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Lords Chamber

Volume 592: debated on Thursday 30 July 1998

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House Of Lords

Thursday, 30th July 1998.

The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Chichester.

The Lord Chancellor: Leave Of Absence

My Lords, before business begins, I take the opportunity to inform the House that I am to attend a departmental strategy conference on 5th October when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

House Of Lords: Working Hours And Conditions

What consideration they have given to improving the working hours and conditions of the House of Lords in line with proposals being put forward for the House of Commons by the Leader of that House.

My Lords, Her Majesty's Government have put forward a number of proposals to the Modernisation Committee of another place. The most recent include: Thursday sittings to be advanced by three hours to end at 7 p.m.; a constituency week to coincide with half-terms in February and October; Standing Committees to sit during the Recess; and consideration to be given to altering the normal sitting day so that it begins at 1.30 p.m. and ends at 9.30 p.m.

Not all of those proposals are relevant to your Lordships' House and they would in any case be matters for the Procedure Committee. As Chief Whip, I would be willing to put appropriate proposals to that committee but, of course, in this as in all other matters, your Lordships' House proceeds by agreement.

My Lords, I think that I thank my noble friend for that Answer. Does he agree that many noble Lords on all sides of your Lordships' House would find morning sittings difficult because, obviously, they like to try to earn the odd shilling, which is perfectly understandable? In those circumstances, would he accept that it might be worth thinking the unthinkable and considering even paying noble Lords who attended morning sittings?

My Lords, I cannot help reflecting on the fate of the last Minister who was required to think the unthinkable! The noble Lord puts forward an interesting idea about morning sittings. Your Lordships occasionally sit in the mornings, principally on Fridays and before the Recess. As we know, the other place does so regularly on Wednesdays. But there is no guarantee that sitting in the morning means rising earlier at night. As all Chief Whips know, business expands to fill the time available. Many of your Lordships find the mornings useful for other work; for instance, in this House serving on important Select Committees, such as that chaired by my noble friend, and away from the House to earn a living.

My Lords, does the noble Lord the Government Chief Whip accept that no working procedure will compensate for either the overload of Parliament or the imbalance of business between the two Houses? Will he also agree that this is the longest Session since 1979–80 and that the average daily sitting has increased by about one hour since that time?

Will the noble Lord the Government Chief Whip and the noble Baroness the Leader of the House make it their summer task to convince their colleagues in the Cabinet that it should give more business to the House of Lords at the beginning of the Session so as to avoid it having to scrutinise important constitutional business in the middle of the night?

My Lords, I am afraid that the noble Lord is wrong about the House sitting longer on average. This Session, the House has sat for an average of six hours and 57 minutes each day. That is in line with the average sitting time under the previous Administration. But as we know, this Government have delivered a heavy programme of legislation and there is still more to come. It is comparable to the 1979–80 Session because it is an 18-month Session of a government which was elected after a period in opposition in the spring of 1979, and in our case in the spring of 1997.

I am sure that the whole House will agree that the sweeping nature of the Government's majority in May last year, combined with a wide-ranging manifesto for reform on which we were elected, has meant that it is inevitable that there will be a number of major items of legislation this Session. I believe that the number of Bills for Royal Assent by the summer break is fewer in this Session than in that of 1979–80. The statistics on the average sitting time of the House indicate that, while it has been a long Session, the Government have, with the co-operation of the noble Lord, managed their programme to ensure that their important priorities are delivered without having to force your Lordships to sit late into the night on too many occasions. I should add that there has been no all-night Sitting in this House this Session—so far.

My Lords, is the noble Lord aware that all Opposition parties in this House, and no doubt in the House of Commons, complain about an overloaded legislative programme, which translated means a programme that they do not support?

As regards the serious point made by the noble Lord, Lord Barnett, would it not be a good idea to have the matter considered at the next meeting of the Procedure Committee? Perhaps the noble Lord might arrange for a memorandum to be placed before that committee, reminding the House of the most valuable report of the late Lord Rippon of Hexham, who made a number of proposals which, unhappily, were not supported by the then government?

My Lords, will the Government kindly bear in mind that one Peer's better working conditions and hours may be another Peer's worse working conditions and hours? Will he give the matter a great deal of thought and advice before altering the status quo?

My Lords, yes, that is a view I have heard on almost every occasion in relation to making a change in this House.

My Lords, does the noble Lord agree that Members of this House do a wonderful job with great expertise without being paid any salary? I would not compare the expertise of Members of another place with what is to be found in your Lordships' House, but they do cost the taxpayer a large amount of money, whereas we cost the taxpayer scarcely anything. If change is not necessary, is it better not to change?

My Lords, the question of the payment of a salary to Peers has been suggested a number of times. We all know that many of your Lordships work long and hard for very little financial reward. I can remember my own time in opposition. But there are considerable practical difficulties with any such proposal in what I think is fair to describe as a predominantly amateur House with a very variable membership. It is true that your Lordships can be rightly proud of the value for money that this House provides for the Government.

My Lords, in an earlier reply my noble friend referred to the fact that a number of noble Lords need to earn a living outside, as he described it. Your Lordships' House reached the stage some years ago at which, in order to get business through the House, there needed to be an increasing number of full-time Peers and not part-timers. On that basis, should we not be looking at a more generous scheme of allowances than the very poor one that we have at present?

My Lords, as I understand it, the question of your Lordships' allowances was considered some time ago and it was decided that it should be looked at again in, I believe, the year 2000 by the Top Salaries Review Body.

My Lords, in view of the heavy strain on Members of this House, should we not introduce a retirement age?

My Lords, that has also been suggested. Perhaps the noble Lord would like me to prepare a paper on that suggestion. However, the problem is as to what age I should put in the paper.

My Lords, whatever is done about working hours and conditions, I ask the noble Lord to ensure that nothing will ever be done to inhibit the freedom of Back-Benchers in this House to initiate debates and ask questions, unlike the position in another place.

My Lords, as the Government Chief Whip, I love the idea of Back-Benchers asking questions and initiating debates and playing the very full part which they do in the work of the House.

President Of Argentina: State Visit

3.16 p.m.

Whether there is any intention on their part to discuss the sovereignty of the Falkland Islands, or relations between the Falkland Islands and Argentina, with President Menem when he visits the United Kingdom in the autumn.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office
(Baroness Symons of Vernham Dean)

My Lords, the visit by President Menem will be an occasion on which to concentrate on the good and substantial relationship we enjoy with Argentina on a range of issues. Our position on the sovereignty of the Falkland Islands is well known and remains unchanged. We do not regard it as negotiable.

My Lords, many of us welcome the impending visit of the president because we strongly favour substantial friendship between Britain and Argentina, including practical arrangements where necessary as regards oil and fishing licences in the South Atlantic. But I welcome the noble Baroness's reply when she made clear that questions of sovereignty over the Falklands are quite a separate matter. As she said, Her Majesty's Government, in line with the policy also of the previous government, do not intend to negotiate or discuss that sovereignty with the Argentine authorities.

My Lords, when we invited President Menem, we made it clear that the visit would not be an opportunity to discuss the sovereignty of the Falkland Islands but should rather focus on the strong bilateral relationship between the two countries. We see eye-to-eye with Argentina on a wide spectrum of international issues, as the noble Lord, Lord Hurd, indicated. We worked together in the United Nations on peacekeeping operations and we have been working together to co-ordinate the international response to nuclear testing in India and Pakistan, among many other issues.

My Lords, does the noble Baroness believe that we can retain our capability with a reduced presence without undermining sovereignty issues?

My Lords, we reduced the military presence in the Falklands with the construction of the airport at Mount Pleasant in 1986. But the islands are currently defended by a garrison comprising air, sea and land assets. We believe that those are maintained at the minimum size required to guarantee their security.

My Lords, in connection with bilateral relations, is the noble Baroness aware that this is the first visit by an Argentine president since 1961 and therefore some may consider it long overdue? Secondly, does she agree that since the restoration of commercial relations in 1989, our trade has increased quite spectacularly from a position of zero to something which is growing very quickly indeed in both directions.

My Lords, I realise that it is the first visit since the time that the noble Viscount has indicated. Everything that he says about the importance of the commercial and trading relationship is true. Argentina is now our second largest market in Latin America ahead of Mexico and Chile. In 1997, Argentina was one of our fastest growing markets anywhere in the world. In that year, it imported 0.5 billion worth of British goods into the country. Moreover, it is a key member of Mercosur, and in our role in the EU, we have been prominent in promoting a greater interchange between the EU and Mercosur.

My Lords, obviously my noble friend the Minister is well aware that the Argentinian Government have been saying to their own people that they expect to be able to settle all their difficulties with this country about the Falklands during the forthcoming visit. Therefore, how do the Government regard this statement, when laid alongside the statement that my noble friend has just made as regards our willingness to discuss sovereignty?

My Lords, there is a world of difference between President Menem restating Argentina's position on the Falklands and our entering into any sort of negotiations. President Menem has a right to restate his position on the Falklands, but we do not intend that there will be any discussion of the issues. We remain firmly committed to the islanders' right of self-determination. They continue to tell us unequivocally that they wish to remain British, and the Argentinians are well aware of our position.

My Lords, I welcome the reply that the Minister gave a few moments ago. However, in response to President Menem's suggestions on shared sovereignty, could the noble Baroness elaborate a little further as to exactly how the Government will seek to reconcile the wishes of the Falkland Islanders with the promotion of a constructive relationship with Argentina as an important trading partner of the United Kingdom?

My Lords, there are many things to discuss other than the sovereignty issue which, as I said, is not up for discussion. Indeed, I believe that I have been as clear on this as I can. We fully expect President Menem—no doubt for his own domestic reasons, given the Argentinian position on the matter—to state his position in relation to the Falklands. However, that does not mean to say that there will be any negotiations on that issue. Of course, there are many other issues that we shall be discussing. For example, we discussed a few moments ago the importance of trade. Moreover, the noble Lord, Lord Hurd, talked about oil and we shall discuss fisheries. There are a number of important issues in the area and a number of very important international issues, which I detailed in my supplementary answer to the noble Lord, Lord Hurd. That will make a very substantial agenda during the visit of President Menem.

My Lords, can the Minister say whether anything will be discussed about the removal of landmines which now litter the Falkland Islands, and whether Argentina will be able to contribute towards solving that particular problem?

My Lords, the Ottawa Convention, as now enacted, requires us to de-mine all areas under our jurisdiction, and that includes the Falkland Islands, within 10 years of the legislation entering into force, unless we can show good reason why we should not do so. Such reasons might include humanitarian, environmental, financial and technical considerations. There are problems with de-mining the Falklands. There are many mines on the island and, bearing in mind the terrain, the enormous number of mines and the problems with the peat, in which many of the mines are embedded, there will need to be technological solutions. We propose to carry out a British-led study into the feasibility and the costings of de-mining the Falklands. We are currently considering how this might best be financed and carried out.

My Lords, can the Minister assure the House that transport links will also be on the agenda—that is to say, access directly from the Falklands to Argentina and open travel in both directions? After all, that has been one of the more difficult issues to arise thus far.

My Lords, it is a difficult issue. However, it is a matter for the Falkland Island's Government. Their policy to date is that Argentine passport holders are not permitted to visit the islands. We have encouraged the islanders to consider broadening the range of contacts between themselves and Argentina. We believe that the process of reconciliation and the development of mutual understanding would be helped by more interaction between the two communities. But that would in no way compromise the sovereignty of the Falkland Islands.

Iran: Ecgd Cover

3.23 p.m.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I should declare that, this week, I was appointed chairman of the British Iranian Chamber of Commerce.

The Question was as follows:

To ask Her Majesty's Government whether they will introduce ECGD (Export Credits Guarantee Department) cover for Iran; and, if so, when.

My Lords, Iran is a difficult market to assess, not least because of oil price uncertainty. However, my right honourable friend the President of the Council when President of the Board of Trade, announced that ECGD has reintroduced insurance cover for capital goods and services contracts concluded on cash payment terms and short-term reinsurance capacity for private sector insurers of consumer goods exports.

My Lords, I thank the Minister for that Answer. However, while that is welcome as a first step, it falls short of the much-needed full cover which currently France and Italy offer, and which Germany will soon be offering. Therefore, will the Minister undertake to monitor the situation? Further, is the noble Lord aware that, procedurally, our visa regime is practically unworkable? That causes considerable difficulties. Is it not now high time to exchange ambassadors in what is potentially Britain's largest single market in the Middle East?

My Lords, perhaps I may, first, congratulate the noble Viscount on his appointment. I am sure that that will do a great deal for relations and the trade that we want to build up with Iran. However, in response to the noble Viscount's two questions, it is important to point out that the cover already announced will facilitate some valuable trade and that this will be broadly welcomed by exporters. As I said, the Government are keen to encourage trade relations but there are a number of steps that we will have to take before full cover is reintroduced. That is largely to balance the interests of taxpayers and the trading opportunities. I believe that that is the right first step on the road, but it is to be hoped that there will be more to come. As regards visas, I agree that there is work to be done to smooth the procedures which are not yet what we would like them to be.

My Lords, does the Minister agree that a precondition of more active relations with Iran should be the cancellation of the fatwa against Salman Rushdie and repayment to this country of the costs which British taxpayers have incurred in protecting him?

My Lords, it is quite clear that the Government have a number of issues which need to be resolved with the Iranians. Indeed, they will be part of the wide-ranging negotiations which will also affect our trading conditions and be undertaken by colleagues in other departments.

My Lords, can the Minister tell the House whether the Government of Iran are still sponsoring murder outside its borders, while persecuting religious and other minorities inside its borders?

No, my Lords. I am afraid that I am not in a position to comment on what the Government of Iran are undertaking. Indeed, that is a matter for the Government of Iran to answer.

Lockerbie Air Disaster: Trial Prospects

3.27 p.m.

Whether they will consider making arrangements for an international venue to try the two persons accused of the Lockerbie disaster under Scottish law in a neutral country.

My Lords, although I remain committed to a trial in Scotland, I can confirm that I have considered alternative ways of securing my objective of bringing the accused to justice. We are currently involved in discussions of a highly complex nature and full consideration must be given to all the legal and technical aspects of such an initiative before a final decision can be made. It would be quite inappropriate for me to say any more at this time. I can assure the House that any steps that I take will be in accordance with my independent responsibility to discharge my duty as prosecutor.

My Lords, I should like to give a very warm welcome to the tone of the noble and learned Lord's Answer; indeed, it is the first sign of flexibility on the issue after nearly 10 years since the disaster occurred over Lockerbie. Will the noble and learned Lord at least recognise that there are many people who believe that if the authorities remain obdurate on this question there might never be a trial and we would never discover the truth of what happened at Lockerbie?

Will the noble and learned Lord accept that there is international unease at this stalemate and that the bereaved families themselves are pressing for the solution that I have put forward in this Question? Will he also recognise that citizens of some 13 nations were killed in this disaster, but that if the bomb had gone off either 10 minutes or 10 minutes later it would not have been in Scottish jurisdiction? If ever there was a major international crime, this was one.

My Lords, I fully recognise all the points made by the noble Lord as I was involved in the Lockerbie incident from the outset. I was junior to the noble and learned Lord, Lord Fraser of Carmyllie, when he was Lord Advocate, at the public inquiry.

I am fully aware of the concerns of the families but the primary consideration for me must be to ensure a proper trial in accordance with Scots law in Scotland. If that cannot be achieved, other considerations will be taken into account. However, the overriding consideration must be to ensure that whatever arrangements are made do not interfere with the ability of the prosecution to conduct the case without any prejudice, nor to interfere with the interests of the defence, and that both of those interests are safeguarded. If those conditions cannot be met, I shall not prosecute anywhere other than in Scotland.

My Lords, many of us in this House will be reassured by the noble and learned Lord's repeated and proper preference for a trial in Scotland of those accused of the Lockerbie murders. We strongly support his reassertion of his primacy in this matter as the independent public prosecutor in Scotland with a lonely responsibility and not a collective one. We offer that support particularly in the light of the clumsy, constitutionally improper and badly leaked efforts of the Foreign Office to usurp the noble and learned Lord.

If he takes an irreversible step to hold the trial outside Scotland—we understand why he might wish to contemplate that, given the decade of agony and uncertainty that the relatives of the victims of Flight Pan Am 103 have endured—I hope he will understand that, in spite of our understanding of why he is possibly looking to a way forward, we must reserve the right to scrutinise whether any agreement he reaches brings the prospect of a trial closer or whether it merely offers the opportunity for endless further wrangling from Tripoli.

My Lords, I welcome the comments of the noble and learned Lord about the lonely office of Lord Advocate. I can assure the noble and learned Lord that I share his concerns about the press speculation as to what has been going on. I have been assured by the Foreign and Commonwealth Office that it is not responsible for such leaks. In relation to the scrutiny of the agreement, if any agreement is reached the terms of that agreement and any necessary orders will, of course, be made available to your Lordships for consideration. I repeat that my sole consideration is to ensure that the prosecution of the accused is in accordance with Scots law and will take place preferably in Scotland. It will not take place outwith Scotland unless my two criteria are satisfied. I referred to those criteria when answering the noble Lord, Lord Steel of Aikwood.

My Lords, I refer to the proceedings before the International Court of Justice raised by Libya against the United Kingdom and the United States. I seek the noble and learned Lord's assurance that, in reaching his decision on whether the trial may take place overseas, he will have regard to the existence of that litigation because there may be an argument that it would be highly undesirable for the noble and learned Lord the Lord Advocate to agree that the trial should be held in the Hague, or anywhere else, if at the same time Libya continues the action it has raised against this country and America.

My Lords, the proceedings before the International Court of Justice are effectively civil proceedings relating to the interpretation of the Security Council resolutions and the applicability of the Montreal Convention. I am fully aware that these proceedings are continuing. At the present time I am involved in drafting and revising pleadings for the next stage. If a criminal trial were to take place either in Scotland or outwith Scotland, there may well be a case for making an application to the court to assist these proceedings, but that is further down the line.

