5.33 pm

Lord Steel of Aikwood (LD): My Lords, way back in the mists of time—I am talking about 1960 or 1961— I was president of the students’ representative council at the University of Edinburgh. A young man was elected to the council that year on behalf of the first-year students who turned out to be a complete pest. He was always raising points of order, asking awkward questions of the establishment and interrupting other people. I always wondered what would happen to him—his name was George Foulkes. He has continued that wonderful tradition in the House of Commons, in the Scottish Parliament and now here in the House of Lords. It is a great pleasure to follow him and agree so much with his last peroration. He echoed what my old friend and colleague, my noble friend Lord Campbell of Pittenweem, was saying in urging that we should have a proper debate and a proper constitutional commission at some future time to look at the whole future settlement of the United Kingdom rather than these endless piecemeal points. I entirely applaud what my noble friend Lord Campbell said on that matter. I also welcome the report of the noble Lord, Lord Smith of Kelvin, my former constituent, particularly the foreword that he wrote, to which reference has already been made, about further decentralisation within Scotland.

I welcome this Scotland Bill. I said right at the start of the Scottish Parliament, when I was elected its first Presiding Officer, that no self-respecting Parliament could exist for ever on a financial grant from another Parliament. So the proposed transfer of responsibility for raising the bulk of the money that it spends in future, which is the basis of the Bill, is entirely correct. However, I have two concerns. First, as so often happens, the Bill was not fully scrutinised in the Commons, where it was subject to tight timetabling. That was especially so on Report, when the Government tabled many important amendments, some of which were simply never debated at all. If they plan to have this on the statute book before next May’s Scottish elections—which is wise—they will need to aim for Easter. In that case, to do it justice, they will need more days in this House than they have been contemplating so far.

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Secondly, and more substantially, I am deeply disturbed at what I see as the growth of a one-party state in Scotland, about which we need to warn the electorate. I do not wish to be misunderstood. I have the advantage, shared by others in this House who have served in the Scottish Parliament, of knowing the personalities in the SNP quite well. I have from my objective chair developed a genuinely high regard for the First Minister, Nicola Sturgeon, and for her two close allies, John Swinney, her deputy and Finance Minister, and Angus Robertson, its leader in the Commons. These people should not be underrated. They also have some talented younger members not yet known here, such as Humza Yousaf, who any party would be glad to have in their ranks. It simply will not do to sneer at or belittle these people as somehow inferior to those we are used to here at Westminster.

However, the one-party state is a real threat. I do not mean by that ludicrous comparisons with North Korea nor Mussolini’s Italy—although some of the cybernats come close to that—but the growing assumption that if you are not an SNP supporter you are somehow unpatriotic or anti-Scotland. I will give two examples. Recently an Orkney friend of mine complained to a Highland MSP that areas such as the Western Isles and Argyll, which happened to have SNP MSPs, enjoyed lower public ferry fares than the Lib Dem-voting islands of Orkney and Shetland, only to get the response, “Well, you know what to do next time”.

The other example is the tendency of the SNP Government to increasing centralisation, as has been mentioned several times already. Scotland is a small country where it is relatively easy to centralise. We have already seen the disaster of abolishing local police forces and combining them into one. Local authorities and health boards are increasingly nervous that their powers are being subsumed by central government, while education and health service targets are being missed, as the noble Baroness, Lady Liddell, rightly told the House a few minutes ago. The SNP Government are sort of Teflon coated. Every time these figures are produced, they simply say, “It’s all the fault of Westminster for not providing the money”. That is one of the reasons why the Bill is so important.

The latest threat in terms of centralisation is to the governance of the Tweed river, which, ever since the Tweed Act 1950, has been an outstanding example of good management, involving scientists, the local authorities, angling clubs, fishing owners and landowners. The SNP appears baffled by that Act, which applies Scots law to the English side of the Tweed and English law to the Scottish bank of the Esk in the west. They want to scrap those decades of success and impose a centralised governance on all Scottish rivers.

Last autumn, we in Scotland had a lucky escape in the referendum. At the time, the SNP was able to predict a healthy economy based on North Sea oil prices at over $100 per barrel. They have been bouncing along since at just over $40 per barrel, which would have hit every household grievously had we gone independent without the protection of the United Kingdom. Now we are faced with this new threat: if the nationalist tsunami hits the Scottish Parliament

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next May, we shall have uncontrollable government of the most dangerous kind. The Bill should be passed with that very serious health warning in mind.

5.39 pm

Lord Mackay of Clashfern (Con): My Lords, I would like to begin by expressing my appreciation of the maiden speech by the noble Lord, Lord Campbell of Pittenweem. He has been a colleague in the Faculty of Advocates for many years and his coming to this House can only be a benefit to us. I simply say the same about the noble Baroness, Lady McIntosh. As another member of the Faculty of Advocates, it is a great privilege to welcome her and to listen to her maiden speech in due course.

I have been privileged to hold a number of important offices in Scotland and also in the United Kingdom with functions in Scotland. Today, I am glad to participate in discussion of this important Bill relating to my native land. The most relevant of those offices today is my appointment as sheriff principal of Renfrew and Argyll, when I was the returning officer for Argyll and declared the late Iain MacCormick, the SNP candidate, as Member of Parliament for Argyll in the elections of 1974.

Turning to the Bill, on 12 November 2015 Bruce Crawford MSP, chairman of the relevant committee of the Scottish Parliament, wrote a letter to the Secretary of State for Scotland, from which I quote:

“Dear Secretary of State … Re. Views on the Scotland Bill—post-Report Stage … I am writing to you on behalf of the Committee following our consideration of the latest stage (Report Stage) of amending the Scotland Bill in the House of Commons held on 9 November.

We welcome your constructive engagement with the Committee during the process since then and the obvious improvements that have been made at this most recent stage. Many of the changes that you made are in line with our suggestions and we are pleased that you have agreed with the Committee’s view and further improved the Bill. We welcome your comments to this effect made in the House of Commons during Report Stage.

As you are aware from previous correspondence and our Interim Report published back in May 2015, the Committee remains in agreement that we want to see the final Scotland Bill fully respect both the ‘spirit and substance’ of the all-party Smith Commission agreement. At both introduction of the Bill and at Committee Stage, we stated that, in some of the areas, the legislative proposals met the challenge of fully translating the political agreement reached in the Smith Commission. In other areas, improvements in drafting and further clarification were required. In some critical areas, the legislative clauses fell short.

In particular, the Committee is pleased to see the changes that have been made to some of the welfare provisions, notably the ability to introduce new benefits in devolved areas and to top-up benefits in reserved areas”.

He goes on to list a number of detailed points about the clauses which it would be appropriate to consider in Committee.

I have quoted this to show my profound appreciation for the co-operation that, in this case, has marked the process so far associated with the Bill—which I hope will continue—and to refer to the agreement that the final Bill should fully respect both the spirit and substance of the all-party Smith commission agreement. In my view, a role of this House as a revising Chamber is to examine the Bill to see if other amendments are required in order that that agreement be fully implemented.

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The fact that I am not elected in no way disqualifies me from fulfilling this function, and I am comforted by the knowledge that any amendments we judge to be necessary need to be approved by an elected Chamber before they become part of the Bill that passes into law. I say this in the light of the comments about this House made by a member of the Scottish Government some weeks ago on the BBC’s “Question Time”.

I believe that the process so far precludes us from giving effect to the conclusions of our Select Committee on Economic Affairs concerning the Barnett formula, but of course, they may well be effected by the fiscal framework which is still in the process of negotiation. The principles set out for that in the Smith agreement are reasonably clear, in language that is not very recondite. To put them into practice just now is quite difficult. I conclude by suggesting that my noble friend the Minister make copies of the letter to which I have just referred available to Members of this House, as I think the later paragraphs would be very useful in Committee.

I am very conscious of the problems in Scotland that have been mentioned. As a resident of Scotland most of the time, it is apparent to me that there are matters that need to be dealt with. They are primarily matters for the Scottish Parliament, but there are serious problems relating to the constitution of the United Kingdom as a whole, and I am glad that my noble friend Lord Lang of Monkton and his very capable Constitution Committee are looking into them.

5.46 pm

Lord Kirkwood of Kirkhope (LD): My Lords, it is always a great pleasure to follow the noble Lord, Lord Mackay of Clashfern. He is one of these unique individuals who never says anything that is not worth listening to, and his speech will repay careful study. I remind the House of my interest in the Wise Group, which will become obvious in a moment because I want to restrict my remarks in the next five minutes to the welfare clauses, Clauses 20 to 29. I also want to express the hope that someone in our Whips’ Office reminded my noble friend Lord Campbell of Pittenweem that the last time he was here, he got his clerk to send a fee note for £3,000 for his performance. I hope someone will put him right about the going rate at today’s prices, although it was probably worth £3,000 in terms of the value of his contribution.

This has been a more optimistic debate than I expected. I take my cue from my leader, my noble and learned friend Lord Wallace of Tankerness, by saying that I think this is an opportunity. If I can claim to be a kind of specialist in social policy, I have a distinct feeling that investing in social protection is something more easily accepted by the electorate north of the border than in other parts of the United Kingdom—I put it no higher than that. I have come across a number of exceptional examples in Scotland of investing in preventive spending and giving early attention to preventing recidivism, for example, some of which I have seen as a non-executive director of the Wise Group. There are such opportunities in smaller scale communities across different parts of Scotland that I think would benefit from having more control over what they do.

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I agree with everyone who says that it is essential to retain for the benefit of the population of Scotland the residual machinery that deploys universal credit and the private pensions industry in the United Kingdom, but there are areas that I am increasingly coming to believe would be better devolved. I include in that category—it is not in the Bill but we need to think about it for the future; maybe 2020, not 2017—devolving Jobcentre Plus and putting it under the control of the Scottish Government. According to a report published by Cambridge Econometrics, £660 million is spent on employability in Scotland. It comes from all sorts of different places of different sizes, such as the European Social Fund and the Government’s Work Programme. I am absolutely certain that a Scottish Government who were sensible about planning and controlling that expenditure could get better results. The Bill opens the door to that.

