“The speed of the reductions between now and the end of 2014 will be in accordance with the conditions on the ground and with what is right in terms of transitioning from allied control to Afghan control—and at all times, of course, paramount in our minds is the safety and security of our brave armed forces”.—[Official Report, 25 April 2012; Vol. 543, c. 943.]

That safety and security will be best assured by working with our allies in a co-ordinated draw-down as responsibilities are handed progressively to the ANSF. That is the way to honour and protect the legacy of our involvement in Afghanistan and the sacrifice made by the 409 servicemen and women who have given their lives and the hundreds more who have suffered life-changing injuries. I commend this statement to the House.

12.35 pm

Mr Russell Brown (Dumfries and Galloway) (Lab): I thank the Secretary of State for his statement and advance sight of it. My right hon. Friend the shadow

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Secretary of State is in Scotland at a family engagement and could not return to the Commons because of the short notice of the statement.

Labour Members have been consistent, both in government and in opposition, in our support for the mission in Afghanistan. We have immense pride in our armed forces, who fight for others’ security and peace in order to protect our own here at home. We will offer the Government our support where they do the right thing, but we will scrutinise their decisions and urge them to make the case for a conflict that we believe remains firmly in our national interest.

We agree with the Secretary of State that there has been progress in Afghanistan. The continued growth in the size of the Afghan national army and the Taliban’s agreement to open an office in Qatar as a place to hold peace talks are notable examples, alongside those he mentioned, but such gains have been overshadowed by recent events. Key allies have unilaterally announced divergent withdrawal dates; instability in the US-Pakistan relationship remains; infiltration of the army by the Taliban remains a serious concern; and, most worrying, we have all recently seen the Taliban’s continued capacity to launch “spectacular” attacks in allied-controlled areas. Any discussion of troop numbers must be held in that context. Although we welcome today’s update, we hope that the right hon. Gentleman will be able to answer some further questions about long-term Afghan security.

It is the political conditions within and beyond Afghan borders that will ultimately determine whether the conditions that led us to war in the first place never return. Disconcertingly, last month the Prime Minister made clear his view that the handover to Afghan forces could be achieved satisfactorily without a political settlement, but that is contrary to all experience. A power vacuum would encourage neighbouring countries to seek influence, could allow the Taliban to return, and would jeopardise the gains already outlined. A clear political strategy must match military might. Can the Secretary of State assure the House that the Government’s efforts are focused on achieving an inclusive political settlement and give us an assessment of the progress made?

The Secretary of State will know that, painful though the process may be, constructive, proactive and flexible negotiations with the Taliban are necessary if any lasting settlement is to be reached. We must demand a denunciation of violence and an endorsement of the principles of the constitution, but there will be no peace without a settlement reflective of a diverse nation. Will he therefore outline how Britain is supporting the Afghan Government in facilitating that and, indeed, the role of regional partners in that effort?

We agree with the Government that there must not be a cliff-edge withdrawal, and that reductions must take place in areas where Afghan forces have the skill and capacity to take full responsibility. It may worry some that the Secretary of State has talked today of transition as a sign of progress, because recently British fatalities have tragically occurred in Lashkar Gah, an area where transition has been completed. Does he have full confidence in the capacity of those to whom we are transferring responsibility? What assurances can he give the House that, following those events, the scrutiny of Afghan forces assuming lead security responsibility has been strengthened?

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Further, will the Secretary of State expand on the nature of the role of British personnel in Afghanistan post-2014? What is involved in the combat support role that they will play, and can he confirm that any British personnel in Afghanistan post-2014 will be non-combat and will rely entirely on Afghan forces for their security? Does he have full confidence in that arrangement and does he believe that changes need to be made to the police and army recruitment processes? That is particularly pertinent to the police, whose quality, by their Government’s own admission, has not yet reached the required standard.

What assessment has been made of the size of the residual British presence in Afghanistan, and what commitments will the Government seek to gain from NATO partners at the Chicago summit next month on their long-term commitment post-2014? The Secretary of State mentioned the recently announced £70 million contribution to a £4 billion international fund for Afghanistan to support Afghan forces, and we support that important investment. Does he expect a greater UK contribution to be announced at the Chicago NATO summit? As we approach the summit, what will the Government’s goals be? Does the Secretary of State agree that they need to include a co-ordinated timetable for the withdrawal of NATO forces, a stable funding package for the Afghan security forces and a status-of-forces agreement on the role of any international forces after 2014? To that list, I hope he will add genuine progress on a stable political settlement in Afghanistan, bringing regional powers into the agreement.

In all these discussions, uppermost in our minds are all those who are still serving in that most difficult environment and all those who have made the ultimate sacrifice. We pay tribute to them and to their families.

Mr Hammond: I am grateful to the hon. Gentleman for his support and delighted, as will our armed forces be, that once again the cross-party consensus on a campaign that was entered into for reasons of our national security interest, and continues to be prosecuted for those reasons, has been reasserted by an Opposition Front Bencher.

I am sorry that the right hon. Member for East Renfrewshire (Mr Murphy), who leads for the Opposition on defence, is not able to be here. The hon. Member for Dumfries and Galloway (Mr Brown) says that this was because of the statement’s short notice, but I make it clear that the title of the statement was laid last night before the House rose, as is the proper procedure.

The hon. Gentleman asks about the US-Pakistan relationship. He is absolutely right that good relations between the US and Pakistan are crucial, and recent disruptions to those relations are a matter of concern. Good relations between Pakistan and Afghanistan will also be central to ensuring the stability of the region.

The hon. Gentleman talks about the Taliban’s capacity to mount attacks and refers, I think, to the Kabul attack. Yes, that attack caused significant disruption, but we need to be clear that it was a complete failure: the attack itself failed to inflict any casualties or any significant damage. A number of members of the Afghan security forces and some civilians were killed in the clearance operation afterwards, but there is no doubt that the attack was a failure.

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The hon. Gentleman talks about the handover of security responsibility to the Afghans potentially creating a power vacuum, but that is definitively not the case. ISAF is very clear that the draw-down needs to be measured and calibrated to match the building capability of the Afghan security forces, so that they can take over the ground-holding and security role, and we ensure that a power vacuum is avoided. I agree that it is not something we would tolerate.

I agree also that we need an inclusive political settlement. All Afghan citizens who are prepared to renounce violence and accept the constitution need to be brought inside the tent, and we need to see diversity in the way Afghanistan is run. I have to say that Helmand is leading the way: we have the significant engagement of female political and community figures in community councils and district councils in the area of operations for which we are responsible, and the Afghan peace and reintegration programme has so far recruited 4,000—admittedly, mainly low-level—Afghan fighters back into mainstream Afghan life. That is a basis on which we will want to build very significantly over the remaining two and a half years of ISAF combat operations.

The hon. Gentleman talks about the scrutiny of Afghan forces, referring, I think, to the very tragic recent “green on blue” incident in Lashkar Gah. There is in fact no evidence that that was an act of infiltration. Of course we have to be constantly alert to infiltration, but we have also to recognise the reality that Afghanistan is a society where people are used to settling personal grievances by resorting to violence, including violence with firearms. I have seen no evidence that the incident was an act of Taliban infiltration.

The hon. Gentleman asks me about the UK’s role and the size of force lay-down post-2014, but no decisions have been taken yet, other than that we will not be there in anything like our current force strength and we will not be there in a combat role. We have made a commitment to run the Afghan national officer training academy, but beyond that we will make our decisions with our allies over the coming months and, probably, years. It is not a decision that we need to make now; the process will start at Chicago but it will certainly not be completed there.

The hon. Gentleman asks me whether the UK contribution that I announced last week of £70 million, or about $110 million, to a fund of $4 billion—not £4 billion, as he said—to fund the future ANSF is likely to be increased at Chicago. That is not the case. That £70 million is the UK’s proposed contribution, and we have decided to make the announcement early to encourage others to make a commitment.

Of course we will co-ordinate with our allies on the timetable, but the timetable for draw-down will be responsive. It will depend on what is happening on the ground and on what our allies are doing, and of course the hon. Gentleman is right to say that any ISAF forces remaining in-country after 2014 will need a stationing-of-forces agreement.

Bob Stewart (Beckenham) (Con): The battalion that I had the honour to command returned from Afghanistan two years ago with 12 men dead and more than 100 wounded, and it returns to the country in October. I am worried about two things. First, we must ensure that as we withdraw we retain our soldiers in sufficient

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strength so that there is a balance to deter attacks. Secondly, I am concerned that we have had too many instances of rogue Afghan national army soldiers turning their guns on our allies and on our personnel. We have to be very careful, and I ask the Secretary of State to look at that.

Mr Hammond: I hear what my hon. Friend says, and of course the so-called “green on blue” incidents are particularly tragic. I was in Lashkar Gah two days after the most recent incident, when I was able to speak to Afghan commanders about it. I can tell the House that they feel a deep sense of shame and betrayal about what has happened. They recognise that the future of Afghanistan depends on effective partnering between ISAF forces and Afghan forces, and they recognise the huge damage that those very rare incidents cause.

UK forces are in routine contact with their Afghan counterparts—there are thousands of contacts every day —and we have to see these tragic but very rare incidents in that context. I assure my hon. Friend that commanders on the ground have taken a number of sensible precautionary measures to ensure that UK forces are always in a position to defend themselves if necessary, and the Afghans themselves have taken a number of measures to ensure the more effective vetting and monitoring of their own soldiers.

Mr David Winnick (Walsall North) (Lab): Is the Secretary of State aware that there will be a mighty sense of relief when Britain’s combat role in Afghanistan comes to an end? There are bound to be different points of view in this House—it would be odd if there were not. However, does he recognise that very many people in this country—I would say a large majority—believe that we have been involved for more than 10 years in an unwinnable war? The sooner British troops come home, the better.

Mr Hammond: I suspect that there is an almighty sense of relief when any war is over. I am sure that the British people wish for nothing more than to see our troops come home, but that will be a pyrrhic achievement if the territory of Afghanistan again becomes available to international terrorism that attacks us and our allies. We have to bring our troops home, but we have to do the job properly and ensure that the Afghan national security forces can secure the territory, protect their own country and ensure that international terrorism never again takes root in Afghanistan.

Sir Bob Russell (Colchester) (LD): For those who have served, for those who have suffered life-changing injuries and for those who have lost loved ones, to honour and protect their involvement, I welcome the confirmation by the Secretary of State that the United Kingdom’s commitment to Afghanistan is for the long term. With that in mind, will he prepare a statement on what has happened to the Kajaki dam project in the four years since 2008, when soldiers from 16 Air Assault Brigade took a turbine through dangerous terrain without losing a single life?

Mr Hammond: There is good news on the Kajaki dam project. I am trying to find the exact details in rapid time, but I am afraid that I cannot. Further

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equipment has been installed at Kajaki—I was briefed on the project during my visit to Afghanistan a couple of weeks ago—but I will write to my hon. Friend and place a copy of the letter in the Library.

Derek Twigg (Halton) (Lab): If the Secretary of State receives advice by 2014 that the security situation has not improved to the extent that is envisaged or has deteriorated, or that the Afghan Government do not believe that their security forces can take on the security role that is envisaged, will the combat role continue after 2014?

Mr Hammond: We are very clear that United Kingdom forces will not be in a combat role after 2014. We have to bring this engagement to a close. It was a measured decision to fix December 2014 as the end of combat operations. We are highly confident about the level of development of the ANSF.

I say to the hon. Gentleman that there is no example in history of an insurgency being effectively and sustainably defeated by foreign troops. It has to be local forces that sustainably defeat an insurgency. That is the path on which we are embarked in Afghanistan.

Mr Julian Brazier (Canterbury) (Con): I welcome the statement, which stands in marked contrast to the gloom and doom we heard a year or two ago from some elements in the House. I put it to the Secretary of State that for the military success in which our troops have played such an important part to be seen through, a national political settlement is crucial. To that end, the idea that has been floated of bringing the elections forward a year so that the new Government are in place in good time would be a constructive step.