My Lords, I assure the noble and learned Lord the Lord Advocate that I fully respect the integrity and independence of his office and welcome everything he has said this afternoon. Will he confirm that the Security Council resolution on this subject refers to a trial either in Scotland or the United States? Accordingly, in arriving at his future conclusions, will the noble and learned Lord confirm that he is in touch with his opposite numbers in Washington?

My Lords, as I have indicated, there have been detailed, complex negotiations which have involved myself with people of equivalent standing in other countries and officials. Clearly I am aware of the existence of the Security Council resolutions. The existence of those resolutions will be taken into account in any agreement, should agreement be reached.

My Lords, does the noble and learned Lord the Lord Advocate accept that calls which have been made in the past to Lord Advocates that evidence in this case should be revealed in advance of a trial are totally inappropriate and could be prejudicial to the accused?

My Lords, I thank the noble Lord for those comments. It is not the practice of the Lord Advocate ever to disclose evidence other than in the course of a trial. I do not accept that it would be appropriate to disclose the evidence while there is the prospect of a trial.

Scotland Bill

3.36 p.m.

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Sewel.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

After Clause 53, insert the following new clause—

Community Obligations Of The Parliament

(" . A Community obligation of the United Kingdom is also an obligation on the Scottish Executive if, and to the extent that, the obligation could be implemented (or enabled to be implemented) or complied with by the exercise by the Parliament of any of its functions.").

The noble Earl said: In moving Amendment No. 260 I wish to speak also to Amendment No. 261. In Clause 53 the parliament of Scotland must comply with any Community obligations in the same way as this Parliament at Westminster has to do. Clause 54 mentions the Secretary of State, although we already know that when the Scottish parliament is established his or her position is somewhat doubtful. In complying with international or Community obligations governments from time to time have had to introduce retrospective legislation. The object of this amendment is to ensure that no person in the broadest sense of the meaning of "person" is guilty of an offence where the law is changed by retrospective legislation. I hope that the principle I have put forward will be seriously considered by the Government. I beg to move.

My Amendment No. 260A is grouped with the one we are discussing. It refers to the powers of the Secretary of State to prevent or require action with regard to Scottish parliamentary legislation. The purpose of Amendment No. 260A is to clarify Clause 54(1), which refers to international obligations by adding the words "Community law" to international obligations.

The need for this amendment stems from the definition of "international obligations". Clause 112(10) defines it as,
"obligations … other than … under Community law".
If the clause remains unamended, the Secretary of State will not have the explicit power to require action on legislation which does not comply with Community law. Although Clause 53 refers to Community law, it does not seem expressly to empower any action by the Secretary of State to remedy errant legislation. This amendment makes the issue abundantly clear.

I understand the thinking behind the amendments in this group, but we are satisfied that we have already provided a robust legislative framework to ensure that EU obligations are properly fulfilled by the Scottish parliament and the Scottish executive. The noble Earl, Lord Balfour, has suggested in Amendment No. 260 that a clear statement should appear on the face of the Bill to the effect that community obligations extend to the Scottish executive. The general transfer of functions in Clause 49 already achieves that.

Any obligation upon Ministers of the Crown to observe and implement Community law within devolved competence is transferred to Scottish ministers by Clause 49. Scottish ministers will therefore be liable to implement community obligations within devolved competence and be responsible for any failure to do so under EU law. Scottish ministers will also be liable for the same penalties as UK Ministers if they fail to observe or implement Community obligations. All that is confirmed by Clause 53(1), which provides that,
"Despite the transfer to the Scottish Ministers by virtue of section 49 of functions in relation to observing and implementing obligations under Community law, any function of a Minister of the Crown in relation to any matter shall continue to be exercisable by him as regards Scotland for the purposes specified in section 2(2) of the European Communities Act 1972".
Ministers of the Crown do not lose their powers to implement Community law in relation to devolved matters but continue to be able to exercise any function as regards Scotland for the purposes of implementing Community law. In other words, Ministers of the Crown have concurrent powers with Scottish ministers. Furthermore, Clause 53(2) requires a member of the Scottish executive to act only in accordance with Community law. Clause 28(2)(d) also makes it clear that legislation of the parliament must be compatible with Community law.

Any breach of Community law by a member of the Scottish executive, whether constituted by some action or failure to act or by some subordinate legislation made by that member, is one of the devolution issues which are subject to the special procedures in Schedule 6. While I understand the noble Earl's intention, I think his amendment is unnecessary and I hope that in the light of my explanation he will feel able to withdraw it.

The effect of Amendment No. 260A would be to extend the power of UK Ministers to prevent or require action in relation to the UK's international obligations, to cover Community obligations. It would be inappropriate and unnecessary to include a reference to Community obligations in Clause 54. Clause 54 refers to international obligations because that is the only way in which the UK Government can ensure observance of international obligations by the Scottish executive. It is not possible, for example, to make this a vires issue which can be adjudicated by the courts because the courts generally do not take cognisance of any international obligations unless they are incorporated into domestic law.

However, that does not apply in the case of Community law because that is part of our domestic law and our courts can, and must, have regard to it and enforce it. As I have pointed out already, the Bill requires the Scottish executive to comply with Community law and its failure to do so can be adjudicated by the courts.

These provisions make it unnecessary to extend the power of intervention to include Community obligations—‹there is no scope for the Scottish executive to derogate from the same essential requirements to comply with Community law that bind the UK Government. With that explanation, I invite the noble Earl to withdraw the amendment.

I can fully appreciate the noble Earl's reasons for introducing Amendment No. 261. However, in our view it is unnecessary. An order made under this provision may require action to be taken by a member of the Scottish executive to implement international obligations in so far as the member of the Scottish executive has power to take the required action retrospectively, the Secretary of State can require him to do that. If the member of the Scottish executive did not have power to take retrospective action there would be no point in the Secretary of State's order having retrospective effect. In the light of what I have said I ask the noble Earl to withdraw the amendment.

3.45 p.m.

My Lords, I am grateful to the noble Baroness for having explained the position. I was particularly concerned about someone being considered guilty of an offence retrospectively. I did not want to see that happen. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 [ Power to prevent or require action]:

[ Amendment No. 260A not moved.]

Page 23, line 45, after ("international") insert ("treaty").

The noble and learned Lord said: With the leave of the Committee I shall speak also to Amendments Nos. 260C and 260D, 261A, 262A and 263A. These amendments fall into two groups. First, Amendments Nos. 260B, 262A and 263A seek to introduce the word "treaty" between the words "international" and "obligations" where they appear in Clause 54 and elsewhere in the Bill.

The purpose of the amendments is to make it clear that when the Bill refers to international obligations, it refers to legal obligations which are binding on the United Kingdom as a matter of international law. The concern is that unless the term is more carefully defined it might be construed to cover all sorts of understandings, and indeed moral obligations, which emerge from discussions involving Foreign Office Ministers, members of the Diplomatic Service or Foreign Office officials in the course of their duties.

Similar concerns arise out of the introduction of the terms "interests of defence" and "interests of national security" which now form part of the provision as a consequence of government amendments moved earlier. Clearly, the full ramifications of these amendments will require consideration during the Recess by those of us participating in these debates.

The practical consequence of the concern is this. If these terms remain as general as they are it will be possible for the Government, without any reference to Parliament whatsoever, to expand upon the extent to which the Secretary of State in terms of his powers under Clause 54 can interfere with the Scottish executive's exercise of the functions that lie within its competence. This matter was raised in our debates on Tuesday by my noble and learned friend Lord Fraser of Carmyllie. The noble Lord, Lord Steel, undertook to reflect and write on it over the Recess. That takes the discussion—

I beg the noble Lord's pardon. I was in error in thinking that the noble Lord, Lord Steel, intended to do anything over the Recess—except of course, engage in a little fishing. I do not think he will be alone.

The purpose of the other amendments is slightly different. They provide that if the Secretary of State is of the view that the Scottish executive has acted or refused to act in a way which is incompatible with international treaty obligations or incompatible with national security or defence interests, he should have two options. One option is to go to the court and seek a declarator that the Scottish executive has acted in such a way. The alternative would be for him to have an order-making power in his own right to take the action which is necessary—an expansion of the power which he already has in terms of subsection (4).

My concern is that his order-making powers in subsections (1) and (2) which enable him to direct the Scottish executive to take action or refrain from taking action will be perceived to be the powers of a colonial governor. If they were ever used and if they exist and the use of them could be threatened, it would serve to provoke friction between the Scottish executive and the United Kingdom Government, where there is a concern that the Scottish executive's actions could be or are perceived to be incompatible with the three terms to be found in the Bill.

It should be a clear-cut choice for the Secretary of State. In such a case he should raise the matter with the court and seek a declarator. It may be a complicated action to bring and it may be a complicated matter for the court to decide. But as I understand orders under Clause 54 to be subject to judicial review, these are the kind of difficult legal issues which the court may require to deal with in any event. He should have these two routes, either to go to the court or to act on his own hand. The idea of him directing the Scottish executive on what to do is not compatible with common sense or the hope that the executive and the Government will work profitably and fruitfully together in the future. I beg to move.

As Amendment No. 263A is also being spoken to, I must point out to the Committee that if that amendment is agreed to I cannot call Amendments Nos. 264 to 266 inclusive.

We await with interest the Government's response to these amendments which raise some rather erudite questions of both domestic and international law. Am I right in feeling believing in connection with the phrase "international obligations" in the Bill, that it is designed to cover a wider range of possibilities than simply treaty obligations? Do we not have general obligations under customary international law? It is the international equivalent, I suppose, of common law, or binding Security Council resolutions or decisions of international tribunals, such as the International Court of Justice. On that at the moment I am content with what I guess may be the Government's position.

On the other matter, I await the answer with interest. The mind boggles at the idea of the Secretary of State, in the new post-Scottish parliament situation, sitting in Dover House acting as a colonial governor. It seems to defy common sense to me.

On the grounds that everything possible should be done in advance to try to prevent conflict between different levels of government within the United Kingdom which may be governments of different political complexions, I am inclined to support the thrust of this group of amendments.

Arising out of what has been said, it has been stressed that yet again there are legal minefields ahead. It might be helpful if the Government reflected over the Recess on whether anything could or should be done to assist the courts when, for example, they are faced with questions as to what international obligations are. As the noble Baroness pointed out, it is not usual for domestic courts to become involved in questions of international law and what constitutes an international obligation.

I am not clear how it is envisaged that it will be handled if there were a judicial review such as is contemplated by the noble and learned Lord, Lord Mackay of Drumadoon. It is obviously possible, or given the idea of reasonable grounds it looks possible. For that reason, therefore, it might be for consideration whether anything requires to be done as to the way in which such international obligations could be proved and how the courts could look at international obligations. I should also be interested to know whether it is envisaged that some kind of certificate system would be used in order to signify what the interests of defence and national security were thought to be by the Secretary of State.

As has been observed, Clause 54 enables the Secretary of State, by order, to require the Scottish executive to take or desist from action in respect of international obligations or to revoke subordinate legislation that he has reasonable grounds to believe to be incompatible with international obligations.

The noble and learned Lord's amendment would restrict those powers so that they were only available for treaty obligations. The noble Lord, Lord Thomson of Monifieth, was correct and, for the reasons outlined by him, the Government do not believe that it would be right to restrict the powers to such limited obligations.

The effect of the amendment would be to leave the United Kingdom Government unable to enforce those international obligations which arise under customary international law. These are just as important and just as binding on the United Kingdom as our treaty obligations. Indeed, even where matters are generally governed by multilateral treaties, in fields such as diplomatic immunity, the law of the sea or human rights, not all states are parties to the treaties in question. Vis-à-vis non-parties, our obligations are governed by customary law. Devolved areas in which such obligations might be found include: fisheries and marine pollution; immunities of foreign states; immunities of diplomats and consuls from states not party to the Vienna Conventions.

I hope that in the light of this explanation, the noble and learned Lord will agree that it would not be appropriate to restrict the Secretary of State's powers of intervention in the way proposed by him. I ask him to withdraw the amendment.

As for the concept of the United Kingdom acting as a colonial power in relation to Scotland I would not accept that that is a fair interpretation to put upon the right of the Secretary of State to intervene in such matters.

The Committee will be aware that foreign relations are a reserved matter and will remain the responsibility of the United Kingdom Government and Parliament. In any scheme of devolution, that must be so. To give effect to our international obligations, it is essential that this power is available to the Secretary of State.

Having said that, again I wish to express my hope and optimism that the situation will not arise. I am sure that the Scottish parliament will endeavour to ensure that its legislation is not incompatible with the United Kingdom's international obligations.

Amendments Nos. 260C and 260D would replace the order-making power of the Secretary of State in regard to compliance with international obligations with a power for the courts to rule on such matters. As my noble friend Lady Ramsay of Cartvale has already observed, and the noble and learned Lord, Lord Rodger of Earlsferry, alluded to it, it is not normal for domestic courts to take cognisance of international obligations. It is for that reason that the Bill proceeds in the way that it does. Before the Secretary of State can intervene, he must have reasonable grounds for that belief—that is, that the obligation has not been complied with—and obviously those grounds may be challenged by way of judicial review.

The Government feel that the powers given to the Secretary of State in this regard are entirely appropriate. To deal with the question raised by the noble and learned Lord, Lord Roger of Earlsferry, in relation to the approach to be taken by the courts, I hope that my explanation of what international obligations encompass will be of some assistance to the courts should any challenge ever arise.

In determining the question of whether the Secretary of State had reasonable grounds, one would expect the court to apply the same standards and tests as it does in reviewing the decision of any other authority which is obliged to have reasonable grounds before taking action. As I said, the question of the role of the courts and its relationship to Parliament is a matter which is being considered and hopefully will be clarified in that regard as well as others before we reach the next stage of the Bill.

In relation to Amendment No. 261A, the Secretary of State can by order require the Scottish Ministers to take action to implement an international obligation. Where an obligation relates to reserved matters the UK Government will of course implement it in any case across the United Kingdom. I suggest that the powers already envisaged for the Secretary of State in this regard are already sufficiently wide and I invite the noble Lord to withdraw the amendment.

Amendment No. 263 seeks to delete the order-making power of the Secretary of State to revoke subordinate legislation of the Scottish parliament under Clause 54(4)(b). That power, which has already been modified by government Amendments Nos. 264 and 266, as the noble and learned Lord observed, is necessary to provide safeguards where Scottish legislation could have adverse effects on the law as it applies to reserved matters. As I have already said, these powers are meant to be longstops and their use would require to be justified and would be liable to scrutiny by judicial review.

I ask the noble and learned Lord to withdraw the amendment.

4 p.m.

I did not entirely follow the argument of the noble and learned Lord the Lord Advocate. In Schedule 6, Part I, paragraph 1 says "devolution issue" includes, at (d),

"a purported or proposed exercise of a function … by a member of the Scottish Executive [whether it] is, or would be, incompatible with any of the Convention rights or with Community law".
It is envisaged therefore that the Scottish courts would be considering incompatibility of Scottish legislation with the human rights convention and with Community law made in Europe. Therefore, although the Scottish parliament is not charged with Community law, nevertheless the courts are required to consider incompatibility in that context.

However, in addressing Amendments Nos. 260C and 260D, the noble and learned Lord said that the Secretary of State is to have this fairly draconian power of acting upon his own belief—that is what subsections (1) and (2) of Clause 54 actually say—checked only by judicial review. The reason given for that was that the Scottish courts do not have anything to do with the construing of international law. Yet, if there is judicial review of the exercise of that power by the Secretary of State, what is to be considered save the competence of the Scottish legislature to take either a proposed action or to legislate the competence, having regard to its compatibility with those very international obligations which the noble and learned Lord said would not be within the competence of the Scottish courts?

Therefore, on judicial review, using that machinery, the Scottish courts will consider compatibility with international obligations. Under Schedule 6 as a devolution issue, the Scottish courts will construe the competence of Scottish legislation having regard to the convention rights or Community law. But the right of the Secretary of State to act on his own belief is still maintained in that context. I see no logic in that and suggest that the noble and learned Lord ought to consider further the logic that may lie behind his explanation.

Perhaps I can explain to the noble Lord, Lord Thomas of Gresford, that, of course, Community law is in a different category from international law. Clause 54 considers the question of international obligations. The question for the court would not be whether the actions of the Scottish parliament were or were not compatible—that would be asking the court to substitute its decision for the decision of the Secretary of State—but whether the Secretary of State had reasonable grounds to believe that the proposed action was or was not compatible. Applying the Wednesbury test and that line of authority, the court would only interfere if it concluded that the Secretary of State had acted in a way which no reasonable Secretary of State could have acted, or had acted in a capricious manner. The noble Lord will be well aware of the line of authority to which I refer.

Of course, but in considering whether there are reasonable grounds to believe that there is an incompatibility, what else can the court do but look at the international obligations and set against them the proposed action or the proposed legislation with which the Scottish parliament is concerned, and come to a conclusion as to whether that compatibility exists? It seems to me that on judicial review the Scottish courts will be bound to consider that issue one way or the other.

That would be a fact that the court would take into account—looking into the international obligations and the proposed action of the Scottish parliament—but it would also take into account any other factors that the Secretary of State may have taken into account in reaching his or her decision. That would be the test; not whether or not the action was incompatible, but whether, on the information before the Secretary of State, the Secretary of State had reasonable grounds to believe that it was incompatible.

The noble Lord, Lord Thomas of Gresford, put the point rather more clearly than I put it when I made my intervention earlier. I was asking how it was that the court, which could not normally consider matters of international obligation, when it came to judicial review would be furnished with the power, the knowledge of this international law and the right to consider this international law in the context of judicial review.

The point which I understand the noble Lord, Lord Thomas, to be making is if, in the context of judicial review, the court is going to be seized necessarily with comparing the action with the rights and obligations under international law, why is it thought to be wrong for the courts simply to test the subordinate legislation in question against those self-same obligations under international law which it will have to consider any way in judicial review?

The question as to whether there are reasonable grounds for believing that it is incompatible is quite different from a purely legal issue of comparing an international obligation with the text of the Scottish provision.

