CoSLA and the Scottish Government are both represented on the universal credit partnerships forum, chaired jointly by the DWP and the Local Government Association.

As to reporting, I am happy to take on board and explore with the Scottish Government how we can improve reporting on the working of the joint ministerial working group on welfare, and our intent would be to provide annual reports on implementation.

Therefore, we regard the amendment tabled by the noble Lord as unnecessary, but it also confuses executive and scrutiny functions and perhaps lacks a clear objective—what outcome are we looking for here? One difficulty is that there is no precedent that I am aware of to fall back on. To whom will this body report? As I have explained, there are better ways to achieve the intent behind this amendment, to which, as I say, I am sympathetic. Therefore I ask the noble Lord to withdraw it.

My Lords, I thank the Minister for his positive response, particularly with regard to his response to the noble Lord, Lord Kirkwood of Kirkhope. I share the Minister’s surprise that he was not aware of it, because he seems to know everything else about social security. However, I am pleased, not by the concession—it is not a case of wanting concessions—but by the confirmation from the Minister that he will look at ways at following up the proposal from the noble Lord, Lord Kirkwood.

As the Minister was outlining all the ministerial and civil servant involvement, I thought that something was glaringly missing, which was the users, the public—some sort of public consultation and representation. He then went on to list a whole host of organisations that the Government have some kind of link with. However, I still feel that there is a case for more direct involvement by users groups and local organisations. I get the feeling that the links with the organisations are perhaps a bit perfunctory. I hope that I am wrong about that but nevertheless there is still a bit of a case for more direct users’ involvement. The system always needs to hear what went wrong and what went right, and so on. Nevertheless, with that little prevarication, I beg leave to withdraw the amendment.

Amendment 78 withdrawn.

Clause 29: Employment support

Amendment 79 not moved.

Amendment 79ZA not moved.

Clause 29 agreed.

Clause 30 agreed.

Amendment 79ZB

Moved by

79ZB: After Clause 30, insert the following new Clause—

“Social Security Advisory Committee and Industrial Injuries Advisory Council

(1) Section 53 of the Scotland Act 1998 does not apply in relation to any function of a Minister of the Crown under the legislation relating to social security and industrial injuries advisory bodies.

(2) Section 117 of that Act does not apply in relation to any reference to a Minister of the Crown in that legislation.

(3) In this section—

“the legislation relating to social security and industrial injuries advisory bodies” means any provision of sections 170 to 174 of, and Schedules 5 to 7 to, the Social Security Administration Act 1992 (Social Security Advisory Committee and Industrial Injuries Advisory Council);“Minister of the Crown” includes the Treasury.”

Amendment 79ZB agreed.

Clause 31 disagreed.

Clauses 32 and 33 agreed.

Amendments 79ZC and 79ZD not moved.

Clause 65: Subordinate legislation under functions exercisable within devolved competence

Amendments 79ZE to 79ZG

Moved by

79ZE: Clause 65, page 73, line 20, after “24,” insert “25,”

79ZF: Clause 65, page 73, line 27, after “24,” insert “25,”

79ZG: Clause 65, page 73, line 37, after “24,” insert “25,”

Amendments 79ZE to 79ZG agreed.

Clause 65, as amended, agreed.

Clauses 66 and 67 agreed.

Clause 68: Power to make consequential, transitional and saving provision

Amendment 79A

Moved by

79A: Clause 68, page 74, line 22, leave out paragraph (a)

My Lords, this amendment is the first in a group which deals with Clause 68 and draws attention to the very broad nature of this clause, which is usually described as a Henry VIII clause. In this group are five amendments in my name: Amendments 79A to 79E, which are also in the name of the noble Lord, Lord Forsyth.

May I explain a little of the background to this series of amendments? In recent months increasing concern has been expressed in this House about the use of Henry VIII clauses. I recall particularly the debate on the report of the noble Lord, Lord Strathclyde, arising from the concern about the use of statutory instruments and the inability of this House to amend them and do anything other than pass or refuse to pass them. It was in that connection that the noble and learned Lord, Lord Judge, delivered a very powerful speech that alerted us to the great dangers of overuse of Henry VIII clauses.

Clause 68 has been cited as a particularly extreme example of the use of this type of clause. To explain the point, I will analyse the clause a little to see what it actually does. It is headed:

“Power to make consequential, transitional and saving provision”.

I have no complaint about transitional and saving provision. My amendments seek to remove from the clause those parts that refer to consequential provisions.

If you look through the clause you will find that subsection (1) would give power to the Secretary of State by regulations to make,

“such consequential provision in connection with any provision of Part 1, 3, 4, 5 or 6 … as the Secretary of State considers appropriate”.

Part 2 is not mentioned there. If you look at Part 2, you will find more precisely targeted provisions dealing with related powers in Clauses 15 and 19. The draftsman has taken the trouble to provide provisions related to the needs of that particular part. In this subsection you will see that Parts 1, 3, 4, 5 and 6 are grouped together in a way that does not attempt to target the need for the provision in any particular way at all.

Then you will find in subsection (2):

“Regulations under this section may amend, repeal, revoke or otherwise modify any of the following (whenever passed or made) … an enactment or an instrument made under an enactment … a prerogative instrument … any other instrument or document”.

Subsection (3) is very wide because of the way in which it enables these regulations to proceed. They may be used for all sorts of purposes which are set out in the subsection.

As far as the expression “an enactment” is concerned, there is a definition in subsection (7), which tells us that it includes,

“an Act of the Scottish Parliament”,

but also goes on to say that it includes,

“a Measure or Act of the National Assembly for Wales, and … Northern Ireland legislation”.

It is startling to find references to the measures passed by the other devolved institutions in a Bill that purports to deal only with Scotland.