Mr Hammond: The timing of the Afghan presidential election is a matter for the Afghans, in accordance with the Afghan constitution. Our concern is to ensure that the constitution is upheld, that a democratic process is followed and that there is an orderly transfer of power from President Karzai at the end of his term.

Mike Gapes (Ilford South) (Lab/Co-op): In 2014 or 2015 when our combat role has ended, who will provide force protection for our trainers?

Mr Hammond: I am grateful to the hon. Gentleman for that question, because I have just written myself a note to remind me to respond to a point made by the hon. Member for Dumfries and Galloway. When we talk about not having combat troops in place, that does not mean that the troops who are in Afghanistan will not be permitted to defend themselves should they come under attack. Clearly, when British personnel are deployed in an area where there is danger, they must have the capability to defend themselves. The Afghan national officer training academy is being built within the perimeter of an American facility that will be defended by US troops.

Mr John Baron (Basildon and Billericay) (Con): I too pay tribute to our troops, but I continue to have grave doubts about the capability that the Afghan forces will have when ISAF ceases combat operations. What scope is there to drop the preconditions to talks with our enemies, which are unrealistic in many respects, so that

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we can explore possible common ground, particularly given the fundamental differences between the Taliban and al-Qaeda? I suggest to the Secretary of State that those of us who served in Northern Ireland showed, I hope, that one can talk and fight at the same time.

Mr Hammond: I have no doubt about the growing competence, capability and confidence of the Afghan national security forces. They will inevitably fight a different type of campaign after 2014 from that fought by ISAF. I have a high level of confidence in their ability to hold the ground against the insurgents. The UK Government recognise the need for an Afghan-led reconciliation process, but the basis for that must be that the people who are involved renounce the use of violence and agree to pursue their objectives by political means.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): Following on from the previous question, we talk about insurgents as though they were a uniform group. Has the Secretary of State made an assessment of whether the pattern of who the insurgents are has changed and of the differentiated response that is therefore required?

Mr Hammond: The hon. Lady is absolutely right. One striking statistic shows the percentage of the reintegrees—horrible word—who have joined the peace and reconciliation programme whose original gripe with the Afghan Government had nothing to do with ideology, but was a land dispute or some other local dispute that led them to feel disfranchised and disillusioned with Afghan society. Sometimes it was a reaction to the corruption that is still, I am afraid, only too endemic. She is right that there is a hard core of people who are ideologically motivated, but there is also a much softer group of insurgents who are alienated from Afghan society but not ideologically motivated against it. That represents fertile territory for the reconciliation programme.

Jack Lopresti (Filton and Bradley Stoke) (Con): Does the Secretary of State believe that our troops have the kit and equipment they need to continue to do the job effectively?

Mr Hammond: I am happy to tell my hon. Friend that when Brigadier Patrick Sanders, who commanded 20th Armoured Brigade during Herrick 15, was in the House on Tuesday evening, he said, as Members who were there will have heard, that the equipment that he had available during his tour was the best that he had known in his 26 years in the Army. The soldiers who are fighting for us have the best personal protection equipment they have ever had and their commanders have the enablers that they need. I have no doubt that, at long last, we have the kit that we need to fight this campaign.

Tony Lloyd (Manchester Central) (Lab): It is not obvious that the political process has made the same progress as the military one. In that context, does President Karzai have the capacity to deal with the issues that the Secretary of State has mentioned today, such as corruption, and allow more people to be reintegrated? In any case, does he have the capacity to have proper dialogue with his previous political opponents? Without a political solution there will be no long-term capacity for peace.

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Mr Hammond: I agree with the hon. Gentleman that there is no long-term solution without reconciliation and reintegration, but it would be a mistake to judge Afghan society by our own standards. While I was in Helmand, I was astonished to see an attitude survey suggesting that Afghans object to the level of bribes, not their existence. They accept the existence of bribes as part of everyday lives, but they do not like their reaching extortionate levels. We have to go with the grain of Afghan society, but he is absolutely right that the willingness and ability of the political elite to manage reconciliation to a successful conclusion will ultimately determine whether the process succeeds.

Mr James Gray (North Wiltshire) (Con): The nation will be very glad that today marks the beginning of the end of combat operations in Afghanistan by our magnificent troops there. Nevertheless, does the Secretary of State acknowledge that the next three or four years will be among the most dangerous and sensitive times that our troops have had to face, as they withdraw, and that any information that he might inadvertently give in the House or elsewhere might endanger that withdrawal? Will he therefore be very cautious indeed about the tactical level of information that he gives out about the withdrawal?

Mr Hammond: My hon. Friend is of course absolutely right. As we go through the withdrawal, our troops will face new and different challenges, and nothing that we say in the House should place them at any greater risk. I reassure him that my statement was made with the full agreement of the military commanders to the detail that it contained.

Caroline Lucas (Brighton, Pavilion) (Green): Figures suggest that UK arms sales to Afghanistan are doubling, while Transparency International’s corruption index still shows the regime there as one of the most corrupt in the world. In that context, as we bring our brave troops home, how will the end use of the arms that we sell to Afghanistan be monitored?

Mr Hammond: As the hon. Lady knows, we have one of the most rigorous arms control and monitoring regimes of any nation, but if we want the ANSF to take over the combat role from us, we clearly have to ensure that it is effectively equipped to do so.

Dr Julian Lewis (New Forest East) (Con): Will the Secretary of State confirm that our American allies are seriously considering the retention of one or more strategic bases in Afghanistan after 2014 as the best way, and indeed probably the only way, of ensuring that the military gains and any political settlement do not unravel after that date?

Mr Hammond: My hon. Friend will know that that has been widely reported as a US objective, but my understanding is that nothing has been agreed or finalised between the Afghans and the US on post-2014 lay-down at this stage.

Paul Flynn (Newport West) (Lab): May I offer my heartfelt condolences and those of my hon. Friend the Member for Newport East (Jessica Morden) to

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the family of Sapper Connor Ray? Sapper Ray came from the city that we both represent and was the 409th fatality from Britain. He was among the bravest of the brave.

The Secretary of State’s statement contained, as always, excessive optimism about the situation in Afghanistan. Will he admit, and tell us about, the growing strength of the Taliban outside Helmand and the growing area that they control? Is there not a real possibility that after going into Afghanistan to get rid of a Taliban Government, when we leave we might find a new Taliban Government in control?

Mr Hammond: No. I am sorry, but I have to disagree with the hon. Gentleman on the last part of his question. Of course, I wholeheartedly agree with his condolences to the family and friends of Sapper Connor Ray. I am sure the whole House join him in that.

It seems to me that the hon. Gentleman has a fixed agenda and just keeps reiterating it. The reality is that the Taliban are significantly weakened and do not have the ground-holding capability that they did before. Yes, there are areas in the east of the country, along the border with Pakistan, where there is still significant Taliban activity. However, an Afghanistan in which Helmand province, the main highway and the big cities are under the Afghan Government’s control will be a viable Afghanistan that can contain an insurgency in the mountains along the Pakistani border. The key to the battle is in the big cities of the south and south-west and on highway 1, and it is about ensuring freedom of movement and control of the big population areas.

I wish the hon. Gentleman could find it in his heart to share our aspiration for Afghanistan and take it from me that the military gains on the ground and the growth in the capability of the Afghan national security forces are real. This is a good news story, but I agree with him that it is not irreversible.

Dr Andrew Murrison (South West Wiltshire) (Con): I welcome the statement and the intent that it contained, but does my right hon. Friend recognise the remarks that General John Allen made in evidence to the Senate armed services committee last month? He said that he was having what he described as a “strategic conversation” with his political masters about the US draw-down towards the end of the year, in advance of a report on the subject that he intended to deliver later this year. To what extent is the announcement that my right hon. Friend has made today provisional on that report?

Mr Hammond: The announcement that I have made is not in any way provisional on that report. The United States will recall its surge troops during the course of this year, bringing its force level in Afghanistan back down to 68,000. The discussion that General Allen referred to is about the trajectory of US force levels beyond that figure. We have no definitive read-out of that discussion yet, and we have as yet made no definitive plan for our own draw-down beyond the end of 2012.

Thomas Docherty (Dunfermline and West Fife) (Lab): Understandably, much of the focus has been on the role of the British Army, but may I press the Secretary of

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State to say a little about what role, if any, the Royal Air Force may provide post-2014 either in direct combat operations or in combat-enabling operations?

Mr Hammond: I should first say that members of all the armed forces will be involved in the Afghan national officer training academy, so there will definitely be a tri-service presence in Afghanistan after 2014 in that capacity. Beyond that, we have made no decisions about the nature or scale of any continuing support that we may provide. As I said earlier, the conversation about that will begin in Chicago, but I do not expect it to be concluded quickly.

Caroline Dinenage (Gosport) (Con): Will the Secretary of State assure the House that no UK forces will be required to backfill any areas that are left as US forces withdraw from Helmand?

Mr Hammond: Yes, I can give that assurance. The UK’s area of operations—the three districts of Nad Ali, Lashkar Gah and Nahri Sarraj in central Helmand—will remain the focus of UK operations. We do not intend to extend our area of operations, and US forces drawing down elsewhere in regional command south-west will be replaced by Afghan national security forces.

Mr Denis MacShane (Rotherham) (Lab): How easy it is to start a war, and how difficult to finish one. The Secretary of State has announced another 32 months of our soldiers being Taliban target practice. President Hollande, if he wins next week, will pull French troops out this year, and I believe that if President Romney is elected in November, there may be some big political rethinking in the United States. Having listened to six Secretaries of State make the same statement—we are defeating the enemy, we are making political progress—I ask the Secretary of State at least to ask our military to ensure that as few of our soldiers as possible are killed in the remaining 32 months. We do not honour the sacrifice of those who have died by adding more corpses to the funeral pile.

Mr Hammond: The right hon. Gentleman is a real dyed-in-the-wool glass-half-empty man. I have not announced that we will commit our forces for another 32 months. The Prime Minister announced early last year that we would have them out of a combat role by the end of 2014. That is a good news story, as is the fact that in the interim, all the ISAF nations are focused on creating an ANSF that can take over our role and maintain security in Afghanistan.

In the meantime, everybody in the House ought to be extremely proud of the social and economic development in central Helmand. There are significantly more schools, hospitals, clinics, bazaars, and bridges. Over the past six months, the British Army has built the biggest bridge that it has constructed since the second world war. All those things allow ordinary people in Helmand province to resume their normal life, grow their income and make mainstream Afghan society more and more attractive to those who have previously been attracted by the insurgency.

John Glen (Salisbury) (Con): My concern is that the current residual threat is not a reliable indicator of what precisely will happen post-2014. What assurance

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can the Secretary of State give the House that the likely change or intensification of threats from without Afghanistan in 2015 are being properly examined and acknowledged in the training being received now by the ANSF?

Mr Hammond: The strategic threats are acknowledged in, and form a core part of, ISAF’s thinking. I do not know whether my hon. Friend had a particular aspect in mind, but it is clear to us that building a sustainable and reliable relationship with Pakistan and ensuring the security of the border with Pakistan will be fundamental to the future of Afghanistan.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The UN assistance mission in Afghanistan recently confirmed that there were 3,000 civilian deaths in 2010, that 25% of Afghan children die before they are five and that 70% of people live in poverty. Is not that the real legacy of a decade of war?

Mr Hammond: No, it absolutely is not. The number of civilian casualties is of course a matter of extreme regret, but more than 76% of civilian casualties are caused by Taliban activity, not by ISAF or ANSF activity. Health care, literacy and poverty have all taken great strides forward since 2006. The Taliban banned girls from schools. There were no girls in school—

Paul Flynn: Yes, there were.