As I indicated, it may well be a factor for the court to look at the two provisions, but the real issue is to look at what was before the Secretary of State before he or she reached the conclusion that he or she had reasonable grounds to believe that the action was or would be incompatible.

I hope that the noble and learned Lord will reflect on what has been raised today. If I may respectfully say so, what the noble Lord, Lord Thomas, and the noble and learned Lord, Lord Rodger, have said seems to have considerable force. Whether the Court is considering whether the action of the Scottish executive is incompatible with international obligations or whether it is considering that the Secretary of State had reasonable grounds for believing that the action of the Scottish executive was incompatible with international obligations, the Court has to address its mind to the issue of what is meant by the term "international obligations" and what in the context of the case before it is the international obligation in question which gives rise to the incompatibility. If one uses the term "national security", what is the aspect of national security which gives rise either to the existence of the incompatibility or the existence of reasonable grounds for believing that there is such an incompatibility?

I remain concerned about the Secretary of State directing a member of the Scottish executive to do anything. As the noble and learned Lord was responding to the debate, a point struck me which I had not thought of earlier. If having been ordered to do something or to stop doing something by the Secretary of State, what happens if the member of the Scottish executive just continues as before and, for whatever reason, says, "I am not taking instructions in this manner"? I wonder whether it might not be better to give the Secretary of State the power contained in one of my amendments.

It is clear from what noble Lords on the Government Front Bench have been saying, both on Tuesday and this afternoon, that this clause will be the subject of reflection over the Recess. Letters are to be sent and I am sure replies will also be sent. When we return to this in October it might be possible to see a way through the practical problems which this grouping of amendments has raised. On that basis, I seek leave to withdraw Amendment No. 260B.

Amendment, by leave, withdrawn.

[ Amendments Nos. 260C to 261A not moved.]

Page 24, line 10, leave out ("would") and insert ("to").

On Question, amendment agreed to.

[ Amendment No. 262A not moved.]

Page 24, line 11, after ("obligations") insert ("or the interests of defence or national security").

On Question, amendment agreed to.

[ Amendment No. 263A not moved.]

Page 24, line 12, leave out from ("which") to ("which") in line 15 and insert ("make modifications of the law as it applies to reserved matters and").

On Question, amendment agreed to.

Page 24, line 16, leave out ("would") and insert ("to").

Page 24, line 17, leave out ("an enactment") and insert ("the law").

Page 24, line 19, leave out ("revoking the legislation") and insert ("making the order").

On Question, amendments agreed to.

Clause 54, as amended, agreed to.

After Clause 54, insert the following new clause—

Delegations To Europe

(".—(1) When matters in relation to which the Parliament has competence are being discussed between the United Kingdom and any of the institutions of the European Union, the appropriate Scottish Ministers shall be entitled to accompany United Kingdom Government Ministers and to participate in such discussions on behalf of the Parliament.

(2) Where the matters to be discussed under subsection (1) are non-reserved matters that only affect Scotland and do not affect other parts of the United Kingdom, Scottish Ministers shall be the sole representatives of the United Kingdom.

(3) In appropriate cases, on non-reserved matters affecting both Scotland and other parts of the United Kingdom, a Scottish Minister, with the agreement of a Minister of the Crown, may lead the United Kingdom delegation.").

The noble Lord said: Let me first say to the noble and learned Lord. Lord Mackay of Drumadoon, that I well understand his slip of the tongue earlier between "Steel" and "Sewel". He is not the first person to make it. He may be interested to know that a couple of weeks ago I had a telephone message after midnight from a young lady inviting me to telephone her. I did so with curiosity as she was not known to me, only to discover it was a call for the noble Lord, Lord Sewel. In the hope of getting a very good answer to this amendment I shall say nothing more.

We have debated this matter before and we should not go over the whole ground again. The reason we have tabled this amendment is to achieve a little more clarity than we have had in either House so far as to what is to happen when Ministers from the Scottish executive—or Scottish government, as I prefer to call it—are involved in discussions on European Union matters.

What we set out in our amendment is very straightforward. It is what we think the practice should be. First of all, when matters in relation to which the Scottish parliament has competence are being discussed between the UK and any of the institutions of the European Union, the appropriate Scottish Ministers should be entitled to accompany the United Kingdom Government Ministers and to participate in such discussions on behalf of the Scottish parliament. I cannot believe that that is particularly controversial.

We go on to suggest that where the matters to be discussed are non-reserved matters which only affect Scotland and not other parts of the United Kingdom, the appropriate representatives to attend such meetings are the Scottish Ministers. We had in earlier debates mention of precedents from the parliaments of Catalonia and Bavaria.

We go on to say that in appropriate cases on non-reserved matters which affect both Scotland and other parts of the UK, a Scottish Minister, with the agreement of a Minister of the Crown, may lead the UK delegation. Again, that is obvious common sense.

If I may refer to a previous debate on this matter, I know that the noble Lord, Lord Mackay of Ardbrecknish, and his colleagues take the view that when it comes to European discussions Scotland does better out of having a Parliamentary Under-Secretary tagging along with the UK Minister. That is a perfectly legitimate point of view. But it is not one that I or many other people share, including the President of the Scottish National Farmers' Union.

My noble friend Lord Mackie of Benshie, who is, as everyone knows, a kindly and benign man, chided me for being a little rough on the noble Lord, Lord Mackay, on a previous occasion on this matter simply because the president of the Scottish NFU happens to have been adopted as the Liberal Democrat candidate for his old constituency. I make a serious point here. I hope he will not make too much of this. We should be pleased that there are people at the top of their professions and occupations in Scotland who are willing to come forward as candidates for the Scottish parliament, regardless of party. I certainly welcome that. They should not be attacked in this House or elsewhere because they happen, in order to get membership of the Scottish parliament, naturally to be affiliated to the party of their choice.

To stick with the issue under discussion, our amendment clarifies what ought to be good practice in future where delegations consisting both of UK Ministers and Scottish Ministers attend meetings of the European Union. I beg to move.

4.15 p.m.

I should like to speak to Amendment No. 269, which is similar to Amendment No. 268, although mine applies more specifically to representation at the Council of Ministers. With the enormous importance of both agriculture and fisheries to the Scottish economy, and as so many vital decisions affecting both those industries are decided at the Council of Ministers of the European Community, it is absolutely vital that Scotland and the new Scottish parliament should have a direct voice and say in anything being discussed. Therefore there should be Scottish Ministers included in any United Kingdom delegation which discusses these matters. If the matters discussed would primarily affect Scotland, the delegation should be led by Scottish Ministers. The effect of this amendment would mean that, without in any way diminishing the close union between Scotland and England, we in Scotland would still have a direct say in the European matters which closely affect us.

Last Tuesday, on Amendment No. 249A, I understood the Minister to say that the United Kingdom Ministers at the European Parliament would be responsible to the United Kingdom Parliament and would report to the United Kingdom Parliament only, not to the Scottish parliament. This hardly seems fair to the Scottish parliament, or indeed to the people of Scotland.

The Scottish Nationalists have always made a point of direct representation in the European Parliament at ministerial level. If we have this already written into the Bill it would destroy much of the force of their argument.

I wish to raise one point that I feel the Government should bear in mind. It concerns the extremely valuable whisky industry in Scotland. It is through European directives that Scottish whisky cannot be sold less than 40 per cent. by volume—if it is below that level it is almost impossible to analyse its origin—and it must also be kept for at least three years. Such provisions have helped that valuable industry tremendously. Therefore, I hope that the Government will look sympathetically on these amendments.

The analogy of Northern Ireland may be relevant here. The Committee will be aware that the ban on the export of beef from Northern Ireland has recently been lifted, which is a great step forward. That came about because the Minister responsible for agriculture in Northern Ireland and the Minister of Agriculture, Fisheries and Food in the United Kingdom were both members of the same party and of the same government. In Scotland, when agriculture is devolved, that may no longer be the case. They may be of different political complexions. We need to have on the face of the Bill something very similar to one or other or both of the amendments.

We have already debated this matter very fully and it was discussed during proceedings on the Government of Wales Bill. I am a little concerned about the noble Lord's amendment. I understand what he is trying to do and I believe that his objective is wholly laudable and desirable.

Subsection (1) of the amendment provides that the appropriate Scottish Ministers should be entitled to accompany the United Kingdom delegation. That is fine. I should like to see that entitlement there and the entitlement to participate. Subsection (2) is slightly more confusing. It is suggested that, on items that are non-reserved matters, it would be possible for Scottish Ministers to be the sole representatives. They might be non-reserved matters, but the relationship with the European Union is a reserved matter. It appears to me that a decision could be taken that was out of kilter with that which the United Kingdom Government wanted. I am not sure what would happen if that occurred. Likewise, under subsection (3), if a Scottish Minister was leading, which would in many ways be desirable, what would happen if the decision taken was contrary to that which the United Kingdom Government wanted?

During proceedings on the Government of Wales Bill the noble Lord, Lord Williams of Mostyn, replied that the Minister could always resign. I did not think that that was convincing. I do not see why a Minister should resign for doing something wrong in the eyes of the United Kingdom Government when he is answerable to the Scottish parliament. That is a rather confused line of thought. If the Minister could clarify his views on subsection (2) and (3) and say that he is satisfied and will accept the amendment, no one will be happier than me. But I do not quite understand how it would be possible.

This is the third time during the Committee stage that we have returned to this general subject. The exchange that we had on Tuesday has greatly helped me to understand exactly how the Government see negotiations on important European matters. I suspect that the Government will reject the amendment of the noble Lord, Lord Steel of Aikwood, and indeed the amendment of my noble friend Lady Strange, because they are incompatible with the overriding principle that negotiations with the European Union are reserved matters.

There is only one way—we should not beat about the bush—ofor Scotland to have a direct say in the meetings of the Council of Ministers; and that is to be a separate member state of the European Union. There is no way round that problem. That applies especially on reserved matters, but more particularly on almost all matters. There is just no way round that. Member states are the ones who sit at Council of Ministers' meetings and member states cast the votes. The Minister from the United Kingdom casts 10 votes. The only way for a Scottish representative to be there as of right is if he is there from an independent Scotland casting the princely sum of probably three votes. That itself is something which everyone in Scotland ought to bear in mind when it comes to thinking that Scotland might possibly be better off around the Council of Ministers' table if it was independent.

I have to say to the Committee—all my noble friends who have been in similar positions at Council of Ministers' meetings will know this—that the score sheet we draw up has two leagues in it: the league of the voters with 10 votes and the league of the voters with three votes. The people who carry the clout are the people in the league with 10 votes. That is where Scotland is at the moment, as a member of the United Kingdom; and that is where I at least firmly want Scotland to stay.

I believe that a great deal of what we see in the amendments carries the danger of crossing over the boundary between a devolved situation and an independent situation.

I am grateful to the noble Lord for giving way. I wish only to put to him this hypothetical question. Would he be confident in expressing the view which he has just expressed to a Danish representative, a Norwegian representative, a Swedish representative and so on?

If the noble Lord is asking about the number of votes, I certainly would. I can remember the fisheries Minister of the Republic of Ireland occasionally asking me how we were going to vote on fisheries matters, in which we had something of a common interest with regard to the west coast of Scotland and Ireland, because it really did not matter much how he was going to vote if we were not going to vote in the same way.

Norway has gained much of what it wanted by its voting and by its discussions within the groups.

What Norway has gained has been because it is outside the European Union and not inside it. The noble Lord is in danger of putting forward an argument which one or two of his noble friends who are not present and one or two of my noble friends are always advancing. I urge the noble Lord to sit back for a moment or else the noble Lord, Lord Bruce of Donington, will come into the Chamber and haunt him.

I quite understand the position of Norway. As the noble Lord will know, I am, and have been for 12 years, a member of the Council of Europe. I am perfectly aware of that reality. I cited Norway not because it is outwith the European Union but because it has determined negotiators standing for it. If I had wanted to, I could have said the same for Denmark and I could have said the same for countries that are within the European Union.

4.30 p.m.

I know from having been there that the Council of Ministers is always mindful about the position of the smaller states. All I am saying is that when it comes to a vote, as it does occasionally and as it will increasingly do as decisions are taken by majority voting, the point I have made is true. Ten votes are a lot more than three. If one is looking for a majority, one is looking for the people who are casting the 10 votes to get that majority. Those with three votes may be helpful, but unless one has those with 10 votes one does not get the majority. My essential point is this. We have to be clear that if people want Scotland to have a direct say they want an independent Scotland. There is no half-way house.

With regard to subsection (2) of the amendment, on matters which are solely Scottish and solely devolved, then, as I have explained to your Lordships before, I can see that the United Kingdom delegation could easily be led by a Scottish Minister. In the letter from the noble Lord, Lord Williams of Mostyn, which I have quoted to your Lordships on a number of occasions, he gave two examples: one was of Bavaria leading for Germany on a cultural matter and the other was of Catalonia leading for Spain on language matters. As I have said before, although these matters may be very important, they do not fall into the same category of importance as matters affecting the common fisheries policy, the common agricultural policy or economic and trade policy. It is those matters which concern me.

On the third suggestion, I do not think that it is possible for a Scottish Minister to lead a UK delegation when matters which affect parts of the United Kingdom, other than Scotland, are involved. That is for a number of reasons. It is partly, as I said at the beginning, because that Minister is not a UK Minister. It is also partly because he is not answerable to anybody in the rest of the UK. We established quite late on Tuesday—this has helped me greatly and I continue to read it in Hansard because it continues to help me—that the overarching point is that negotiations with the European Union are reserved matters. Even if the negotiations relate to devolved matters, they are still reserved. Although the Scottish parliament and the Scottish government—I am like the noble Lord, Lord Steel, in believing that that is what we should call it because, frankly, that is what it will be called—may be involved at quite a high level in discussions with the UK on the policies to be pursued, the ultimate responsibility will rest with the UK Ministers who will have to decide what is to happen in the midst of the negotiations.

As I have explained to the Committee previously, these matters often have to be decided as compromises, late at night. Frankly, at that stage, the UK Government Minister will have to make difficult decisions on behalf of the United Kingdom. If my reading of the White Paper is correct, the Scottish Minister will jolly well have to go along with that because he is part and parcel of the collective responsibility, although, ironically, he is not part and parcel of the same government. The Minister made that absolutely clear. I shall quote what he said so that over the long Recess he and his officials can make absolutely sure that this is what was meant and that this is what the position will be. The noble Lord, Lord Sewel, said:

"It is the responsibility of Scottish Ministers to report to the Scottish parliament and of UK Ministers to answer to the UK Parliament for the conduct of EU negotiations even when they affect devolved matters. If the Fisheries Council were deciding questions of TACs and quotas"—
I notice that Hansard reported that as "tax" rather than as "TACs"—
"many of us have been involved in long nights of macho negotiations on quotas—it would be perfectly proper for a Westminster MP to ask the Minister for Agriculture, Fisheries and Food a question on TACs and quotas, perhaps on how they affected Scottish interests. Similarly, a question on dairy quotas and the Agriculture Council could quite properly be asked of the Minister by a Scottish Member of Parliament at Westminster".—[Official Report, 28/7/98; col. 1434.]
Later at col. 1438, the noble Lord said:

"It starts from the basis that the conduct of foreign relations, including EU negotiations, is a reserved matter. That is the starting-off point. UK Ministers, therefore, can properly be made accountable to the Westminster Parliament for that, even when the content affects devolved matters. They are answerable to all Members of the Westminster Parliament".
If that remains the stated position, I at least am almost content with the long debates that we have had. I rather regret that Ministers from the Welsh Office were not able to say the same things. As my noble friend Lord Sanderson said on an earlier occasion, it will mean that organisations which want to lobby on European Union matters will not go to Edinburgh to lobby; they will come to London. Particularly with regard to the common agricultural policy and the common fisheries policy, the NFU and the Scottish Fishermen's Federation will be coming here to lobby their Members of Parliament at the other end of this building. They will come here to lobby Ministers in this Parliament because they will be conducting the negotiations. If the Minister can confirm that I am almost—or even fully—right in my interpretation of the position, I at least will think that I have gained quite a lot from this Committee stage.

Before I come to deal with the amendments, perhaps I may point out that during our discussion on Clause 35 on Tuesday night I referred to the Treaty of Amsterdam as having inserted the provision which allows Ministers from regional or devolved governments to represent their member states in EU Councils. As I believe that the noble Lord, Lord Mackay of Ardbrecknish, may have been aware, I should have attributed that provision to the Maastricht Treaty. I apologise for any misunderstanding caused. Clearly, confusing Maastricht and Amsterdam is a bit of double Dutch!

Well, it is 25 minutes to five o'clock!

The noble Lord, Lord Mackay of Ardbrecknish, quoted back at me what I said on Tuesday night. Ninety per cent. of his interpretation of those remarks is absolutely right. I repeat that the essential point is that negotiations with the European Union, including negotiations at the Council of Ministers, are reserved because foreign affairs are reserved and EU negotiations are a foreign affairs matter. I believe that that puts it as clearly and as simply as I can.

There is an important difference between that clear statement and, to pick up the words of the noble Lord, Lord Steel of Aikwood, what we want to see in terms of "good practice". I believe that those were the noble Lord's words. That is a different matter. I think that we can get there. Indeed, we are trying to indicate how we can adopt the good practice which will ensure that a Scottish voice is built into the development of UK policy at Council meetings and that, where appropriate, that Scottish voice is able to speak and to represent the agreed UK line.

I have said on a number of occasions that the Government fully intend that Scottish Ministers should play as full a role as possible in developing UK positions on EU matters and, where appropriate, in presenting them to the Council. However, we believe that that is best left to administrative arrangements between Her Majesty's Government and the Scottish executive. That flows from the very position that I believe that the noble Lord, Lord Mackay, was outlining when he quoted what I said on Tuesday. That is why the administrative arrangements are best dealt with through a concordat. That gives a flexibility of approach. I believe that it is the best and most sensible way of dealing with what is by its nature a relatively unpredictable business and one which is basically not open to be defined through statute. I hope that the noble Lord will recognise that within the framework within which we have to operate, which flows from the fact that the UK is the member state, we are absolutely intent on ensuring that there will be a Scottish voice and a Scottish presence in the development of the UK line and, where appropriate, a Scottish presence and a Scottish voice in the presentation of the UK line. That deals with subsection (1).

