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Lord Sewel: Amendment No. 275E has the effect of deleting Clause 62(2)(b) which allows sums to be paid out of the Scottish Consolidated Fund to meet expenditure payable out of that fund under any enactment, including the Bill. If we were to accept the amendment, we would find ourselves in the strange position such that expenditure in relation to a whole myriad of activities, which would rightly fall due to the Scottish Consolidated Fund, would not be competent since they would not be caught by the other provisions of Clause 62 relating to expenditure of the Scottish administration and sums charged on the fund. Clearly, that would not be acceptable. It would, for example, rule out expenditure of such bodies as the Scottish parliamentary corporate body, the expenditure of which is payable out of the Scottish Consolidated Fund by virtue of Clause 27.

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It would also mean that the salaries and allowances of members of the parliament could not be paid unless the parliament made them a statutory charge on the Scottish Consolidated Fund or provided for them to be paid by the Scottish Ministers. None of those functions can properly be described as expenditure of the Scottish administration and would therefore not be included under the provisions of Clause 62(2)(a).

Moreover, the parliament would be unable to vote money directly to the Auditor General for Scotland and his office but could only arrange for him to be paid by the administration or for his expenses to be a charge on the fund. That, of course, would undermine his independence. On reflection, it can be seen that we would be heading quickly for a rather chaotic situation if we went down that route.

Turning to Amendment No. 275F, the effect of this amendment would be to require the Scottish parliament to ensure that sums it proposes should be paid out of the Scottish Consolidated Fund in any financial year do not exceed the sums expected to be paid into that fund for the same financial year.

First, the Scottish parliament could not effectively budget to live outwith its means since, as the noble Lord observed, the Scottish executive will have no borrowing powers on its own account other than the short-term borrowing provided for in Clause 63; nor can the parliament grant the executive further borrowing powers--subsection (4) ensures that. Thus, it would simply not have the cash to finance a budget it could not afford. Moveover--this is a bit of a sting in the tail--even the short-term borrowing is repayable under such terms as the Treasury may determine; and this includes the timescale for repayment.

The noble Lord hinted about the possibility of the Scottish parliament acting almost deliberately irresponsibly and setting itself on a collision course with the UK Parliament over its budget. I genuinely believe that that possibility is remote. We have no reason to believe the parliament will act in anything but a mature and responsible manner. With devolution comes responsibility and freedom to determine its own affairs. If the parliament were determined to act in such a way as to break the devolution settlement, this amendment would not prevent it from doing so.

There are a number of ways for the devolution settlement to be broken if that is the wish of an immature and irresponsible parliament which is set on a collision course. It would be impracticable to legislate for all of those opportunities. Again, I do not believe that we have any grounds for believing that the parliament will act irresponsibly in such matters. In the unlikely event that the Scottish parliament did propose to budget outwith its means, that would become apparent since its expenditure proposals would be in the public domain. It would be clear that that was the course of action upon which the parliament was intent. That would undoubtedly create a political crisis. However, in those circumstances, the UK Parliament could legislate for a remedy.

The other more practical objection to the noble Lord's amendment is that if its provisions were to be applied the Scottish parliament would be unable to carry

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forward unspent balances. That would, in turn, mean that it would be unable to enjoy the sort of end-year flexibility arrangements which government departments normally have. In some ways, those arrangements are to be encouraged to ensure the more effective and efficient use of resources. On the basis of that explanation, I hope that the noble Lord feels assured and able to withdraw his amendment.

Lord Mackay of Ardbrecknish: On Amendment No. 275F, I understand the noble Lord's point about the importance of the parliament and the government being able to carry forward unspent balances rather than having what I have always considered to be the rather silly practice of spending money as if there was no tomorrow just because it is March.

If I were a member of another political party which shall remain nameless but which is not represented in your Lordships' House, I might be attracted by the idea of spending more money than I received in order to underline the point that I was not getting enough. I am impressed by the confidence of the noble Lord that that will not happen. Given the opinion polls, I do not share his confidence. But his suggestion that if that happened the United Kingdom Parliament could take very quick steps to legislate to put an end to it fills me with a degree of confidence. Therefore, when the Committee comes to Amendment No. 275F I shall seek leave to withdraw it.