Mr Hammond: Virtually no girls were in school in Afghanistan in 2006, but now large numbers of girls are being educated. Schools, clinics and hospitals are springing up all over the place: 90% of the population of Helmand is within one hour’s walk of a health facility. That state of affairs could not even have been imagined in 2006. I therefore tell the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) not to talk the place down. It is making significant socio-economic progress.

Jason McCartney (Colne Valley) (Con): Next week sees the funerals of my constituents Corporal Jake Hartley, Private Anthony Frampton and Private Danny Wilford of the Yorkshire Regiment. Will my right hon. Friend continue to state the progress made in Afghanistan, as he has today, and describe the orderly way in which we will withdraw from the country, so that we continue to demonstrate to their loved ones that their sacrifices have not been in vain?

Mr Hammond: I absolutely agree with my hon. Friend. We owe it to those who have made the ultimate sacrifice to conclude this operation in good order and to secure our legacy—their legacy—for the future.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): In paying tribute to our troops and recognising their hard work, I seek a reassurance from the Secretary of State. Although we recognise the development of the ANSF, is he getting reassurances from our ISAF partners that they understand the need to maintain resources on the ground during transition so that there can be a flexible response to the assistance role?

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Mr Hammond: Yes. I attended last week the NATO Defence Ministers conference in Brussels, where speaker after speaker asserted the principles of “in together, out together” and reaffirmed their commitment to the Lisbon 2010 declaration principles. We all understand that we are now in the last stretch of this campaign, but we have to do it properly in order to secure the legacy.

Tony Baldry (Banbury) (Con): Because of the need to balance the Ministry of Defence budget, a number of service personnel will be made redundant later this year, including, I suspect, a number who have recently returned from Afghanistan and a number based in my constituency with the Royal Logistic Corps. However, those people have skills that are much sought after by local employers, so will my right hon. Friend ensure that MOD officials work with the local community to set up a social enterprise to ensure that the skills of the service personnel who are made redundant are made known to local employers as swiftly as possible, and so that as many of those skills and those people can be brought into the local labour market as swiftly and speedily as possible?

Mr Hammond: I should say first of all that nobody who is on operations in Afghanistan nor anyone who is recuperating in the six-month period after returning from Afghanistan is eligible for redundancy, but my hon. Friend is right. As we balance the MOD budget and reduce the size of the Army to around 82,000, there will be a series of redundancies. Many of the people being made redundant will fortunately have skills that are of value in the civilian economy. I am not sure I agree with him on the need to create a social enterprise, but I can assure him that very robust arrangements are in place to ensure that local jobcentres are alerted in advance to the availability of the skills that those people have.

Oliver Colvile (Plymouth, Sutton and Devonport) (Con): I thank my right hon. Friend very much for his announcement, which I am sure will go down well in my constituency, where, as hon. Members may know, 3 Commando Brigade, which served so valiantly last year out in Afghanistan, is based. What impact will today’s statement have on the reservists? Will he also explain what support his Department is giving to reservists’ families, who can on occasion feel somewhat isolated from the support given to their regular counterparts?

Mr Hammond: My hon. Friend makes a good point. A significant number of reservists contribute to the campaign in Afghanistan. They tend to serve as individual augmentees—people with specific skills who are called up to reinforce other units—and as such, their families do not benefit from the group support that tends to help the families of personnel in Regular Army units. As we move forward with our plans to strengthen the reserves, we hope there will be more opportunity to deploy reserve units as formed units, which will in itself help to address the problem my hon. Friend highlights.

Mr Deputy Speaker (Mr Lindsay Hoyle): Last but not least, I call Guy Opperman.

Guy Opperman (Hexham) (Con): Thank you, Mr Deputy Speaker. I shall try to be good value.

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I welcome the ongoing withdrawal and support the troops from my constituency from 39 Regiment Royal Artillery who have recently returned from a successful tour of Afghanistan. Does the Secretary of State agree that a political deal with the Taliban must be a vital precondition of continuing the social and economic progress in Afghanistan that we would all seek as we continue our withdrawal?

Mr Hammond: Yes, Taliban is a loose term. As I have already sought to suggest, a significant proportion of people who have supported the insurgency are not obviously ideologically motivated. The key challenge for the Government of Afghanistan is to negotiate with the political leaders of the Taliban and seek to reintegrate those who are supportive of the insurgency at the moment but who are not necessarily ideologically motivated—those who can be brought back on side by simply dealing with the grievances that put them off side in the first place.

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Points of Order

1.18 pm

Karen Bradley (Staffordshire Moorlands) (Con): On a point of order, Mr Deputy Speaker. You will be aware that yesterday in the House, the hon. Member for Rhondda (Chris Bryant) listed meetings contained in the written witness statement of Mr Rupert Murdoch. The hon. Gentleman stated that the information had been published by the Leveson inquiry, whereas in fact it was still subject to the restriction order made by Lord Leveson on 7 December 2011. Could I ask your guidance on whether it is appropriate for Members of the House to disclose information before it has been properly disclosed by the Leveson inquiry?

Mr Deputy Speaker (Mr Lindsay Hoyle): That is not a point of order for me to deal with. It was put on the record yesterday and the hon. Lady has also put it on the record, and I think the issue will come back to the House.

Mr Denis MacShane (Rotherham) (Lab): On a point of order, Mr Deputy Speaker. Twice in the business statement the Leader of the House made a comparison between Mr Adam Smith, the special adviser who has just left his post, and another special adviser who left under completely different circumstances, and who was widely condemned on both sides of the House and by the public. It is unfair to cast aspersions and slurs on special advisers. The Leader of the House was not doing it in a nasty way, which I understand, but all Government Ministers are nervous and are very unhappy about this situation. Everybody says Mr Smith’s behaviour was completely straight and honest, and only reflected the wishes and orders of his master. This House should not cast any negative aspersions on that gentleman.

Mr Deputy Speaker: As the right hon. Gentleman knows, it is up to Members and Ministers to be responsible for their words and actions in the House; it is not for the Chair to make a decision on that matter.


Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Scotland Bill for the purpose of supplementing the Orders of 27 January 2011 (Scotland Bill (Programme)) and 21 June 2011 (Scotland Bill (Programme) (No. 2)):

Consideration of Lords Amendments

1. Proceedings on Consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

Subsequent stages

2. Any further Message from the Lords may be considered forthwith without any Question being put.

3. The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Michael Fabricant.)

Question agreed to.

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Scotland Bill

Consideration of Lords amendments

Clause 3

Supplementary and transitional provision about elections

1.20 pm

The Parliamentary Under-Secretary of State for Scotland (David Mundell): I beg to move, That this House agrees with Lords amendment 1.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this we may take Lords amendments 7, 8, 10 and 11.

David Mundell: Along with the redoubtable Wendy Alexander, Annabel Goldie, Lord Browne of Ladyton, Lord Stephen and my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), I took part in the very first meeting that led to the establishment of the Calman commission. I am pleased and proud today to be part of what I hope will be the successful conclusion of the commission’s work. The return of the Scotland Bill to this House comes after the other place has given the Bill a great deal of detailed scrutiny and consideration for many months. Indeed, in handling the Bill in the Lords, Lord Wallace of Tankerness was compared to Kate Adie. That comparison is not correct: he was more like General Montgomery, because he was at the forefront of the action rather than a mere commentator.

Since the Bill was last in this House, there have been two very significant developments. The Scottish Government have changed their position from one of opposition to one of support for the Bill, including many of the amendments we will consider today. On 21 March, the Secretary of State confirmed in a written ministerial statement the terms on which agreement had been reached with the Scottish Government on the Bill, and on 18 April the Scottish Parliament passed the legislative consent motion for the Bill unanimously.

When the Bill was last in this House, it appeared that the Scottish National party would never join the consensus that has been shared throughout both the Calman commission process and the parliamentary process on the Bill.

Stewart Hosie (Dundee East) (SNP): I know that the Minister wants to pretend that this Bill is incredibly important, but in fact it is a rather modest Bill. If I may correct him—I know that he sometimes struggles with detail—he will remember that on Second Reading, I made it clear that we would not stand in the way of the Bill. I welcome the changes that the UK Government have made, in particular to remove some of the re-reservations, and I hope that we can now get on and pass this modest little measure.

David Mundell: I also remember the occasion on which the Scottish National party voted against the Bill, as we will detail in respect of the specific amendments that come forward. Several changes have been made to the Bill, but all of them have been on the basis of assurances provided by the Scottish Government as to how the matters will be conducted.

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Mrs Anne McGuire (Stirling) (Lab): Except sometimes the right hand of the Scottish National party does not know what the left hand is doing. While down here it was being conciliatory, it was initially prepared to stand in the way of this extensive devolution of powers.

David Mundell: The right hon. Lady may recall that during previous consideration of the Bill, I identified London SNP as a quite different body from the Scotland-based SNP. At the same time as the SNP in London opposed the Bill, more sensible forces in the Scottish Parliament were looking to bring forward what will be a significant package of measures that will strengthen devolution by increasing the financial accountability and responsibility of the Scottish Parliament.

Stewart Hosie: Instead of misrepresenting me, why does not the junior Minister understand that the only reason the Scottish Parliament was able to agree the legislative consent motion was because the UK Government agreed to remove the idiotic re-reservations that they had planned; agreed to take out some of the significant and damaging things that they had intended with the Supreme Court; and, fundamentally and very sensibly, agreed proper commencement procedures, about which I will say more later?

David Mundell: I am sure that the SNP at Westminster group leader’s substitute will recognise that when this Bill was previously debated in this Parliament, the Scottish National party indicated that it had six demands that it required to be reflected on the face of the Bill before it would support it. None of those six demands is in the Bill as we debate it today or as it was debated in the Scottish Parliament, where it received unanimous support—including that of all members of the Scottish National party present.

Bob Stewart (Beckenham) (Con): I do not really like the Bill being called modest by the Scottish National party when the Office for Budget Responsibility says that the Scottish Parliament will be able to have over £500 million of income tax in 2015-16. That is hardly modest.

David Mundell: I could not agree more with my hon. Friend. This is a significant measure which will lead to the largest transfer of fiscal powers between Westminster and Scotland in 300 years, and it should be welcomed by all parties. My hon. Friend may be aware that yesterday that the First Minister apparently told the Institute of Directors that he planned to align taxes in Scotland with the rest of the UK, so the Scottish National party may now regard the actual requirement for tax-varying powers as insignificant.

Lords amendment 1 seeks to improve the drafting of clause 3. Section 113 of the Scotland Act 1998 makes provision about the scope of subordinate legislation powers in that Act. Clause 3(1) amends section 113 of the Scotland Act so that the supplementary powers contained in section 113 also apply to Scottish Ministers’ new power to make subordinate legislation about the administration of Scottish Parliament elections under section 12 of the 1998 Act.

Lords amendment 1 would replace clause 3(1) with new provision having the same effect. The amendment would have the effect of restructuring section 113 and

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this would make it easier for provisions in this Bill or future legislation to provide that the supplementary powers contained in section 113 apply in relation to other powers that may be conferred on the Scottish Ministers.

Clause 15 changes the name of the Scottish Executive to the Scottish Government. Lords amendments 7 and 8 are minor technical amendments that would ensure that all the references to “Scottish Executive” in section 44 of the Scotland Act are amended to “Scottish Government”.

Clause 22 makes provision for there to be a Crown Estate Commissioner who knows about conditions in Scotland. Lords amendments 10 and 11 would change the name of this Commissioner from the “Scottish Crown Estate Commissioner”, to the “Crown Estate Commissioner with special responsibility for Scotland”. I can confirm that the original title for the commissioner included in the Bill was taken from the Calman commission’s own proposals and discussed with the Crown Estate. However, it is accepted that the amendments to the commissioner’s title will properly reflect the role that the commissioner will play.

1.30 pm

Stewart Hosie: The Minister will concede, I hope, that notwithstanding this change there is no material difference between the Bill as it was and the amendment to the title of the Crown Estate Commissioner?