I understand the powerful speech of Lord Foulkes. I was his best man, and that has been held against me—particularly by his wife. He stands up to the cyber nats; I do not have the bottle to handle them the way he does. I have a Twitter account which I hide in; he has a Twitter account through which he attacks everybody in sight. My noble friend Lord Steel made the point that there is a danger of a single-party state. We must remember that the nationalists will not be the Government for ever. I come back to the point made by my noble and learned friend Lord Wallace of Tankerness. We are setting plans in train, and this is an opportunity to think about how we do things better in future. I am more confident than some others; I might be more naive, but I am more confident.

I have two more things to mention before I turn to the eight clauses I will concentrate on. I listened carefully to the noble Lord, Lord Smith of Kelvin, and it was his last point that worried me most. If he is of the considered view that the relationship between our two Governments still is not good enough, the Government need to respond. The Minister has a hard job responding to what will be a detailed and complicated debate. If he does nothing else, I ask him to address that point, if he can. Secondly, it is entirely correct that we put Part 3 at the end of Committee. I am against any principle of detriment, whether it is the first or the second; I just do not think that detriment is a good thing. We should take our time and give the clauses due consideration. If Part 3 comes last, nobody will be more pleased than me, because I will be tabling amendments the like of which I have a minute now to describe.

One thing we need to think carefully about is that Clause 27 introduces the notion of concurrent powers. I do not know of any other part of the social security legal framework that contains that concept. We need to be very careful about how the machinery is put in place to ensure that that works.

We should also consider—I will be tabling amendments to this effect—introducing the Social Security Advisory Committee in some form north of the border, because I do not believe that social security provision will lessen in future in the devolution settlement. I support those who say that the constitutional framework now needs to be addressed. There is a whole series of such

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questions, and I give notice to the Minister that I will be tabling amendments to try to clarify the Bill, make it more effective and less ambiguous and ensure that there are no unintended consequences.

I end on a point made by the noble Lord, Lord McAvoy, in what was a very measured speech: the important thing is to get a smooth transition in 2017, because the welfare changes affect hundreds of thousands of families. If the machinery does not work, it is not the politicians or the policymakers who will suffer; it is the families who depend on those benefits coming in week by week, month by month. Let us hasten slowly; let us get this important Bill on the statute book in good time to plan for the social security work necessary to ensure that smooth transition in 2017.

5.53 pm

Lord Forsyth of Drumlean: My Lords, it is a pleasure to follow the noble Lord, and I am sure we can all agree that we are against detriment.

I thank the noble Lord, Lord Hollick, who chairs the Economic Affairs Committee, of which I am a member, for the brilliant way in which he introduced the substance of our report. It is a high-powered committee, very diverse in its nature, but we had no disagreements or arguments: the report is absolutely unanimous. It was described by one journalist in Scotland as delivering the political equivalent of a Glasgow kiss to the Government; he clearly does not understand that we are much more civilised in this House, but I am sure that my noble friend can feel the pain from some of the report’s recommendations. It is a double whammy, because the other great committee of this House, the Constitution Committee, has independently come out with exactly the same conclusion: that we should not proceed with the Bill without the fiscal framework.

This has been a very interesting debate. It is a great pleasure to have heard the maiden speech of the noble Lord, Lord Campbell. I have a lot of sympathy with his view that what we need is a new Act of Union which is well thought through and not based on a ragbag of conclusions. There was no greater joy in heaven than to hear the noble Lord, Lord Foulkes, confess that perhaps devolution on a piecemeal basis had not quite worked out as he expected. I must say that I thought it would be a disaster, but I never expected that it would reduce the Labour Party to only one MP in Scotland. We were told that no party would have a majority. We were told that they had devised a scheme which would save the union and kill nationalism stone dead. I will not venture down an analysis of how well that has worked out.

I was disappointed to hear that the noble Lord, Lord Campbell, managed to steal the mother of the noble Earl, Lord Kinnoull, from the Conservative Party, but I take comfort in the fact that his mother-in-law and his father-in-law, the very distinguished General Urquhart, were both stalwarts of my local branch when I was the Member of Parliament for Stirling.

I know that it is difficult to keep up with all the reports produced in this House, or sometimes even just to read the summary, but if your Lordships cannot bring yourselves to read the report of the Economic Affairs Committee, all you need to do is look at the title: A Fracturing Union? The Implications of Financial

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Devolution to Scotland

. If you can get to the last paragraph of the first section, entitled “Executive summary”, it says all you need to know. You can forget what the members of the committee had to say. Under the heading “Huge risks to the union?”, it says:

“A number of witnesses expressed concern that overlooking the problems identified above is storing up trouble for the future, even threatening the existence of the Union. Professor David Heald, Professor of Accountancy, University of Aberdeen Business School, described the political climate around these issues as ‘toxic … the future of the United Kingdom remains at risk’”.

Professor John Kay, whom we all know as having three brains—it does not say that in the report, by the way— and who is the visiting professor of economics at the London School of Economics, thought that Scotland would drift towards independence,

“because it is the only way to resolve these problems”.

So there is a special responsibility on this House, on this Parliament, to seek to resolve those problems.

Here we have the Scotland Bill, all gleaming and new. The noble Baroness, Lady Liddell, the former Secretary of State for Scotland, knows of the complexities of the Barnett formula, and all the rest. In a fantastic speech, she said that she was the daughter of a bus driver and talked about the failure of education in Scotland—not least, actually, caused by the Labour Party’s refusal to embrace our education reforms in Scotland. I have to balance my remarks because I would not want to damage the noble Baroness by praising her too highly. During her excellent speech, I was reflecting that my father sold second-hand cars.

Noble Lords: Ah!

Lord Forsyth of Drumlean: Yes, and I am proud of that, just as the noble Baroness is proud of her origins. My mother used to polish the cars so that they were gleaming in the sunlight, in the hope that someone would come in to buy them.

So we have the Bill: all beautifully presented and put together. I do not think that my father would have got very far if he had tried to sell a car by saying, “I am terribly sorry, you can’t look at the engine. I can’t tell you about the gearbox. In fact, there might not be an engine—actually, it is confidential. But once you’ve bought the car, we can tell you whether the engine works, whether the gearbox works and whether the software works”. That is what we are being asked to do on the Bill: “We can’t possibly tell you about the fiscal framework”, which is the guts of the Bill, “because it is confidential. We are discussing it with the SNP. By the way, we are getting on very well; we have a long record of getting on very well with them”.

I thought that my noble friend Lord Dunlop had given me an assurance, in a private meeting back in the early part of the summer, that the Bill would not be introduced to this House without the fiscal framework. However, because I know the ways of the Civil Service, and of the Treasury and Governments, I thought that I would table a Written Question. I tabled it on 9 July—remember July? It was a long time ago. I asked Her Majesty’s Government,

“when they plan to publish the new fiscal framework agreed with the Scottish Government”.

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The Answer I got was:

“The Chancellor of the Exchequer, the Chief Secretary to the Treasury and the Deputy First Minister met on 8 June where they agreed that they would aim to conclude negotiations on the fiscal framework that will underpin the financial provisions of the Scotland Bill by the autumn, in tandem to the timetable for the Bill”.

I thought that Answer was not quite consistent with what I thought my noble friend Lord Dunlop had said, so I put down another Question. I asked,

“whether they plan to take any stages of the Scotland Bill in the House of Lords before the fiscal framework has been agreed and published”.

The Answer I got on 22 July was:

“The Government intends to progress the negotiations on the fiscal framework in parallel with the Scotland Bill. At their meeting on 7 July, the Chief Secretary to the Treasury and the Deputy First Minister re-affirmed their aim to conclude negotiations on the fiscal framework by the autumn”.

Now is the winter of our discontent not made glorious summer by my noble friend. When I was in school, “in parallel” meant “alongside each other”. How can it be “in parallel” with the House of Commons when the Bill has left that House? In his speech, my noble friend said that the Bill was unopposed at Third Reading. Third Reading in the other place took all of 10 minutes, with the fiscal framework not known.

Of course, I understand the political difficulties that afflict my noble friend and the Government. We have heard a great deal about this amazing vow. I do not normally recommend the Daily Recordfor reading, but I recommend looking at its report on the anniversary of the vow on 17 September, where the editor says that it was all his idea. It was invented by him: he rang up Gordon Brown and said, “Gordon, can you get the other party leaders to do this and we will put it on the front page?”. Indeed, the description of the vow was not that of the party leaders but invented by a tabloid journalist. Noble Lords can imagine my astonishment on hearing this when we got evidence to our committee from a distinguished academic who told me that the vow was the nearest thing we had in Scotland to Magna Carta. So there we have it: the Daily Record is better than Magna Carta.

If we look at this vow—this vow which is of such importance—it contains the sentence,

“And because of the continuation of the Barnett allocation for resources and the powers of the Scottish Parliament to raise revenue, we can state categorically that the final say on how much is spent on the NHS will be a matter for the Scottish Parliament”.

That is what it said when it was signed by David Cameron, who is still a leader, Ed Miliband and Nick Clegg—both of whom have since disappeared, leaving us to sort out the problem. It is illiterate and completely wrong. How can you say that spending on the health service would be “protected” because of the Barnett formula and the tax-raising powers? The whole point about the Barnett formula is that the amount of money that goes to Scotland for health is determined by what is decided in England. That is why the report of the Economic Affairs Committee is right to emphasise that we need to move away from Barnett towards a needs-based system if Scotland is to get the share of grant that represents its needs. The whole thing—this

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clash between the Barnett formula and the impact of the tax-raising powers—is based on something put together by a tabloid journalist.

We then had the argument that we cannot delay the Bill and need to get on with it. This has been the problem all along. I pay tribute to the noble Lord, Lord Smith, the Smith commission and the work that he did on it. However, I cannot think of any time in our history—perhaps we could go back to Henry VIII—when three privy counsellors could sit down and agree something that then had the force of law. Normally, Governments—the Executive—have to go to Parliament: it is a matter for Parliament, not Governments, to decide the fiscal framework. The only part of our parliamentary process in these islands now that seems to understand that—irony of irony—is the Scottish Nationalists, who are saying, “We want to see the fiscal framework and the Bill. We are only prepared to consider them together and if we don’t think it works in a fair way, we will reject it”. It is a situation that has been denied to the House of Commons.