If you look carefully at subsection (5) you can find that the regulations may repeal,

“any provision of primary legislation”,

and that expression is defined as including an Act of Parliament—in other words an Act of this Parliament. The Secretary of State is seeking to assert to himself a power to,

“amend, repeal, revoke or otherwise modify”,

a whole range of statutes including Acts of this Parliament and measures of the devolved institutions, without any limit of time whatever for any purpose he may consider proper, so long as it can be described as consequential.

There are four features of this provision which are the source of particular concern and I have, in a way, hinted at them in the opening remarks. First, there is no limit on the time during which this power may be exercised or on its extent. Secondly, there is no attempt to relate the provisions about consequential provision to the needs of any particular parts or clauses within the parts referred to in subsection (1).

Thirdly, the power is to be exercised by statutory instrument, which has all the defects referred to in the debate that I mentioned earlier. All we can do is look at what the instrument says and either pass or refuse to pass it. There is no opportunity for this House, or indeed the other place, to subject it to the scrutiny that primary legislation would receive. That is quite extraordinary when you consider the scope of the power that the Secretary of State is seeking to give himself.

Fourthly, the power is to be exercised by the Secretary of State, but there is no provision that he is to be required to consult Scottish Ministers. We have already had debates about Clause 2 and the Sewel convention, which is not being made part of a statutory provision. It is subject to the word “normally”, and its scope and application are open to some question unless they are spelled out in the statute, and it is perhaps not entirely clear whether it extends to statutory instruments as well as to primary legislation.

Therefore, the scope of the clause is in itself disturbing, but in this Bill, of all Bills, it is even more extraordinary because, as we have been told from the very beginning, the purpose of the Bill is to give effect to what one finds in the Smith commission report—no more, no less. Yet the power given to the Secretary of State will enable him to go well beyond what is set out in this Bill and it is not qualified in any way to limit the Secretary of State to what may be found in the Smith commission report, however widely one might construe it.

This really is an extreme provision which ought to be edited in some way to make it clear that what is being done relates to the nature of the Bill, which deals with Scotland, and to the need of the clauses or parts of the Bill in question to give effect to the Smith commission report. As it stands, it seems far, far too wide. It may simply be the product of—if I may say so with all due respect to those who are responsible—lazy draftsmanship. Of course, it is dead easy to write in words as widely as we find here without giving any thought to how necessary they may be.

For those reasons, I respectfully suggest that this clause is defective in so far as it seeks to relate to consequential provisions, and the parts which are the subject of my amendments should simply be taken out of the Bill. I beg to move.

My Lords, amendments in my name and that of my noble friend Lord Stephen are in this group. Basically, the arguments are very similar to those just advanced by the noble and learned Lord, Lord Hope of Craighead. The powers in Clause 68 are extremely wide. We are coming to the end of the Bill and people will think that these are technical amendments but in fact they are of profound constitutional importance. In its report on the Bill, your Lordships’ Constitution Committee has already drawn the House’s attention to the extent of the powers conferred by Clause 68, and therefore it is important that the Government take these points seriously.

Our Amendment 79AA is very similar to the amendment moved by the noble and learned Lord, Lord Hope, with one difference, which is that we allow the powers to apply in respect of Part 3 because of the report of the Delegated Powers and Regulatory Reform Committee. Paragraphs 24 to 28 of the committee’s 15th report of this Session deal with this clause.

The noble and learned Lord gave a number of reasons why he thought that this provision was exceptional but I think that he may have missed one out. He said that there was no limit to when these powers could be used but in fact there is no time limit on the legislation that it can apply to. Subsection (2) says:

“Regulations under this section may amend, repeal, revoke or otherwise modify any of the following (whenever passed or made)”.

I emphasise the last four words, which mean that future legislation could be affected by these powers. The Delegated Powers and Regulatory Reform Committee said in paragraph 25 of its report that the memorandum from the Government,

“acknowledges that the power to amend or repeal future enactments is exceptional. Reasons are given as to why this is needed in connection with Part 3 of the Bill which deals with welfare benefits: the commencement of Part 3 is expected to take place over a period of time and, because of the complexity of the area, it may be necessary to make changes to legislation enacted between the date on which the Bill is passed and the date on which the functions to which Part 3 applies are transferred to Scottish Ministers. We consider this provides a reasonable explanation for needing the power to amend future enactments in relation to Part 3 of the Bill”.

But the report goes on to say that that,

“does not justify the extension of this power to the other Parts of the Bill. It may be that similar considerations apply, but because nothing is said about this in the memorandum it is impossible to know”.

In other words, the Government are not only trying to take these powers but they have given the appropriate committee of your Lordships’ House that is scrutinising the Bill no reason whatsoever for such wide powers, including the exceptional power to amend or repeal future enactments. They did provide an explanation in respect of Part 3, which the committee found to be a reasonable one, and that is why we have not sought to remove it. Amendment 79AB is consequential.

As was also picked up on by the noble and learned Lord, Lord Hope, Amendment 79BA refers to the provision that talks about,

“any other instrument or document”.

Our amendment would remove those words from subsection (2), as it is thought that it is extremely wide. Again, the 15th report of the Delegated Powers and Regulatory Reform Committee commented on this at paragraph 27, noting its exceptionally wide effect without any compelling reason—that no justification has been given for a power to revoke any instrument or document, whenever made. Therefore, we believe that it should be removed from the Bill.

The other point is one touched on by the noble and learned Lord, Lord Hope. We deal with it in Amendment 79EA, which would remove references to Acts of the National Assembly for Wales and Northern Ireland legislation from this regulation-making power. Again, no substantive reason has been provided for extending the Secretary of State’s regulation-making power under Clause 68 to legislation made by either the National Assembly for Wales or the Northern Ireland Assembly. It seems very wide and raises the interesting question of whether legislative consent Motions were required in the Northern Ireland Assembly or the National Assembly for Wales before including these provisions in the Bill or whether, indeed, if these powers are ever wished to be used, doing so would require legislative consent Motions. Perhaps the Minister can enlighten us when he comes to reply.