David Mundell: The amendment changes the title. If the hon. Gentleman is alluding to whether the Scottish Government, in their discussions on the Bill, put forward a requirement for further devolution of the Crown Estate, I can tell him that they did not. It was not a red line for the Scottish Government.

Mr Frank Roy (Motherwell and Wishaw) (Lab): Are any costs associated with the name change?

David Mundell: As far as I am aware, no costs are associated with changing the name from that proposed in the original Bill to the revised one.

Anas Sarwar (Glasgow Central) (Lab): Will the title of First Minister be changed to “Secretary of State for Rupert Murdoch”?

David Mundell: I am sure that that is a matter on which the hon. Gentleman and many others hold a view but on which the Government do not.

The Select Committee on Scottish Affairs has produced an interesting report on the future of the Crown Estate in Scotland. Obviously, the Government welcome the assiduous work carried out in preparing the report. I am surprised that its Chairman, the hon. Member for Glasgow South West (Mr Davidson), who usually plays a robust part in these deliberations, is not present. I had anticipated his having something to say about his report. However, the Government will consider it in due course. I understand that it has been debated in the Scottish Parliament, where the devolution of Crown Estate activities directly to local communities found support, at least among opposition parties there.

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On that basis, I hope that the House will agree with the Lords amendments.

Mr William Bain (Glasgow North East) (Lab): As we begin debating the Lords amendments, I hope the House will consider it appropriate for the Opposition to mark the significance of what is likely to be our final consideration of the Scotland Bill. If it receives Royal Assent in the coming days, the Bill will represent the largest devolution of financial powers to Scotland in 300 years; will make decisions on spending and taxation more transparently accountable to the Scottish Parliament than at any time since 1999; and create new borrowing powers with the potential to boost economic growth significantly.

This enhancement of devolution is the culmination of a four-year process of cross-party and cross-societal constitutional reform through the Calman commission, which was established by Wendy Alexander and other pro-devolution party leaders in Scotland. Its outcome was accepted in a White Paper by my right hon. Friend the Member for East Renfrewshire (Mr Murphy); was assisted by my hon. Friends the Members for Glasgow North (Ann McKechin) and for Rutherglen and Hamilton West (Tom Greatrex) in various capacities; and has been implemented with cross-party support by the coalition Government.

It is also welcome that the Scottish Government have finally indicated their assent, if not warm-hearted approval, for the Bill, after a significantly longer and more circuitous journey to reach that position than that undergone by Scotland’s other political parties.

The Secretary of State for Scotland (Michael Moore): I would like to pay tribute to the hon. Gentleman, his colleague the shadow Secretary of State, the hon. Members for Glasgow North (Ann McKechin) and for Rutherglen and Hamilton West (Tom Greatrex) and those from all parties in the House and elsewhere who have helped to make this Bill what it is today. I hope that the hon. Member for Glasgow North East (Mr Bain) will agree that this is a good model for how parties should work together to produce consensus and plan, and then devolve significant powers to Scotland.

Mr Bain: I heartily agree with the Secretary of State.

The Bill is good for democracy in decentralising certain financial powers, and good for the Scottish economy in devolving the right levers to promote further growth.

Mr Frank Roy: Will my hon. Friend confirm that, in effect, this really is devo-max?

Mr Bain: It is intriguing. We have several descriptions: “indy-lite”, “devo-plus”, “devo-max”. Various formulations for additional powers have been put out for public discussion. I think this is “devo-positive”. It will give the Scottish Parliament additional democratic legitimacy by enabling it to raise about 35% of what it spends—far more than at present—but without the race to the bottom with other countries or parts of the United Kingdom on tax rates, including corporate tax rates, which would be very damaging for growth.

Ian Murray (Edinburgh South) (Lab): Lots of adjectives have been attached to the word “devo” with regards to the debate about the constitutional settlement in Scotland.

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Given that the Scottish National party supported it, then did not support it, then supported it again, then did not support it, then supported it again, could this be “devo-hokey cokey”?

Mr Bain: That is a very interesting point put with typical style by my hon. Friend.

As a party that first supported devolution more than a century ago, we are pleased to see the Scottish Parliament strengthened by the Bill’s progress through the House and the other place.

Stewart Hosie: Will the hon. Gentleman give way?

Mr Bain: I was about to leave this point, but I will give way.

Stewart Hosie: The hon. Gentleman’s introductory remarks are interesting. Can we take it, given that he is speaking from the Opposition Front Bench, that the position of the British Labour party is no devolution of corporation tax to Scotland, under any circumstances, even if the evidence tells us that the power it might give would be incredibly beneficial for jobs and working people?

Mr Bain rose

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I might be able to help. I know that Mr Bain will come straight back to the amendments and that we will not drift any further.

Mr Bain: I am sure that if the hon. Gentleman wishes to make that intervention again when we discuss the implementation of tax powers, Mr Deputy Speaker, you might view it in order for me to address it then.

On the specific amendments, we support the provisions that make clearer the circumstances and criteria for Scottish Ministers to make orders in relation to the conduct of Scottish parliamentary elections. Those powers will be largely devolved to the Scottish Parliament under clause 3. We also agree with amendments 7 and 8, which resolve any remaining drafting ambiguities in relation to the change in the legal name of the Scottish Executive to “the Scottish Government” in clause 15. We also have no difficulty with amendments 10 and 11, which amend clause 22 to alter the Crown Estate commissioner’s name to

“Crown Estate Commissioner with special responsibility for Scotland”

to denote the special status that one of the Crown Estate commissioners will have, should the Bill become law.

In short, then, the Opposition support the amendments.

Several hon. Members rose

Mr Deputy Speaker: I call Mr Bob Stewart.

Bob Stewart: Thank you, Mr Deputy Speaker. I am surprised to be called so early. [Laughter.]

Mr Deputy Speaker: Order. If the hon. Gentleman wishes me to call someone else, I can do, but I am sure he is happy to continue.

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Bob Stewart: Forgive me, Mr Deputy Speaker. I was in total shock. I fell over.

I speak as someone who sounds like a Sassenach, but my Scottish father joined the Royal Air Force and was thereafter posted all over the world. Many members of my family still live in Scotland. My Aunt Eileen lives in Largs and my cousin teaches Gaelic in the Outer Hebrides. I say that to demonstrate that what happens in Scotland matters to a great number of us in the House. Many of my colleagues, such as my hon. and very good Friend the Member for Epping Forest (Mrs Laing), have Scottish ancestry going back—

Mr Deputy Speaker: Order. I know, Mr Stewart, that you will come to the amendments immediately, rather than touring Scotland. It is interesting to hear where your relatives live, and on another day I would welcome that information, but today I want to hear your views on the amendments.

Bob Stewart: All the amendments are very acceptable to me and to the other Stewarts in the House.

Mrs Eleanor Laing (Epping Forest) (Con): I am sure, Mr Deputy Speaker, that you will agree that it is relevant to say that the amendment matters not only to people living in Scotland but to people in the whole of the United Kingdom, because our country operates as one. I am sure that the speech by my hon. Friend the Member for Beckenham (Bob Stewart), who was educated at the excellent Chigwell school in Epping Forest, will be warmly welcomed by the Epping Forest Scottish Society, which shares his views on this matter.

Mr Deputy Speaker: The southern Scottish seat of Epping Forest has been mentioned, but it is not relevant to this group of amendments. Let us now get back to the amendments.

Bob Stewart: Thank you, Mr Deputy Speaker. The amendments will certainly be welcomed by the Stewart Society, which I shall be speaking to in two weeks’ time.

It is absolutely right that Members of the Scottish Parliament should have responsibility for raising more money, and the amendments will help them to do that. I am also pleased that MSPs will be more accountable to the Scottish people. I fully support, as do most people in this House, the fact that the Scottish Parliament will have responsibility for health, education, transport and the police. I am very pleased with the amendments.

Mr Frank Roy: Would it not be a great shame if all these amendments were to fall because, for some bizarre reason, the people of Scotland decided to separate from the United Kingdom?

Bob Stewart: It would be horrific if that were to happen. The Opposition and the Conservatives are all Unionists in this regard. It would be a disaster if there were any kind of separation of our great nation. Scotland is much more powerful through being connected with the English, the Welsh and the Northern Irish.

I am delighted to end my speech here. My jokes have been cut short by the unkindness of the Deputy Speaker, who will not allow me—

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Hon. Members: Ooh!

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I am sure that the hon. Gentleman is immediately going to withdraw that remark.

Bob Stewart: I am not sure that I will—[Hon. Members: “Oh!”] Yes, I certainly will withdraw it!

Mr Deputy Speaker: I am being very generous to the hon. Gentleman, and I am giving him that chance.

Bob Stewart: With crawlingness, I withdraw my remark. I shall sit down at this point.

Mr Deputy Speaker: There are some benefits from doing so.

Pete Wishart (Perth and North Perthshire) (SNP): It is a great pleasure to follow the hon. Member for Beckenham (Bob Stewart), and it is a pity that we did not get to hear the rest of his speech. SNP Members were particularly looking forward to the tour de force that his tour around Scotland would have provided. Perhaps we will have the opportunity to hear it another day.

We in the Scottish National party welcome the Lords amendments. Anything that gives more power to the Scottish Parliament will be welcome to us. At this, the last moment of the last day of the last stage of the Scotland Bill, I just want to say: what a process we have had! There are many things we could say about the Bill, but we could never describe it as being particularly exciting. It has never had much press attention in the course of the past few months. We could describe it as unambitious, uneventful or lacking the powers to grow the economy, but the main thing about the Bill is that it is so “minority Government”. It is from another day, another era—it is from the last gasp of a Unionist majority in the Scottish Parliament. It is from a day that has passed.

Mrs Laing: I fail to understand how the hon. Gentleman can find it unexciting or irrelevant that Members of the Scottish Parliament are being made more accountable to the people of Scotland. That is what devolution and increasing democracy are all about. I would have thought that he would be excited by that.

Pete Wishart: I am very grateful to the hon. Lady for her intervention. As always in these debates, she makes a colourful presence and puts her case passionately and well. I must say, however, that the Bill has been overtaken by events. Things have happened over the past year, and the one big thing that happened was the election of a majority SNP Government. Everything has changed because of that.

Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op): I am genuinely sorry that the hon. Gentleman is not more positive in welcoming the Bill, but his support in the voting Lobby is obviously what matters. He mentions the things that have happened over the past year. In the past day, we have heard the amazing announcement by the First Minister that he is in favour of having the same income tax levels even if Scotland were to be given independence. Is it not amazing that a

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party that has been struggling for independence for 90 years is now telling us that, if Scotland were to become independent, nothing much would change?

Pete Wishart: What the Scottish people are hearing is a compelling case for Scottish independence, and the question will be put to them in a couple of years. The overwhelming majority of them will endorse and support it. We look forward to having that debate over the next couple of years, because we are absolutely confident that we will secure that overwhelming majority.

Mr Frank Roy: Will the hon. Gentleman tell the House what made the Bill a bad Bill, and what it is that now makes it a good Bill?

Pete Wishart: To be fair, this is a much better Bill now than it was a year ago. All the damaging economic powers that would have cost Scotland so much have gone. I am also glad that the UK Government have agreed with the Scottish Government on commencement powers, so that we will no longer be exposed to the damaging measure that would have had a massive and dramatic impact on Scotland.

1.45 pm

David Mundell rose—

Margaret Curran (Glasgow East) (Lab) rose—

Pete Wishart: I have a choice between the two Front Benches. I will give way to the Minister first.

David Mundell: We would not want the hon. Gentleman to mislead the House. The UK Government have not agreed with the Scottish Government on dual commencement. What we have said is that it is desirable and that we will work with the Scottish Government to achieve it, but it has not been agreed on at this stage. I say this just so that right hon. and hon. Members are not misled.