I would like to pick up the noble Lord, Lord Smith, on one point. In his forward to the Smith commission report—there is a picture of him on the front—he says, under “A more autonomous Parliament”:

“The Scottish Parliament will be made permanent in UK legislation and given powers over how it is elected and run … The Parliament will also have the power to extend the vote to 16 and 17 year olds—”

So it goes on, using “will”. I am sorry, but it should perhaps say “should” or “we recommend that it might”. Whether or not it does is a matter for this Parliament—not for the Smith commission or the Government, but for Parliament. It is right that Parliament should have the opportunity to look at it.

I will make one final comment, because I realise that I am over my time. By the way, that is another disgrace: for us to be limited to six minutes on a major constitutional change is quite ridiculous.

Lord McAvoy: Before he sits down, could the noble Lord perhaps give us his understanding of “no detriment”?

Lord Forsyth of Drumlean: God bless the man: I have an excuse to speak for another six minutes. First, all the evidence that we had from our witnesses—it is all on the internet; people can read it and it is available in the Printed Paper Office—is that “no detriment” is completely unworkable. The report says that if on either side of the border, a change of policy results in a change in the money available to either side, the other side should compensate it. I will give an example. When I was Secretary of State, they privatised water in England. In Scotland, my noble friend Lord Lang decided that we were in enough trouble; he did not privatise water. As a result, of course, Scotland no longer got the Barnett consequences of the public expenditure on water in England, because it was charged, and we had to find from within the Scottish block the money to pay for water.

My understanding of the no-detriment principle, if it means what it says on the paper, is that in similar circumstances under the new arrangements, if in England they decided to privatise or stop doing something and that resulted in a lesser grant to Scotland through the

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part related to the Barnett formula, then England would have to send Scotland a cheque. That seems to be rather unworkable. The idea that because England, say, had privatised water, it should send a cheque to the Scots to enable them to continue with a state-run, inefficient system, does not seem to be practical politics. I might have got this completely wrong, but every time I ask the Minister or the author or its exponents what it means, they say, “This is a matter for negotiation and we cannot possibly comment, because it has all been done on a secret basis”. It is just not acceptable to proceed beyond Committee until we have answers to this and many other questions that I will seek to elucidate for my noble friend by tabling lots of amendments.

6.08 pm

Lord Hope of Craighead (CB): My Lords, it is a very real pleasure for me to follow the noble Lord, Lord Forsyth of Drumlean. He will remember that, when he was Secretary of State for Scotland and I was the head of the judiciary, we did not always see eye to eye. In fact, I can assure your Lordships that he was just as vigorous and energetic in his presentation of policies with which I did not agree, and just as controversial, as he is now. These days are past now, if I can echo the words of a well-known song, and it is a pleasure to listen to such a spirited speech, with much of which I can agree.

I would also like to echo the words of the noble and learned Lord, Lord Mackay of Clashfern, a former dean of the Faculty of Advocates—as am I—in what he said about the noble Lord, Lord Campbell of Pittenweem, and the noble Baroness, Lady McIntosh of Pickering. It is a quite unusual situation for two members of the Faculty of Advocates to make their maiden speech in this House on the same day. I am not sure that this has ever happened before. It is a very real pleasure for us, who recall the faculty and owe it so much.

Turning to the Bill, I confess to having mixed feelings about it. Of course, the Bill must pass and it was—and is—an essential part of the process that the recommendations of the Smith commission are put in place. As the noble Lord, Lord Smith of Kelvin, put it in his foreword and also said today, that process is one of turning the recommendations into law. There must be some relief at the progress made in what has been achieved so far to bring the Bill forward to this House within a year of publication. The report is not yet one year old—I think its birthday is on Friday of this week.

Leaving that to one side, there are some serious grounds for concern. I mention a point developed by the noble Earl, Lord Kinnoull, in his very perceptive speech, that if you look at the detail in the Bill and contemplate what it really means for the people in the Scottish Parliament, you begin to wonder at the ability of that Parliament to handle what we propose to deliver. After all, the Parliament was designed in the Bill that became the Scotland Act 1998. I am one of a number of noble Lords here who is a veteran of the debates then. I remember that the Minister who introduced it, the noble Lord, Lord Sewel, said:

“Through this Bill we seek to establish an enduring, fair and stable settlement”.—[Official Report, 17/6/98; col. 1567.]

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He said he was,

“completing the unfinished business of which John Smith spoke”,

and that this was to be a,

“lasting political legacy”.—[

Official Report

, 17/6/98; col. 1574.]

What was designed, in a similar pattern to Wales and Northern Ireland, was a unicameral system with a series of committees to control and scrutinise the Executive and the legislation being put through. Given the package that was in the Scotland Bill of 1998, that seemed a reasonable and stable situation. However, as the noble Baroness, Lady Goldie, was careful to explain to us, the political situation has changed entirely from what was envisaged in 1998. That leads me to the concern about the ability of the Parliament to really deal with the situation we have now, with a majority Government and all the consequences already mentioned.

The noble Lord, Lord Smith of Kelvin, drew attention to this problem in his foreword, where he said that the addition of these new responsibilities,

“means that the Parliament’s oversight of Government will need to be strengthened”.

He called for,

“an inclusive review which will produce recommendations to run alongside the timetable for the transfer of powers”.

As far as I can detect, that has not happened. I do not know what is going on to try and achieve the noble Lord’s wise words. I hope that the Minister in his reply will be able to give us some insight into the progress, if any, being made to achieve that kind of strengthening of the system of government which will need to cope with these new responsibilities.

On the detail of the Bill, in the short time I have left, there are particularly Clauses 1 and 2, to which the noble Lord, Lord Lang of Monkton, referred and which have been the subject of some discussion in the Constitution Committee’s report. Clause 1 reminds me of Article XIX of the Act of Union 1707, which declares:

“That the Court of Session or Colledge of Justice do after the Union and notwithstanding thereof remain in all time coming within Scotland as it is now constituted by the Laws of that Kingdom”.

In other words, that was a declaration that the College of Justice was not to be capable of being removed by an Act of this Parliament. As a student at Edinburgh University many years ago, I was taught that the provision in those terms was fundamental law and in that respect the UK Parliament did not have absolute sovereignty. That is what I was taught. Clause 1 seems to drive in the same direction: a declaration that is perhaps intended to have political effect but, as the noble Lord, Lord Smith, said, the purpose of the Bill is to turn these things into law. If it is turned into law then one day somebody will bring the issue before the judges. The judges do not invent the argument; it is brought before them. If it were brought before them—I sincerely hope it never would be—that would give rise to exactly the point that the noble Lord talked about.

In Clause 2, I am concerned about the use of the word “normally”. I do not understand what that would mean. If this is making law, again the judges will have to decide what is normal. I do not see how they could possibly do that without evidence. It has to be explained. Also, as has been pointed out, the Sewel

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convention must be explained. If it is to be turned into law, it must be capable of being argued about in court and made the subject of a determination by the judges which makes sense and contributes to our well-being. These points are very well taken by the committee, with great respect, and I hope we can develop some further thinking about this in Committee.

6.15 pm

Lord Brennan (Lab): My Lords, having had the privilege of serving on a board with the noble Lord, Lord Forsyth, for several years, I recognise his formidable debating skills but today’s was a star performance. As the second English contributor to this debate, I will take an English point of view about much of the content with which we should be concerned. Of the matters raised by the Bill that affect the role and future of the union, of particular importance are governmental structures, finance and potential adverse consequences.

First, on governmental structures, we have three devolved legislatures in this nation and the peoples of those three each have their own Assembly and devolved powers, and therefore their say through that Assembly in the exercise of those powers. The English have none of that. In addition to the fact that we have those three legislatures, each of them has significant differences one from another—sometimes all three the same and sometimes all three different. Now we have yet further changes to compound that: this Bill giving the greatest powers to a devolved nation, in many ways, in the world; then the draft Wales Bill; and then the Northern Ireland (Welfare Reform) Bill that we will debate this evening. There was also the corporation tax Bill for that devolved legislature a few months ago. It is more and more change, none of it properly interrelated and with no cohesive structure. That is a recipe for a constitutional mess, to put it bluntly. Of course these decisions are political, but they must be responsibly political.

This unhappy state of affairs now frequently attracts the use of the word “asymmetry”. That is a refined, classical Greek word in origin which is extremely useful to describe a state of affairs that it would be embarrassing to describe in plain English. When I looked at the dictionary today, “asymmetry” not only means simple things such as imbalance of power or irregularity but also has one definition that I thought significant: a state of affairs in which there is an uneven distribution to the detriment of one. Which one might that be in the system I just described—Scotland, Northern Ireland, Wales or England? Who knows? With this Bill, asymmetry takes on a yet more profound significance. This present state of affairs illustrates a fact we must recognise: there is no constitutional cohesion in the present union and this Bill further compounds that.

I have one final example on this question. There are 13 major powers in this Bill shared between the UK Government and the Scottish Government, including on energy and the like. How are they to be resolved? Under what system of co-operation are the two Governments required to engage? We do not know. The inter-governmental relations programme is as yet undefined on that issue. So let us have a care. We are here to look after the constitution of our country not just, as we should from time to time, to satisfy the devolution wishes of individual parts.

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Secondly, on finance, I cannot conceive as a Member of this House passing legislation which involves such a vast tax-raising power without the Bill including the fiscal framework under which that power is to be exercised. It is a negation of parliamentary duty. The present state of affairs—let us look at it in the simplest constitutional terms—requires, first, fiscal sharing by us all; secondly, fiscal responsibility; and, three, fiscal accountability. In my view, those are constitutional principles that should be common to the nation. If in Scotland there comes a time when spending significantly exceeds the tax revenue or borrowing powers are so far exceeded that the Government cannot repay their debt, who is to rescue that position? Who bears the risk? That is a question that I ask of Scotland as of the other three countries in this kingdom. Probably it will be London and the UK Government who bear the risk—the risk of whether, how and when to bail out such a disaster.

Extending the Committee period and giving it an extra day is simply inadequate. This House is not asking for delay; it is asking for the participant Governments to exercise fiscal responsibility and present the results to this House for our decision.