Subsection (2) seeks to provide that where matters affect only Scotland, Scottish Ministers should be the sole representatives of the United Kingdom. That is a difficult idea in any case because very few international or European matters could be said to affect only Scotland. Even if not directly, then at least indirectly, there are likely to be UK implications. That is a very difficult line to draw.

Subsection (3) seeks to provide that in appropriate cases on non-reserved matters affecting Scotland the Scottish Minister may lead the UK delegation. This is where I part company from the noble Lord, Lord Mackay of Ardbrecknish, and his interpretation. It is the Government's intention that that could happen with the agreement of the UK Minister. It is because the Scottish Minister would be a minister of the Crown—that is, "minister" with a lower case "m" and "Crown" with a capital "C" rather than "minister" with a capital "M"!—that it would be perfectly possible for the Scottish Minister with the agreement of the UK Minister to speak on any matter. The same sort of argument applies virtually directly to the amendment in the name of the noble Baroness, Lady Strange. On that basis and with that explanation, I hope that the amendments will not be pressed.

The Committee has had a very useful short debate that has clarified the Government's intentions. There is nothing in my amendment that detracts from the fact that the UK has responsibility in relation to the European Union. Perhaps I may give a specific example that eases the mind of the noble Lord, Lord Mackay of Ardbrecknish. If a UK Minister said to a Scottish Minister that a particular matter affected mainly Scotland, that he had other things to do and that the Scottish Minister should take over the delegation because the line had been agreed upon, and something went wrong, the UK Minister would still be accountable to the Westminster Parliament for what he had done. I see no difficulty in this matter at all—even if the noble Lord, Lord Mackay, were himself that Scottish Minister.

The consequences of that would be that the UK Minister would not let it happen again.

I accept that that may be so. The Committee has reached an astonishingly amicable agreement as to what should happen. In that spirit I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendment No. 269 not moved.]

After Clause 54, insert the following new clause—

Review Of Judiciary

(" . The First Minister shall conduct on an annual basis a review of—

  • (a) the workload of the Court of Session, the High Court of Justiciary, the Sheriff Court and the District Court, and
  • (b) whether the resources made available to those courts are adequate to meet the interests of justice.").
  • The noble Lord said: Amendment No. 270 is very much a probing amendment. It is important to ensure that there is a sufficiency of judges for the workload with which they must deal in the criminal and civil courts. Undoubtedly that workload will increase with the passing of the Scotland Bill and the Human Rights Bill. Furthermore, the powers under the Scotland Bill to deal with devolution issues give the judges a new constitutional position. I understand that the Crown Office has set up a unit to consider the impact of the Human Rights Bill with a view to ensuring that the extent to which legislation increases the workload is monitored. There is a need for a sufficiency of full-time judges. I look forward to hearing the response of the noble and learned Lord the Lord Advocate.

    I should like to intervene briefly to say that, while I understand why my noble friend has tabled this amendment, I believe it would be inappropriate to place such a statutory duty on the first minister alone. In the first instance it is the job of the courts to keep under review its own workload and the availability of resources. I have absolutely no doubt that the Lord President of the Court of Session of the day would, if he felt it necessary to seek additional resources, draw that to the attention of the Scottish executive and the United Kingdom Government.

    I concur with what has just been said by the noble and learned Lord. Both he and the Lord Advocate are aware that from time to time it is the duty of the Lord President—I have performed this duty—to draw attention to resource issues not just for the Court of Session but for courts generally. That is probably the best way around it. For my part, I would not welcome the introduction of a clause along the lines proposed by the noble Lord.

    I agree with both noble and learned Lords. At present Section 1 of the Sheriff Courts (Scotland) Act 1971 imposes a duty

    "to secure the efficient organisation and administration of the Sheriff Courts".
    That carries the clear implication that Scottish Ministers must seek to provide the necessary resources to achieve that desirable aim. But there are no statutory equivalent responsibilities with regard to the Supreme Courts where the historic role of the Lord President of the Court of Session comes into play. The holder of that high office, whom I am pleased to see in the Committee today, has the task of organising the business of the courts. With that explanation, I hope that the noble Lord will withdraw his amendment.

    I am very grateful to the noble and learned Lord the Lord Advocate for his explanation. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    4.45 p.m.

    After Clause 54, insert the following new clause—

    Consultation With Business

    (" . The Scottish Ministers shall carry out consultation with such organisations representative of business and such other organisations as they consider appropriate, having regard to the impact of the exercise by the Parliament of its functions on the interests of business.").

    The noble Earl said: I make no secret of the fact that I have lifted this proposed clause from the Government of Wales Bill. The new Scottish parliament must have new businesses very much in mind, particularly small businesses. Recently small businesses have thrived in Scotland and made an enormous contribution to the welfare of this country. I do not believe that I need say any more. I beg to move.

    My noble friend introduces an interesting new clause. I recall that we spent a few happy minutes, perhaps longer, discussing a similar clause in the context of the Government of Wales Bill. In that Bill there are a number of clauses in which consultation is spelt out. Business was virtually missed out. Some noble Lords believed that that was wrong, that the position of business should be enhanced and consultation with business should be spelt out in more or less the same way as with various pressure groups. I am not surprised that my noble friend is alert to what is in one Bill and not the other and has tabled this amendment. I look forward to the response of the Minister.

    Since the proposed new clause has been lifted straight out of the Government of Wales Bill, why is there a need to "carry out consultation"? Surely, the verb "to consult" suffices.

    As the noble Earl has explained, Amendment No. 271 would impose a requirement on Scottish Ministers to consult business representatives and other appropriate organisations about the impact of the parliament's activities on business. As the noble Earl has explained and as the Government have spotted, the amendment is based on a provision in the Government of Wales Bill. That provision requires the assembly to carry out this kind of consultation.

    The noble Earl is very well aware that the Government of Wales Bill requires the assembly to consult in a number of areas, for example in promoting voluntary organisations and sustainable development, but we have not imposed similar requirements on the parliament or the Scottish executive in this Bill. Quite simply, it would not be appropriate to make similar provision for the Scottish parliament which will be a legislative rather than an executive body. The nature of the Scottish parliament and Welsh assembly is very different. As I and my noble friends have explained at other points in Committee, what may be appropriate for one is not necessarily appropriate for the other.

    In this case, as in many others, direct comparisons cannot be made between the Scotland Bill and the Government of Wales Bill. There are two very important differences in the two entities which the Bills create. The Scotland Bill creates a parliament which must be allowed to decide for itself the duties that it should impose on the Scottish executive, whereas the Government of Wales Bill sets up the Welsh assembly which in many respects is more akin to an executive body. There is no Welsh parliament which in future can impose duties on the Welsh assembly. The imposition of duties on the Welsh assembly can best be done through the Government of Wales Bill but the imposition of duties on the Scottish executive should be left to the Scottish parliament.

    Scottish Ministers may very well want to take account of the implications for business of the activities of the parliament, and their legislative proposals and the parliament may want to take evidence from these groups. It might even decide that it would be appropriate to have something akin to the assessment of compliance costs for business which forms part of the regulatory appraisal that must accompany all relevant regulatory proposals presented to this Parliament. However, as we have made clear, we believe that this is a matter for the Scottish executive and parliament to decide for themselves. In the light of my explanation, I hope that the noble Earl will withdraw his amendment.

    I am most grateful to the Minister for her very helpful explanation. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 55 [ Property and liabilities of the Scottish Ministers]:

    Page 24, line 22, after ("Property") insert (", including property outside Scotland held for the purposes of facilitating discussion with Ministers of the Crown in relation to matters relevant to the competencies of the Parliament and Parliament,").

    The noble Lord said: The effect of this particular amendment is to ensure that the Scottish executive can hold property outside Scotland so as to facilitate discussions between Ministers of the Crown and Ministers of the Scottish executive in relation to matters relevant to the competencies of both parliaments. It is important that the Scottish executive has a base outwith Scotland in which it can hold or host meetings or carry out necessary work which is of significance to the people of Scotland. This means that the first minister and Scottish Ministers should have ready access to the use of facilities close to or within Whitehall and near to the United Kingdom Parliament. Dover House is ideally situated. Can the Minister or the noble and learned Lord the Lord Advocate in reply enlighten the Committee about rumours that the Prime Minister has strong views on this subject? Can the Minister say what the Prime Minister's policy is on this subject? Is Dover House to be used for the Scottish executive or will it be occupied by others who perhaps are less involved with the government of Scotland? What is the position with regard to the lease organised by a previous Lord Advocate in relation to Dover House? When does the lease expire and is there not a strong case for ensuring that that lease continues?

    There also has to be sufficient accommodation for the Advocate General who has to be adviser to the United Kingdom Government. What accommodation is to be afforded to the Advocate General? Is Dover House to be prevented from being handed over to the Scottish executive rather like the Tantalus grapes, only to have this rich prize snatched away for the benefit of other groups? If it is the Government's purpose to transfer Dover House to the Scottish executive, how best could this be achieved? Is there provision in the Bill to secure that particular objective? Could that be done without a vast bill being inflicted on the Scottish taxpayer? If not, how best could their purpose be achieved?

    The benefits of Dover House are there for all to see. There are rooms for at least five or more ministers and the head of the Scottish civil service. There is room for special advisers. There are rooms for private secretaries, parliamentary clerks and even a press corps. There is room for civil servants, many more rooms on the third and fourth floors, and even a number of beds for those civil servants who are sufficiently diligent to work late or throughout the night.

    I do not think so. I would be most grateful to hear from the Minister what proposals he could put forward in this connection if decisions have not already been made.

    I would add that there is the most modern form of video conferencing in existence in Dover House. Should not this magnificent house, which has been the home of Lord Melbourne and his wayward wife Lady Caroline Lamb, also be provided as being of some relevance to the Scottish executive? There is an important principle embodied in this amendment; namely, that the Scottish executive should have a suitable place. There should be legislation in one form or another to ensure that this becomes a reality.

    The noble Lord raises a very interesting point and I greatly look forward to the answer. In answering, could the noble and learned Lord tell us not just what is going to happen to St. Andrew's House but, if it is no longer a Scottish Office of any form, where the Secretary of State will have his base? Where, for example, will the Moderator of the Church of Scotland visit the Scottish members of this Parliament? Could he also tell us what is going to happen to his offices, which are quite copious and convenient in Carlton Gardens? Will the Lord Advocate of the day be entirely absent from those offices and will it simply be the Advocate General who will be there on his own, with his staff? Will the Lord Advocate have no base in London?

    These are all very interesting points, probably not so much to the public at large but certainly to Members of the other place and to this House, and it will be of great interest to the members of the Scottish parliament. I would be most grateful if we could be told what is going to happen about that, as well as what is implied in the Bill.

    Is the Minister aware that the kingdom of Scotland held property in the Scotland Yard and Whitehall Court area for very many years?

    Does the wording of the amendment mean property can be held outside Scotland only to facilitate discussion with Ministers of the Crown? What about holding property outside Scotland where it is necessary to have an office to encourage business to go to Scotland, maybe in a part of the world that is not even part of the United Kingdom? Would this particular amendment limit the area in which the Scottish parliament could own property?

    My noble friend has raised an interesting point which goes beyond the bricks and mortar of Dover House or Carlton Gardens. Indeed, those of your Lordships who have been to Dover House know that it is a very grand building. There is always competition among Scottish junior ministers as to who will get Lady Caroline Lamb's bedroom, I suspect in the hope that her ghost may turn up, preferably while they are there. I have to say that I never saw her ghost; I am not sure that my noble friend ever did either. There were some frightening things that came through Dover House, but not Lady Caroline Lamb's ghost.

    As I understand it, and putting it in its most general form, the Scottish Office has two buildings: one at Dover House and the other at Carlton Gardens, though that is more rightly described as the Lord Advocate's premises. What do the Government envisage will be the future of Carlton Gardens. Will the Advocate General take up residence there or will he perhaps move to Dover House? Clearly there will not be the need for so much accommodation for the Scottish ministerial team, because as I understand it it will be reduced to one; namely, the Secretary of State himself.

    My noble and learned friend Lord Fraser of Carmyllie has already indicated that he thought the most difficult decision a future Secretary of State for Scotland and an Advocate General would have to make would be where to have lunch together on each day on which the House was sitting. I suspect that it would be much easier if they both inhabited Dover House. The serious point, however, is this. Dover House is at the centre of Whitehall. The Scottish Office is therefore one of the serious offices of state which inhabit an office in Whitehall. Those of your Lordships who have been in offices which are not in Whitehall will know that it leads to some disadvantage. It may be that it should not do so, but it does. There is therefore an advantage in the Scottish Office being in Whitehall. The Secretary of State for Scotland will need a Whitehall base in London. I very much hope that he will remain in Dover House with its key position.

    I also hope that he will be able to share Dover House with those people from the Scottish government who will need to be in London in order to do business, either with the Secretary of State or, as we have discussed earlier, with Ministers who will be negotiating matters on the European Union or whatever it may be. It is essential that those officials and Ministers should have proper accommodation here in London from which to work when they conduct these negotiations. It would be a downgrading of the Scottish position if the Scottish Secretary of State and the Scottish government from the Scottish parliament were to be moved out of Dover House, which I think is exactly the right place. It would certainly cause some resentment among many people who have worked there, who know it and who realise its symbolic importance to Scotland, if it were to be taken over as a kind of adjunct to No. 10 Downing Street in which to throw parties. I fully accept that it must be one of the grandest buildings in Whitehall, perhaps in central London, in which to throw a party. The Scots are the best at throwing parties. Dover House should remain the residence of the Secretary of State and the pied-à-terre of the Scottish government and its officials when they visit London.

    5 p.m.

    There may be room for some of those dispossessed Ministers at the Caledonian Club where we fly the Scottish saltire and have an excellent lunch.

    It has been an interesting debate, with speculation about what might happen to property in the future. However, the Government cannot accept the amendment for two reasons. First, it is unnecessary. The second reason is related to the first. The point was raised by the noble Lord, Lord Swinfen. The amendment would restrict the powers which already exist for the Scottish executive to hold property outwith Scotland. Nothing in the Bill prevents Scottish Ministers from holding property outwith Scotland in connection with the exercise of their functions; and that is much wider than the purpose which the noble Lord put in his amendment.

    Clause 56 of the Bill allows that,
    "Subordinate legislation may provide for the transfer to Scottish Ministers any property to which this section applies; or (b) for the Scottish Ministers to have such rights or interests in relation to any property".
    Subsection (2) explains that,
    "This section applies to property belonging to a Minister of the Crown which appears to the person making the legislation—
    (a) to be held or used wholly or partly for or in connection with the exercise of devolved functions, or"—
    if it does not fall within paragraph(b)—
    "when last held or used for or in connection with the exercise of any function, to have been within that paragraph".
    At the date of transfer the property which is held by the Scottish Office will fall within paragraph (b). It will be then for the person making the legislation to make appropriate transfer orders.

    The speculation about Dover House is precisely that. After devolution there will undoubtedly be a continuing need for the Scottish executive to have a physical base in London. I do not think that anyone disputes that. It is difficult to predict the intensity of the use, or the precise amount of accommodation, which will be required. We anticipate that after devolution it would be necessary for officials—as well as, on occasions perhaps, members of the executive—to be in London almost as much as at present to maintain close contact with Whitehall departments. Indeed, there may even be an argument that they would be here more often than officials who travel to and from Scotland, to ensure that there is appropriate contact between the Scottish executive and the United Kingdom Government.

    It is not possible at this stage to indicate what the precise arrangements will be either in relation to Dover House or Carlton Gardens. Perhaps I may say to the noble Baroness, Lady Carnegy of Lour, that although it is likely that officials from the Scottish executive will be in London, and perhaps Scottish Ministers occasionally for the purpose of meetings, it is unlikely that the Lord Advocate would be in London for any significant period. Certainly I would not envisage the Lord Advocate or his department requiring separate accommodation in London.

    With that explanation, I hope that the noble Lord will feel able to withdraw the amendment.

    Out of interest; if, say, the Prime Minister wanted to hire Dover House for a party and it belonged to the Scottish executive, would the rent the Prime Minister paid have to be returned to the Treasury?

    The noble Baroness poses an interesting question. It is of course hypothetical. I would think that it would depend on the terms in which the property was held.

    The noble and learned Lord explained to my noble friend why the amendment may be too narrowly drawn, given that the Scottish government may want offices outside Scotland to advance economic development, inward investment, and so on, but he has not answered the questions about Dover House. I know that it is speculation, but we have a right to know what the Government intend.

    If the Government have not thought about the matter can we have an assurance that the Secretary of State will fight to prevent people getting their hands on Dover House before the Scottish government are set up and can take part in any such discussions? Having been involved in government, I believe that it would be considerably to Scotland's disadvantage if officials who might wish to be in London were moved out of Whitehall into less salubrious property. It would simply look as though Scotland were downgraded.

    I am amazed to hear that the noble and learned Lord thinks that there will be more officials in London from Scotland after devolution. I thought the whole point of devolution was that there might be fewer officials in London; but one learns something new every day. Given the volatile nature of the Scottish political scene, and just in case Mrs. Helen Liddell is not able to turn the tide of nationalism, is it not sensible that the Secretary of State keeps a grip on Dover House so that if the worst comes to the worst it can be the embassy of Scotland in its nearest and dearest neighbour England?

    The noble and learned Lord responded as regards the property of Dover House. Might we have some assurance on the contents of Dover House? In the room which I believe is presently occupied by the Minister of State—it is quite the grandest room in all of Whitehall—are hung two of the finest Allan Ramsay paintings in the land. In the presence of one of their number, I have to say to the noble and learned Lord, if he does not know, that the trustees of the National Gallery of Scotland are trying to get their thieving hands on those portraits!