Pete Wishart: I am grateful to the Minister for clarifying that. It is good that he agrees with the Scottish Government that joint commencement is a good idea and I welcome the fact that there will be a veto for the Scottish Parliament in regard to the commencement of potentially damaging tax powers.

The Bill does not meet the aspirations of the Scottish people. It does not meet the aspirations of the anti-independence parties either. They have all moved on as well, and decided that these provisions are not enough. The Conservative-led Unionist alliance and what accounts for their think-tanks are all now considering the next stages of devolution as they move forward. They, as well as the Scottish Parliament and the Scottish people, have passed the Bill by. The Bill is finished, it is dead, it is something that belongs to another day and another era.

David Mowat (Warrington South) (Con): I think I heard the hon. Gentleman say a few moments ago that this version of the Bill would save the Scottish Government and the Scottish people many billions, compared with the version that we discussed a year ago. Will he tell the House which amendments that observation pertains to, and what it was that he was talking about?

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Pete Wishart: I do not know whether the hon. Gentleman heard my exchange with the Minister, but this is to do with commencement powers. The agreement of the Scottish Parliament will now have to be sought before any tax-changing powers are brought in, which is right and appropriate. That will ensure that we do not go down any route that could damage the Scottish economy or the way in which the Scottish Parliament is funded.

I can see that you are keen for me to speak to the Lords amendments, Mr Deputy Speaker. We welcome the amendments. It is unfortunate that the hon. Member for Dundee West (Jim McGovern) is not here, but he will at last be able to refer to the Scottish Government as, well, a Government. The days of the Executive—and the unambitious Executives of the past—are finally at an end. The term “Executive” refers to boardrooms and golf clubs. It is Governments who run Scotland. As long as we are in charge, it is a Government, it will continue to be a Government and it will have the powers of a Government.

Mr Frank Roy: Will the hon. Gentleman confirm that his party voted for the Scotland Act 1998, which introduced the Scottish Executive?

Pete Wishart: One of the first things we did when we came into government, back in 2007, was to ensure that we were a Scottish Government. If it looks like a Government, walks like a Government and quacks like a Government, it is a Government. We will continue to be that Government. The days of the unambitious Labour-Liberal Executive have now gone, and thank goodness for that.

We welcome the amendments, and I look forward to discussing the others and finding out why the Labour party has changed its mind on—

Ian Murray rose—

Pete Wishart: I have just about finished my speech, if the hon. Gentleman does not mind. I have had enough of Labour Members’ interventions, as they all tend to be on the same theme, but I thank him for his interest.

We will support the Lords amendments. It is in Scotland’s interests that the powers should be transferred, and we will continue to support the rest of the amendments.

Mr Deputy Speaker (Mr Lindsay Hoyle): Minister, do you wish to speak—[ Interruption. ] I am sorry; I call Anne McGuire.

Mrs McGuire: I appreciate I am a blushing violet sitting here and you obviously did not quite see me, Mr Deputy Speaker. You are one of the few men who could say that they did not see me—even on this matter, but never mind!

I want to deal with the comments made by the hon. Member for Perth and North Perthshire (Pete Wishart) on this group of miscellaneous amendments. I think his comments are indicative of the fact that it does not matter how much devolution is given to Scotland or is agreed with the people of Scotland, it is never enough for a party that has only one ambition in this life, which is to separate Scotland from the rest of the United Kingdom. Such a party will continue to throw around the sort of parliamentary insults that the hon. Gentleman

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managed to put into his short contribution—such as “unambitious”. Frankly, it is not unambitious to provide the greatest transfer of powers to the Scottish people, and to give not just fiscal autonomy, which is a camouflage for independence, but fiscal responsibility to the Scottish Parliament.

I can see that you are getting agitated, Mr Deputy Speaker, because I may not be addressing the amendments, so let me deal with amendment 7, which is about health professionals. I have some concern about it. Although there is significant devolution of power, there is still cross-border traffic when it comes to health professionals. It was rational to say that this should have been a reserved power. However, it was yesterday’s statement by the First Minister that convinced me that this was probably the right way to go. We are now going to have not only the same Queen, the same currency and the same NATO, but, I hope, the same level of regulatory provision for health professionals, too.

I welcome the amendment, but I ask the Minister to convince me that there will be enough communication and consideration between the UK Government and the Scottish Government to ensure that we keep in sync health professional regulation between Scotland and the rest of the United Kingdom, so that people do not feel that they will get a different level of professionalism from the people they need to trust for their medical care according to whether they live north or south of the border.

Ian Murray: My right hon. Friend is creating an important narrative for the link between the national health services in Scotland and in the rest of the United Kingdom. Does she agree that that probably explains how the Scottish National party ended up voting on the Health and Social Care Bill—because of the interlinked nature of the NHS between Scotland and the rest of the UK?

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. The amendment refers only to leaving something out, which is all we are effectively debating. I have allowed some latitude, but I have to watch that we do not stray too far away from the amendment. I understand that the provisions affect Scotland and that hon. Members want to open up the debate, but we must try to stick to the amendments.

Mrs McGuire: I take your advice, Mr Deputy Speaker.

If the amendment is accepted—

Pete Wishart: Will the right hon. Lady give way?

Mrs McGuire: No, I do not think I will.

Pete Wishart: I gave way to them!

Mrs McGuire: I think that Mr Deputy Speaker wants us to move the business on, and I do not wish to trespass further on his charity.

I want a reassurance that there will be full discussions between the UK Government and the Scottish Government to ensure that we have a framework that will regulate health professionals across the United Kingdom, albeit that the Scottish Government will have responsibility.

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Chris Bryant (Rhondda) (Lab): On a point of order, Mr Deputy Speaker.

Yesterday afternoon, my hon. Friend the Member for Bradford South (Mr Sutcliffe) asked the Secretary of State for Culture, Media and Sport:

“Why was the special adviser the nominated person in the Department? If this was so important, as the Secretary of State is saying, why was his special adviser the nominated person?”

The Secretary of State replied:

“His role was agreed by the permanent secretary”.—[Official Report, 25 April 2012; Vol. 543, c. 963.]

This morning, at the Public Accounts Committee, the permanent secretary was asked on 10 occasions whether he had actually approved that decision, as the Secretary of State suggested to the House yesterday, and he point blank refused to say. The reason this is a point of order is that if we were to apply for a Standing Order No. 24 debate on this very serious issue of whether the Secretary of State might have inadvertently or advertently misled the House, we would have to have the first debate on Monday and the second on Tuesday. Can you confirm, Mr Deputy Speaker, that the House would not be able to prorogue on Tuesday in that eventuality?

Mr Deputy Speaker (Mr Lindsay Hoyle): First, I cannot judge something that has not happened. We do not know whether what the hon. Member mentions will be received on Monday. The decision will obviously be taken when such a request has been received; only then could it be decided upon. It would be wrong for me to rule on something hypothetical.

Mrs McGuire: On a point of order, Mr Deputy Speaker. I want to apologise to the House. As I was speaking, I was looking at amendment 7 from the Lords rather than our amendment 7. I hope that my contribution will be taken in the context of the right amendment.

Mr Deputy Speaker: I am sure that everything is possible.

David Mundell: I shall make a few points on the issues pertaining to this group of amendments. I can assure the right hon. Member for Stirling (Mrs McGuire) that we on the Government Benches always listen to her wise counsel. I will deal with the specific points she raised, which are important—regardless of when or where they are raised.

As the matter was raised by the hon. Member for Perth and North Perthshire (Pete Wishart), let me be clear about the position on joint commencement. The Scottish Government sought a specific provision for joint commencement in this Bill. The request was refused, as it was unworkable—like so many proposals advanced either by the SNP in London or the Scottish Government. Instead, we focused on delivering this Bill. At last, that objective is shared by the Scottish Government.

Of course we want to achieve circumstances in which joint commencement can take place. I shall quote from a letter sent by the Secretary of State on 20 March to Bruce Crawford and John Swinney:

“Consistent with the principle of consent, our two governments should reach agreement on implementation issues, including adjustments to the block grant, to take account of the Scottish Parliament’s new fiscal powers.”

That is the Government’s position.

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Let me respond to a point made by hon. Member for Dundee East (Stewart Hosie). He seemed to suggest that evidence had been produced to support the Scottish Government’s and indeed the Scottish National party’s suggestion that corporation tax should be devolved. Again, I am sure that he would not wish to mislead the House into thinking that actual evidence had been produced to support that proposition. Indeed, it was not.

Stewart Hosie: The Minister’s memory is appalling. I intervened on the Labour Front-Bench spokesman to ask the Labour party’s position on corporation tax. I said no such thing about evidence being provided to the UK Government. I am sure Hansard will bear that out. If, however, the Minister wants to carry on and embarrass himself further, I will be delighted to listen.

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I would obviously not allow the Opposition Front-Bench team to respond. I am sure that, as we go through the further provisions, everyone will be able to discuss the issues about taxation that they wish to raise.

David Mundell: Thank you, Mr Deputy Speaker. I shall not use the same tone as the hon. Gentleman, although I think his remarks confirmed that no evidence had been produced at all or in any form to support the proposition of devolving corporation tax. That is why it is not being devolved in this Bill and is not the subject of these or any other amendments brought forward in the House of Lords. I support the amendment on that basis.

Lords amendment 1 agreed to.

Clause 7

Partial suspension of Acts subject to scrutiny by Supreme Court

David Mundell: I beg to move, That this House agrees with Lords amendment 2.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this we may take Lords amendments 5, 6, 17, 18 and 26.

2 pm

David Mundell: As I have already explained, on 21 March the Government announced a package of measures in the Bill, and supporting non-legislative arrangements, to ensure that the Bill would operate in a fair and sustainable way to benefit Scotland and the rest of the United Kingdom. That announcement followed productive discussions with the Scottish Government.

I hope that it does not prove career-limiting for him if I pay tribute to Bruce Crawford MSP, the Cabinet Secretary for Parliamentary Business and Government Strategy in the Scottish Government, who has worked closely with me and with the Secretary of State on the dialogue that has been taking place about the Bill. Mr Crawford and his officials have always engaged constructively in discussions on the Bill, and, even on occasions when we have not agreed, we have always conducted those discussions in an orderly and proper fashion. I am most grateful to Mr Crawford for the way in which he dealt with the legislative consent motion in

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the Scottish Parliament, securing a unanimous outcome. There was no dissent from any member of the Scottish National party.

Following the agreement announced on 21 March, changes were made to both the finance and non-finance provisions in the Bill. Since its introduction in November 2010, it has been subjected to detailed scrutiny in the United Kingdom and Scottish Parliaments. In Westminster, it has passed successfully through its Commons and Lords stages, and has returned to the Commons today for further consideration. In Holyrood, not one but two Scotland Bill Committees have taken evidence and reported to the Scottish Parliament. I pay tribute to my colleague David McLetchie MSP, who experienced the pleasure of serving on both those Committees. I think that his expertise could rightly be said to be beyond that of Members of this House and the other place, in that he has a true understanding of the Bill and all its ramifications. I also pay tribute to the other MSPs who served on both Committees for their work in dealing with the reports, and subsequently passing the legislative consent motion tabled by the Scottish Government in favour of the Bill.

We have gone further than ever before in working with parties in Scotland and across the United Kingdom to deliver a Bill built on cross-party consensus. We have carefully considered and, when appropriate—that is, when a case based on evidence has been properly made—taken on board the views of the Scottish Government and the Scottish Parliament. We are pleased that we have reached agreement and can make progress with the Bill.

The package of measures announced on 21 March meets the tests that the Government set for changes in the Bill package. They are based on evidence, maintain the cross-party consensus that supports the Bill, and will benefit Scotland without detriment to the rest of the United Kingdom. The amendments in this group are part of those changes. Lords amendments 2, 5, 6, 17 and 26 would remove clause 7, clause 12, schedule 2, clause 13 and clause 26.