Before the noble and learned Lord sits down, may I ask him a question on that point that I meant to ask my noble and learned friend Lord Hope? The particular measure in subsection (7) refers to, as the noble Lord said, Wales and Northern Ireland legislation. Is that within the Long Title of the Bill? The Long Title is:

“To amend the Scotland Act 1998 and make provision about the functions of the Scottish Ministers”,

not the Secretary of State, “and for connected purposes”. I am not very good at reading Long Titles, but when I read this I cannot see how the subsection objected to fits within it.

The noble and learned Lord makes a very important and perceptive point, and I am glad it is not me who has to reply to it from the Dispatch Box. I certainly see his point that it is a very stark, simple Long Title. To actually extend the ambit of the Bill to Measures or Acts of the National Assembly for Wales or legislation of the Northern Ireland Assembly does seem a bit of a stretch. No doubt the Minister can enlighten us when he comes to reply.

The important point is that we do take seriously the report from the Delegated Powers and Regulatory Reform Committee. At the heart of it, these are extremely wide powers and, in some respects, exceptional powers. With the one exception relating to Part 3, no explanation or justification has been provided by the Government for taking these wide powers.

Could the noble and learned Lord, with his considerable experience, give me some legal advice? I wonder whether, if a clause like this had been included in the previous Scotland Bill, it would have been necessary to have this Bill at all.

That is a good point. As the noble Lord was making it I was wondering whether the phrase,

“any other instrument or document”,

could apply to the fiscal framework—but perhaps that is stretching things a bit too far. Actually, “any document” could include the fiscal framework, so perhaps the Minister can tell us more.

The serious point—not that I am saying that the points made by the noble and learned Lord, Lord McCluskey, and the noble Lord, Lord Forsyth, are not serious—is that these are quite important constitutional issues. I hope that in replying to the debate the Minister will indicate that the Government are willing to look at this again, because these powers go far beyond what is reasonable.

I support the amendment tabled by the noble and learned Lord, Lord Hope of Craighead. I said near the start of the debate that I felt that, of all the stuff we have had in Committee over the past few days, this clause was the one thing that was inconsistent with the Smith commission agreement. I shall explain a bit more of my thinking behind that.

I have my dog-eared copy of the Smith commission report here, and in the foreword there is a paragraph headed “A more autonomous Parliament”, which starts:

“The Scottish Parliament will be made permanent … and given powers over how it is elected and run”.

In paragraph 26, entitled “Powers over the operation of the Scottish Parliament and the Scottish Administration”, we read that:

“UK legislation will give the Scottish Parliament powers to make decisions about all matters relating to the arrangements and operations of the Scottish Parliament and Scottish Government, including”,

and then follows a list of the things that are included.

It seems to me that those words—and I am sure that we could trawl through the Smith commission report and find others—at least raise a reasonable doubt about whether the provisions are consistent with the Smith agreement. I would certainly feel, on balance, that they were not. There are few fans of Henry VIII clauses in this House, and I can see no reason why these powers are needed, or indeed—because of my point about the Smith commission—why they should be there.

My Lords, when I first saw Clause 68 I was outraged, and my instinct was to take it out entirely. Then I saw the rather more finessed approach of the noble and learned Lord, Lord Hope, so I quickly added my name to his amendments. I very much support those amendments, and the approach taken by the noble and learned Lord, Lord Wallace of Tankerness.

I was outraged when I saw the clause because—together with the fact that the Government propose to take this Bill, as it has already been taken, through the House of Commons, and then through the House of Lords, without the fiscal framework being in place—it gives the impression of a Government who see Parliament as a rather irritating thing that has to be got through, rather than as the process by which legislation is carefully considered.

It is 20 years since I was in government, but in my day this would never have got past the parliamentary draftsmen. Even if it had, it would have been knocked on the head by L Committee. It is very worrying that a Bill can get to this stage, having gone through the House of Commons, with such completely open provisions. I was not making the point in jest: I genuinely think that with these powers it would have been possible to put the entire contents of the Bill into statutory instruments. That would have been jolly convenient for the Government—would it not?—because they would have been able to say, “We’re simply implementing the Smith commission report. There’s a convention that your Lordships don’t amend or vote against regulations”, and that would have been that. It would have been a very retrograde step indeed—so I hope that my noble friend will simply take the clause out entirely, as he did with a previous clause this evening. If not that, I certainly accept the amendments tabled by the noble and learned Lord, Lord Hope, and possibly make a concession because of the points made to the Delegated Powers Committee.

I will certainly not press removing the clause altogether at a later stage, but the Government need to respond to this and recognise the very considerable feeling in the House, which was illustrated by the debate that we had on the Strathclyde commission proposals. I thought that the Government said that they were going to mend their ways. Certainly, the Strathclyde commission report was balanced in that it suggested that that needed to be done. This would be a great opportunity for the Government to show good will towards the Strathclyde recommendations. Then they might be able to persuade some of us who have doubts about them that it would be sensible to reach a compromise.

My Lords, I want to reinforce points that have already been made. It is important to stress that we should not let the late hour mask the importance of the amendments before us. As the noble and learned Lord, Lord Wallace of Tankerness, stressed, this clause has important constitutional significance. It raises fundamental issues and I concur with everything that was said by the noble and learned Lord, Lord Hope of Craighead, and reinforced by the noble and learned Lord, Lord Wallace of Tankerness. He referred to the report by the Constitution Committee on the Scotland Bill and I reiterate the comments made by that committee, on which I served, in respect of this clause.

In its report, the committee drew attention to the clause, saying:

“As has become a trend over the years, the Government has put forward a Henry VIII clause which gives it powers well beyond those which are necessary to achieve this end”—

that is, the end of the Bill. It goes on to say that,

“we once again must express our concern at a Government proposal that would provide Ministers with too much power at the expense of Parliament”.