Lastly, I turn to potential adverse consequences—I use the word “potential” because they can be avoided with proper parliamentary and governmental action. On the fiscal framework, an English taxpayer would like to know, as would the Northern Ireland and the Welsh taxpayers, what the liability is of those citizens to a Scotland that might go wrong in financial terms. It is so obvious that it is almost embarrassing to have to state it. Therefore, it is the obligation of all of us to ensure that those citizens receive the same protection as the Scots citizens receive in advancing their devolution.

Next, I turn to the no-detriment principle—and the noble Lord, Lord Forsyth, having asked the question, answered it to his own satisfaction. He is waiting for the Minister to give his answer to what is a tough question. How we put into comprehensible and persuasive words that which all the experts say is unworkable is quite a parliamentary challenge, and he deserves our sympathy—but it is a significant point. Who carries the burden is what taxpayers want to know.

The third point is on inter-governmental relations. How is everything going to work? There is no statute and there is a memorandum of understanding affecting the present arrangements, which is being reviewed. Who is reviewing it, and when are they going to report? The Government say that they are going to update it, but when? If we cannot make it work, what is the point of the legislation?

Fourthly, constitutional instability has to be avoided, especially when it concerns England. It is a simple proposition: with 50 million people out of the 60 million, we have to pay attention. English votes for English laws is the barest of beginnings; it is not a conclusion.

Lastly, I was surprised to see a clause such as Clause 68 in a constitutional Bill, creating a Henry VIII power for the Government to present secondary legislation on behalf of themselves and, presumably,

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the Scottish Government, to this Parliament without the opportunity for us to vote against it. That is astonishing.

We have been told that this measure has to be delivered, and I agree—but it has to be delivered following proper parliamentary process. Haste based on a hasty political vow is not the foundation for sensible legislation; expedition tempered by prudence is. All that the House is asking in many of the speeches heard today is that, in the conduct of this Bill, we get the chance to debate and decide on everything, and then we can say as parliamentarians that it has been delivered.

6.26 pm

Lord Shipley (LD): My Lords, it has been a pleasure to listen to this debate and to the excellence and importance of all the contributions that have been made—not least that of my noble friend Lord Campbell of Pittenweem in his maiden speech. I look forward to the rest of the contributions and, in particular, to the speech of the noble Baroness, Lady McIntosh of Pickering.

I decided to speak in this debate for two reasons. First, the Bill concerns the whole of the United Kingdom and not just Scotland. Secondly, there is the principle of no detriment, which remains the central issue and is clearly not yet resolved.

The Bill has to be considered, not just from the perspective of the two Governments—the Scottish and UK Governments—but from the perspective of those parts of the United Kingdom that share a border with Scotland. Living in Newcastle upon Tyne, I have an acute awareness of cross-border issues.

I make it clear at the outset that I support the principles behind the Bill. The people of Scotland want enhanced devolution with the tax-raising powers that come with it, and it is also clear that devolution commands broad support from the UK’s political parties. But the no-detriment principles are primarily seen as a matter for the two Governments. We have had a lengthy debate as to what those two no-detriment principles mean and whether they are deliverable. I suggest, as part of this Second Reading, that a no detriment principle must surely extend to ensuring no detriment to those parts of the United Kingdom that share a border with Scotland and which could lose out—if, for example, the Scottish Government reduced air passenger duty by 50% or 100%. The impact of such a decision on airports south of the border might be significant. A small outflow of passengers chasing lower fares in Scotland could cause a movement of carriers. It would be of little help to the connectivity of the north-east of England if air passenger duty was not reduced there in line with whatever decision was taken to lower it in Scotland.

There is a further issue. If Scotland reduces APD, who meets the cost of it—the Scottish Government or the UK Government? Logically, the answer is the Scottish Government. If it is the Scottish Government, presumably it will come from the block grant, but the adjustment of the block grant is currently unknown. How will we know that it is fair to the rest of the United Kingdom or that an APD reduction is paid for by Scotland, rather than by the rest of the UK?

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I am puzzled, as are many others, as to why this Bill is being considered before the fiscal framework has been agreed. I read the report from the Institute for Fiscal Studies questioning a process in which the new fiscal framework is not part of the Bill. I want to quote from it, because it is highly material. Last week’s report said that,

“it is impossible to design a block grant adjustment system that satisfies the spirit of the ‘no detriment’ from the decision to devolve principle at the same time as fully achieving the ‘taxpayer fairness’ principle at least while the Barnett formula remains in place”.

As part of our discussions on the Bill, it needs to be clear how the block grant is to be calculated in future. The indexation of the Barnett formula during the last 36 years has resulted in serious anomalies. These must be addressed. If they are not, there is a real possibility that increases in taxes in the rest of the UK, which fund higher spending in the rest of the UK, could end up funding higher spending in Scotland through the block grant system without a corresponding increase in Scotland’s tax levels. The Smith commission talked in terms of taxpayer fairness. We must ensure that this is fulfilled for the whole of the United Kingdom.

Perhaps the reason the block grant adjustment system has not been agreed is that there have been very few formal meetings to get on with doing it. Papers for and reports of meetings are not in the public arena. However, in a Written Statement earlier this month, the Secretary of State for Scotland said that the Joint Exchequer Committee had met four times since June 2015, that work was continuing and that both Governments aimed to complete this work as soon as possible to give the respective Parliaments time for due consideration of both the fiscal framework and the Scotland Bill. Broadly speaking, that is a meeting a month. It is hard to see how the timetable will be met, since the Bill is with us now and Committee stage approaches. We have, however, received ministerial assurances that we will have a fiscal framework by the time we reach Committee in the new year. I hope that proves to be the case.

In a compelling report, the second conclusion from the Institute for Fiscal Studies is very important. It says that,

“it may now be time for a more fundamental reassessment of how the devolved governments are financed”—

that includes Wales and Northern Ireland—

“including whether the Barnett formula should be retained. Reform of Barnett may remove some of the conflicts between the Smith commission’s principles. The Smith Commission parked these issues to one side by stating that the Barnett formula should be retained. Making the UK’s fiscal framework sustainable for the long term may require reopening the debate”.

We have heard that this problem over the Barnett formula has also been pursued by the Economic Affairs Committee in its excellent report published last Thursday. It too concluded that the Barnett formula should be replaced with a needs-based funding formula. That has to be right. It would be in line with the report published by the Select Committee of your Lordships’ House on the Barnett formula in 2009.

In conclusion, we have a Bill to consider which, in principle, I want to support and which should be supported. However, we lack the information we need

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to consider it and which is central to getting the legislation right. I hope we will have the fiscal framework to consider at some point during Committee and that the Government will take seriously the need to revisit the Barnett formula as part of the block grant agreement that is reached.

6.35 pm

Earl of Stair (CB): My Lords, I broadly welcome the arrival of the Scotland Bill in this House. Although I have many concerns about many aspects of the Bill— most of which have been mentioned by other noble Lords—I hope it receives a successful, but not too speedy, passage to Royal Assent.

This is the second time I have given a Second Reading speech on a Scotland Bill. The first was on the initial devolution Bill and I very much hope that this will be the last. There are horrible similarities in the production of both, in so far as they have both resulted from promises made by leaders of parties seeking to ensure support from Scotland. In the first, it resulted in what became the Labour Government earning the support of Scottish Labour. In this, the second, it has resulted from the present Prime Minister retaining Scotland as part of the union. If the Government had spent a bit more time fighting for the union during the referendum, with less of a last-minute rush, I am sure that the result would have been far more conclusive and there would be no need for this present Bill.

I thank the noble Lord, Lord Smith, who is sadly not in his place, for leading the inquiry that resulted in a degree of harmony among the parties and led to this Bill. I know there are supporters of independence—who may or may not be members of the SNP—who are watching carefully the outcome of this Bill. They are prepared to continue to accept the union if they deem Scotland to have received fair treatment and greater recognition as a result. I am sure that there are some in the SNP of a similar opinion. As has been said on many occasions, I am sad that there are no members of the SNP in this House. I hope that they will accept from afar the amendments that may come from this place as being for the future benefit of all in Scotland and the remainder of the United Kingdom.

I am keen that this important piece of legislation should pass quickly because I do not wish future changes to the powers of the Scottish Government to become entangled in the election campaign in Scotland next year. If we fail to establish exactly how the new powers will be implemented, I can see the Bill becoming a political football in the election campaign, with an attendant loss of credibility. Although I would like to see the Bill pass quickly, it should not be at the expense of too short a time being allocated to complete all its stages. I urge the Government not to underestimate the importance of this Bill and to allow as much time as is needed to ensure that all the detail is tied in correctly.

I hope that the Scottish Government may also use some of their new powers to modify the Scotland Act 1998, and to reappraise and possibly reassess some of their own working practices in the Scottish Parliament. To my mind, a significant error was made during the debate on what was then the first Scotland Bill: the determination that a revising chamber of the

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Parliament would not be needed and that the committee structure would suffice. Ministers on the then government Benches assured the House that there was no possibility that the committee system could be dominated by any one party, and certainly not by the party in power. Sadly, that has not proved to be the case. I earnestly hope that, when the Bill is passed and with significant money-raising powers, there will be no opportunity for one party to overwhelm all others.

Another main area of concern in the Bill is the fiscal framework, which has been raised by virtually every other speaker in this debate. With the potential to raise so much money under the new powers, the Government are assuring us that the fiscal framework will be complete before the Bill is passed. However, I regret to say that I think the description of the noble Lord, Lord Hollick, of the current state of the fiscal framework and what will be required is the most accurate.

It is vital that information is available to the people of Scotland on all aspects of VAT and taxation before the start of elections next year. Clause 17, on air passenger duty, is a welcome addition, and I am sure it will be a tremendous boost to transport and development in Scotland. I hope that some of the income can be invested in the impressive, but mostly mothballed, Prestwick airport, but not to the detriment of other airports in the United Kingdom.

However taxation is not the only part of the future finances of Scotland. The Barnett formula still needs to be considered and amended. Until all these matters are addressed, I find it difficult to understand how the Bill can be passed in any form of sound condition. It is vital that it is clear at the end of the passage of the Bill where responsibility lies for expenditure and, more importantly, that there is accountability for all the money that will be raised through taxation. There must be no chance of any grey areas whereby blame can be passed from Parliament to Parliament.