Lords amendment 2 would remove clause 7. As it stands, section 33 of the Scotland Act 1998 allows for only a Bill, rather than a single provision of a Bill, in the Scottish Parliament to be referred to the Supreme Court in its entirety on questions of legislative competence. That means that implementation of the whole Bill would be delayed if the matter were referred to the Supreme Court pending a decision of that court. The Government’s intention in pursuing the limited reference procedure contained in clause 7 was to prevent unnecessary delays on Bills the majority of whose provisions were considered to be within the legislative competence of the Scottish Parliament.

The Scottish Government expressed the fear that the clause could have the potential to introduce unintended consequences and delay to the enactment of legislation in the Scottish Parliament. As a result of our discussions with the Scottish Government, we agreed that the clause could be removed. The Scottish Government accept that that will mean that in future, as at present, only a full Act of the Scottish Parliament can be referred to the Supreme Court, even if only a single provision raises competence issues. I should make clear that the provision in the original Bill was intended to be helpful to the Scottish Government. However, they decided that they did not want that helpful measure to be included, and as a result we agreed to remove it.

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Lords amendments 5 and 26 would remove the clause on insolvency and the related provision in schedule 2. Clause 12 would return exclusive legislative competence to the UK Parliament in relation to all aspects of the winding up of business associations. It is intended to ensure that the rules on corporate insolvency are consistent on both sides of the border. The UK Government continue to believe that it is important to take into account the view of stakeholders that, when appropriate, Scottish insolvency procedures should be in step with those in the rest of the UK. Our discussions with the Scottish Government have provided us with assurances that we can address those concerns without amending the devolution settlement in this respect.

Let me make clear to Scottish National party Members that the UK Government have removed the clause on the understanding that the Scottish Government will consider the modernisation measures for the devolved areas of winding up in Scotland that were introduced into the reserved insolvency procedures in 2009 and 2010, and have provided assurances that future changes made by the UK Parliament or Ministers in that area will be considered in a timely fashion by the Scottish Government in their area of competence.

Lords amendment 6 seeks to remove clause 13. The clause deals with the regulation of health professionals, to which the right hon. Member for Stirling (Mrs McGuire) has already alluded. Since Royal Assent to the Scotland Act 1998, the regulation of any health professionals not regulated by the legislation listed in schedule 5 has fallen within the legislative competence of the Scottish Parliament, but although the Scottish Parliament has had the power to introduce separate legislation in respect of the regulation of health professionals, it has chosen not to do so.

During our discussions with the Scottish Government, they raised some concerns about the clause. They pointed out that the delivery of health care is, on the whole, devolved to Scotland. However, they gave us clear assurances that they would work closely with us to ensure that consistent regulatory regimes apply to all health professionals. I assure the right hon. Member for Stirling that it is on the basis of those assurances that the UK Government are content to continue to develop policy in relation to the regulation of health professionals with the Scottish Government.

Mr Frank Roy: Does this not prove that some things should be done on a UK-wide basis rather than on the basis of a separate Scotland?

David Mundell: During consideration of the Bill in the House of Commons and by the Committees of the Scottish Parliament, I was not aware of a single piece of evidence suggesting that the regulation of health professionals would benefit from not being carried out on a UK-wide basis. In fact, it has been pointed out that health professionals are a relatively mobile group who may want to move to and from jobs in Scotland and England, and who would therefore not benefit from separate regulation.

Mr Roy: Presumably the SNP agrees with that.

David Mundell: As I said earlier, the Scottish Government have given assurances that although there will not be a relevant clause in the Bill, they will work with the UK

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Government to ensure that there is a uniform approach to the regulation of health professionals. I think that those remarks are consistent with the First Minister’s statement yesterday that he intended to align taxes in Scotland with those in the rest of the United Kingdom if Scotland became independent. In fact, if Scotland became independent, there would be no difference on virtually any matter.

Lords amendment 17 would remove clause 27. The Government included that clause to provide UK Ministers, concurrently with Scottish Ministers, with a power to implement international obligations in devolved areas. That would have allowed UK Ministers to implement international obligations on a UK basis, where it would be more convenient to do so. Both Governments acknowledge the importance of ensuring that all of the UK’s international obligations are fully implemented across the UK in a timely fashion. The UK Government are willing to remove this clause on the understanding that Scottish Ministers will ensure that any international obligations that fall within their responsibility are implemented on time. We have made clear to Scottish Ministers that the Government would be prepared to use their existing powers of direction under section 58(2) of the Scotland Act 1998 if we were to have concerns about the implementation of international obligations within the remit of Scottish Ministers.

Let me make it absolutely clear that the Government have not conceded on the principle of re-reservation, as the Scottish National party suggested during our earlier debates on this Bill. The Bill does not make devolution a one-way street. Clause 14 re-reserves the regulation of activities in Antarctica.

Pete Wishart: If it is not a one-way street, which powers are now coming back to this House apart from those on Antarctica?

David Mundell: The hon. Gentleman forgets that he and his colleagues moved an amendment to remove the clause re-reserving activities in Antarctica. They were defeated in this House, and the Scottish Government have accepted that the regulation of activities in Antarctica should be re-reserved. I fail to understand the SNP negotiating position, because it appears that the regulation of dental hygienists—important though that is, as the right hon. Member for Stirling said—cannot be re-reserved, yet matters such as the administration of the Crown Estate, corporation tax, excise duties and further broadcasting powers were not red lines for the SNP in its discussions on this Bill.

Pete Wishart: To ensure that the Minister does not mischaracterise the approach of the Scottish Government, let me state that we are not for any re-reservations of powers now. That is why the Bill is now more acceptable to the SNP and the Scottish Government.

David Mundell: Again, I would not want the hon. Gentleman to mislead the House. The regulation of activities in Antarctica are re-reserved to this House.

Mr Deputy Speaker (Mr Lindsay Hoyle): And I know that no Member would mislead this House.

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David Mundell: This re-reservation—which some Members on the Opposition Benches sought to remove at an earlier stage—is a sensible measure.

We have removed provisions from the Bill where we have been given necessary assurances that their effect will be achieved by other means, or where we now take the view that we can sufficiently rely on existing powers.

Finally, let me turn to the proposed new clause under Lords amendment 18. Its purpose is to provide information to both Houses in the UK Parliament on the implementation and operation of the financial powers in this Bill. It requires the Secretary of State for Scotland to publish an annual report to both Houses of Parliament within one year of the Scotland Bill becoming an Act and until a year after the tax and borrowing powers are fully transferred to the Scottish Parliament. The last report is therefore expected to be published in 2020. The Secretary of State will send a copy of his report to Scottish Ministers, who will lay a copy of it before the Scottish Parliament. The proposed new clause also requires Scottish Ministers to lay a report of the same title to the Scottish Parliament on an annual basis and to provide a copy to lay before both Houses of the UK Parliament.

This amendment was proposed by the Government during discussions with the Scottish Government. The new provision will ensure that there is a transparent mechanism of reporting to both Parliaments on implementation. Passing the Bill is just one part of the process to ensure that these new powers are delivered and the accountability and responsibility of the Scottish Parliament are increased. The important implementation work that both Governments need to undertake to ensure that the financial measures operate successfully will now begin in earnest. This amendment will ensure that both Parliaments are kept properly informed of progress on implementation by both the Secretary of State for Scotland and the Scottish Government.

2.15 pm

The Government intend for these reports to be comprehensive and accessible to all. They must cover all aspects of implementing the Scotland Bill financial package, legislative and non-legislative. The proposed new clause sets out the areas that each report must address. They are as follows: an update on all aspects of progress in implementing the powers in the Bill and its Command Paper since the previous report; details of the future steps towards implementation that all parties must take; an assessment of the operation of the powers; an assessment of the operation of powers to devolve taxes to the Scottish Parliament or changes to the powers of the Scottish Ministers to borrow, or any other changes to the finance provisions in the Bill; the effect of transferring tax powers on the Scottish block grant; and any other matters concerning sources of revenue to the Scottish Government.

I believe the amendments in this group will help ensure that the Bill delivers the most significant transfer of powers to the Scottish Parliament, and I beg to move that the House agrees to them.

Mr Bain: This group of amendments is a result of agreement between the UK and Scottish Governments on the legislative consent motion passed last week by the Scottish Parliament, giving its assent to the transfer of powers prospectively made by the Bill.

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Lords amendment 2 would remove clause 7, which creates new arrangements for the partial suspension of a Bill passed by the Scottish Parliament, subject to a reference made by the Advocate-General for Scotland, the Attorney-General or the Lord Advocate to the Supreme Court under section 33 of the Scotland Act 1998. The Scottish Government said that that could delay the overall implementation of affected Bills, and have thus invited this House to consider the merits of the existing arrangements. We consider that the existing judicial processes have worked sufficiently well in ensuring that the Scottish Parliament legislates within its powers, and that any incompatibilities found to arise by the Supreme Court in Bills pre-Assent or Acts post-Assent can be dealt with by amending legislation at Holyrood. We are therefore minded to accept the amendment.

Lords amendment 5 would remove clause 12, which re-reserves to the UK Parliament certain aspects of insolvency law in Scotland—on the winding-up of companies, the effect on diligence, prior transactions and the insolvency of social landlords. Personal insolvency and receiverships remain entirely devolved to Holyrood, and administrations and company voluntary agreements remain a responsibility of this Parliament as they affect Scotland. Lords amendment 26 would remove schedule 2, which makes the consequential changes to insolvency law required if clause 12 remains part of the Bill.

Lords amendment 6 would remove clause 13, which re-reserves the regulation of the medical professions in Scotland to the UK Parliament. On Lords amendments 5 and 6, we note that the Scottish Parliament indicates in its legislative consent motion that it will aim to make regulation in both matters in a way that is consistent with regulation across the United Kingdom. Given that commitment, we see no reason to oppose either amendment.

Lords amendment 17 would remove clause 27, which permits Ministers in the UK Government to make a single order in relation to the implementation of international obligations applicable across the United Kingdom, whether they extend into devolved competences or not. A similar approach already exists in relation to EU obligations. The Scottish Government have made commitments on the continued implementation of non-EU international obligations. Given that, and given also the power of direction available to the UK Government in such matters under section 58 of the 1998 Act, we would not oppose Lords amendment 17.

Lords amendment 18 would add, after clause 37, a significant new clause creating a new obligation on both the UK and Scottish Governments to make an annual report to their respective Parliaments on the progress made toward implementing the new tax and borrowing powers devolved to the Scottish Parliament by the Bill. We are aware that the Office for Budget Responsibility has already begun to make estimates of Scottish revenues from the tax responsibilities to be devolved, and has published, alongside its economic and fiscal outlook, estimates for this fiscal year and each successive year. In particular, it estimates revenues from the prospective Scottish rate of income tax at £4.4 billion this financial year, rising to £5.6 billion by 2016-17; revenues from stamp duty land tax at £328 million this financial year, rising to £536 million by 2016-17; and revenues from landfill tax at £123 million this financial year, rising to £157 million by 2016-17.

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Fiona O'Donnell (East Lothian) (Lab): The money derived from the landfill tax is currently ring-fenced in the UK, bringing back direct environmental benefits to communities. Does my hon. Friend know whether the Scottish Government will continue that approach?

Mr Bain: My hon. Friend raises a pertinent point, because although we hear demands for powers made by certain parties, no purpose is ever given for the devolution of those powers. It is a staggering omission that we know absolutely nothing about the future of stamp duty land tax, given that it is due to be devolved to Holyrood in just a few short years. We have heard about the lack of evidence provided for the devolution of other taxes, with the Institute for Fiscal Studies setting out convincing evidence in its “Green Budget” a few months ago that devolving corporation tax would involve a race to the bottom and be a very risky endeavour indeed.