Here we have a Bill that is giving the Government greater powers than is the norm in these types of clauses, as has already been stressed, without any justification for so doing.

It is amazing that we have got to this stage without the Government providing a clear justification for what is before us. We must take our role seriously in terms of acting as a constitutional safeguard to make sure that the Government do not use these measures to take powers that have not been justified by them and which would put us in a difficult situation in any future measures. The Government must take this very seriously and I hope that the Minister will give some commitment that between now and Report changes will be introduced by the Government themselves.

My Lords, I join in the debate and fully endorse all of the speeches made, particularly by the noble and learned Lords, Lord Hope of Craighead and Lord Wallace of Tankerness. As most of my comments have already been made as quotes from the Delegated Powers Committee, I will concentrate on one aspect of this, although I also completely endorse the comments of the noble Lord, Lord Forsyth of Drumlean. It gives me such pleasure to do so.

The comments about scrutiny were made far more eloquently than I could make, so I will just endorse those comments of the noble Lord, Lord Norton of Louth. I want to concentrate particularly on the provision-making policy because it affects a significant amount of social security legislation, which can be of an extremely complicated nature.

In a letter, the Minister said:

“Although extensive checks have been carried out as to the effect of the provisions of this Bill and the interaction with social security legislation, it is possible that, in implementing the provisions of the Bill, consequential amendments are found to be necessary to fulfil Parliamentary intention”.

As the noble Lord, Lord Norton of Louth, mentioned, there is an important constitutional role for the House, even at this time of night.

The memorandum concerning the delegated powers in the Bill states:

“Furthermore, Social security has, until now, broadly remained reserved across Great Britain and delivered on a GB-wide basis by the UK Government. In operating a system where responsibility for the different social security benefits paid in Scotland is split between the UK and Scottish Parliament there may be some areas where the respective Governments may wish to make mutually beneficial agreements relating to delivery which may require consequential amendments to existing legislation—for example to facilitate fraud investigations, debt recovery and compliance issues arising out of overpayments in respect of both reserved and devolved benefits”.

I conclude by joining the comments made by many Members of your Lordships’ House who have spoken tonight. There has got to be a reason—is it laziness, bad draftsmanship or is there a purpose behind it? Were they thought out, were they put down specifically? I join other noble Lords in asking why it was felt these powers were necessary.

First, I thank noble and learned Lords for their contribution to the debate about Clause 68. These provisions have been well scrutinised by the Delegated Powers and Regulatory Reform Committee and I am grateful for the Committee’s examination and subsequent report. Of course, Bills of this nature do require necessary powers to ensure that the powers that are transferring to the Scottish Parliament transfer effectively. That is one point that the committee recognised in its report; it is therefore to retain those aspects of Clause 68. However, having considered the report, the Government accept that the ability to amend future enactments and prerogative instruments, and any other future instruments or documents, and Welsh and Northern Ireland legislation whether made in the future or the past, is unlikely to be required for Parts 1, 4, 5 and 6 of the Scotland Bill. Therefore, we intend to bring forward an appropriate amendment on Report, amending the provisions.

More broadly, powers to make consequential provision are commonly found in primary legislation. Section 105, read with Section 113 of the Scotland Act, provides similar powers. The Bill contains consequential amendments identified as necessary during the course of its preparation. However, given the nature of the Scotland Bill and the significant devolution of legislative and Executive powers, it is difficult to anticipate the full extent of the consequential amendments required once the Bill has been commenced. Further, the nature of the Bill means that it effects both Westminster and Scottish Parliament legislation and it is possible that officials in either Administration may in future identify additional necessary amendments to either primary or secondary legislation.

I turn specifically to the use of the consequential power in relation to welfare provisions:

“In operating a system where responsibility for the different social security benefits paid in Scotland is split between the UK and Scottish Parliament there may be some areas where the respective Governments may wish to make mutually beneficial agreements relating to delivery which may require consequential amendments to existing legislation—for example to facilitate fraud investigations, debt recovery and compliance issues arising out of overpayments in respect of both reserved and devolved benefits”.

How feasible it is to make such arrangements will depend,

“to some degree on the provision that the Scottish Parliament puts in place and any agreements would need to be considered and agreed between both the UK and Scottish Governments”.

Therefore, it is necessary to have appropriate consequential provision in the Bill. However, as I said, the Government intend to bring forward an appropriate amendment on the basis that I have set out.

Next I would like to address the concern of the noble and learned Lord, Lord Wallace, related to,

“any other instrument or document”,

which I think has been proposed by the Law Society. The Government intend to retain the power to amend current instruments or documents. Let me offer the rationale for that. Section 117 of the Scotland Act 1998 provides that, so far as may be necessary for the purpose of or in consequence of an exercise of a function by a Member of the Scottish Government in devolved competence, any pre-commencement enactment or prerogative instrument and any other instrument or document shall be read as if references to a Minister of the Crown were or included references to Scottish Ministers. The effect of the gloss by Clause 30 of the Bill of references to pre-commencement enactment in the Scotland Act 1998 is that instruments or documents such as the contracts entered into by the UK Government for the provision of welfare that refer to a Minister of the Crown will be glossed appropriately to refer to Scottish Ministers.

However, other amendments or transitional arrangements may be required to ensure the efficient and effective transfer of contracts. For example, the gloss converts references only to a Minister of the Crown to Scottish Ministers. There may be other references that need to be amended. Accordingly, a power to amend, repeal, revoke or modify any other instruments or documents whenever passed or made is required for Part 3. We accept that the power to amend any other future instruments or documents is unlikely to be required, as I have said, in relation to Parts 1, 4, 5 and 6, and we will be bringing forward an amendment to address this issue. We are retaining the power to amend existing instruments and documents on the basis that that is likely to be required, given the scale of the powers being devolved to the Scottish Parliament and Scottish Ministers.