    Can we have a further assurance from him that every effort will be made to ensure that those paintings are retained and hung in that room where they look absolutely splendid?

    Reference was made by the noble Baroness, Lady Carnegy of Lour, to the Advocate General for Scotland who has been described as a rather shadowy "third man". However, that suggests that he or she will be an entirely new person exercising what I suspect will be a difficult and sensitive role, which must be seen as being of complete independence, too.

    I hope that the Government will bear in mind the need for the Advocate General to be suitably housed. The Government may have in mind that the present premises in Carlton Gardens would go to the Advocate General; or perhaps not. However, the Advocate General should be separately housed, so that he or she can be seen to be acting entirely independently in an important legal role such as the Lord Advocate at present occupies. Lord Advocates for many years have had separate accommodation.

    I am grateful to the noble and learned Lord the Lord Advocate for enlightening the Committee that the Scottish executive will be able to have a base.

    I wonder whether I may ask my noble friend to ask the Lord Advocate to answer some of the points just made.

    My noble friend anticipates some of the remarks I shall make. First, I thank the Lord Advocate for confirming that a base can be owned outwith Scotland; and, secondly, that there would and should be such a base in Whitehall. I shall be grateful if he will tell the Committee exactly what present considerations are before the Government with regard to the future of Dover House. There must be considerations. This must be a key issue. I believe that while the Bill is going through Parliament it is an appropriate opportunity for the Lord Advocate to say what those considerations are.

    It is an attractive base and has been used by many. Indeed, in days gone by I was asked to move out of my office in order to accommodate Sir Robin Butler when he was moved out of Downing Street during the refurbishment of his rooms. Field Marshal Montgomery of Alamein also had the use of those rooms at one time. It would be helpful to know exactly what the proposals are. We would be grateful for confirmation that a fight is being put up in the best interests of Scotland.

    I shall deal first with the points raised by the noble and learned Lord, Lord Rodger of Earlsferry. As regards accommodation for the Advocate General, no discussions have taken place on that or on the future of Dover House. The Committee will appreciate that we are some way from the date at which the transfer will take place. However, I can assure the noble and learned Lord that the Government will take note of his comments in reaching a decision on an appropriate base for the Advocate General for Scotland.

    As regards Dover House, the noble Lord, Lord Mackay of Ardbrecknish, asked whether my right honourable friend the Secretary of State for Scotland would fight his corner. I can assure the noble Lord that my right honourable friend will look to the interests of Scotland in this issue, as he has done throughout his office. The future of Dover House will be the subject of discussions within government at the appropriate time. When it is possible to make an announcement or to give further information to your Lordships I am sure that that will be done either by me or by one of my noble friends.

    In relation to the paintings, I am sure that the interests of the trustees and of the Government will ultimately be resolved, perhaps in a court.

    To whom will the freehold belong? Will the Scots pay a rent to the English for the use of their property?

    The transfer of the property is covered by the Bill. The property will transfer to the Scottish executive or it will remain with the British Government, as the case may be. If there is a transfer to the Scottish executive it will belong to the Scottish executive.

    Dover House belongs to the Crown Estate. It is a long time since I was a Crown Estate Commissioner, but if I am right will the Government ensure that the Crown Estate is fully informed of the debate?

    I can assure the noble Earl that the interest of the Crown Estate will be respected and the Crown Estate Commissioners will be fully advised of the situation. If there is a Crown Estate interest it will be respected and any lease or other arrangements from the Commissioners would transfer either to the Scottish executive or remain with the United Kingdom Government.

    Am I right in thinking that not only will the property be transferred but so, too, will the liabilities which go with it?

    I am extremely grateful to the Lord Advocate for giving us more information. I hope that when decisions are made further information will be supplied, as we are acutely interested in the subject. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 55 agreed to.

    Clause 56 [ Transfers to the Scottish Ministers]:

    5.15 p.m.

    Page 24, line 36, leave out ("to which this section applies") and insert ("belonging to a Minister of the Crown or government department").

    Page 24, line 39, leave out ("to which this section applies") and insert ("belonging to a Minister of the Crown or government department").

    On Question, amendments agreed to.

    Page 24, line 41, at end insert—

    ("( ) Any subordinate legislation under subsection (1) above which transfers heritable property shall be registrable in the Register of Sasines or the Land Register for Scotland.").

    The noble and learned Lord said: Amendments Nos. 271C and 271K are technical amendments dealing with the importance of keeping the property records of Scotland up to date in the event that powers to be given in Clauses 55 and 58 to transfer property in the first place to the Scottish Ministers and in the second place to the Lord Advocate are used.

    It is accepted on all sides that such registers should be as accurate as possible. The Government would set a good example by accepting the proposal that if any orders are made they should be recorded either in the Register of Sasines or the Land Register for Scotland, whichever is appropriate. I beg to move.

    These amendments are unnecessary. The Bill, when it receives Royal Assent, together with the subordinate legislation transferring the property, will constitute a sufficient link in the title which the Scottish Ministers or the Lord Advocate can use to register title to particular items of heritable property if they so wish. As the noble and learned Lord will be aware, they could record a notice of title using the Act and the subordinate legislation as links. That would not always be necessary, but would accord with the usual practice.

    It would be most unusual to provide for the registration in Scotland of subordinate legislation transferring property. It is unlikely that such subordinate legislation would list each particular item of heritable property transferred and it would certainly not contain a full conveyancing description. The burden on the Keeper of the Registers would therefore be enormous and he would have an almost impossible task in identifying the titles against which to show the subordinate legislation. The simplest way in respect of particular items of property would be to register a notice of title.

    There would of course be nothing to prevent the title to any particular heritable property so transferred from being formally recorded at a later stage if Scottish Ministers or the Lord Advocate were minded to. I invite the noble and learned Lord to withdraw the amendment.

    Should not the transfer be registrable under the Land Registration Act?

    It may well be, but the same issue would arise because subordinate legislation might not identify the particular property.

    It is a matter for the Government, but they might care to consider whether, since there would be a transfer, it would require registration under the Land Registration Act.

    The amendments were moved in the hope that they might be helpful. I am surprised that subordinate legislation is being contemplated which does not identify the property that has been transferred by it.

    I shall look carefully at what the noble and learned Lord the Lord Advocate said and I shall research the point made by the noble and learned Lord, Lord Rodger. It may be necessary to raise the issue again on Report. In the meantime, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Page 24, line 42, leave out subsection (2).

    Page 25, line 6, after ("Crown") insert ("or government department").

    Page 25, line 6, leave out from ("subject") to end of line 12.

    Page 25, line 12, at end insert—

    ("( ) Subordinate legislation under this section may only be made in connection with any transfer or sharing of functions of a Minister of the Crown by virtue of section 49, 59 or 84 or in any other circumstances in which the person making the legislation considers it appropriate to do so for the purposes of this Act.").

    On Question, amendments agreed to.

    Clause 56, as amended, agreed to.

    Clause 57 agreed to.

    Clause 58 [ Transfers to the Lord Advocate]:

    Page 25, line 28, leave out ("to which this section applies,") and insert ("belonging to a Minister of the Crown or government department,").
    Page 25, line 31, leave out ("to which this section applies") and insert ("belonging to a Minister of the Crown or government department").

    On Question, amendments agreed to.

    [ Amendment No. 271K not moved.]

    Page 25, line 34, leave out subsection (2).

    Page 25, line 43, after ("Crown") insert ("or government department").

    Page 25, line 43, leave out from ("subject") to end of line 3 on page 26.

    Page 26, line 3, at end insert—

    ("( ) Subordinate legislation under this section may only be made in connection with the Lord Advocate becoming a member of the Scottish Executive or having any retained functions or in any other circumstances in which the person making the legislation considers it appropriate to do so for the purposes of this Act.").

    On Question, amendments agreed to.

    Clause 58, as amended, agreed to.

    Clause 59 [ Power to transfer functions]:

    Page 26, leave out line 8.

    The noble and learned Lord said: This amendment and Amendment No. 271T raise certain issues relating to the powers which are proposed in Clause 59 to the effect that Her Majesty may, by Order in Council, provide for functions which are currently exercisable by a Minister of the Crown in, or as regards, Scotland to be exercised in different ways: first, by Scottish Ministers in place of or instead of a Minister of the Crown; secondly by Scottish Ministers concurrently with a Minister of the Crown; and thirdly by the Minister of the Crown only with the agreement of or after consultation with Scottish Ministers.

    That is a power which could be used to transfer to the Scottish executive, either to act on its own or to act concurrently with Ministers of the Crown, executive competence over a wide range of functions additional to the executive competence which will flow from other provisions of the Bill.

    As Members of the Committee will be aware, there has been deposited in the Printed Paper Office a draft of the first Order in Council under Clause 59 which extends to almost 90 pages and indicates a huge variety of functions under a large number of Acts, covering a great range of reserved matters as those are to be found in Schedule 5.

    The purpose of the amendments are two-fold: first, to prevent that expansion of executive competence in a manner which would exclude altogether a Minister of the Crown. I have no objection to Scottish ministers being given such competence which they could exercise concurrently with Ministers of the Crown. As I understand it, in such a situation one or other could act and no doubt the working arrangements, whether they be by way of concordat or otherwise which will evolve in the years ahead, will ensure which one does act. But I am concerned about the Minister of the Crown being excluded from having any executive competence in those fields which all relate to reserved matters.

    Amendment No. 271T seeks to ensure that it is not one-way traffic; in other words at present all that can happen is that the executive powers of British Government Ministers can go to Scottish Ministers in one of the three ways set out in Clause 59(1). If that power is exercised, it can mean only that the executive competence of Ministers of the Scottish executive increases every time another Order in Council is made.

    The purpose of Amendment No. 271T is to enable there to be a reverse process in circumstances that if Her Majesty in Council decided that a particular executive power should go back to the Minister of the Crown alone, or be altered in the second and third ways set out in subsection (1), that also would be competent. I should indicate that I have no objection to government Amendment No. 271TA. I beg to move.

    Members of the Committee on these Benches do not agree with this series of amendments. We regard Clause 59 as providing a very welcome, flexible process by which, over the years, some executive functions may transfer. I simply do not understand the objection to that by the Conservative Party. It is quite clear in subsection (1)(a) that if functions are to be transferred to Scottish Ministers instead of a Minister of the Crown, Ministers of the Crown must agree to that, otherwise it would not happen. Therefore, I am afraid that this is the Conservative Party reverting to type and the great conversion on which I praised the noble Lord, Lord Mackay, on occasion has temporarily disappeared.

    I find the last comments of the noble Lord, Lord Steel, surprising as well as being unacceptable. Surely the overriding factor which we must bear in mind in considering these amendments is that although there is to be devolution, and on a fairly large scale, the unity of the United Kingdom must be preserved.

    If merely by an Order in Council Scottish Ministers are to have responsibilities transferred to them by a Minister of the Crown, that departs from the definite character of devolution at which we should aim. Flexibility in many matters of government is worthwhile. However, we must bear in mind the need for preserving the unity of the United Kingdom and giving the United Kingdom Government and Parliament the power to do what is necessary for the country as a whole. I believe that the amendment proposed by my noble and learned friend is necessary.

    Amendments Nos. 271Q and 271T are about the executive devolution of functions to Scottish Ministers; that is the process by which executive functions which relate to reserved matters are to be exercisable, in particular as regards Scotland by Scottish Ministers.

    Amendment No. 271Q would prevent any such functions being transferred to Scottish Ministers so as to be wholly the responsibility of those Scottish Ministers. That transfer would take place only by order and on the initiative of a Minister of the Crown. On the basis of this amendment, that option would not be available to the Minister of the Crown. By preventing functions being transferred to Scottish Ministers in that way, the amendment goes against the very principle of devolution and introduces a degree of inflexibility into the system that I do not want.

    The transfer order to set in train that process would be an Order in Council which would be affirmative in both Westminster and the Scottish parliament so there is plenty of opportunity for both parliaments to come to a view as to whether the content of the order is appropriate in any particular.

    Amendment No. 271T appears to be intended to allow for the statutory functions exercisable by Scottish Ministers to be transferred to UK Ministers or to be exercisable by UK Ministers of the Crown either concurrently with Scottish Ministers or with the agreement of or after consultation with Scottish Ministers. I assure the noble and learned Lord that that matter is covered fully by Clause 98. An order under that clause can provide functions exercisable by a member of the Scottish executive to be transferred to a UK Minister or to be made concurrently exercisable by a Scottish Minister and a UK Minister. Again, it is the order route and I believe that that maintains the right framework and provides the right vehicle.

    Therefore, I trust that having been given that explanation the noble and learned Lord will be able to withdraw his amendment.

    I turn now to Amendment No. 271TA which stands in my name. Clause 59 provides that a function to be transferred or made concurrent under a Clause 59 order is exercisable only,
    "with the agreement of, or after consultation with, another Minister of the Crown or other person".
    Then, unless the order provides otherwise,
    "the function shall be exercisable…free from any such requirement".
    Amendment No. 271TA removes the reference to the "other person", so that, for example, a requirement to consult the local authority transfers automatically with the function. Further reflection on the wording of Clause 59 has led us to conclude that it is right that where a UK Minister is required to obtain the agreement of, or consult with, a third party—the "other person"—the Scottish Ministers should also be subject to the same requirement when they come to exercise that function after devolution. I am grateful to see the noble and learned Lord, Lord Mackay of Drumadoon, indicate that he has no objection to my amendment. On that basis, I hope that it will be acceptable to the Committee.

    5.30 p.m.

    I am only going by what I read in the Bill, but I am worried about the proposal to leave out the words "or other person", as set out in Amendment No. 271TA. I must say that I felt the original words would cover—and here I am on shaky ground—the independence of the Law Officers, because they are not quite Ministers of the Crown in this respect. I thought that the words "or other person" were designed to cover them within the provisions.

    No, that is not the case. The "other person" in this subsection would relate to a situation where it was necessary for a Minister to consult a local authority or some other body before exercising his functions.

    Can the Minister confirm whether I am correct in thinking that we are now discussing the transfer of reserved or devolved matters between the Westminster Parliament and the Scottish parliament?

    No, that is not the case. We are not discussing the transfer of reserved or devolved matters; we are talking about the transfer of executive function, not legislative competence.

    I understand the argument advanced by the Minister, but surely the power in Clause 59(1)(a) should be limited to such change as is made necessary by the power given under Clause 29 which says:

    "Her Majesty may by Order in Council make any modifications of that Schedule"—
    that is, the schedule which defines the reserve powers and exceptions. The Minister's argument was that the functions must be transferred because the legislative powers have been transferred. If that is not so—

    Well, if it is not so, when he reads the Hansard report of the debate I think the Minister will find that he has limited it in that way.

    It is perhaps necessary to pull back a little and recognise the difference between legislative devolution—that is, the devolution of legislative competence—and some executive acts in respect of which, where the legislative competence is reserved, the executive authority will nevertheless devolve to Ministers.

    As the noble and learned Lord mentioned, we published a draft order in February and a further draft was made available on 10th July. They indicated the different categories into which various executive functions would be allocated; for example, those relating to reserved matters. Some were to be transferred to the Scottish Ministers, some would be made concurrently exercisable by the Scottish Ministers and a UK Minister, and some would be exercisable by UK Ministers only with the agreement of, or after consultation with, the Scottish Ministers.

    The current version of the draft order lists over 400 functions which will be treated in one of those three ways. The majority of them will be transferred to Scottish Ministers so that only the Scottish Ministers will exercise that function in or as regards Scotland after devolution. Functions to be executively devolved include functions relating to betting, gaming and lotteries, firearms licensing, extradition, funding Gaelic broadcasting, appointments to tribunals, powers and duties in respect of electricity supply, roads and airports, the running of public sector pension schemes and the approving of places where abortions may be carried out. Those are all areas where the legislative competence remains reserved, but they are executive functions which conveniently, on the basis of common sense, are best carried out by the Scottish executive.

    I was disappointed to hear the noble Lord, Lord Steel, accuse me of reverting to type. Indeed, from day one of the proceedings on the Bill I have made quite clear where my priorities lie; namely, to make the Scottish parliament and the Scottish executive as successful as possible. In the first of my amendments I was not seeking to prevent the transfer of some executive authority or executive competence to Scottish Ministers in relation to reserved matters, if that was sensible. I fully accept that there are many instances where it is highly sensible that they should have that executive competence. I was seeking to avoid a situation where the sole person who would have executive competence would be a Scottish Minister in a situation where the only body which would have legislative competence would be this Parliament. I anticipate that what is competent under Clause 59(1)(a) could, in certain circumstances, give rise to tension between London and Edinburgh.

    I draw the Committee's attention to one example which happened to catch my eye in the draft order. There are certain powers under the Abortion Act 1967 where the executive competence is to be devolved. I hope that I am right in that assumption. Indeed, this is a matter where the Scottish Ministers alone would have that power; yet the legislative competence lies entirely here, as noble Lords decided in a vote earlier this week. Therefore, it is possible that a problem could arise, which could be avoided, if we were limited to Clause 59(1)(a). That is why I raised the matter. I hope that I did so in a constructive manner.

    On Amendment No. 271T, I fully accept that, when one looks at Clause 98, it could be construed as covering sending the powers back. Indeed, I should have appreciated that earlier. I fully accept that this amendment is unnecessary. However, I have raised the matter, and I now beg leave to withdraw Amendment No. 271Q.

    Amendment, by leave, withdrawn.

    [ Amendments Nos. 271R to 271T not moved.]

    Page 26, line 15, leave out ("or other person").

    On Question, amendment agreed to.

    Clause 59, as amended, agreed to.

    Clause 60 [ Transfers of property and liabilities in connection with functions]:

    On Question, Whether Clause 60 shall stand part of the Bill?

    I must point out to the Committee that, on this Bill, I have not reached my best until about 10.30 at night. Indeed, this is just the opening canter. Clause 60 is no longer required in consequence of Amendment No. 271G, which the Committee agreed to earlier.

    Clause 60 negatived.