Ian Murray: My hon. Friend is being incredibly generous in giving way again. Is it not the case that the setting of corporation tax was devolved to Northern Ireland simply to allow it to equalise its rate with the rate on the other side of the land border to the south? Indeed, the First Minister of Scotland’s speech at the Institute of Directors yesterday, in which he said that he would use the taxation powers only to equalise the rates, highlights why corporation tax should not be devolved to Scotland.

Mr Bain: The other implication of devolving corporation tax for it to be reduced to the levels that apply in the Republic of Ireland is that £2.6 billion would be lost from the Scottish block as a result. That would not be in the interests of economic growth, services, health or education in Scotland. As PricewaterhouseCoopers said in its report to Scottish Parliament’s Bill Committee on the Bill, the cut in corporation tax was only the 16th or 17th highest reason for companies investing in the Republic of Ireland, while most of the investment in the Republic of Ireland occurred when corporation taxes were not at the reduced level. The case for devolving corporation tax has therefore not been made. As we have seen in the past few days, with confusion over income tax policy and no rule on what debt levels a separate Scottish state would have, the First Minister’s plans for separation seem to be dissolving into yet another omnishambles.

Stewart Hosie: As we are debating this matter, can we have confirmation that the British Labour party is now completely opposed to the devolution of corporation tax to Scotland, even if the evidence was that it would benefit Scotland through economic growth and jobs for ordinary working people? Is that correct?

Mr Bain: Let me, as a member of the Scottish Labour party, tell a member of the London Scottish National party that our commission will look at the evidence on all fiscal matters. However, strong evidence has already been presented that goes against the devolution of corporation tax. No convincing evidence has been presented by either the Scottish Government or the Scottish National party to show how simply basing a policy on corporation tax would produce additional jobs and growth.

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Mrs Laing: I am listening carefully to what the hon. Gentleman is saying about this complicated subject. He quoted the First Minister of Scotland as saying that he would only equalise taxation. I know the hon. Gentleman cannot answer for the SNP, but if the past is anything to go by, Labour always raises taxes. Can he therefore confirm that, should Scotland separate from the rest of the United Kingdom, he could give no undertaking that a future Labour Government in Scotland might not stick by the current First Minister’s—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. The length of the hon. Lady’s intervention is stretching even my patience a little. We are not speculating about such matters; we are only discussing an amendment at this stage.

Mr Bain: Thank you, Mr Deputy Speaker. The hon. Lady tempts me to make future tax policy. However, the point she makes is that corporation tax is better levied and raised at UK level, and that is what we shall be defending in the debates on these amendments and the debates in the coming months.

The agreement between the UK Government and the Scottish Government provides that borrowing limits will be reviewed regularly, ahead of UK spending reviews by the Joint Exchequer Committee, and a consultation will be initiated on the Scottish Government being able to issue bonds. The annual reports will allow Members of this House and the Scottish Parliament both to scrutinise the detailed arrangements made by Her Majesty’s Revenue and Customs and the Scottish Government in the run-up to implementation and the first five years following the commencement of operation of the new fiscal powers, and to permit any remaining issues—such as the precise interpretation of the definition of a Scottish taxpayer, as raised by my hon. Friend the Member for Glasgow North (Ann McKechin) in Committee—to be resolved before the tax powers become active in April 2015. It is also our view that the reports will provide an opportunity to scrutinise arrangements made at Holyrood on the workings or replacement of stamp duty land tax. We welcome the new commitments on giving consideration to bond issuance by the Scottish Government, and the additional capacity that such borrowing powers will provide to the Scottish Government to make capital and infrastructure investments, which are vital for Scotland’s economic competitiveness.

The requirement to make annual reports will also show the strength of the financial powers being devolved by the Bill. The Scottish Consolidated Fund will have sufficient balance to ensure cash flow on the devolution of these new tax powers and to manage any excessive in-year volatility of tax receipts. It will also meet differences between forecast and out-turn receipts on income tax allocated to the Scottish Government at the beginning of the relevant fiscal year.

Mr Frank Roy: Presumably the safeguards that my hon. Friend just spoke about will not be there if Scotland separates from the United Kingdom. Is that the case?

Mr Bain: Indeed, one of the benefits of being part of the United Kingdom is that we enjoy a fiscal union in which there are significant fiscal transfers from the UK level to Scotland. The evidence published in January 2010

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by my right hon. Friend the Member for East Renfrewshire (Mr Murphy), when he was Secretary of State for Scotland, indicated that in the 20 years running up to 2008, fiscal transfers of about £75 billion had taken place. That is the Union dividend; that is the benefit that Scotland has obtained from remaining part of the United Kingdom, and we will defend that in the debates in the coming months.

These powers to meet any differences between forecasts and actual receipts of income tax rise to a cumulative limit of £500 million and permit an annual increase in capital investment of up to £230 million per year, subject to a cumulative limit of £2.2 billion from the national loans fund, the Public Works Loans Board or commercial banks.

We welcome the fact that the Scottish Government have not persisted with their demands on the devolution in the Bill of corporation tax or excise duty, which would not be in the interests of the people of Scotland at this time. Finally, may I say that we offer our support for this amendment and the others in this group?

2.30 pm

Iain Stewart (Milton Keynes South) (Con): I am grateful for the opportunity to speak on this group. I will speak specifically to Lords amendment 18, but before I do so, Mr Deputy Speaker, I hope it is in order for me, having taken part in all the Bill’s proceedings in the House, to place on the record how much I welcome the progress that has been made, both here and in the Scottish Parliament; I particularly welcome the unanimous approval given by the Scottish Parliament on 18 April. I believe that the Bill as a whole embodies sensible evolutionary progress on devolution. It represents a measured and calm approach, which takes forward at a sensible pace the whole devolutionary process, and it avoids some of the risk and uncertainty that would be involved in more extreme constitutional change that some Opposition parties want.

On Lords amendment 18, the publication of an annual statement of progress on the transfer of fiscal powers is a welcome and sensible move. I do not think we should underestimate the scale of change that will occur when capital borrowing powers are devolved, when income tax powers are devolved, and when stamp duty and the other measures are passed down. A huge sum of money is involved and, as other right hon. and hon. Members have mentioned, it will mean that the Scottish Parliament is responsible for raising more than one third of its spending. When coupled with the actual amount of money involved, the process of disentangling what has been a unitary tax system should not be underestimated.

John Stevenson (Carlisle) (Con): Does my hon. Friend agree that producing such a report will bring greater openness and transparency to the financial affairs of the Scottish Parliament, and that it will also allow greater scrutiny of issues relating to the Barnett formula?

Iain Stewart: My hon. Friend makes a very important point, as the essence of the Bill is that it creates additional transparency and provides for democratic scrutiny of the decisions made by the Scottish Parliament. That is important not only in Scotland, but in England. I am sure that constituents write to him to complain about some of what they see as the largesse given to Scotland.

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Some of what is reported to us is not accurate—the media tend to whip up a storm about the bounty that is provided to Scotland. Some of what is said may be true, but greater transparency will be healthy for democracy and it will remove some of the myths from the debate. I think that this measure will be good for the Scottish Parliament, for devolution and for the Union.

Pete Wishart: I am listening to the hon. Gentleman with keen interest and I very much approve of the tone of his remarks. Will he ensure that when nonsensical claims are made about Scotland having this “largesse”, as he describes it, he will deal with them all in the same way as he just has?

Iain Stewart: I am grateful to the hon. Gentleman for that intervention. I always try to be reasonable and measured in my comments. These issues are important and I have long argued—I will not repeat the arguments that I have made in other debates, as I think you would quickly rule me out of order, Madam Deputy Speaker—that there is a great deal of confusion about the fiscal relationship between Scotland and the rest of the United Kingdom. I think that this measure will give extra clarity. Some of the claims are justified; others are not. I shall not be tempted down the path of identifying which are and which are not, but, as my hon. Friend the Member for Carlisle (John Stevenson) says, it is important to have that scrutiny so that we can keep tabs on this very complex change. The last thing our economy needs in these difficult economic times is additional uncertainty about changes that are being rushed through that might provide uncertain trading conditions for companies. The proposed process is measured, calm and sensible.

I am glad that some of the other demands for fiscal transfers have been resisted at this stage. We have talked about corporation tax and I will not re-enter that debate. The demands made by the Scottish National party initially included the transfer of excise duties, but even they now realise the complexity that that would involve, thanks to the fact that such an august body as the Scotch Whisky Association—a very fine body—pointed out that different alcohol duties north and south of the border would require the introduction of some sort of tax border policing to ensure that there was no abuse of the system. I am glad that that demand has been dropped.

As my hon. Friend says, the additional transparency will be good for our constituents. The publication of the annual reports will also be helpful in relation to another sensible change that has been made during the progress of this Bill, which is the proposed adjustment to the annual block grant. Initially, I think there was to be a one-off assessment of what change should be made to the block grant as a result of the fiscal changes. That has now been amended to be an annual assessment of what I think is known as the Holtham approach, which has been considered for funding for the Welsh Assembly. Having that annual check on a very complex and dynamic fiscal situation will be sensible. I recall that similar changes were made to the calculation of the Barnett formula in the 1990s when the initial formula, which had been set in stone since it was first introduced in the late 1970s, had resulted in some disparities and anomalies as a result of changing population levels. That has since been adjusted to an annual change.

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David Mowat: As my hon. Friend says, a change has been made at the last moment to what is called the no-detriment principle, which was indeed set out in the Holtham report, produced in July 2010. Does he concede that the majority of the Holtham report focused on a needs-based funding formula, and that we are not implementing that at this time?

Iain Stewart: I am grateful to my hon. Friend for that intervention but I do not think that you would be terribly enamoured of me, Madam Deputy Speaker, if I widened the debate into a discussion of the Barnett formula and fiscal matters more generally. My hon. Friend is right, however, that that is not part of the Bill. It is a subject to which I think we will return on another day.

In conclusion, I welcome Lords amendment 18, which would make a sensible change to the Bill. I welcome the Bill as a whole, as it is a sensible change and a sensible evolution of the devolutionary process, and I think that it will be welcomed both north and south of the border.

Stewart Hosie: I want to say only a few words about this group of amendments. They are very welcome, particularly the scratching out of some of the re-reservations. We tabled amendments, of course, to remove the re-reservation of insolvency and health professional regulation matters in a previous stage, but the Government rejected them at that point, as did the British Labour party. I am delighted that there is now unanimity that those re-reservations should be removed.

David Mundell: Will the hon. Gentleman confirm that he also tabled an amendment at an earlier stage to remove the re-reservation of Antarctica and that the re-reservation of Antarctica remains in the Bill?

Stewart Hosie: Indeed it does. We can safely say that we have no territorial claims on Antarctica. This is a Scotland Bill, and the re-reservation removal is sensible.

Lords amendment 18 deals with reports on the implementation and operation of financial measures in the Bill. That is a sensible provision, and it is linked closely to the commencement of those financial provisions. We made that point repeatedly throughout debates on the Bill. In the Committee of the whole House, on the second day of debate, we discussed commencement powers to ensure that things were done at the correct time. We had a good debate on six separate commencement provisions for various financial measures. We said:

“If the commencement arrangements are left unchanged, many of the most important questions about the Bill will be left unanswered.”—[Official Report, 14 March 2011; Vol. 525, c. 89.]

On Third Reading, we said that the amendments that we had tabled on commencement would ensure that the tax provisions could not

“be brought into effect unless the Scottish Parliament...specifically consented.”—[Official Report, 21 June 2011; Vol. 530, c. 248.]

That was not just a point of principle—matters that affect the Scottish Parliament should be decided by the Scottish Parliament—but concerned some practical, technical issues. If a number of fiscal measures were introduced at the wrong time in the economic cycle that could be detrimental economically. Several Labour Members understood that point, and did so very clearly indeed, and it was interesting that Labour abstained

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from decisions on commencement—the party did not object to it, and I am glad that it welcomes what we have at the moment.

