Devolution: A Decade On - Justice Committee Contents

Examination of Witness (Questions 520-531)


22 APRIL 2008

  Q520  Mr Turner: I am sure that is for debate, but the point is surely there is a lump sum for Scotland which is spent by Scotland in the way Scots wish which is a higher proportion, about 15%, than in the whole of England and also for Wales some elements are higher. You have not responded to that particular point.

  Mr McConnell: The historical reasons for that have been well laid out and have been justified by both Conservative and Labour Governments here in the past. The debate around the distribution of money between Scotland and England actually distracts from what might be the real debate that needs to take place, which is inside England itself. I say very much as an observer that there are different needs in different parts of England and those debates have not taken place because primarily the politicians have focused more on the national debate.

  Q521  Mr Turner: So you might advocate regional instead.

  Mr McConnell: There needs to be a far healthier debate inside England about the way public expenditure is used in different regions of the country. It is not for me to tell members how to conduct their business, but as long as members who represent constituencies inside England are focused on what Scotland has, or for that matter what Northern Ireland or Wales has, then perhaps they are not contributing to that debate that will basically need to be resolved because there are Whitehall departments spending a lot of money in England and it is being spent in different areas in different ways.

  Q522  Mr Tyrie: I was hoping to be exceedingly quick because I thought I was going to be able to ask you whether there is anything on the issue of the Barnett formula and the issue of the English question which Lord Steel said with which you disagreed, but I think there is. At one point in your replies it appeared that there was not anything but there is, is there not? I do not think you are in favour of moving a long way across that spectrum on fiscal autonomy, whereas Lord Steel is quite clear that there is something to be said for devolution on income tax or CGT and once that is done, he feels that the Barnett formula will need looking at again, even if it might result in pretty much the same arrangement as before.

  Mr McConnell: On the one hand, there is a need to discuss the financial purpose of the Scottish Parliament and the financial responsibility that it has alongside perhaps the ongoing debate about how much money it has to spend. It is right that the current block grant plus or minus three pence income tax was designed back in the early 1990s at a time when income tax was 30 pence or so in the pound, when there were no differential rates. They are about to change, are they not? It is also right that after 10 years of devolution there is a good hard look at that and international examples to see whether there is a better way of securing financial accountability and responsibility and potential economic benefit in Scotland. On the other hand, I have been involved in this debate now since the late 1980s in terms of detail. I was a member of the Constitutional Convention Executive Committee, I have obviously been both Finance Minister and First Minister and I have yet to see someone produce a workable alternative that would have the consent of enough politicians and across a wider spectrum in Scotland. The business community in Scotland is very nervous about fiscal autonomy, very nervous. They operate as part of a single market across the UK, the idea of differential tax rates in different parts of the UK worries them significantly and I understand that.

  Q523  Mr Tyrie: But where are you on this is what I am asking?

  Mr McConnell: I am trying to say that there is a case for looking at the current settlement, but the case has not yet been made to move away from that to a new arrangement. If you start from a position of fiscal autonomy, you are starting from a dangerous position because you are starting from a position that effectively creates two different taxation regimes inside the UK single market and that is difficult economically. If you start from the position of wishing to move incrementally towards more taxation powers, then the Scottish Parliament have to think that through extremely carefully, look at international evidence and try to design a system that is workable. My preference on that would probably be that it is taken away from the politicians, some form of Royal Commission or something of that sort that would look at this in some detail, look at the evidence and come back with a reasoned report that could be considered by all parties, perhaps after the next general election. I would say that was worth looking at.

  Q524  Mr Tyrie: Just to be clear, you are making the recommendation that there be a Royal Commission to examine the Barnett formula?

  Mr McConnell: I would not put it as strongly as to say I was making a recommendation, but I would suggest that that kind of format for looking at this would be more appropriate than a political debate where people are essentially making political points through the debate on fiscal powers.

  Q525  Mr Tyrie: I am sorry to press you, but what are you recommending?

  Mr McConnell: I am sorry to be unhelpful, but I hope what I am saying is consistent in that I believe that the current arrangement does require to be reviewed but I also believe that any change in the current arrangement is extremely difficult and needs to be discussed, debated and analysed with great care by everyone involved and all the parties have people with different positions on this.

  Q526  Mr Tyrie: So you favour a review of the Barnett formula.

  Mr McConnell: I am not yet persuaded that there is a workable alternative.

  Q527  Mr Tyrie: You are not yet persuaded there is an alternative; you are not persuaded that it would come out with something different, radically different from the current structure. I do not want to put words in your mouth I just want to clarify what you said. As for how that review should be conducted, you think one possibility would be a royal commission but you have no hard and fast views on exactly how to conduct the review.

  Mr McConnell: That is very close to my position.

  Q528  Mr Tyrie: Just add or subtract so that we can be clear for the record what your opinion is.

  Mr McConnell: I am persuaded of the case for looking at the financial powers. I am not persuaded of the case for any specific alternative yet. I would be concerned about the idea of what is described as full fiscal autonomy. I believe that there is a need for some independent analysis and review of this perhaps by a body like a royal commission. However, the one positive thing that I would say, because that might appear to be very negative, is that I do not believe that it is beyond the intelligence of the good people of the United Kingdom, academics, politicians, civil servants and others, to come up with a workable alternative, but nobody has yet.

  Q529  Chairman: For six years you had the power to implement a degree of fiscal autonomy, by either raising income tax or lowering income tax to a different level from that in the rest of the UK. Was it political paralysis that you never did so?

  Mr McConnell: It was a decision about priorities. First of all, it would have been difficult to justify any money that we would have raised or we would have taken out of the taxation system against the administrative costs of such a change. That is an absolute primary contribution to the judgment that has led to all the parties not using that power or proposing its use over the last eight years. Beyond that I took the view that we had, as a number one priority in Scotland, a need to raise the level of economic growth and that the way in which we did that was to invest in skills and transport infrastructure and promoting Scottish business abroad and that that was more important than to think about the taxation system.

  Q530  Mr Tyrie: Did you agree or disagree with Lord Steel's conclusion that there was an inevitability about a move towards English committees in the UK Parliament to deal with English-only legislation certified by the Speaker?

  Mr McConnell: Like him, I am hesitant to comment on the work of Members of this House from constituencies in England but I suspect that this is the kind of debate that will rise and fall depending on who is in power and who is in opposition and what the distribution of constituencies is across England rather than necessarily being a point of principle.

  Q531  Mr Tyrie: Lord Steel gave us a very clear indication of the direction of change. I am asking you whether you agree with his conclusions about the direction of change.

  Mr McConnell: I do not think that change is inevitable. Continuing debate is inevitable but change is not inevitable.

  Chairman: We have been able to cover a great deal of ground and we are very grateful to you for your help this afternoon. Thank you very much indeed.

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