    Clause 61 [ Scottish Consolidated Fund]:

    Page 27, line 4, at beginning insert ("Recognising the needs of Scotland in relation to the United Kingdom as a whole,")

    The noble Lord said: We now come to Part III of the Bill which concerns financial provisions. Amendments in this group stand in my name, one in the name of my noble friend Lord Dixon-Smith and I believe two in the name of the noble Lord, Lord Steel of Aikwood. These amendments deal with the question of the money which is to go to the Scots parliament, how much it is to be and how it is to be calculated.

    I should explain why I think my amendments are superior to that of my noble friend and to those of the noble Lord, Lord Steel of Aikwood. We have to be clear about exactly how the system works, and how I understand it may work in the future. I shall probably have to help the Government as they do not appear to be able to find their way in their own Bill at the moment.

    5.45 p.m.

    It may be cheap, but it is true. One of the interesting aspects of all discussion on the money which goes to the Scottish Office currently—and which will, of course, go to the Scottish parliament—is a total confusion about exactly what the Barnett formula does and is. The Barnett formula is not the mechanism for determining spending levels in Scotland. It determines only the annual changes that take place to the totals. The block itself is determined quite separately.

    The Barnett formula was devised—but not named—by the noble Lord, Lord Barnett, when he was the Chief Secretary to the Treasury in 1978. It replaced a formula called the Goschen formula which was named after the forebear of my noble friend Lord Goschen, and which I believe had lasted for some considerable time. The noble Lord, Lord Barnett, did not name his formula. Interestingly enough, it was named by Mr. David Heald, who is now the professor of accountancy at Aberdeen University. It is amazing how Aberdeen University has cropped up throughout the Committee stage of this Bill, sometimes to the Government's advantage, but sometimes, I suspect, to their disadvantage. In 1980 Mr. Heald wrote when he was then at the University of Strathclyde's centre for the study of public policy,
    "All formulae need a name. In the apparent absence of an official one I now name this the Barnett formula. Perhaps some day this will make Joel Barnett as famous as Lord Goschen".
    It certainly has made the noble Lord, Lord Barnett, as famous as Lord Goschen; they talk about little else but the Barnett formula in the pubs of Scotland.

    As regards the Scottish Office expenditure—and therefore the expenditure which will go to the new parliament—the block itself constitutes about 96 per cent. of the Scottish Office spend. I know that my noble friend the Duke of Montrose is interested in agriculture, fisheries and food. However, those matters are outwith the block. Perhaps we should establish whether that will continue to be the case. In the deep recesses of the Treasury a decision is made every year as regards what the percentage uplift should be for each department's spending. That is decided on inflation factors. We shall discuss later exactly how that is or ought to be measured. Thereafter there are negotiations between the Treasury and the English, or English and Welsh spending departments. They agree either increases or decreases. If they agree an increase, a proportion of that increase is added to the Scottish block. If they agree a decrease—that does not happen terribly often, but it happens occasionally—a proportionate cut is made.

    Until 1992 the formula was related to population—as I believe one of the amendments in this group states—and it was 10/90ths for English and Welsh expenditure together and 10/85ths for England only. However, in 1992, after the censuses, the formula was changed. Now if there is an increase in an English department, the Scottish Office will receive 10.66 per cent. of that increase. If that occurs in an English and Welsh department such as the Home Office—I think that is the only case where this applies—the figure is 10.06 per cent.

    The principle which the noble Lord, Lord Barnett, had in mind was that, over time, spending per head in Scotland ought to reduce to the English level. However, the simple fact is that the noble Lord, Lord Barnett, was wrong in that regard. Convergence has not occurred largely because of advantageous changes which have been made to the block thanks to the negotiating power of successive Secretaries of State. To be honest, these are negotiating changes which I—

    Is there not perhaps another reason; namely, the emerging SNP? It has nothing to do with negotiations.

    I imagine that quite often Secretaries of State say to their Treasury colleagues, "If you do not give me some more money, the SNP will obtain more votes". However, that has not been terribly successful in stopping the march of the SNP in the past few months. The Government have now decided that rather than give more money, they will send a Treasury Minister. I am not entirely sure whether she will fare much better. But in fairness to my right honourable friends—some of whom are now my noble friends—they negotiated favourable positions thanks to the clout they had in Whitehall. That clout will be removed. There are therefore two ways in which this money is made up. It is because there are two ways that I think the formula advanced by the noble Lord, Lord Steel of Aikwood, misses the point entirely because his amendment implies—if I read it correctly—that the Barnett formula affects the whole of the block. However, that is not the case: it is not nearly as mechanistic as that.

    In 1980 there was an interesting exchange. It was interesting partly because of what was said, but also partly because of the two individuals who took part. There was an exchange between Donald Dewar—now the Secretary of State for Scotland, but then the chairman of the Scottish Select Committee—and the then Secretary of State, my noble friend Lord Younger of Leckie, then Mr. George Younger. In answer to Donald Dewar, George Younger said,
    "There are two different sorts of expenditure which come under my control. Those sorts of expenditure which have comparable forms of expenditure in England like education, health etc., are common to north and south of the Border, and other sorts of expenditure which are not strictly comparable. They are dealt with differently. What you have just asked refers to the main block of expenditure which concerns the comparable programmes. The way those are adjusted year by year is that they are argued on a general basis within government as comparable programmes as a whole".
    That is why Scottish Office Ministers invariably accompany UK colleagues at discussions between the Treasury and the spending ministries. The Scottish block expenditure is calculated according to the formula that I have just explained. Mr. George Younger concludes,
    "This is, I should stress, purely for the alteration of the programmes and not for the base line from which they start".
    I must warn the Committee against making calculations and inserting mechanistic formulae which do not take into account the fact that the Barnett formula refers only to increases and decreases and not to the block.

    The noble Lord, Lord Barnett, is always greatly flattered to be quoted in Scottish debates. He gave evidence to the Treasury Select Committee of the other place just recently. He said,
    "I am flattered that the Barnett formula has lasted 20 years. I hope it will last much longer. At the time I must confess I did not think it would last a year or even 20 minutes. I was not sure".
    I say to the noble Lord, Lord Steel of Aikwood, that I am not sure the noble Lord, Lord Barnett, will be flattered if his name is put into legislation and therefore acquires the eternity that that brings with it. The noble Lord, Lord Barnett, also said,
    "Can I also make clear, as you also referred to the question of devolution, that the Barnett formula either then or now—although I know somebody said it at the time—has nothing whatsoever to do with devolution. I think that has to be borne in mind".
    In the White Paper the Government stated that the arrangements I have explained based on the block and formula,
    "have produced fair settlements for Scotland in annual public expenditure rounds and have allowed the Secretary of State for Scotland to determine spending decisions in accordance with Scottish needs and priorities. They have largely removed the need for annual negotiations between the Scottish Office and the Treasury. The Government have therefore concluded that the financial framework for the Scottish parliament should be based on these existing arrangements with, in future, the Scottish parliament determining Scottish spending priorities".
    That is fine as far as it goes, but the reality is that from time to time over the past 18 years—I have little doubt this will occur from time to time in the future—the Treasury had a go at the block. It will not have a go at the Barnett bit of the block as that does not worry the Treasury too much because it has already negotiated that matter with a Whitehall department, but it will have a go at the block, sometimes aided and abetted. When that happens, the Secretary of State has to work very hard to resist it, as I know one or two of my noble friends have had to do in their time.

    My Amendments Nos. 271U and 275A get away from the idea of the block and any mechanistic proposal and simply say that the amount of money should be allowed,
    "Recognising the needs of Scotland in relation to the United Kingdom as a whole".
    That would be a fairer and better long-term position for Scotland with regard to the money that comes to it. I am sure that it can be argued on a variety of counts that there are good reasons why Scotland ought to receive more per capita than other parts of the UK, just as it can be argued that there are good reasons in relation to Northern Ireland and Wales, and, if I may say so, that certain areas of England should have higher expenditure per capita than other parts of the United Kingdom. I should like to write my amendments onto the face of the Bill to make clear the basis on which any future discussion would be held on the block itself.

    My noble friend Lord Dixon-Smith has tabled a much more mechanistic amendment which probably introduces the "Dixon-Smith formula" into the block. I do not particularly like it. It is too mechanistic, and I believe that my amendment is better. My noble friend tries to measure the same sort of matters, such as GDP per capita in Scotland and how it relates to the rest of the UK. But there is more to the issue than merely GDP per capita in Scotland. There are questions of needs, sparsity and other factors which are present in Scotland and which require, and deserve, higher government expenditure.

    With his Amendments Nos. 272 and 274, the noble Lord, Lord Steel, wants to enshrine the Barnett formula. I do not know where that leaves the block itself. If it leaves it anywhere, it certainly leaves it open to considerable attack by the Treasury.

    Perhaps I may say a word about the previous amendment just to give the flavour of my—

    I am most grateful to the noble Lord for his exposition. It has been remarkably lucid. But surely his Amendment No. 271U, simply saying,

    "Recognising the needs of Scotland in relation to the United Kingdom as a whole",
    without any mechanistic formula whatsoever, is far more likely to be open to raids by the Treasury. I do not think the noble Lord was present on the occasion when the Secretary of State, Malcolm Rifkind, was going through the same tortuous explanation to the Commons. My noble friend Lord Russell-Johnston asked him about the application of the "OCHTHINE" formula and whether that did not apply. Malcolm Rifkind looked rather puzzled and asked what it was. He was told that it was the well-known Scottish Office dictum: "Och, tae hell, it's near enough"!

    I do not think we will have that formula, nor indeed a new Russell-Johnston formula.

    It is difficult to devise a provision that ties in the relationship between Scotland and the United Kingdom when we move to devolution. I am basing my effort on a broad-brush, broad-principled approach, because it is extremely difficult to tie the matter down. It is certainly very difficult to do so on the basis of the Barnett formula, for the reasons I have given. Perhaps some of us would merely prefer to write into the Bill, "and nothing will ever change". But in reality that cannot be done.

    Let us assume for a moment that the new Scottish parliament is as good as some of its advocates suggest, the economy of Scotland hugely improves, and some of the reasons for Scotland acquiring more money begin to disappear—as in many ways they have over the past 20 years; they have been reduced. The previous government were very successful in many regards in changing the Scottish economy, introducing new industry and so on. But if we are to have these changes, there must be some underlying principle by which future Secretaries of State and Treasury officials will judge the matter.

    The amendment tabled by the noble Earl, Lord Mar and Kellie, and my noble friend Lord Lindsay, seems a good deal more interested in territory, wildlife and scenery than it does in people. I believe that a formula should be devised more on the basis of the needs of the people of Scotland relative to the United Kingdom. I beg to move.

    I rise to speak to Amendment No. 272 and related amendments. I, too, am extremely grateful to the noble Lord, Lord Mackay of Ardbrecknish, for his exposition. It was lengthy but full of good work, and I am the wiser for it. What we are trying to do is elicit from the Government how they intend to lay down a system. The amendment is a probe to find out how in future we are to have a system that will work. It appears to us that one approach is certainly the so-called Barnett formula.

    One of the reasons that we like to think that the Barnett formula might be used has already been given by the noble Lord, Lord Mackay of Ardbrecknish. It is that successive Secretaries of State in the Tory government successfully competed with the Treasury for more money under that formula. It is a system whereby at least the supply of money is laid down according to some formula and there cannot be the kind of competition that one always gets in the Treasury—and the competition that there might be from a hostile government. The other point is that, as I understand it, there is competition between Members of the same Cabinet on some occasions. They might well use their enmity to force their own point to the detriment of Scotland.

    We are saying simply that we need a formula. If there is a formula, then at least the new Scottish government can begin to tackle the problems that have given rise to the need for more money per head as compared with England. The obvious one is the amount of area that is involved, the distance that has to be covered. Another factor to be contended with is the bad health of the people of Scotland. There is also the decline in heavy industry from which Scotland has suffered since the end of the war, although it is now catching up in the field of electronics and so on. Those are all special problems that Scotland has. If the Scottish parliament works within a formula that has been enough under previous governments, then it can do better and can do more with that money. But to leave matters as stated in subsection (2) that,
    "The Secretary of State shall from time to time make payments into the Fund out of money provided by Parliament of such amounts as he may determine"—
    is possibly a little too wide. A formula needs to be provided so that we know that for a recognisable period of time there will be adequate income for the new parliament to overcome the ills that have lowered the income per head and the need for more money per head.

    Amendment No. 279 is a simple amendment to determine what is going on, to assess the amount of money coming in from Scotland's industry, to assess the increase, and so on. That is a factor that we shall be examining. In time, if the Scottish parliament is any good at all, then it will depend on the money that it raises on its own. As the noble Lord, Lord Mackay of Ardbrecknish, said, agriculture is presently in a different category. But in Scotland it is a far more important factor proportionately than it is in England. I shall be interested to hear the Government's response. I am sure that we shall receive an admirable explanation as to how the system will work.

    I am grateful to the noble Lord, Lord Mackay of Ardbrecknish, for, in a sense, introducing my Amendment No. 273. During the course of his remarks, although he rejected it, he actually began to make the case for it. I do not need to remind the Committee that we are discussing the Scottish block—not increases to that block, but the block itself. I have tabled an amendment which attempts to protect the Government from the slings and arrows of outrageous politicians—or perhaps it should be outraged politicians. Without something on the face of the Bill, it is my view that the Government's position will become increasingly difficult as we go forward into the future.

    I have a formula of sorts which relates expenditure in Scotland to population. It picks up the factor that my noble friend Lord Mackay of Ardbrecknish mentioned of sparsity. It has an escalator clause in it in relation to prosperity. The escalator may go up and down too rapidly or it may be that the sparsity proportionality is not absolutely appropriate. However, I took the trouble to work it out in relation to existing expenditure, with a view to not causing too great a shock. Expenditure in Scotland is just below 20 per cent. greater than the average United Kingdom expenditure. I shall not trouble to compare it with the English per capita average.

    If I take the wording of the amendment proposed by the noble Lord, Lord Steel of Aikwood, literally and apply it to the Scottish block, as it is intended to be applied, it is my belief that it would lead to a dramatic reduction in the size of the Scottish block. I am sure that that is not quite what the noble Lord intends. I assume that he is applying the proportionality of the increase to the total public expenditure budget and bringing it back as a proportion to create a figure for Scotland. On my arithmetic, I think Scotland would lose if that were done. It may be that I have misinterpreted the way it is intended to be used.

    All we are saying is that we continue the block negotiations as at present. So how that can block the expenditure or reduce the amount of money coming into Scotland, I fail to follow.

    6 p.m.

    The problem with the block is that it is not a definable sum. The block itself reveals the weakness to my mind of the amendment proposed by my noble friend on the Front Bench. The block consists of a sum of money calculated annually after a negotiation between the Secretary of State for Scotland and the Treasury in which it seems that, unusually, over the years the Secretary of State for Scotland has beaten the Treasury and been successful.

    However, they will both argue that that calculation is made recognising the needs of Scotland in relation to the United Kingdom as a whole. It has always seemed to me that that is the present situation and I am sure that when the noble Lord, Lord Sewel, winds up he will tell me that that is the case. I shall be surprised if he does not. If the government of the day, in arriving at that kind of calculation, do not take account of the needs of Scotland in relation to the needs of the United Kingdom as a whole, then frankly, I do not know what they would be doing. They would certainly not be doing their proper job.

    I seek to provide protection for the Government for the future. Let me illustrate the problem. The exam questions will become more difficult as time passes. The noble Lord, Lord Sewel, will need no reminder of the differences between secondary education in England and Scotland. We had a debate on the subject a little while ago in relation to payment of fees at Scottish universities. We know that Scottish secondary education is based on a five-year module and that English secondary education is based on a six-year module. The fact is that the five-year module costs just over £900 more per pupil, but in order to make the point we will take £1,000. That is £1,000 more per pupil than the English six-year module. If I were a tight-fisted canny Scot, I would begin to wonder why this supposedly superior system, which costs £1,000 more, actually produces a product which then requires four years of university education to achieve the same degree for which an English pupil, having had less spent on him in an inferior system, only requires three years.

    Of course, I am not a canny hard-nosed Scot so I do not have to ask the question. But if I were standing as a member of the Scottish parliament I would see enormous opportunities here for re-jigging the budget. It seems to me that there are elements of excess expenditure. The point I make is this. These questions will arise and be examined in detail. They will be examined more and more from an English perspective. As the questions are asked, pressures will increasingly be put on the Government. The result will be that the Scottish block will come under critical examination and there will be pressure for it to be reduced.

    The Government will then have a choice. They can reduce it and become the enemy of Scotland or maintain it and become the enemy of England. That is not a situation in which the Government of the United Kingdom should ever permit themselves to be put. That is why I have devised a formula. It may be inadequate, it may even be that it needs considerable improvement. But I suggest in all seriousness that the Government will put themselves in jeopardy for the future if they do not put something like this on the face of the Bill.

    I am puzzled as to why we are talking about amendments on what financial assistance or entitlement will be received by Scotland when the Scottish parliament becomes fact. It does not exist yet, but as I understand the situation, people already know what they will get before the parliament has been brought into existence. In my opinion, that is a peculiar way of legislating. One only has to look at Hansard for Tuesday 14th July to see repeated in your Lordships' House the Statement on the Comprehensive Spending Review. Col. 133 states:

    "At every stage, we are linking investment to reform and it is on this basis that the Education Secretary tomorrow will announce the biggest single investment in education in the history of our country. In this and other services there will be separate announcements based on the Barnett formula for Scotland, Wales and Northern Ireland".
    There is nothing about England; we do not know what England will get. No figures are put on it.

    Will the noble Lord allow me to intervene? I have one question on what he has been saying. Does he appreciate that the increases in the Barnett formula are based on spending in England? That is why it is not mentioned.