Amendment 79D, tabled by the noble and learned Lord, Lord Hope, requires that all regulations passed under Clause 68 should be subject to the affirmative procedure, reflecting the suggestion of the Delegated Powers Committee that non-textual modifications of an Act should require the same level of parliamentary scrutiny as textual amendments, that being the affirmative procedure. The Government accept the general principle that changes made to primary legislation by secondary legislation should be subject to the affirmative procedure. Wherever possible in the approach to drafting legislation, changes to primary legislation are made by textual amendment.

I have noted the suggestion made by both the committee and the noble and learned Lord. However, we continue to believe that non-textual and minor or technical changes should be possible under the negative resolution procedure. It would be inappropriate to set out on the face of the Bill specific kinds of modification of primary legislation that should require the negative procedure. Doing so would create legal uncertainty, especially in those outlying and indirect cases where it is not always clear when a provision non-textually modifies primary legislation. As well as this undesirable level of legal uncertainty, the Government think that many of the cases which fall into this category are unlikely to warrant the use of the affirmative procedure due to their indirect and remote nature. Furthermore, given the range of legislation under the provisions in this Bill, the Government consider that the approach taken is appropriate, particularly as they enable the use of the affirmative procedure should there be a need to do so. The Government acknowledge that this allows discretion on the part of the Minister, but we have also indicated to the committee that on those rare occasions, and unless otherwise provided for, changes to primary legislation by secondary legislation are normally subject to the affirmative procedure. I hope that this offers noble Lords reassurance on the points raised in the debate and I urge the noble and learned Lord to withdraw his amendment.

It is welcome to hear the Government’s view as regards potential amendments on Report. However, in light of the Minister’s remarks, how does Clause 68 sit with Clause 2 when it comes to areas where the Government may have the power to amend Acts of the Scottish Parliament and devolved legislation? Would a legislative consent Motion mechanism be required for that, and equally for the National Assembly for Wales?

I am happy to take the noble Lord’s point away and reflect on it, and I shall either write to him or discuss it.

Can I take my noble friend back to the debate we had earlier when the noble Lord, Lord Turnbull, argued that it was important to have in the Bill specific provisions relating to borrowing powers? I think that my noble friend indicated that more primary legislation would be required; he used the phrase “primary legislation”. Can we take it that these powers would not be used, for example, to put in place a borrowing regime for the Scottish Parliament, taking into account what he has just said now with what he said earlier this evening?

I absolutely stand by what I said earlier. There may be some aspects of borrowing that could be done through secondary legislation, and that will be made clear when we agree and publish the fiscal framework.

Before the Minister sits down yet again, I am not quite sure from his explanation that he has fully taken on board the points made by the noble Earl, Lord Kinnoull, and me about the nature of this legislation—in other words, that the purpose of the legislation is to give effect to the Smith commission report. What concerns us is the opportunity that the provisions as framed—and, indeed, as forecast by the Minister—would give for straying outside the scope of the commission. I do not know whether the Minister’s brief has really addressed that point. If not, perhaps he will be kind enough to say that he will give further thought to it. It is an important matter because we really need to keep faith with the Government’s undertaking when they introduce legislation as to what it is all about.

I will certainly give further thought to what the noble and learned Lord has said and come back to him on it.

My Lords, I am extremely grateful to all noble and noble and learned Lords who have spoken in this debate and, in particular, to the noble and learned Lord, Lord Wallace, who has drawn attention to the report of the Delegated Powers Committee, and to the noble Lord, Lord Norton, for his contribution, given his background on the Constitution Committee. This matter’s constitutional nature is evident from what has been said in the course of the debate. Of course, I am glad that some of the points I have been making have been observed already by those who are providing information to the Minister, but here is a case where—if I may say so with great respect—the Minister has the authority of the House to go back to the draftsmen on the Bill team and say that this has been taken too far and it is time to put an end to the wide use of these clauses.

The Minister has gone some way along that course already, for which I am very grateful, but I urge him to read very carefully the points made by everybody in this debate and reflect carefully with the Bill team on whether the extent of the trimming down he has forecast goes far enough. I appreciate that time is very short, with Report stage on Wednesday. I am prepared, in light of what the Minister has said, to withdraw my amendment for the time being, but I give notice that I have to put down some kind of amendment to keep the point open, because I do not know exactly what he will come up with. So we will return to this issue, because of its importance. Having said that, I am content for the time being to withdraw my amendment.

Amendment 79A withdrawn.

Amendments 79AA to 79EA not moved.

Clause 68 agreed.

Amendment 79F

Moved by

79F: After Clause 68, insert the following new Clause—

“The fiscal framework

(1) Within 30 days of the date on which this Act is passed, the Secretary of State must publish in full the new fiscal framework agreed between the Scottish and UK Governments, unless it has already been published by the Secretary of State.

(2) Within 30 days of the date on which this Act is passed, the Secretary of State shall publish as an appendix to the new fiscal framework as published a full description of any agreement whatsoever reached between the said Governments relating to the future of the Barnett Formula or its application, amendment or replacement in the future, including any agreement as to when any such change is intended to be considered by the two Governments in the future.

(3) In this section, “the new fiscal framework” means the agreement between the said Governments as to the arrangements and institutions intended to underpin the tax and spending powers included and devolved under this Act and under the Scotland Acts of 1998 and 2012, including the funding of the Scottish budget, planning, management and scrutiny of public revenues and spending, the manner in which the block grant is or may be adjusted to accommodate further devolution, and the operation of borrowing powers and cash reserve, fiscal rules, and independent institutions.”

I am not sure whether I moved Amendment 79F originally, but if I did, I would want to withdraw it. The same applies to Amendments 79G, 81A and 82A. What I want to do is return to these matters on Report. For the benefit of my noble and learned friend Lord Hope of Craighead and others, it is possible to make those amendments known tonight. Officials are meeting at the end of this debate to discuss what is to go into the list of amendments for Report and I have put mine in by dint of simply asking them to repeat certain numbered ones which appeared in the Marshalled List. They accept that that is a method they can use to proceed.