Finally, it must be remembered that we are here with this Bill because of politics. I believe that the majority of voters in last year’s referendum did not wish for a change to the status quo, irrespective of posturing in the lead-up to the referendum and before the vow was made. I earnestly hope that when this Bill is passed it will be in such a condition that not only will it be sound but it will restore the confidence of the electorate in Scotland.

6.41 pm

Baroness McIntosh of Pickering (Con) (Maiden Speech): My Lords, to speak for the first time in your Lordships’ House is a great honour and very humbling. I am delighted to follow the noble Earl in this debate. I take this opportunity to thank the noble and learned Lords, Lord Wallace, Lord Mackay and Lord Hope, the noble Lord, Lord Foulkes, and many others for all their kind words since I have been in the House. I extend heartfelt thanks to all who have made my introduction and my early days in this place so smooth. The doorkeepers, the clerks, the attendants, the Library, catering and all the officials and other staff are due a very big thank you. Like the noble Lord, Lord Campbell, I am sure I will have many opportunities to call on their advice in future months and years.

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To my supporters at my introduction, my noble friends Lord Plumb and Lady Byford, warm thanks are due. In many respects, the fact that I entered politics at all is due to my noble friend Lord Plumb, who many years ago recruited me to work for the European Democrats, the family of Conservatives in the European Parliament. I had the good fortune to work on the same shadow ministerial team as my noble friend Lady Byford. I yield to no one in my admiration for my noble friends’ collective knowledge and experience of farming, the countryside and rural affairs, which they share with my noble friend Lord Jopling, a former Minister for Agriculture in the other place.

I was born in Edinburgh to a line of pharmacists. Anybody who over the years went to the chemist in Elm Row or to George Cowie chemist on Dublin Street or to the chemist in North Berwick could have been served by my grandfather or one of my uncles. My father, my uncle and my brother took a medical path, but I followed my mother’s interests in languages and history and embarked upon a legal career. I studied law at Edinburgh University. I remember being a student of JDB Mitchell, who introduced the first six-month course on the implications for British constitutional law of joining the European Union in 1973. I entered the Faculty of Advocates in 1982 and benefited from the rigorous training. At the time, professional training was serving a Bar apprenticeship with a firm of solicitors before undertaking a period of devilling with a devil master. Both parts of my training straddled the longest case in Scottish legal history, in which Strathclyde Regional Council’s attempt to add fluoride to the water supply was thwarted by a pensioner who wore dentures who petitioned the Court of Session because she could see no personal benefit from adding a potential carcinogen to her drinking water supply. Needless to say, the council lost. I was fortunate to have as my apprentice master the much revered Evan Weir of Simpson & Marwick, who ultimately became the Auditor of the Court of Session. My first duty as a Bar apprentice was debt collecting, but my most memorable experience was being asked to take evidence productions to court in Mr Weir’s car. Imagine my consternation when the vehicle broke down outside the then venue of the sheriff court. It was not my most career-enhancing moment as I faced Mr Weir, who questioned my driving skills rather more than the age or unreliability of his car.

The fact that Scots law is closer to Roman law stood me in good stead when I subsequently practised European law in Brussels before going on to advise the Conservatives in the European Parliament. Therefore my background is very much in European law, European politics, transport, farming, the environment and the countryside. I was transport spokesman in the European Parliament for a number of years, held a number of shadow ministerial positions in the other place, and for five years I was honoured to chair the Environment, Food and Rural Affairs Select Committee in the House of Commons, which covered all aspects of farming, flooding, food production and animal health.

My political career took a circuitous route, with 10 years representing part of Essex and Suffolk in the European Parliament, and then the Vale of York and

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subsequently Thirsk, Malton and Filey in the other place. I am immensely proud of my Scottish heritage and roots, and particularly of our Clan Mackintosh motto, “Touch not the cat bot a glove”. I leave its interpretation to your Lordships.

I must not forget my Danish roots. My mother was born and bred in Copenhagen. Denmark’s loss of independence when occupied by Nazi Germany in the Second World War is a constant reminder to me and my family of why a strong Europe has ensured democracy across this continent in the intervening years. I firmly believe that the union of the United Kingdom and the UK’s union—a customs union and single market—with the European Union are the bedrocks of our economic strength and place in the world. I counsel all those who refer to the Schleswig-Holstein question to beware of the fact that the conclusion of the war in 1864 led to the loss of one-third of Danish territory to Prussia. That is one thing we should be careful of in the debate today.

This debate is important because it makes good all the conclusions and recommendations of the Smith commission and the political agreement of the main parties. However, I have two main concerns. One was referred to by the noble Lord, Lord Shipley, and others and is the implications for airports in the north of England of air passenger duty being confirmed as part of the revenue-raising powers. I would like to understand how that will be calculated, how that will be raised by Scottish airports and what economic impact it will have on English competitors, particularly in the north of England. My other concern relates to not just the fiscal framework, which is being discussed at length by noble Lords, but the sheer number of secondary regulations giving legislative teeth to the Bill before the House today. In particular, Clause 14 has a number of subsections that leave much to secondary legislation. When the Minister replies, will he say to what extent there will be parliamentary scrutiny not just of the fiscal framework but of the enabling regulations, which presumably will not meet the same timetable as the rest of the Bill?

The fact that the main parties agree and support the main provisions of the Bill does not negate the absolute need for parliamentary scrutiny by both Houses. The statute book numbers many Acts on which all parties agreed that led to enormous practical difficulties of implementation. Two immediately spring to mind: the Act setting up the Child Support Agency and the Dangerous Dogs Act.

This debate and this legislation are historic. The Bill gives effect to the Smith commission, and makes good the promise made by the Prime Minister in the immediate aftermath of the Scottish referendum last year not just to the people of Scotland but to the people of the United Kingdom as a whole.

6.49 pm

Lord Selkirk of Douglas (Con): My Lords, it is a very great pleasure to congratulate my noble friend Lady McIntosh of Pickering. Her speech was excellent and we look forward to very many more. She and I have both been advocates at the Scots Bar, but unlike many parliamentarians she has been both an MEP

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and an MP. Our training as advocates helps us to think straight—I like to hope so, at any rate. She will find this House full of dedication and good humour and—usually—engaging in the pursuit of excellence. I wish her every success and happiness here in the years to come. I also congratulate the noble Lord, Lord Campbell of Pittenweem, on a characteristically memorable speech. It seems like only yesterday that I was his junior counsel in a thoroughly traumatic and tragic murder case. We are extremely glad to see him here and welcome his great experience, including as chancellor of St Andrews University, and his substantial expertise. His point about Scotland’s security will be an important marker in a debate which looks as if it will continue for a long time.

It will come as no surprise that I support the Bill and wish the Minister success with it. I do not think this House should try to halt its progress, as recommended by the Economic Affairs Committee. I fully appreciate the importance of the United Kingdom and Scottish Governments agreeing on a fair and workable fiscal framework in which to embed the new financial arrangements, but it should surely not prove beyond the wit of man and woman to reach such an agreement in the near future without any intervention from this House which would be both misinterpreted and badly received. When he winds up, it would be helpful if the Minister informed the House of his willingness to update it on the negotiations between the Treasury and the Scottish Government. I have a past interest in the first Scottish Parliament, since I served two terms as an MSP. I remember the excitement, enthusiasm and optimism of the opening day, which included a fly-past by Concorde and the Red Arrows.

Lord Forsyth of Drumlean: Does my noble friend really mean that he would like to see the Bill pass out of this Parliament, even if we have not got the fiscal framework and even if that resulted in Scotland being greatly disadvantaged?

Lord Selkirk of Douglas: My noble friend misunderstands the purpose of what I was saying. It would of course be 100% better if we had the fiscal framework before us. I hope the Minister will assure us that he will report back to the House on the progress of his discussions with the Scottish Government, because that is very important. However, if a Bill went through this Parliament on a subject which came under the devolved powers of the Scottish Parliament and that Parliament found it wholly unacceptable, it would not be implemented. I am not too concerned about the Minister asking for more time. He should be given the benefit of the doubt and supported. I hope he will come back with an agreement and that his confidence has not been misplaced.

I served as a member of the Calman commission which first reviewed the progress of devolution in the UK. It reported in 2009 and proposed an increase in the Parliament’s powers that is just beginning to come into force. We now have a Scotland Bill before us which gives extensive new powers to Holyrood promised in the famous vow. It is worth stressing that the noble Lord, Lord Smith of Kelvin, who chaired the all-party commission, is on record as stating that he believes

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that the promises in the vow have been met by the legislation proposed so far, as does Gordon Brown, who intervened so passionately during the referendum campaign. I very much hope that the new powers over setting a Scottish income tax and welfare spending will be available by 2017. This will mean that all parties in Scotland will have to publish their tax and spending plans in their manifestos for the election next May. For the very first time there should be no hiding place, especially for those who have taken refuge for years in simply blaming the United Kingdom Government for every financial problem. Accountability and transparency will be greatly enhanced and it is to be hoped that, instead of arguing endlessly about process, all Scotland’s politicians will have to convince the voters of the benefits of their policies.

One of the SNP’s former top advisers recently declared, in a powerful critique, that the economic plan for independence which it put forward last year is “broken beyond repair”, and that the Scottish Government currently have no credible alternative to Tory financial plans. For their part, however, unionists must not appear grudging and disgruntled at the progress of events since September 2014. There have been more than enough predictions of doom and gloom. Instead, I welcome the reality that the Scottish electorate will soon have the opportunity to make very important decisions about the kind of Scotland in which they wish to work, live and care for their families. I hope they will conclude that this legislation offers them a constitutional framework within which they can enjoy the best of both worlds: having one of the most powerful devolved Parliaments in the world, operating within the wider parameters of a very strong and extremely successful United Kingdom.

6.56 pm

Baroness Quin (Lab): My Lords, it is a pleasure to follow the noble Lord, who is very often a travelling companion on the east coast line between London, Northumberland and the Scottish borders. It is also a pleasure to pay tribute to and welcome the two maiden speakers in this debate: the noble Lord, Lord Campbell of Pittenweem, alias Ming, and the noble Baroness, Lady McIntosh of Pickering.