I turn to Amendment No. 275E. I now understand what Amendment No. 275B means. Obviously, I did not think about it for long enough. The attraction of seeing how many people would stand for this parliament if there was no power to pay them almost tempts me to call a Division. However, as I do not believe that the noble Lord, Lord Sewel, even if he were not a Minister, the noble Lord, Lord Steel of Aikwood, and perhaps my noble friends Lord Selkirk of Douglas and Lord Sempill, to name but four or five, would join me in the Lobby, I shall resist the temptation and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 275F not moved.]

Clause 62 agreed to.

Clause 63 [Borrowing by the Scottish Ministers, etc.]:

9 p.m.

Lord Mackay of Ardbrecknish moved Amendment No. 275G:

Page 27, line 36, at beginning insert ("Subject to the approval of the Chancellor of the Exchequer,").

The noble Lord said: This is a short matter. I regret that the noble and learned Lord, Lord Simon of Glaisdale, is not present because he would have applauded the Minister on the drafting of this Bill. I have suggested the wording,

    "Subject to the approval of the Chancellor of the Exchequer, the Scottish Ministers may borrow from the Secretary of State any sums required".

In Amendment No. 275H I suggest that "Treasury" should replace "Secretary of State". Interestingly enough, in the Government of Wales Bill when a

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proposal was made to delete references to the Treasury and the Chancellor of the Exchequer the noble and learned Lord, Lord Falconer of Thoroton, the former Solicitor-General--he has now gone on to be the great enforcer--vigorously defended these words and the drafting practice. It was said that every time one saw the word "loans" it had to be with the permission of the Treasury. It was said to be a long-held drafting tradition and it was absolutely essential. He put up a very serious defence. The noble Lord, Lord Simon of Glaisdale, believed that the words were quite unnecessary, but his noble and learned friend was not prepared to agree with him. The Government refused to budge. I simply ask that if this is good enough for the Welsh why is it not good enough for the Scots, or is this a change in drafting procedure since the introduction of the Government of Wales Bill?

Lord Hardie: I have been asked to reply to this amendment in view of the fact that my noble and learned friend the former Solicitor-General dealt with the equivalent Welsh provision. Amendment No. 275G would require the Scottish Ministers to seek the approval of the Chancellor of the Exchequer in relation to sums borrowed by the Secretary of State. Amendments Nos. 275H and 275J would mean that the lender under the short-term borrowing power would be the Treasury rather than the Secretary of State. Under this clause all borrowing is subject to the provisions of Clause 64. This explicitly states that the Treasury may issue to the Secretary of State out of the National Loans Fund the sums required by him for making loans to the Scottish Ministers under Clause 63. I am advised by our draftsman that this is the usual formulation for National Loans Fund lending provisions of this kind and acknowledges in an appropriate way the Treasury's role in controlling access to that fund.

Clause 63(3) was referred to by my noble friend Lord Sewel in his previous answer. That provides that borrowing is to be repaid to the Secretary of State on terms determined by the Treasury. This includes such matters as timescale, methods of repayment and the rate of interest. I am satisfied that these provisions provide the Treasury with robust powers in relation to such short-term borrowing under Clause 63. I ask the noble Lord to withdraw his amendment for the reasons that I have given. As I have explained previously, I do not believe that comparisons between this and the Government of Wales Bill are necessarily apt.

Lord Mackay of Ardbrecknish: They may not be apt but clearly the same dead hand of the Treasury is in both of them. I had thought for one moment that Scottish Ministers and the Secretary of State had escaped, but as the noble and learned Lord the Lord Advocate has pointed out, the Treasury is still there. I am not sure whether I am relieved by that. In any event the noble and learned Lord, Lord Simon of Glaisdale, will be disappointed to learn that the phrase "the Treasury" still figures in legislation wherever loans appear, even if as in this case it figures in another clause. I am grateful to the noble and learned Lord for that explanation and beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

[Amendments Nos. 275H and 275J not moved.]

Clause 63 agreed to.

Clause 64 [Lending by the Secretary of State]:

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