The other point is a matter for the Committee. It appears quite silly in a way for the Committee to group Amendments 75 to 82, and then not allow those to be dealt with when the discussion on all these amendments is completed. We ought at that stage to be able to say, “I am not going to move Amendment 82A”, or whatever it may be, instead of which we have to go through the sequence. Therefore, I have been sitting here for approximately two and a half hours, waiting to stand up and say, “Not moved”. I am happy to say it now.

On the important point made by the noble and learned Lord, Lord McCluskey, about having to table amendments again to maintain the sequence, and, indeed, in relation to the point made by the noble and learned Lord, Lord Hope of Craighead, on the last group of amendments, perhaps the Minister will take this opportunity to clarify whether, when we come to Report, the order of consideration will be as in Committee; in other words, that Parts 2 and 3 will be taken at the end—I think next Monday is the day currently set down for that—and the other parts will be debated on Wednesday.

I am sorry to intervene on the same point but we have today debated Part 7, in which Clause 68 appears. I am not quite sure in which order it will appear on Report. That affects what we do in terms of tabling further amendments. Will it be in the first stage of Report or the second?

This obviously has to be discussed through the usual channels but my understanding is that we will consider the Bill on Report in the same order that we have considered it in Committee.

Amendment 79F withdrawn.

Amendment 79G not moved.

Clause 69: Commencement

Amendment 79H not moved.

Amendment 80

Moved by

80: Clause 69, page 75, line 17, leave out subsections (1) and (2) and insert—

“(1) Sections 13 to 68 of this Act shall not come into force until such time as the relevant Secretary of State has laid before Parliament a statement to the effect that the Secretary of State is satisfied that the Scottish Government and any Scottish authorities to which power is devolved under this Act have the appropriate arrangements in place with which to exercise the relevant powers devolved under this Act.

(1A) Each section or subsection to which subsection (1) applies may be the subject of a statement under subsection (1), which once laid before Parliament would cause that section or subsection to come into force.

(1B) The provisions in subsections (3) to (7) are subject to the provision in subsection (1).

(2) Sections 1, 69 and 70 come into force on the day on which this Act is passed.”

My Lords, in moving Amendment 80, I wish to speak also to Amendment 81.

Amendment 80 is intended to do something very simple. The language is illustrative only. The concept is that a power to be transferred under the Bill would be so transferred only once the Secretary of State was satisfied that arrangements were in place for the transferred power to be successfully and smoothly operated in Scotland; and that, by implication, matters in the rest of the UK would continue at least as successfully and smoothly as before that transfer. This is fully consistent with the Smith commission agreement and would, of course, remove all temptation to go for a rushed and bodged job—a temptation that has so often been succumbed to in the process that has led us here today. It is quite simply a small source of comfort and protection for the ordinary citizens of Scotland and the rest of the UK who would be the innocent victims of such a rushed and bodged job. It is worth noting that I was anticipating that a similar discipline would be observed in Holyrood.

As I said in an earlier debate in Committee, the origin of this thinking came from a conversation that I had with an SNP MP, who said that he had anticipated teething troubles where the British Transport Police were concerned. Here, I assume that “teething troubles” means young women being thumped, drug smuggling having an easier ride and terrorists getting through. I dare say that the Minister will suggest that the amendment is not needed because responsible Ministers would act in such a manner anyway. However, I put it to the Committee that in the politically charged atmosphere that is the genesis and continuing history of this Bill, we have seen time and again actions taking place that would not occur under the simple discipline proposed in Amendment 80, and when taking into account the ordinary citizen’s point of view rather than the political one.

I further add that, as we move into a more devolved United Kingdom, with further devolution deals affecting other parts of the UK, this would be a help as a general principle. It would ensure that the risk of teething troubles is greatly reduced. It would mean that devolution is considered from the point of view of the ordinary citizen, not the politician.

Amendment 81 was debated at an earlier stage, and I know that the Crown Estate will come up again on Report, but would the Minister care to comment on whether the SNP has had put to it the various Crown Estate ideas which have been debated in this House? If so, what did it have to say about them? I beg to move.

My Lords, in supporting this amendment, I stress three aspects: its timeliness without leading to procrastination; between the two Parliaments and Governments its inference of co-operation; and within the United Kingdom, both in Scotland and elsewhere, its enhancement of good practice. It is clearly desirable to avoid teething troubles following powers which may have been transferred too quickly. In particular, it is indeed so concerning the British Transport Police, instanced just now by the noble Earl, Lord Kinnoull. Yet a timely transfer means just that, and if for good reason it is judged to take place at a certain moment rather than at another, then that transfer of powers has become neither prevaricated nor procrastinated. This is not least the case since the decision on when to transfer will have been made by Scottish Ministers and the Secretary of State together in a spirit of co-operation, thus jointly enhancing good practice by adopting a necessary method which benefits both Scotland and the rest of the United Kingdom.

My Lords, I speak to Amendment 82, in my name and that of my noble friend Lord McAvoy, which allows some time for consultation about the implementation of Clause 50. That clause was a late addition to the Bill, which means there has not been the normal consultation with women’s groups, medics, lawyers, the health service or, indeed, ethicists and constitutional experts. Above all, there has been no discussion about the implication for the funding for abortion for women should they move between Scotland and England or Wales, should any differences emerge in the future between the laws on abortion either side of the border. We should consider the lessons of Northern Ireland before implementing this new provision.

Although the Smith commission reported that the parties favoured the devolution of abortion, regarding it as an anomalous health reservation, it recommended only that further serious consideration should be given to its devolution and a process established immediately to consider the matter further. However, that process has not happened and our amendment seeks to give the matter proper consideration before the clause is implemented. Indeed, because the Smith commission did not call for immediate devolution, the Government initially thought that an early change would pre-empt such discussions and there was, therefore, no reference to abortion in the original Bill. An amendment was tabled, but not voted on, in Committee in the Commons, by which stage women’s groups and the Scottish TUC began expressing their concerns, particularly that this could have a discriminatory impact on women in Scotland, just as in Northern Ireland.