    The reference is not only to the Barnett formula; we are talking about financial issues in general. The key figures are given at paragraph 22.4 on page 93 of the Comprehensive Spending Review:

    "The new plans will provide an additional £4.1 billion over the next three years to invest in Scottish public services".
    It has not been negotiated, it is a handout which is already known. I wonder why we are going through all the business of trying to introduce separate amendments. For the life of me, I cannot see any Chancellor of the Exchequer of the United Kingdom altering major decisions which are taken on the basis that amendments of some kind may arise. I just wonder what the situation is.

    Over a period, as is probably known by those who are interested in the Bill, I obtained a league table. I have not brought it with me because I am hoping to speak more at length when we reach Report stage. By then we will know in detail what is emerging from the Statements to which I have just referred. At present, we do not know. At that time I may be able to find out what will be paid to the different services in the English regions.

    I believe that the announcements made today or those to be made tomorrow in relation to the English regions will have come into being and they will be de facto. The chairmen of those regional councils will want to know how big a share of the cake they will receive once they know what Scotland is receiving. They would be doing less than their job if they did not ask for a better comparison than we see in the figures before us.

    In relation to every item of spending, if we take it on a per capita basis, Scotland does infinitely better than England. Wales does better on a lower scale, but the biggest difference pro rata is Northern Ireland, and there are specific reasons for that. Let me give some examples. I received some figures today. I tried to obtain them from the Treasury some time ago but was sidelined each time I asked for them. In fact, the cost of obtaining them was disproportionate to what they uncover. However, I asked some researchers to look into the situation.

    We all know that there has been a lot of antagonism, especially between Scotland and the northern counties of England just across the Border. I wanted to know how much money was being provided to buy jobs—I say "buy" jobs—for north of the Border. Finally, I obtained these figures—they are the Government's figures—from the Library. We are not talking about peanuts. They show that, in development areas, the average government subvention to Scotland was £8,103 per job; in England, it was £4,326—just slightly more than half. Wales was similar to Scotland.

    When I hear Members of your Lordships' House on the other side asking for a bigger share of the cake, as somebody from the English regions looking at these figures I say, "Not on your life. I think you are doing very well as it is". If we look at the figures produced in your Lordships' House some time ago—for instance, per capita spending on tourism—in England it is £20 a head and in Scotland £5,000.

    Those figures are beyond belief. I do not know what formula produced them, but it is amazing to me that it has been allowed to happen. And they are not my figures. The noble Lord, Lord Dixon-Smith, referred to some figures in his speech. But the known fact is that, under the present system, the total spending per capita in Scotland above the total spending per capita in England is £871 per head, which is a lot of money. According to the headlines in one of the Scottish newspapers, the new deal that was announced a few weeks ago in the spending review gives the Scottish people £800 per head out of that. That makes the difference even more, unless the Government are going to pump a substantial amount of money into the English regions. I do not want to take any of the money back from Scotland, but I do not want Scotland to have a £1,600 advantage over England in the payments it receives from the Treasury.

    I do not know whether any other Members of your Lordships' House received a booklet today called "Brigadoon". Do I take it the noble Earl wants me to give way?

    Would the noble Lord, Lord Dean of Beswick, be equally indignant if the Government were spending more per head in Mosside than they were in Trafford?

    The noble Earl draws a strange conclusion. What happened in Mosside has nothing to do with the people in Mosside; it is to do with ethnic people who have come over here and settled there in an attempt to make a home. We are dealing with people who have been established in England without variation and without specific problems.

    I am grateful to the noble Lord for giving way. Does he accept that the spending in Scotland is part of the Treaty of Union in which Scotland was asked to trade its sovereignty for economic advantage.

    If the noble Earl could say that Scotland had traded in its sovereignty when 60 per cent. of the United Kingdom Cabinet comes from north of the Border, there would be some relevance in it. Three out of the four Ministers at the Treasury who decide these issues—I believe it changed in the latest round—happen to be Scottish MPs. So it is not a bad deal they are getting.

    I believe—and I am making the point—that if all this money is going to be made available to Scotland (I have just quoted the figures from the Chancellor's report and there are substantial increases) we must keep an eye on the situation. The facts will emerge. Once the regional assemblies come into being, the people on those assemblies representing Yorkshire, Lancashire and other areas will want to know what is in it for them; how far will they be able to go in developing areas?

    It is well known that one of the most deprived areas in terms of unemployment south of the Border is the North-East. Its average input from the Government per job is just £3,000 and in Scotland it is £8,000. Let us try to tell the people in the North-East that they are getting a good deal and that the Barnett formula is working. They will tell us to go and get stuffed, to put it crudely. That is what will happen. They are starting to wake up to the situation.

    The Government are aware of the position. I do not intend to do anything about the amendments, but I shall watch the situation when we come back for Report stage. If amendments need to be tabled, there may be some anti-Scottish elements in them from looking at the figures because Scotland is doing a hell of a sight better than any of the regions in England on any of the figures produced.

    The noble Lord opposite has shown the glory of old Labour. The faces of his colleagues on the Front Bench were wonderful to behold as he spoke pure, unadulterated common sense. What he said is so obviously true; that is, that this unbalanced, block formula will do nothing other than cause anguish between England and Scotland. And anguish between England and Scotland is something that I, as a Unionist, English by geography and British by nature, find deeply offensive and terribly worrying. That was perfectly well illustrated by the intervention of the noble Earl, Lord Mar and Kellie, who simply did not understand the Act of Union one tiny bit, even though his forebear signed it.

    In this Bill we have either gone too far or we have not gone far enough. If we are to allow the Scots to have their own money, they should raise it themselves. Or they should not have it at all. What we cannot do is have a "Damascus tailor" argument over the block grant and the irritation, the hassle, the disaster and the increase in hatred—that is exactly the word I intended to use—between the English and the Scots, which to me would be the most tragic thing that could possibly happen. The noble Lord has just said from the Benches opposite exactly what I feel. He may be shaking his head, but I promise your Lordships that he did. He did it wonderfully, and I thank him.

    I am sorry that the noble Earl takes the view that I want to engender antagonism between the Scots and the English. The point I am trying to make is that I do not want any money from Scotland if it has been apportioned to them, even on the increases that have been stated. I am making the case that unless the same things are done for the English regions there will be hell to pay. I hope that the Government are listening. I do not want any aggro over it. The entitlement for those areas should be there, and it should be a fair one. That will remove the animosity. Nothing else will.

    I am sure that we all agree that the noble Lord, Lord Dean, has made a splendid speech. He has expressed the views and fears of a great many people both north and south of the Border. We should all be grateful to him. I agree with him that this is the part of the Bill that will play most immediately into the hands of the people who want to tear Scotland out of the United Kingdom unless something can be done about it.

    It also shows what the Prime Minister meant when he compared the Scottish parliament to a parish council in England. On finance, this parliament will not have anything like the power of even a local government council over its own finances. Local government councils, apart from the money they can raise through their own taxation, can buy and invest on the market; they own and control their own funds. Not so this parliament. Its funds will be raised in the way that the Bill says—of course with the extra tax—but the funds will be held in the Scottish Consolidated Fund, not in its charge but in the charge of the Paymaster General.

    If the parliament receives interest, that interest has to go back into the UK Consolidated Fund. If the Scottish parliament wants to borrow, it can only borrow for a short-term need to keep the books in balance. Again, any interest that it has to pay has to be at the Treasury rate, not the market rate.

    Apart from the tax which the parliament can raise through increased income tax, everything will depend on the size of the Treasury grant that we are discussing. The calculation which is underlying the Bill, with only the Secretary of State for Scotland in the Cabinet to defend the calculated fund, will matter enormously to the people of Scotland. The speech of the noble Lord, Lord Dean, illustrates that.

    There are two ways that it can be calculated. You can do it by a formula, openly stated either on the face of the Bill or published, which is seen to be fair. The amendment of the noble Lord, Lord Dixon-Smith, should not be underrated in this respect. It is a carefully thought-out formula and there is much to be said for it. It may be that the Government will wish to consider something like this over the summer.

    Alternatively, one could have internal arrangements, used for their own convenience by the Treasury and the Cabinet, which of course is what the Barnett formula is. My noble friend Lord Mackay of Ardbrecknish has explained that the Barnett formula does not set the rate of the block but is about increases in Scotland, Wales and Northern Ireland related to the spending in England. That is probably becoming a very old-fashioned way of proceeding. Most local government councils gave up that way of budgeting a long time ago, as I am sure the noble Lord, Lord Sewel, will agree from his experience. They go in for zero budgeting whereby they decide what they need to do and what it will cost, and start there. There is something of that in the amendment of my noble friend Lord Dixon-Smith. It is an old-fashioned way.

    Are the Government prepared to put anything more definite on the face of the Bill? That is the question that we are discussing. Before long other ideas will emerge about this. There is some thinking going on already. There is an interesting pamphlet, published by a group in Scotland called the Tuesday Club, which relates to one method. You can take what the Scottish Office spends at the moment in the way that it calculates it and then calculate what is needed for the reserved powers. You could collect all the money into the Scottish Consolidated Fund, which is raised by taxes in Scotland, and you would then pay over what is required for reserved and other functions.

    I asked the Library to analyse that booklet and it was explained to me that there are certain aspects of it which are somewhat vague. You could question how it calculates what the spending needs are. It is a very interesting approach. Other groups are thinking in the same way. In time the Government will have to think of better ways of deciding how the Scottish parliament can receive its money and spend it so that it is more stable.

    My noble friend on the Front Bench has suggested that the Bill should have on its face the fact that the Scottish block is related to needs. It is a small change, but at least it indicates that what the noble Lord, Lord Dean, was complaining about would not be the case. There would be no mystery about percentages as applied through the Barnett formula.

    There is a rumour that the noble Lord, Lord Barnett, wishes to change his name to Lord Barnett of the Formula in order to perpetuate this marvellous part of history, where his name is attached to what we in Scotland depend upon. I do not know whether he will do that. I do not think that the Barnett formula should be on the face of the Bill. It is out of date. Although it is gradually having a diminishing effect on the difference between spending in Scotland and the average over the UK, it is not the right way to do it now.

    My noble friend has a good point. I hope that the Government will think about this over the Recess and perhaps at least put in the Bill more information on how the whole thing will be worked out. Otherwise the separatists will have a great time with this part of the Bill.

    The indignation that was expressed by the noble Lord, Lord Dean of Beswick, and supported by the noble Earl, Lord Onslow, arises out of the way in which the funds that were devoted to Scotland and Wales were spent in the past. To a very large extent the Secretaries of State for Scotland and Wales were prepared to, in effect, bribe overseas companies to come to their areas, and to attract inward investment in this way.

    One hopes that the Scottish parliament and the Welsh assembly will spend the money that is made available to them on removing the disadvantages of those respective countries. If the money is spent on improving communications, education and technology and encouraging indigenous industry in Scotland and Wales, then those countries will have their economies improved to the extent that they will no longer be, as they are now, suffering a low wage level.

    Does the noble Lord accept that his argument may well be applicable to Wales, which is his own country, where the GDP per head is well below the United Kingdom average, but that it is a much more difficult argument to sustain for Scotland, where the GDP per head is now, thanks to 20 years of successful development, virtually at the United Kingdom average?

    6.30 p.m.

    I am grateful to the noble Lord for his intervention because it enables me to make a point. The Barnett formula has brought Scotland up to a degree which no other mechanism could perhaps have done.

    In Chapter 7 of the White Paper Scotland's Parliament, under the heading "Financial Arrangements", I see that the objectives of the financial arrangements of the Scottish Parliament are said to be that Scotland will continue to benefit from its appropriate share of United Kingdom public expenditure and that the Scottish parliament's assigned budget is to be determined by a method which is "objective, transparent and widely accepted". When one turns to the Bill itself, all one sees is:
    "The Secretary of State shall from time to time make payments … of such amounts as he may determine".
    That does not seem to express a method which is "objective, transparent and widely accepted".

    When one looks further at the White Paper one sees the Government's view that arrangements based on the block and the formula have produced fair settlements for Scotland in annual public expenditure rounds and have allowed the Secretary of State for Scotland to determine his spending decisions in accordance with Scottish needs and priorities. The White Paper goes on to say:
    "The Government have therefore concluded that the financial framework for the Scottish Parliament should be based on these existing arrangements with, in future, the Scottish Parliament determining Scottish spending priorities".
    More than that, an appendix is devoted to explaining the Barnett formula in terms.

    That being the case, I do not see how the Government can now resist the amendments proposed from these Benches which seek to have as a starting point the Barnett formula and its revision over a period of some 10 years, after one sees how the formula is put into effect and when one has had an opportunity to see whether the Barnett formula is working in accordance with what the White Paper said. So the very least the Minister can do in response to the arguments put forward today is to give an assurance that, from the beginning, the Barnett formula will be applied. I am looking to hear that from the Minister when he replies at the end of the debate.

    Perhaps I may move on to Amendment No. 287, which stands in the name of my noble friend Lord Thurso but has not been addressed by anyone so far. It is a probing amendment. The Bill gives the parliament the right to vary income tax upwards or downwards by 3p in the pound. When tax in Scotland is varied upwards, the Bill provides that the surplus revenue generated is to be paid into the Scottish Consolidated Fund and thereby increasing the amount of money available to be spent. Clause 74, to which Amendment No. 287 refers, provides that where tax is varied downwards the shortfalls in receipts are to be deducted from the Scottish Consolidated Fund and paid back to the Treasury.

    The argument in relation to how tax-varying powers are treated is relatively simple. The Government take the view that there is a Scottish block which in the estimation of the United Kingdom Parliament is sufficient for the financial needs of Scotland. However, they have recognised that the Scottish parliament may take a slightly different view as to the needs of the Scottish people. Indeed, when one looks at the amendment moved by the noble Lord, Lord Mackay of Ardbrecknish, one has to ask the question: who estimates the needs to which he refers? Is it the Scottish parliament or is it the United Kingdom Parliament? If hidden within that amendment is the suggestion that it is entirely the United Kingdom Parliament's determination which counts, the Scottish parliament will be entirely at the mercy of what happens at Westminster.

    All those who support tax varying are in agreement with the Government that the Scottish parliament should have this tax-varying power. The Bill provides that the parliament can vary the tax downwards by up to 3 per cent. If that happens, it is the Government's view in Clause 74 that Scotland does not need the total fund voted to it and, consequently, any moneys lost to the central Exchequer from such a downward variance should be reimbursed to the Exchequer out of the Scottish Consolidated Fund. The result of Clause 74 must be that no future government of Scotland would ever vary the basic rate of tax downwards because the money would simply go back to the United Kingdom Parliament. It would be returned to the Treasury.

    What one is looking for in the amendment is a means by which the funds granted under the block grant could be retained in Scotland and used for other purposes. That is the purpose of the amendment in the name of my noble friend Lord Thurso.

    I thank my noble friend Lord Mackay of Ardbrecknish for the masterful way in which he laid out the framework under which we are now operating. I wish to make one or two observations about Clause 66. I listened to the speech of the noble Lord, Lord Lang of Monkton, when we were considering Clause 33, and to the Minister's reply to the debate. The first question that came to mind is: to which Secretary of State does the provision refer? In the first instance, one thinks that it must be the Secretary of State for Scotland. However, given the total lack of definition or content as to what constitutes the office of the Secretary of State for Scotland, one has to ask whether in the long term there will be such a position; and if not, who will take the action.

    At present, the Secretary of State for Scotland receives a block grant from the Treasury. Presumably, that process will continue. In Amendment No. 274 the noble Lord, Lord Steel of Aikwood, asked that the payments to be made under subsection (2) should consist of a block grant to the Consolidated Fund. Presumably, we are talking about two block grants. Let us hope that they will always coincide, but I do not think that that will always be the case.

    I see from Annex B to the White Paper that expenditure on domestic agriculture, fisheries and food is to be taken into the new Scottish block. When one looks to see whether there is any indication of that in the Comprehensive Spending Review to which the noble Lord, Lord Dean of Beswick, referred, one sees that the expenditure limits of the Scottish Office are approximately £1 billion per annum less than in the previously published government expenditure forecast. I wish I could offer this to the noble Lord, Lord Dean of Beswick, as a comfort. However, not being a statistician, I can only say that it must be a statistical quirk, because the Government tell us that this is an increase.

    The figures given for the Ministry of Agriculture, Fisheries and Food refer only to domestic agricultural expenditure for England. I know from inquiries that the expenditure limits for the Department of Agriculture in Scotland have been set until the year 2002, but in the Comprehensive Spending Review they appear to have been dropped into a black hole. The question to which I should like an answer is whether this means that, even after devolution, the money supplied to the Secretary of State for domestic agriculture in Scotland will be under a separate heading and that any reallocation of funds carried out by the Scottish parliament will have to be within the department's own allocation?

    The noble Duke, the Duke of Montrose, has brought us to a point at which it might be appropriate for me to speak to Amendment No. 275, which relates to the environment. Despite the encouraging way in which the noble Lord, Lord Mackay of Ardbrecknish, gave it the thumbs-down, I invite other Members of the Committee to consider it.

    The amendment has been tabled to ensure that payments made to the Scottish parliament are adequate to meet the environmental needs of Scotland. This is the second amendment that has been suggested to me and to the noble Earl, Lord Lindsay, by the RSPB in Scotland. The amendment would supplement the Scottish block calculations, which are largely based on population—by that, I mean that they are based on the human population. It has to be recognised that Scotland is inhabited by more than just humans, and that land is taken up as habitat for many species, of which humans are but one, albeit a significant, component.

    Scotland is distinctive within the United Kingdom in terms of environment, among other things. It is well known that Scotland is home to 8 per cent. of the UK's human population. Scotland comprises 33 per cent. of the UK landmass. The Scottish coastline is lengthy, and accounts for 54 per cent. of the UK coastline. In terms of sites of special scientific interest, Scotland has 29 per cent. of those notified, but examination of the area involved shows that this is larger than usual, and that Scottish SSSIs represent 79 per cent. of the UK's SSSI hectarage.

    When it comes to considering special protection areas as designated under the Birds Directive 79/409, 52 per cent. of the still-incomplete list are to be found in Scotland. Under the Habitats Directive 92/43, 40 per cent. of the UK's special areas of conservation are in Scotland.