The Bill gives legislative effect to the vow and to the outcome of the Smith commission. Once the vow was made, it needed to be delivered. In that sense, I support the Bill and the speech made by my noble friend Lord McAvoy from our Front Bench. Living in England’s most northerly constituency, Berwick-upon-Tweed, I am affected and concerned by the debate on Scotland and its future role within the UK. The referendum vote was the most important one in my political life, although I did not actually have a vote to exercise. The Bill gives effect to the vow and I respect that but, from my own experience of canvassing for Better Together in the borders, particularly in the last 10 days of the referendum campaign, I agree with my noble friend Lord Maxton that the vow was not the reason why Scots voted no. It was certainly not mentioned to me on the doorstep. More effective was the splendid speech by Gordon Brown, reclaiming the saltire for the whole of Scotland, not just the yes campaign.

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I was also struck by a comment made in an earlier debate by the noble Lord, Lord Forsyth of Drumlean, who correctly pointed out that most of the postal votes had been cast well before the vow. As I understand it, those postal votes very much favoured the no side and were therefore not influenced by the vow at the last minute. I also clearly remember Nicola Sturgeon, now First Minister, saying on 16 September that the Scottish people were not daft and would not be taken in by the vow—and, only five days later, Alex Salmond saying that people in Scotland were tricked into voting no because of the vow. This seems highly inconsistent on the part of the SNP. On this occasion, I agree with Nicola Sturgeon that the electorate was not daft and knew what it was voting against, just as much as what it was voting for.

In many ways, I would prefer all the matters in the Bill to have been part of the constitutional convention approach, which a lot of noble Lords have put forward in the course of this debate and over the last few months. There are all kinds of implications as a result, not least for areas neighbouring Scotland, as the noble Lord, Lord Shipley, pointed out. That obviously resonated with me in particular. I also pay tribute to the tremendous speech by my noble friend Lord Hollick in presenting the findings of the Economic Affairs Committee. I hope that the Government will very much take into account the views he expressed.

Some noble Lords in this debate, including the noble and learned Lord, Lord Wallace of Tankerness, have spoken about federalism and how keen they are to see a federal solution. I know that my noble friend Lord Foulkes also takes a keen interest in this. To a certain extent, it depends what you mean by federalism. I say this particularly coming from the north-east of England because, in many ways, our natural allies over many elections were in Scotland and Wales. There is a great worry that if there is simply an England-wide solution or an English Parliament, we could be more marginalised than we are in the United Kingdom Parliament. Although the Government seem now to be embarking on a programme of devolution it seems very piecemeal and aspects of it very much worry me, such as inflicting elected mayors on areas that have already voted against them. That seems against the very principle of localism and regionalism. I hope that regional devolution is not dead. It is true that the past vote in the north-east went strongly against it, in rather different circumstances, but that was by a rather similar majority to the rejection of the Welsh Assembly the first time around in Wales. So I do not lose hope of having a devolved situation in the largest by far, in population, of the four countries of our union.

Nicola Sturgeon recently spoke on “Desert Island Discs” about how she had come into politics and wanted to become involved in the SNP as a result of the effect of Mrs Thatcher’s policies on Scotland. Again, coming from the north-east of England where we, like Scotland, had three industries—shipbuilding, coal and steel—that went into a massive decline at once, I was very sad that she concluded that separation was the better road rather than economic and social solidarity across the whole United Kingdom, which is the approach that I would much prefer to see.

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I accept the Bill but, at the same time, I urge the Government to accept the idea of the constitutional convention and to look urgently at ways of strengthening the union, particularly across the border in areas such as mine adjoining Scotland, so as to make a success of it—and not to allow it to drift apart and, possibly, break up.

7.02 pm

Lord Lyell (Con): My Lords, it is now 44 years since I made my first humble speeches in your Lordships’ House and I think it is the fourth time we have discussed major events dealing with my homeland of Scotland. This evening I seem to be on a downward tide, very happy and content with much of what is in the Bill. It is interesting that the Scottish Parliament is now up and running and is a great success, and we see around us noble Lords who have served, such as my noble friend who spoke before me, and others who are still serving, with a dual hat.

We are discussing a different concept tonight from what I call the constitutional past in that we are doing something fairly quietly but apposite. We are downsizing from what I would call a federal block—known in Scotland as “Waste monster”, or Westminster—and looking at what is, and I hope will continue to be, a very successful devolved system in Edinburgh. We are looking at how these two Parliaments can react well and without too much friction. Before us this evening we have a decent stab—I will use that tactful term—to confirm what already works with the Scottish Parliament, but I worry about some particular gaps in that happy scene.

I commend the noble Lord, Lord Hollick, on his fortitude in having sat here throughout the debate. In fact, he is one of a fairly large number of noble Lords who have not budged from their positions. I also thank him, my noble friend Lord Forsyth and others who sat on the committee that produced this report. My noble friend Lord Forsyth put things far more forcefully, if I may say, than I would be able to. This is a really excellent report on the financial aspects and indeed what I hope may be the fiscal framework. I will just consider two or three small paragraphs from the report of the noble Lord, Lord Hollick. We will be able to discuss them in much more detail when we come to the income tax aspect of the Bill.

If your Lordships glance at paragraph 160 of the Hollick report, there are the immortal words of Professor Holtham, who praises the Barnett formula saying that it is “extremely simple”. I agree with him, since my main motto, both in your Lordships’ House and out, is KISS—it is nothing to do with affection but is “Keep it simple, stupid”; I am only an accountant not a major lawyer. Above all, keep it simple.

I refer to paragraphs 120 to 133 in the Hollick report, which is beautifully put together and has been praised by my noble friend Lord Forsyth. I am very interested in paragraph 122, which points out that so far the Scottish Parliament has made no use of the income tax powers. You might call me a cynical so and so, but I believe that is a mixed blessing since some of the thoughts I have seen in the Scottish media, both in print and in the electronic media, make my blood run cold.

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In paragraph 130, there is marvellous advice from PWC, which I understand is one of the leading firms of chartered accountants. It points out, “For goodness sake, get the system right”. In three words, “Don’t rush it”. Those words, I hope, will be taken on board by my noble friend the Minister when he comes to wind up and indeed will colour my thoughts on what is before us this evening.

I come to paragraph 131 in the Hollick report. Although I shall be out of order and my noble friend on the Front Bench may kick my shins or do other things to me, I wish to pay the highest compliment to the noble Lord, Lord Smith of Kelvin, whom I call my noble colleague. I am not too sure about the noble and learned Lord, Lord Wallace of Tankerness, but I think that I and the noble Lord, Lord Smith, are the only two members of the Institute of Chartered Accounts of Scotland actually sitting in your Lordships’ House. As a member of the institute, I cannot praise highly enough anybody in Scotland who has done what the noble Lord, Lord Smith, has done in gathering politicians and every kind of economic outlook. He has seen Scotland on a global basis and what he has managed to do with his Smith agreement is worthy of the very highest praise. Certainly I bask in the mini-glow of the chartered accountants as a junior member with the noble Lord, Lord Smith.

I am interested in looking at the wise words, in paragraph 131, of Ms Charlotte Barbour, one of the tax directors of the Institute of Chartered Accountants of Scotland. She pointed out that, as far as income tax is concerned, which is the main thrust of what I see in front of us this evening, there is the issue of identifying who is a Scottish taxpayer. The definition of that, she says, will be “difficult”. Well, in the words of the Bible, I say, “Verily, verily”—indeed, it will. My noble friend who is right in front of me and, I think, the noble Lord, Lord Sanderson, and others may well remember that I was entitled to lead on the definition of a “Scottish taxpayer” in 1998. If your Lordships go back and look at the Hansard at that time, they will find that the Government had some difficulty in explaining to me and to the House why somebody on a ferry which was tied up at the ports of Cairnryan or Stranraer would, for the purposes of the Scotland Bill, be defined as being resident in Scotland overnight. It is there in black and white. I hope that it has been changed, and indeed there is room for it to be removed.

Paragraph 133 of the Hollick report refers to the fact that the definition of a Scottish taxpayer will be based on an individual’s main place of residence. I think it was the very kind lady from HMRC who pointed out that for the “vast majority” of the population this would be simple. Perhaps she is watching this debate on television this evening. If so, I ask her to look around at your Lordships. Perhaps I may quote a personal example. My tax affairs used to be dealt with in Dundee. I have one or two interests south of the border and, because of that, my tax details were then dealt with at Leeds and Shipley. I am given to understand that, because at some stage in my career I took paid employment as a Minister—in this House, not in the other place; no one elected me there—all my affairs are, and will be, dealt with in Cardiff. At the moment,

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there are three or four centres that deal with my affairs, and I am just a simple Scottish taxpayer. It is pushing at the limits of reality for an HMRC representative to say that this is going to be quite simple for every Scottish taxpayer. In my case, she might find that it is just a little more than that.

The Bill before us certainly provides the framework for something which is acceptable and reasonable, and which is very practical for Scotland, let alone for Scotland’s finances, and I hope that your Lordships will accept that the further detail can be brought forward in Committee. I congratulate the Minister on what he has done today in bringing everything before us but, above all, I congratulate my noble colleague—if I may call him that as a fellow accountant—the noble Lord, Lord Smith of Kelvin.

7.12 pm

Lord Sharkey (LD): My Lords, I can save some time by saying right away that I cannot explain the second no-detriment principle, even though I am a member of your Lordships’ Economic Affairs Committee under the very able chairmanship of the noble Lord, Lord Hollick, whose amendment I support. I believe that it is impossible to properly debate this Bill unless we have before us the details of the fiscal framework. I believe it is impossible because those details will be critical in determining the nature of the relationship between the rest of the UK and Scotland, and the fiscal framework may well have implications for the future arrangements for Wales and Northern Ireland. If the framework is flawed, as it could easily be, it could lead to friction and to regular disputes. Such friction and regular disputes would weaken the union—the exact opposite of the purpose of this Bill.

As the noble Lord, Lord Hollick, said, our committee identified seven problems that need to be addressed. They are all important but the first is the absence of the fiscal framework and the timetable for the Bill. As things stand, it is not certain that your Lordships will have the opportunity to examine the fiscal framework, and it is entirely unclear, this Bill having been through the Commons, how MPs could have any opportunity to debate any proposed fiscal framework in any meaningful way. This matters because the fiscal framework will determine the funding that the devolved Administration will receive from the UK Government. Our report discusses, for example, the question of the adjustment of the block grant for Scotland after the initial settlement.