The inclusion of the provision was announced by the Government on 14 October, with the amendment tabled on Report in the other place and with none of the debate that took place during the original devolution Bill. Looking back to 1998, there was quite a strong view that abortion, duly protected and regulated by law, was a human rights issue and not simply a medical or, indeed, a criminal matter. There were many voices of the view that a woman’s right to choose should be universal, not delimited by boundaries and borders.

It is this risk of cross-border differences, leading to women having to travel for an abortion, that concerns many, partly because it might undermine the notion of a UK citizenship, but also for the more prosaic but serious issue that there is a fairness dimension. Moving country for a termination is an option more open to the wealthy and well connected than to those without access to money, transport or friends in distant parts. We know the difficulties and trauma that such journeys involve for many Irish women. Indeed, because of the variation in law, some 5,000 Northern Irish women and 20,000 from the Republic of Ireland travelled to Great Britain for an abortion between 2010 and 2014. That is 12 Irish women crossing the Irish Sea every day.

This reflects the fact that when women are desperate for an abortion, whether as the result of rape, because of foetal abnormalities, because of incest or because the woman cannot handle a child due to her psychological state or her age—there are girls as young as 14 coming here for abortions—she will do whatever is needed. No border will prevent that. What is more, though a child in Northern Ireland can come over to be treated at Great Ormond Street on the NHS, her mother, needing an abortion, cannot get it on the NHS but has to go privately and pay, in addition to air fares. It is for these reasons that we need to consider how different rules in England and Scotland would be handled, should teenage girls have to make cross-border journeys to have the procedure, for example. For nearly 50 years, there have been the same rights across Great Britain, but this clause could alter that.

It is not that we anticipate any change in the Scottish law. Indeed, the First Minister said that her Government had no intention of changing the current law, but she cannot, of course, bind her successors. Given the demand for abortion to be devolved, there is surely the possibility of a change being made. It is better to think through the implications now rather than after any such decisions. Indeed we read suggestions that the new power will indeed be used to change Scottish law, with CARE for Scotland, a charity, saying that there should be a debate among MSPs about whether Scotland has the right laws. Lynn Murray of the Edinburgh branch of SPUC has said that devolving abortion would get people thinking about it and that it is time that we looked at it again, while the Scottish Secretary for Social Justice, Communities and Pensioners’ Rights, Alex Neil, has said that he personally favours reducing the 24-week limit.

That is of course a matter for the Scottish people, so we shall not resist or seek to remove Clause 50. However, we need time to consult on and possibly prepare for any impact that such a change could bring and how to respond, particularly as to whether women living in Scotland—be they English women, Welsh women or Scottish women—would be able to have an NHS-funded abortion, say in Newcastle or elsewhere, should they then fulfil our criteria for termination but not new criteria in Scotland. Whatever differences might emerge, some women will want or be forced to travel from England to Scotland or from Scotland to England to exercise their rights under one or other of the two laws. Amendment 82 allows for a 12-month consultation with relevant groups and representatives in Scotland and in the health service to ensure that the process is correct and to follow the wise advice of the Smith commission.

I turn to Amendments 80 and 81 in the names of the noble Earls, Lord Kinnoull and Lord Dundee. Amendment 80 provides that Clauses 13 to 68 would not come into force until the relevant Secretaries of State were satisfied that the Scottish Government had appropriate arrangements in place to exercise the relevant powers. That would mean that discretion remained with the UK Parliament on matters that will be devolved issues, undermining one of the most important principles of the devolution settlement. Your Lordships will not, therefore, be surprised that we oppose this amendment.

In a similar vein, Amendment 81 would delay the devolution of the Scottish Crown Estates until the Secretary of State had laid a report before Parliament regarding the Scottish Crown Estates commissioners and the arrangements to facilitate the transfer of assets. We do not consider it appropriate to delay the commencement of this clause. Furthermore, we understand that talks are taking place between officials on the transfers of assets and that those are still ongoing. It would perhaps be helpful if the Minister could indicate whether the issues included in the amendment are part of such discussions. We understand that the date for the transfer has yet to be decided or even much discussed. I do not know whether the Minister has any further update on this since the letter that he wrote to my noble friend Lord McAvoy on 12 February. We look forward to his comments on that.

My Lords, I add a word in support of the amendment in the name of the noble Baroness, Lady Hayter. It is remarkable that the provision in Clause 50 was not in the Scotland Bill of 1998. I am old enough to remember the debates that took place on that Bill and, as I recall, the provision was not part of the Bill for a very deliberate reason: it was regarded at that stage as undesirable that there should be any question of a difference in law between the laws of Scotland and those of England and Wales in relation to abortion. Things have moved on since then and the noble Baroness has made it clear that she is not opposing Clause 50. However, with great respect, the point that she makes is important given the way in which the clause has been introduced into the Bill at a late stage and the difficult and sensitive matters to which she drew attention in her speech. As I say, this was thought about carefully in the late 1990s when the original Scotland Bill was being considered and my recollection is that there was a deliberate decision to keep it out, for fear that it might give rise to undesirable consequences. That risk, which I think the noble Baroness was mentioning, makes her amendment one deserving of careful consideration.

My Lords, it certainly had not been my intention to take part but I do so given the comments of the noble Baroness, Lady Hayter, and the contribution of the noble and learned Lord, Lord Hope, because I took part in the debates in the other place on the 1998 legislation. Indeed, I tabled an amendment to devolve abortion—the argument being that abortion law is a matter of health and the criminal law, both of which are themselves devolved. It therefore seemed anomalous that abortion should not be. The noble and learned Lord may correct me if I am wrong but I think that prior to 1967, the criminal law in relation to abortion was different in Scotland from what it was in England. So there have been many years, probably decades, in which there were differences on different sides of the border.