    My penultimate percentage concerns wetland sites under the Ramsar convention. Here, Scotland enjoys 34 per cent. Perhaps I may link my final percentage with the purport of all this environmental data and the amendment itself. Scotland clearly has greater liability for its interesting and diverse environment and landscape. The Scottish parliament is, rightly, required to comply with international obligations. Clearly, the formal environment—perhaps I mean "Environment" with a capital "E"—is greater than its population would imply. The funding of the Scottish parliament must reflect that responsibility.

    I conclude with a final statistic, which is that of the UK's protected birds, 67 per cent. live in Scotland. Those birds are a good indicator of how agri-environmental policies are working. They have the means of going elsewhere in the event of policy failure. That, of course, is a possible event if the Scottish parliament is not adequately funded to take up its task of environmental stewardship.

    I have listened with great interest to this afternoon's debate. Although I have nothing original to say, I cannot help feeling that we are discussing the heart of the matter. Most of us are committed—I believe that all Members of this Committee are committed—to Scotland remaining part of the United Kingdom. Unless we resolve sensibly and acceptably the financial arrangements for the continued Union, we will be in immense difficulties.

    The public expenditure review—I have a copy with me—promises that the Barnett formula will continue for another three years. That is not stated in the Bill, but it appears in the Government's spending plans for the next three years. The Barnett formula was formulated when Scotland was suffering severely from economic depression and neglect. For the past 15 years, I have been one of the vice-presidents of the Scottish Council (Development & Industry). As a result of its activities as well as those of the Government, we have been able to improve substantially the standard of living of the people of Scotland—

    6.45 p.m.

    It was a combination of interests. It started even before the coming to power of the Tory Government 18 years ago. I hope that a Scottish parliament will contribute to Scotland's further prosperity, but that will certainly diminish the differentiation in standards on which the Barnett formula was established.

    There is reason to believe that some of the sentiments expressed by the noble Lord, Lord Dean of Beswick, will have some impact on political thinking, particularly south of the Border. I note that one of the candidates for the position of Mayor of London has said that if he is elected mayor of London, he will want the same level of GDP per head expenditure in London as is received by the people of Scotland. That is part of his manifesto programme. So, the noble Lord, Lord Dean of Beswick, has some friends in London.

    The heart of the matter will be how much Scotland will have to spend. During the "yes/no" campaign, what the Scottish parliament was going to deliver was hyped up and exaggerated. It was not totally realistic. The public expenditure review states that Scotland will have sufficient money—bless his heart, Sam Galbraith, an excellent man who is in an appropriate position as Minister for Health, has said that Scotland will have the best health service in Europe. Others have promised that it will have the best transport service, with an integrated transport system. It is said that services in all other areas of public expenditure will be better delivered than ever before.

    As we all know as reasonable and sensible politicians, getting the best health service in Europe is not simply a matter of having a good Minister in charge. It is a matter of cash, expenditure and the good running of the business. The Scottish people have been led to believe that there will be a tremendous economic and social transformation in Scotland. I hope that that will be delivered, but a good deal will depend on what we are discussing this afternoon in terms of the amount of money that will be made available to Scotland as part of the United Kingdom.

    This is a most serious point. Any failure to deliver by the Scottish parliament will be blamed on the Westminster Government—and that is the beginning of the separatist argument. So, I hope that the Minister is fully cognisant of the importance of this issue—I am sure that he is—because it is the heart of the matter.

    I rise to ask two brief questions. In his amendment, my noble friend refers to recognising the needs of Scotland. I should like to ask the Minister whether there will be a comprehensive needs assessment, as I understand happened in the past under the previous Labour Government. If there is not to be a comprehensive needs assessment, is it the Minister's view that the present system of funding equates with the needs of Scotland and other parts of Britain?

    The noble Lord, Lord Taylor of Gryfe, rightly said that he wished all of this to be considered as part of the United Kingdom. If he looks at Amendment No. 275A he may agree that it fulfils his wishes.

    I should like to deal with many of the points that have been raised in this wide-ranging debate on an extremely important issue that affects the devolution project. I start with a comment of the noble Lord, Lord Mackay of Ardbrecknish. He was gracious enough to draw the attention of the Committee to the work of my former colleague Professor David Heald (as he is now). I let the Committee into a little secret. About 10 to 15 years ago Mr. David Heald (as he was then) and I published various articles on public expenditure in Scotland. He came up with the bright idea of describing this as the Barnett formula. Some years later, when I was responsible for social sciences at the University of Aberdeen, the department of accountancy was looking for someone to head the public expenditure branch. David Heald was a formidable candidate for that post and was successful in obtaining his chair. Since that time it has been recognised on all sides that he has made a significant contribution to the whole debate about public expenditure; in particular the implications for public expenditure raised by devolution. He is always constructive and helpful. He is a professor, unlike my other valued colleague Dr. Michael Dyer, whose comments and insight are not always as helpful to Her Majesty's Government. He is a lecturer at the University of Aberdeen.

    The noble Lord, Lord Mackay of Ardbrecknish, explained well the nature of the Barnett formula and what it did; and, perhaps more importantly, what it did not do. I believe that the undergrowth has been cleared. It is important to remember that it is about incremental change and only that. In response to the noble Baroness, Lady Carnegy of Lour, I am a great advocate of incremental change. It is something that is manageable. I am very suspicious of people who say that they carry out zero-based budgeting every year. For complex organisations I believe that that is more rhetoric than reality, but never mind.

    The noble Lord, Lord Mackay of Ardbrecknish, said that one of the purposes of the Barnett formula was to bring about convergence of public expenditure levels on a per head basis as between Scotland and predominantly England. The extent to which convergence takes place is a function of basically two factors: inflation and the real increase in public expenditure from year to year. If inflation and real public expenditure increases are low, convergence takes a long time. If inflation is let rip because one is dealing with incremental change, convergence takes place that much more quickly.

    Further, the Barnett formula element is population-driven and, as such, it is re-calibrated from year to year. That is always a problem for those who have to think of the number on the spur of the moment. The noble Lord, Lord Mackay of Ardbrecknish, came up with 10.66 per cent. I believe that the mid-year estimates have driven it down to 10.45 per cent. this year. It is a dynamic formula which is responsive to population change. In the field of public expenditure one of the annoying factors is that as soon as one thinks one understands it, one or other aspect is changed. The concept of the block is now out of date and has been replaced by the idea of departmental expenditure limits as opposed to annually managed expenditure. That difference may help the noble Duke, the Duke of Montrose. Domestic agriculture, fisheries and food expenditure will in future form part of the DEL. CAP expenditure in Scotland will count as part of annually managed expenditure, but it will not be within the block. CAP expenditure was never part of the block and it will not be part of the DEL.

    A specific point was raised on why Scottish spending was £16 million lower than previous totals. That is a statistical quirk and arises from a definitional problem. Because one moves from the block concept to the concept of departmental expenditure limits more than £16 million of non-domestic rates expenditure goes out. That adjustment arises for that reason. Domestic agriculture will also be included within the DEL.

    A number of points have been raised about need and attempts to produce various formulae. The noble Lord, Lord Dixon-Smith, and the noble Earl, Lord Mar and Kellie, spoke to this. How does one measure need? That is an extremely difficult challenge. We know enough about the drivers of public expenditure to understand that in Scotland factors like sparsity, population loss, multiple deprivation and morbidity are all factors that produce higher levels of spending need than in other parts of the United Kingdom. Another complicating factor in Scotland is that in education there is a much higher percentage of the school population in the public sector than in the private sector. Those factors are identifiable by virtue of various heavy correlative number-crunching exercises.

    I entirely accept the point that has just been made about numbers, but that would not affect the cost per head. I made reference to the cost per head which is not affected by numbers.

    7 p.m.

    In Scottish education one can arrive at a cost per head figure which is driven up. If one is providing primary education in the Highlands and Islands, because of the sparsity factor inevitably one has a large number of very small schools which are comparatively very expensive to provide. Those kinds of factors help to explain the higher expenditure needs in Scotland than elsewhere.

    The amendments before the Committee focus in different ways on the funding arrangements for the Scottish parliament. Amendments Nos. 272, 274 and 279 aim to give, at least for an interim period, some statutory force to the funding arrangements that currently exist for Scotland which will be largely carried forward following devolution. They also make provision for a review of those arrangements aimed at moving the funding of the parliament closer to a system of assigned revenues.

    I listened carefully to the proposed arrangements advanced by noble Lords. I fully appreciate the sentiments behind this set of amendments. I therefore intend to respond primarily on the basis of principle rather than on the practical effect of the amendments. Before doing so, I am bound to point out that Amendment No. 274 would, as it is phrased at the moment, in effect freeze future grants to the parliament at the 2000–2001 level for all time. I appreciate that that is most likely to be a drafting slip but that is what it would actually do as it stands. That cannot have been the noble Lord's intention. Let us turn to the wider picture, however.

    I believe that these amendments are misdirected in principle. I therefore hope that I will be able to persuade the noble Lords who have proposed the amendments to withdraw them. As has been pointed out on many occasions, the funding arrangements proposed by the Government in the White Paper, essentially the continuation of the Barnett formula, have a long history. They go back 20 years. There has been a cross-party acceptance from government to government that they have worked well. The Barnett formula is well understood among the broad cognoscenti in the public expenditure world and has delivered fair settlements for Scotland for the last two decades. That is important. I do not believe that there is anybody—or very few—who would challenge the idea that successive governments in distributing the total have delivered Scotland a fair settlement. No Secretary of State for Scotland in my memory has ever claimed that the formula has worked to adverse effect in Scotland, because it has worked; it is fair; it has reflected the country's relative need for public resources. We may have some dispute and some disagreements among us on absolute need but, in terms of the relative need, the relative share, the formula dishes out the given total fairly and equitably.

    As a Government we are firmly committed to this arrangement and we made this clear in the White Paper. The formula will provide stability and predictability at a time of major change and transition and will establish a firm basis for the longer-term funding of the parliament. It is absolutely vital that, as we change the political institutions of the United Kingdom, there is an underpinning of financial stability to see us through that period of political change. That is exactly what we intend. That is what the comprehensive spending review which my noble friend Lord Dean of Beswick asked us to examine does, by giving us that three-year period of actual figures which is a product of the application of the Barnett formula.

    Of course nothing lasts for ever and I have to recognise that. "Never" is a word that a politician should never use. We made it clear in the White Paper that if circumstances changed some reassessment of relative need could be agreed between the Scottish parliament and the UK Government. I think that is a sensible and pragmatic position to adopt: seeking to start with an arrangement which is familiar and works well but not ruling out for the future the possibility of change. Clearly any change would have to be made on the basis of an extremely thorough assessment at some time in the future of the relative expenditure needs of Scotland vis-à-vis other parts of the United Kingdom.

    I do not believe that there is benefit in enshrining the Barnett formula in statute. We have a clear commitment from the Government that Barnett will be used certainly in the period of transition: that we see it as a sound basis of allocation. If circumstances change, however, there is the opportunity to revisit the area but on the basis of agreement between the two parliaments and, I would strongly suggest and support, on the basis of a thorough and proper means assessment at some time in the future. I am almost getting into the area of speculation, however. What we are faced with at the moment is a clear statement by the Government of how they intend to handle the present and the near future.

    Turning to Amendments Nos. 273, 271U and 275A, these are concerned with relating the size of grant which Scotland gets from the UK Government to the country's needs. Amendment No. 273 would in effect replace the current funding arrangements with a new statutory formula. This would use population density and relative GDP per head as measures of Scotland's relative need.

    Once again I understand the sentiments behind the amendments but I think they are wrong. What we have at present is a system whereby relative need across the spectrum of government spending in Scotland is built into the public expenditure baselines. The historic baseline is part of the building block of the settlement. It is an arrangement which properly captures relative need and that is why we are proposing to continue with it.

    Amendment No. 273 has two particular difficulties. First, I am by no means clear that it is possible to attach a specific and accurate level of uplift purely to the effects of lower population density. I think the noble Lord will recognise that himself. Secondly, relative GDP per head is, at very best, only a partial indicator of relative need and could in practice create distortions. Most of the need indicators lag behind GDP. Health expenditure is a good example. The noble Lord, Lord Dixon-Smith, made the point that Scotland's GDP has increased to almost parity with the rest of the United Kingdom but it is clear that our health record remains very much worse. The level of morbidity in Scotland is much worse than in the rest of the United Kingdom. I hope that it will change. There can be an increase in GDP over a relatively short period of time. It takes so much longer to bring about changes in the cultural aspects of health—the diet of west central Scotland being but one of them.

    Hidden in this Barnett formula concept that the noble Lord is describing is a big problem and he has just illustrated it. The health budget is high partly because of our diet. We eat more chips than anyone does anywhere else; we take less exercise; we eat less fruit and vegetables and we have more heart attacks. As long as the funding formula has, in its base, the payment of all of that in the health service, we will not stop eating more chips.

    This is all very comforting but, at the end of the day, it is not the best thing for Scotland. I hope therefore that this transitional arrangement will not last too long.

    I do not think that we will bring about major changes in the diet of my fellow citizens of Scotland by changing the Barnett formula. It has great value and power but I do not think that even the Barnett formula can bring about those changes.

    Amendment No. 275 tries a different type of approach to the same problem. The kind of indicators which are proposed there are somewhat quixotic in public expenditure terms, if I may say so. I am not absolutely convinced that the number of SSSIs or the hectarage of the country covered by SSSIs is a public expenditure driver of any great moment; nor is the number of rare and endangered bird species. I am exceedingly pleased that the noble Earl, Lord Mar and Kellie, revealed that the provenance of this amendment was the Royal Society for the Protection of Birds. I shall try not to let the amendment colour the way I treat other representations I receive from the Royal Society for the Protection of Birds. However, in this instance the tying of those factors in the noble Earl's amendment to public expenditure need is at best quixotic.

    I turn to Amendment No. 287.

    Perhaps I may invite the Minister to reserve his fire on that amendment. I am conscious of the fact that I did not properly put my noble friend's argument. I am sure the noble Lord did not understand it; I am not sure I did. Perhaps I may return to the amendment in its place on the Marshalled List.

    I was about to say that if I thought we could get away with it, I would welcome it. But I leave the matter at that.

    We have come to the stage where we recognise that we seek a fair, acceptable, efficient and effective system for funding the work of the Scottish parliament. We are building on the Barnett formula. We are continuing the Barnett formula because it has stood the test of time. It is seen as being fair and delivering the goods. It will be uprated annually as a result of population changes; so there will be a recalibration. We are committed to publishing the rules which will determine Scotland's annual assigned budget. In the White Paper we have left open the door for future changes but on the basis of agreement between the Scottish executive and the UK Government.

    I hope that all those points together will give the Committee reassurance that we can go forward with that important degree of financial stability underpinning the political changes that we are introducing.

    The noble Lord, Lord Taylor of Gryfe, uttered perhaps the most important sentence in the debate: that unless we get right the financial side, the whole thing goes pear shaped and we destroy the Union. I may have paraphrased it somewhat, but that was the underlying point. The Government have not addressed the problem. When the block grant is perceived to be too little or too much, with income tax variable by an increase or decrease of 3 per cent., how do the Government get round the complaint that will inevitably arise from Edinburgh that Westminster is dealing with Scotland unfairly? That point goes totally to the core of the matter.

    If we are to have this wretched devolution, which we obviously are, it would have been miles better to have given the Scottish parliament greater tax raising powers so that it was responsible to its own citizens for the taxes it raised from them and the expenditure it made on their behalf. What we have is a United Nations aid agency dolloping out stuff about which there will be undoubtedly complaints and whinges from both sides, be it the noble Lord, Lord Dean of Beswick, myself or the Scots. It is a formula for disaster. Unfortunately the Minister in no way addressed the intellectual incoherence of the basic formula.

    Following the fiery speech from behind me, perhaps I may ask the Minister this question. He always likes to say that I am a simple accountant; and I still am. I admired his coverage of all the points.

    The noble Lord mentioned a figure of £15 million as a statistical quirk. Am I right in thinking that that was the result of a continual uprating of the Barnett formula? Is it a statistical quirk that will arise every two to three years? It is after all, 1 per cent. of the total budget for the Scottish Office. If the figure can be restricted to that, it is pretty accurate. But what was the statistical quirk? The noble Lord was honest in admitting it. Can he clarify that now or later?

    It is the product of changing the concept of the block grant to the departmental expenditure limit. I said that it is infuriating when the concepts keep changing. Non-domestic rates were included in the block but excluded from the near-comparator of the departmental expenditure limit. That accounts for something in excess of £16 million. That is why we have the point identified by the noble Duke, the Duke of Montrose.

    I must clarify a figure. It is not £16 million; it is £1 billion.

    I was puzzled about that. I think that £1 billion is more than a statistical quirk. My noble friend the Duke of Montrose made a smart flanking attack on the Minister worthy of his noble ancestor. I found the answers interesting, especially as regards the departmental expenditure limits, which I suppose we should treat as chips off the old block, so to speak. We shall have to look at this statistical quirk and how £1 million less can be trumpeted in the Scottish press as an increase in public expenditure.

    However, that is not what we are discussing. We are discussing how the Scottish parliament will be funded in future and whether we need to write that into legislation. I detected that some people do not think it worth while to continue the debate; they tend to be those who have not taken much part in the long Committee stage of the Bill. As the noble Lord, Lord Taylor of Gryfe, said, this is the heart of the matter. My fellow citizens have been persuaded that the Scottish parliament will bring with it huge improvements. I do not go so far as to say a land flowing with milk and honey; and many of the improvements can come about only by increased public spending. If that is not coming, people will be disappointed. That disappointment will turn them, I regret to say, to the Scottish National Party.

    I thank the noble Lord for giving way. I am sure he will agree that our fellow citizens are not daft. But they believe that it is possible to spend even the same amount of public expenditure rather more wisely by having it spent closer to the people than at present. It is not simply a question of throwing money at the problem but of being more responsive to needs and having government that is closer to the people. That will apply in English regions as well as the Scottish parliament.