There are many ways of making that adjustment and we examined three in detail. All three showed significant differences in the size of the block grant received by Scotland. For example, in the longer term, there was an annual difference of £1.3 billion between two of the methods we discussed. Without a statement of underlying principles and without being clear what risks the Scottish Government should take responsibility for, it is not possible to argue coherently in favour of one method over another, but the argument needs to be had. The funding differences can be very, very significant. Without the fiscal framework, we do not know which adjustment method is proposed; we do not know on what basis it is proposed; and we do not know its revenue consequences.

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Your Lordships’ Constitution Committee, in its report on the Bill of last Friday, commented on the situation, as the noble Lord, Lord Hollick, noted. It said:

“In the absence of any information about the fiscal framework, it will be impossible for the House to assess whether or not the Bill will cause detriment to all or part of the United Kingdom”.

The word “detriment” of course appears in the discussion of the Bill in another guise. The Economic Affairs Committee concluded, after hearing evidence from experts, that this second no-detriment principle was not workable and that it was in fact a recipe for an unending series of future disagreements about what constituted detriment and about its value. This needs to be dealt with in any fiscal framework. The Government need to explain how they intend to interpret and to implement the second no-detriment principle.

There is also the issue of what borrowing powers will be granted to Scotland. This is obviously a vital question: getting this wrong would put the whole deal at risk. Even framing it in the wrong way would be very damaging. For example, any no-bailout provision would, I think, look like a repudiation of Scotland as a part of the United Kingdom and would, in any case, almost certainly be ignored by the markets. The Constitution Committee quotes the Government on providing the fiscal framework for parliamentary scrutiny. It says that the Government have said that they,

“aim to complete work on the fiscal framework ‘as soon as possible in order to give respective Parliaments time for due consideration of both the Fiscal Framework and the Scotland Bill’”.

It goes on to say:

“It is not clear how the Government expect the House of Commons to give ‘due consideration’ ... when the Commons has already passed the Scotland Bill to the House of Lords”.

No, it is not clear. Perhaps the Minister can explain how the Government intend to allow the Commons this “due consideration” and whether it will include the opportunity to amend. As things stand, it is entirely possible that the only legislature to have an opportunity to scrutinise the fiscal framework will be the Scottish Parliament. This is obviously wrong and completely unacceptable.

As the Constitution Committee and the Economic Affairs Committee suggest, we should consider delaying parts of the Committee stage until after the publication of the fiscal framework. I look forward to hearing the Minister’s plain-English and unequivocal response, making a commitment to arrange matters so that this House can examine the fiscal framework in Committee.

Viscount Younger of Leckie (Con): My Lords, I rise with some trepidation to raise the subject of speeches and time guidelines, which is no reflection on recent speeches. The House may like to know that if noble Lords adhere to the time limit of six minutes for speaking, the debate may finish at a reasonable hour to allow time for the next business.

7.18 pm

Lord Kerr of Kinlochard (CB): The noble Viscount was good enough to tell me that he was about to make that announcement and that it was not directed only at me.

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It is a privilege to take part in a debate which has included a remarkable maiden speech from the noble Lord, Lord Campbell of Pittenweem, whose international performances I have been admiring for about 55 years, and a wonderful maiden speech from the noble Baroness, Lady McIntosh of Pickering, whom I first remember admiring as an extraordinarily active Member of the European Parliament.

It is a privilege for me, too, to serve on the Economic Affairs Committee chaired by the noble Lord, Lord Hollick. I got to realise quite how big a privilege that was when the committee went to Edinburgh to take evidence in the Scottish Parliament. As we drove in from the airport, the streets were lined with cheering crowds, which is not normally how a Glasgow man like me is received in Edinburgh. It even brought a wintry smile to the patrician features of the noble Lord, Lord Lamont. But then our driver explained that the reason for the crowds was that we happened to be in Edinburgh on the day that the Queen became our longest serving monarch ever, that the streets were blocked and that we would now walk to the Scottish Parliament.

I agree with everything that the noble Lord, Lord Hollick, said. I cannot see how we can do our proper scrutiny job without seeing the fiscal framework, and I support the amendment in the noble Lord’s name. Of course we must pass the Bill, but we need to see this crucial part of its underpinning, which will explain how the system that we are about to legislate for will work.

For me, there are three unknowns—I hope the Minister will be able to throw light on them—that have to be made clear before we complete our scrutiny of the Bill. The first is the mechanism for the adjustment to the block grant, year by year, when Scotland is retaining virtually all its income tax paid in Scotland. How will that be done in a way that can be shown to be fair not only to Scotland but to the rest of the United Kingdom? The second is the limits on Scottish borrowing powers. The Economic Affairs Committee report rejects, in my view absolutely correctly, the idea that there should be a no-bailout rule. For so long as Scotland remains part of the union, in extremis, Scotland would be bailed out—of course it would. But that means that there have to be very clear, very strict limits on borrowing, and the House is entitled to know what they are. The third is that we need to know what arrangements are envisaged for future transparency. If the current negotiation on the fiscal framework, behind closed doors, is to be a precedent for the future, we will not see an enduring settlement but enduring dispute. There has to be an open, transparent, principles-based way of proceeding in future.

I want briefly to touch on two aspects of the Smith commission report that I personally regret. One is reflected very clearly in the Bill and we need to work on it, and the other is accepted by all parties and regretted by me. First, I am uneasy about the choice of personal income tax to provide the bulk of devolved revenue raising. As the noble Lord, Lord Campbell of Pittenweem, reminded us, the union is responsible and will remain responsible for the individual’s safety—security, defence, development aid, foreign affairs and so on.

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Would that truth not be more readily perceived by the individual if he believed that he paid his share of the cost of that safety through his income tax? Think of an analogy with council tax: could he not receive a statement indicating where the money was going and how it would be spent? It seems to me, in principle, wrong. I am not arguing against the quantum of devolved revenue raising; I am arguing against the choice of this particular tax. But that pass is sold, and I am sad about that.

Secondly, the other pass that is sold and that I am also sad about is our old friend Barnett. I do not need to rehearse the arguments because we all know how unsatisfactory the Barnett formula is: introduced in 1979 as a temporary expedient, it was always intended to be replaced quite soon. Its financial effects now were explained to the House this afternoon by the noble Lord, Lord Hollick, and its deficiencies were explored in detail in the Select Committee report of 2009 under the chairmanship of the noble Lord, Lord Wakeham. On looking at the Barnett formula, everybody has always agreed that it should be replaced by a needs-based formula. Sadly, that is not going to happen because the vow decreed that the Barnett formula should continue and the Smith commission felt bound by that.

The Economic Affairs Committee report correctly states that the committee unanimously thought that that decision was wrong. The report recommends that the Government consider the case for,

“introducing a needs based approach to funding devolved administrations”.

Last week, all guns blazing and shooting from the hip, the Scottish Government came out against that recommendation. That is unworthy and short-sighted.

Barnett is not demonstrably fair, and is seen as unfair by many in Wales and some in England. An enduring settlement cannot be based on perceived unfairness. Of course, I do not believe that fair allocation necessarily means equal allocation. The cost of providing services such as health, education, transport and social services to an agreed UK standard is plainly higher in Sutherland than it is in Surrey. Peripherality, sparsity of population, population age structures, dependency ratios, incidence of chronic ill health and life expectancy all differ across the kingdom. It should not be impossible—the Australians do it now—to devise a system for fairly assessing relative costs, and so needs, on a continuing basis. Of course there will be disputes about the weighting of the various factors, but these disputes would be containable if clearly based in a framework of principle.

I do not think it follows that any change to the Barnett formula would be a change for the worse for the Scots. I believe that under any fair system, the Welsh would certainly gain compared with the status quo now, and England would undoubtedly receive less per capita. I do not know where the Scots would end up, but I do not agree with their assumption that what we have, we hold—that there must be no change to the Barnett formula because it is bound to be for the worse.

The real gain would actually be stability. It would be possible to explain inequalities, how they arise and why they are fair. Current inequalities are the product

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of a 1979 back-of the-envelope formula that really needs replacing. But that pass is sold, and I am sad about that too.

The difficulty we are in is the result of piecemeal devolution driven by pragmatism, not principles. The underlying principles have not been clearly enunciated. Devo-max was not an option on the referendum ballot paper, and that was a mistake. But that is what we are now getting—devo-max defined on the hoof in the heat of a referendum campaign.

Of course we must pass this Bill—we are where we are—but once we have done that, I hope we can sit back and think. I hope we can think about the proposal from the noble Lord, Lord Campbell of Pittenweem, for a new Act of Union. I hope we can think about the advice we get from our Constitutional Committee, as quoted by the noble Lord, Lord Lang of Monkton, this afternoon:

“The UK Government and the major UK-wide political parties need urgently to devise and articulate a coherent vision for the shape and structure of the United Kingdom, without which there cannot be constitutional stability”.

I strongly agree with that.

I also agree with the noble Baroness, Lady Quin, that the case for a constitutional convention grows stronger every day. The essence of that convention would be that it meet in public, in total transparency. That way, if any participant or group of participants in a convention show themselves unwilling to subscribe to sensible principles and genuinely to seek an enduring settlement, that would be evident to all.

7.29 pm

The Earl of Dundee (Con): My Lords, I begin by congratulating both maiden speakers on their excellent contributions. In another place and for many years, the noble Lord, Lord Campbell, has been a very effective and exemplary Member of Parliament for North East Fife, where I live—and, as it happens, not too far away from Pittenweem.

In my remarks today, I should like to connect three aspects: first, transparency and co-operation, in particular between the Scottish and United Kingdom Parliaments and Governments; secondly, consistent with the principle of devolution, the role of Holyrood in transferring powers to Scottish regions and local communities; and thirdly, following from that, the scope of Scottish devolution for evolving good and better national practice which, as a result, can extend elsewhere.

In his very useful report, the noble Lord, Lord Smith of Kelvin, stresses, as he has also done today, the importance of finding good new systems and arrangements for co-operation. As instruments between the two Governments, we have the joint ministerial committee and the joint exchequer committee. Bilateral government work will clearly assist the successful implementation of more devolved tax and welfare. Both Parliaments and Governments must receive regular updates on funding plans and fiscal changes. Not least, on all matters and at all times, we should seek improved transparency and public awareness arising from proper levels of co-operation between the two Parliaments and Governments.