Having spoken for the devolution of abortion in debates in the other place in 1998, I recall that when the then Secretary of State spoke, there was a conscious decision that the Government’s position was that abortion should not be devolved. So the late Donald Dewar spoke very coherently, as your Lordships would expect, putting the case for a continued reservation of abortion. However, when we came out of the Chamber later he said to me, “I’m glad you did not read my speech during the debates on the 1978 legislation”. So before Committee on this Bill, I went back and looked at Donald Dewar’s speech when he advocated the devolution of abortion during the passage of the 1978 legislation. It made a compelling case for its devolution.

I thank the noble Baroness, Lady Hayter, and the noble Earl, Lord Kinnoull, for the amendments that they have tabled. I hope that the Committee will indulge me if, given this late hour, I am relatively brief in responding to them.

As has already been explained, Amendment 80 would require the Secretary of State to lay a statement before Parliament stating that the Scottish Government and Scottish authorities have made appropriate arrangements in relation to the exercise of the powers which have been devolved to them before parts of the Bill are commenced. The Government regard this amendment as against the spirit of how devolution operates. Moreover, this is an enabling Bill: constitutional legislation which transfers legislative competence to the Scottish Parliament and executive competence to the Scottish Ministers. There will be no change in law until such time as the Scottish Parliament and Scottish Ministers use the powers devolved to them. It will therefore be for them to decide whether they have made appropriate arrangements before doing so. I have discussed this point with the noble Earl—namely, how we ensure an effective transition. It requires the co-operation of the two Governments to discuss those issues. A number of mechanisms are in place to support a smooth transfer of powers and joint working. We have already debated how that works in relation to welfare and I expect similar joint working with regard to the Crown Estate.

Although I fully understand why the noble Earl has tabled Amendment 81, if we intend for devolution to be meaningful we must not tie the hands of the Scottish Government. We cannot on the one hand devolve the management of the Estate and, on the other, dictate the way it is managed. It is right that the Scottish Government are able to manage the Crown Estate in the best interests of the people of Scotland. However, I agree that the Scottish assets must be managed responsibly and it is the duty of this House and the people of Scotland to call on the Scottish Government to be clear about their plans for the future management of the assets. In that regard I, like many other noble Lords, met with the Scottish islands councils. I believe that the islands councils have met the Scottish Government today. I am not up to date with the responses they got, but it is important that we get answers and that the Scottish Government fulfil the commitments that all the parties who were signatories to the Smith commission entered into, to make sure that those are delivered. My right honourable friend the Secretary of State for Scotland is meeting the Deputy First Minister tomorrow and will press him on exactly that point. I will be happy to report back to the noble Earl what answers he gets.

On Amendment 82, noble Lords will recall that the Smith commission agreement stated that the parties were strongly of the view that abortion policy should be devolved to the Scottish Parliament. The Government’s response to the agreement highlighted that productive conversations were already taking place between officials and Ministers on the scope and shape of future work between the two Governments on whether abortion and other issues should be devolved. On Report in the other place in July, the Secretary of State for Scotland provided a further update on the process and highlighted that, in his view, there is no reason why the Scottish Parliament should not be able to decide an issue of this significance, given that it has demonstrated its ability to do so on numerous other significant occasions.

I understand that the topic of abortion policy is one that many people feel strongly about. The amendment tabled seeks to delay devolution of the power to legislate in relation to abortion until 12 months from the date of the Act being passed. Under Clause 69 of the Bill, the abortion clause would come into force two months from the date of the Act being passed. We have reflected very carefully on the concerns that have been raised about this. However, in the Government’s view there is no convincing reason why abortion policy should not be devolved nor why commencement should be delayed for 10 months. At the point of devolution the policy will not change: the current legislation will remain in force until such time as the Scottish Parliament decides to legislate. The Scottish Government have clearly stated that they have no plans to change the law on abortion. The First Minister has made very clear statements in that regard. They recognise the case for gestational limits to remain aligned with England and Wales. The Secretary of State for Scotland has already spoken and written to women’s organisations. Engagement will continue with interested parties as the matter is taken forward and I understand that Scottish Ministers have recently met representatives of a number of stakeholder organisations. Therefore I respectfully ask noble Lords to withdraw their amendment.

Before the Minister sits down, the noble and learned Lord, Lord Hope, who I thank for his intervention, made clear that we were not at all questioning the Scottish Parliament’s ability to take this decision. I very much trust Scottish women to get their views heard strongly, although, as the Minister says, it has been officers, officials and Ministers having those debates so far, not the people who are mostly involved, who are of course women.

The question that I asked is one that we all need answers to, regarding funding: should there be a difference in whether the NHS funding will cover women who travel between the two jurisdictions when those jurisdictions have different laws on this? I do not expect the Minister to be able to answer that tonight but, given our experience in Northern Ireland, I think that this is a really big issue. If he cannot answer tonight, I hope that he will write to us before we reach this part of the Bill on Report.

I thank the Minister for what he said. I was rather ungracious earlier on: he spent a lot of time with me on this issue, and has gone a long way to giving lots of assurances about my essential concern, which is the private citizen as opposed to political expediency. I am grateful to him and I note that he has organised a drop-in on the issue of the British Transport Police tomorrow afternoon; I shall be dropping in for sure. That said, and putting down a marker that I feel that the interests of the private citizen as opposed to political expediency is something that this House should have regard to, I beg leave to withdraw the amendment.

Amendment 80 withdrawn.

Amendments 80A to 82A not moved.

Amendment 83 had been withdrawn from the Marshalled List.

Clause 69 agreed.

Clause 70 agreed.

House resumed.

Bill reported with amendments.

House adjourned at 10.37 pm.