I want to take the opportunity, unusually, to be generous to the Secretary of State. The discussions and negotiations between his team and Bruce Crawford, the Cabinet Secretary for Parliamentary Business and Cabinet Strategy, and the letter that the Secretary of State sent to Bruce and to the Cabinet Secretary for Finance, Employment and Sustainable Growth, John Swinney, were extremely helpful, particularly the part of the letter that said:

“Consistent with the principle of consent”—

which was what we were determined to deliver—

“our two governments should reach agreement on implementation issues, including adjustments to the block grant…Each government should also provide assurance to its Parliament before the relevant provisions of the Bill are brought into force and before implementation arrangements are brought into effect.”

That agreement on the requirement properly to engage the Parliaments, and the principle of consent, were what we were trying to achieve. For the avoidance of doubt—and I have said this to the Secretary of State for Scotland, so it is not a surprise to him—of course there will be a bun fight about the contents of the Bill. Of course the matters that are being devolved do not go far enough for the Scottish National party—that is not a huge surprise—but making sure that we avoid the dangers of the financial provisions commencing at the wrong time was always the key thing that we needed to change. The Secretary of State knows that, so I very much welcome that exchange of letters to ensure that commencement is done properly on the basis of consent.

Michael Moore: Allow me to be equally generous to the hon. Gentleman in accepting the points that he has made. From the outset, we have made it clear that we want to reach agreement on all those provisions before they are implemented. What he and his colleagues originally wished for was joint commencement powers, which are not in the Bill. However, we are committed, as we properly have to be, to working with the Scottish Government, of whatever colour, to ensure that those proposals are implemented properly.

Stewart Hosie: I thank the Secretary of State. Irrespective of the final mechanism, which was a subject of some negotiation, the provisions, which allow us to proceed on the basis of consent and agreement, effectively deliver the protections against the commencement of fiscal provisions at the wrong time, which was a key objective in getting to where we are.

2.45 pm

Rory Stewart (Penrith and The Border) (Con): It seems a little dry to focus on Lords amendment 18 with reference to clause 37, but it is a central issue. It is not a dry issue at all. As my hon. Friends the Members for Carlisle (John Stevenson) and for Milton Keynes South (Iain Stewart) pointed out, this is central to two issues that define the Union. The first is the issue of borrowing and finance, and the second is that of what my hon. Friend the Member for Carlisle called the issue of transparency. These two principles of borrowing and

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transparency—borrowing defined in clause 37 and transparency in Lords amendment 18—show why the Union matters. Transparency matters because an enormous amount of the pressure for separation from Scots, and from some English people, comes from suspicion—suspicion about money. Borrowing matters because borrowing shows why the Union can operate well.

The shadow Minister, the hon. Member for Glasgow North East (Mr Bain), pointed out three things which the clause delivers. It delivers, first, decentralisation. An important part of decentralisation is fiscal responsibility. It delivers, secondly, a lever for growth, but the third and most important thing that it delivers is macroeconomic stability within the context of the United Kingdom. This is central because the biggest argument for the Union, the thing that underlies the dry language of the Bill, is why being part of a bigger country matters—why, to put it in the most brutal terms, we do not want to be Denmark.

Why is it that our ancestors got on their Viking boats, left Denmark and came here? The answer is, of course, that there are benefits in size. There are benefits to having an economy 12 times the size of Denmark’s. There are benefits to having a population 12 times the size of Denmark’s, with the corresponding borrowing and fiscal responsibility. That perfect balance enshrined in clause 37 and revealed in amendment 18 is the balance that comes from the benefits of autonomy combined with the benefits of size.

Stewart Hosie: I am desperately looking forward to the hon. Gentleman explaining when a Viking decided to leave Denmark to come and be part of the British state. I like the hon. Gentleman, but I think his history is rather askew.

Madam Deputy Speaker (Dawn Primarolo): Order. Actually, I would not like the hon. Member for Penrith and The Border (Rory Stewart) to explain that in the context of these amendments, and I am sure he is coming back to what is relevant to them.

Rory Stewart: Thank you, Madam Deputy Speaker. I am happy for us to discuss Scottish history later.

We are discussing transparency, which is exactly what Lords amendment 18 relates to—explaining to this Parliament, to the Scottish Parliament, to the British people and to the Scottish people what we are doing with their money. Transparency is crucial because money is at the heart of this. On the one hand, the Scottish National party uses money to fight for separation through fantasies about oil. On the other hand, English nationalists, who are equally to blame for what is happening to the United Kingdom, focus on money to attack Scotland. This is the wrong thing to do.

Lords amendment 18 matters because it should, we hope, put those arguments aside. There are those who imagine that we are going to wreck the United Kingdom because we are worried about free eye tests, prescription charges or tuition fees. For goodness’ sake, let us, in line with Lords amendment 18, see the money. What we will see is that we are spending every year in transfer payments to Scotland half of what we are spending on the war in Afghanistan, if we include the debt and veterans costs. The reason why we need to move beyond this is that the

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kind of borrowing enshrined in the clause and amended in Lords amendment 18 is the borrowing that made us great together.

The very economics that underlie that notion of borrowing came south from Edinburgh with Adam Smith and the enlightenment. The very same borrowing on the basis of the United Kingdom meant that Scots and English were able to fight together at Waterloo and win. The very borrowing enshrined in clause 37 is what allowed us to create the national health service together. The very borrowing enshrined in clause 37 and amended and made transparent in Lords amendment 18 is what allows us to flourish today. I urge the House to vote for Lords amendment 18 because it enshrines the principle of togetherness.

Mr Frank Roy: The hon. Gentleman spoke of a possible history debate with the hon. Member for Dundee East (Stewart Hosie). We invite the hon. Member for Penrith and The Border (Rory Stewart) to come to the Floor of the House, because I am sure that the debate is one that the whole House would like to hear, and no doubt we know who the winner would be.

Rory Stewart: I thank the hon. Gentleman very much indeed.

Having been a little rhetorical, I will return to the measures set out in the new clause proposed in Lords amendment 18. I congratulate the example set by my hon. Friend the hon. Member for Milton Keynes South in the moderation of his tone. The conduct of the Ministers in this regard, which has been praised by the hon. Member for Dundee East (Stewart Hosie)—he is now leaving the Chamber to research in his history books—shows exemplary co-operation and is an example of why the United Kingdom Parliament works so well. The moderate voices of the hon. Member for Milton Keynes South and the shadow Minister show that separation is unnecessary. The correct praise for the Scottish National party for its successes shows the successes of autonomy, not of separation and independence. If we can get the principles of transparency correct and the exact details of Lords amendment 18, the sinews of the Union, the point-by-point, sometimes dry legislative amendments that allow us to work together and avoid what the Scottish National party wishes to push us into—a black-and-white solution of either fatal inertness or still more terrible activity—we will instead, through a voice of passionate moderation and amendments of this sort, keep together the Union that made us great and will make us greater still.

Ian Murray: It is a great pleasure to follow the hon. Member for Penrith and The Border (Rory Stewart), who has a great knowledge of everything historical and has driven the hon. Member for Dundee East (Stewart Hosie) out of the Chamber to hunt out not only his history books, but no doubt his horned helmet. If he can drive SNP Members out of the Chamber with such ease, he should speak here more often to ensure they disappear.

I, too, wish to concentrate on Lords amendment 18 and its proposed new clause, and that is for one simple reason: transparency. Transparency is the word that hits the new clause on the head, as the hon. Gentleman suggested. We need transparency because over the past few months, and indeed since the Scottish parliamentary

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elections in 2011, we have had anything but from the Scottish Government. We have had smoke and mirrors on tax, the constitutional settlement, the currency, visa arrangements and NATO—the list is endless. One of the most prevalent calls in Scotland in the debate on separation is for transparency on taxation, because that feeds into public services and the ordinary lives of everyone who lives in Scotland and, indeed, the other component parts of the United Kingdom.

Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): My hon. Friend is making an excellent speech. Does he agree that there is a strong case for transparency from the Scottish Parliament on how money is spent, because we have not always had that?

Ian Murray: I am grateful to my right hon. Friend for raising one of the key points on why we need transparency. The hon. Member for Penrith and The Border said clearly that transparency helps not only the Scottish people to determine how their money is spent and allocated, but the other component parts of the United Kingdom to see how money is spent in Scotland, which would be welcomed by everyone in this House. Indeed, we have not even had transparency on the Bill itself. The Bill has been called “a poison pill”, “a dog’s breakfast” and “dangerous” by the same party that voted for it, campaigned against it and will, no doubt, vote for the amendments if the House divides this afternoon.

We need transparency from the Scottish Government at every level on what they wish to achieve. In the past few months, we have heard the Scottish National party say in public—the records are available—that it would reduce fuel duty, reduce corporation tax to the level it is in Ireland, and will be in Northern Ireland, which is 12.5 %, and that it would reduce duties and business rates. I am not an expert on taxation systems or, indeed, on algorithms or mathematics, but it seems that that would lower every single tax in Scotland, so I pose the question, where would the money come from? There is only one place that it can come from, and that is public services, so, on the report that would come from the Secretary of State concerning those powers, I challenge the Scottish Government and the Scottish National party to tell us, with regard to every single tax that they wish to lower or decrease, where the money will come from and where the money will go.

Let us take corporation tax, which my hon. Friend the Member for Glasgow North East (Mr Bain) mentioned, and which is a complicated issue. I mentioned smoke and mirrors at the start of my contribution, and there has been a lot of smoke and mirrors from the Scottish Government on corporation tax. They have used the example of Northern Ireland, but there are two clear lessons from Northern Ireland.

As I said in an intervention, Northern Ireland wants corporation tax devolved to equalise its rate with the country on its land border to the south and ensure that it is not disadvantaged. That highlights two things: first, that the land border is important; and secondly that corporation tax levels, when they are lowered to such a drastic state as we have seen in Ireland, create an uncompetitive situation and a race to the bottom.

We cannot afford that race to the bottom in the United Kingdom, with its land border between England and Scotland, because it would create an environment

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in which the money that came out of the block grant—some £2.6 billion if the rate were equalised with Ireland’s at 12.5%—would have to come from public services.

The Scottish Government have yet to tell us which public services they would cut. The national health service already has far fewer nurses in Scotland than it did in 2007, and the Scottish Government have yet to tell us where the money would come from in terms of public services, so I should welcome the debate and the evidence that the hon. Member for Perth and North Perthshire (Pete Wishart) tells us we should have about corporation tax, because perhaps the Scottish Government could lay out that information, and the report under discussion, which would come back annually to the House until those taxation powers had been fully devolved, would be very welcome and could examine some of those issues.

The smoke and mirrors continues, because the First Minister of Scotland, Alex Salmond, when he was in London yesterday, no doubt met his London SNP colleagues to discuss these issues. In his speech to the Institute of Directors he suggested that, with the powers in the Bill transferred to Scotland, income tax levels in Scotland would not be changed. One of the key points here is that the Scottish Parliament has powers to reduce or to increase income tax in Scotland by 3p, but the Scottish Government chose not to maintain HMRC’s systems to enable that, so we are left with the Scottish Government and, indeed, the First Minister jumping up and down like little children, demanding powers—

Madam Deputy Speaker (Dawn Primarolo): Order. I have given the hon. Gentleman some latitude, but I am sure that he is coming back to the debate which we are having here about the importance and relevance of the report.

Ian Murray: I will be coming back to the report this very second, because it is about transparency, and what we have had quite clearly from the Scottish Government is a complete lack of transparency. I hope that the report allows us some, because when the Bill receives Royal Assent, we will have a Scottish rate of income tax, the devolution of stamp duties, the devolution of landfill tax, the power to create new taxes and the power to borrow of many billions of pounds—borrowing powers, incidentally, which the Scottish Government did not want but have planned to use. So it is quite important that the report comes back.

With this amendment, the Lords have done a good job of enabling us to see where the new taxes will go. I certainly welcome it and will support it later this afternoon.