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Yet how confident are we that these procedures will actually be followed? To encourage them, during the passage of this Bill, which further measures does my noble friend the Minister believe to be necessary?

Political devolution means the transfer of powers from a centre, such as Westminster, to the regions and localities—in this case, of Scotland within the United Kingdom. That is why, consistent with the principle of devolution, Holyrood, as the Scottish centre of power, has the obligation, wherever possible, to pass on functions and powers to Scottish regions and localities.

However, so far, does my noble friend the Minister consider that this aspect has been sufficiently addressed? If not, what relevant amendments to the Bill might he now have in mind to put forward?

Where it promotes localism, one great benefit of devolution is more accurate readings of national performance; and hence a far better understanding of how national success should be defined in the first place. Hitherto, for the latter, we have tended to use the measures of gross domestic product only. Yet on its own GDP does not tell the whole story. Now, as a result, we refer not just to GDP but to a combination of GDP and other indicators, such as those of the satisfaction or well-being of people where they live and in their communities. The criteria for those assessments are currently detailed by the OECD and are increasingly addressed in the United Kingdom, as well as by our 47 Council of Europe states and their Strasbourg parliament, where I have the honour to serve.

In this respect, does my noble friend the Minister agree that localism or devolution, provided that it is properly carried out, can have the beneficial effect of evolving far better practice both in this country and elsewhere? For the same reason, here and elsewhere, proper devolution can hugely reinvigorate democracy.

Nevertheless, we must advocate the full journey of devolution beyond Edinburgh to Scotland’s regions and localities. Previously, too much emphasis on that would have drawn the accusation of upstaging or undermining the role of nation states. Fortunately, that is no longer the case. Instead, devolution or localism can now be viewed as a national force for fairer standards, and an international facilitator of well-being and stability.

7.34 pm

Lord Maxton: My Lords, it is a pleasure to follow the noble Earl, Lord Dundee. Before he became an earl, he was actually the Tory candidate in the famous Hamilton by-election in 1978. Of course, he bears a very famous name in that, in 1924 or 1925 I believe, one of his distant ancestors—standing as a prohibitionist —defeated Winston Churchill in Dundee.

I too congratulate the two maiden speakers, the noble Baroness, Lady McIntosh of Pickering, and the noble Lord, Lord Campbell of Pittenweem—or Ming; I have known him for a very long time. He has had three distinguished careers: first, as an athlete; secondly, at the Bar, where he was a very distinguished lawyer; and thirdly, in politics—and I hope that career will continue. He also had a fourth one; I think I am the only person in this House who can claim to have played rugby against the noble Lord, Lord Campbell.

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He always accused me of being a dirty player, and he was not as distinguished on the rugby field as he was elsewhere—I am sorry he is not here to hear that.

Almost everything I wanted to say has been said. I will concentrate on two aspects. First, we must stop bringing together devolution and nationalism; they are not the same thing. We must emphasise and keep emphasising that point. At the end of the day, devolution is a democratic process—and I am not saying that the SNP is not a democratic party. That is why some of us campaigned for devolution. I know that some people opposite opposed it, but the fact is that we were in favour of devolution because Scotland had become out of sync. Therefore, it was right that we devolved power to a Scottish Parliament. The alternative was to get rid of Scotland, to be honest. When my late friend Donald Dewar said that devolution was a process—although I gather it has been denied that he ever said it—what he meant was that democracy should go below the level of the Scottish Parliament to local authorities and local communities, and that is what democracy means. It means people taking decisions at the point at which they want and need to take them. Devolution has to be a two-way process. Some powers should perhaps be taken back from the Scottish Parliament and given back to this Parliament, or even given to the European Parliament; I do not know. The fact is that devolution is a two-way process and it has to be.

Secondly, we have had a long argument and, quite rightly, a discussion about fiscal autonomy and the fiscal arrangements being made by the two parties, and a large part of me agrees with everything that has been said about that. But a part of me also says that it does not really matter, because whatever the fiscal arrangements this Government comes to with the Scottish Government, at some point or other the Scottish Government are going to say no. What the SNP wants is a fight. It does not really care what the arrangements will be. It just wants a grievance. What it wants is an independent Scotland. We have to stop appeasing it, and to some extent this Bill is an appeasement for the SNP. That is what the vow was; it is what the Smith commission was, to some extent. It was an attempt to appease the Scottish nationalists in their demand for the nationalist case. We have to stop that. We have to start fighting them.

We might start fighting them by asking a very simple question: why do you want to separate from the rest of the United Kingdom? What is it that divides us? I speak with an English accent because I was brought up in Oxford. My mother and father both spoke with Glasgow accents, Scottish accents, because they were brought up in Scotland. My brothers and my sister live in England. My nieces, nephews, grand-nieces and grand-nephews live in England. They do not consider themselves Scottish. My brother may consider himself Scottish, but he does not really consider himself a Scot. At the end of the day, I am typical of many people. What is it that divides us from the rest of the United Kingdom? The answer is: nothing. Religion and language do not divide us. There is not even a natural frontier between England and Scotland any more. Until we start asking those basic questions of, “Why do you want to go? What is it that divides us?”,

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and start fighting nationalism, I fear that Scotland may very well slip uncontrollably down the route towards becoming an independent country, which I personally would regret and I will fight all my political life—what is left of it—against.

7.40 pm

Lord Norton of Louth (Con): My Lords, for the past 18 years, we have seen significant measures of constitutional change enacted on an almost unprecedented scale. For most of those 18 years I have drawn attention to the fact that the measures have been disparate and, crucially, discrete. There has been no attempt to locate them within an intellectually coherent approach to constitutional change. They derive from no clear view of the constitution as a constitution. The constitution of the United Kingdom is being fundamentally altered without any attempt to stand back and make sense of where we are going.

We have before us just one of many measures of major constitutional importance, but one that, as the report of the Constitution Committee puts it, devolves powers,

“in a reactive and ad hoc way”.

I declare an interest as a member of the committee. The Bill derives from what the committee identified as a “disjointed approach”. We have a Bill that is rushed and coheres with no clear view of constitutional change. Perhaps when my noble friend the Minister comes to reply to the debate he will explain what, precisely, is the intellectually coherent approach to constitutional change taken by the Government.

The report of the Constitution Committee draws out the problems with the Bill’s constitutional implications. I wish to pursue problems associated with Clauses 1 and 2 that build on and go beyond the committee’s report.

There is a problem with the first two clauses, in terms of not only the basic issues they raise regarding parliamentary sovereignty but the very purpose of legislating. They have been drawn up in the face of the Government’s own guidance on drafting legislation. I quote paragraph 10.9 of the Cabinet Office Guide to Making Legislation, published in July, which states:

“Finally, when writing instructions it is important to keep in mind the general rule that a bill should only contain legislative propositions. These are propositions that change the law—they bring about a legal state of affairs that would not exist apart from the bill. It can sometimes be tempting to ask the drafter to prepare a provision that is not intended to change the law but is instead designed to serve some political purpose or to explain or emphasise an existing law. However, non-legislative provisions of this sort are likely to go wrong because the courts will be inclined to attribute legal effect to them on the grounds that Parliament does not legislate unnecessarily—and the legal effect attributed may be one the Government could not have predicted”.

The Scottish Parliament is already permanent under the terms of the Scotland Act; it remains in being unless this Parliament legislates otherwise. New subsections (1) and (2), introduced by Clause 1, do not make it any more permanent than it already is. Under the doctrine of parliamentary sovereignty, this Parliament could legislate to suspend or abolish the Scottish Parliament. One could provide, as new subsection (3) does, for a referendum to be held before it is abolished, but this

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Parliament could legislate to remove this provision. The purpose of new subsections (1) and (2) is therefore not clear; they add nothing unless they seek to create some body of higher law and thus conflict with what has been termed the cornerstone of the British constitution.

Lord Hope of Craighead: I am fascinated by what the noble Lord is saying, but the problem is that the Smith agreement was to create these undertakings in law. The difficulty I have is how you can reconcile that proposal with the memorandum that has been quoted, and then provide a formula that the courts can adjudicate on. I find that extremely difficult, but one cannot slide round it by saying that this is simply a political exercise.

Lord Norton of Louth: I agree with the noble and learned Lord. It puts us in a very difficult situation because there is a commitment to it, but it creates problems by being embodied in the Bill. It raises a problem that should not be there and should perhaps not have been made in the first place, because the Smith commission’s recommendation falls outside the commission’s terms of reference.

Clause 2 is a novel provision. There are precedents for transposing a convention of the constitution into statute, but once it is in statute the convention ceases to exist. The most recent example of this replaces the convention that a Government who lose a vote of confidence in the House of Commons either resign or request a Dissolution with Section 2 of the Fixed-term Parliaments Act 2011. The Act provides legal certainty. It was amended in your Lordships’ House to ensure that it did so.

Clause 2 does not transpose the Sewel convention into statute. It simply states the convention. The convention does not cease to exist. We thus have the convention and we have statute. The flexibility inherent in conventions is not displaced by the certainty of a statute. This creates uncertainty in a way that has not existed when conventions have given way to legal certainty before. Conventions are not enforceable in the courts. What we have here is a statutory provision. As the noble and learned Lord, Lord Hope of Craighead, said, it is not immune from being challenged in the courts. It may never be challenged, but there is no immunity. Will my noble friend the Minister therefore explain why these provisions are in the Bill? How does he justify them, given the Government’s very clear guidance on the purpose of legislating?

The Constitution Committee’s report makes a compelling case for standing back and making sense of where we are. Some may see that as justifying the case for a constitutional convention, as we have heard. I do not. I fear that a convention may rush and produce skewed recommendations. I have argued for a different type of body—one that looks at how the changes we have undertaken, or are undertaking, fit together and how the basic principles underpinning our constitution are maintained. The more that Bills such as this come before us, the more the need for such a body becomes urgent. Does my noble friend the Minister agree that the time has come for us to take stock of where we are, and, if not, why not?

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7.47 pm

Lord Thomas of Gresford (LD): My Lords, it is a pleasure to follow the noble Lord, Lord Norton, and to agree with him that we have perhaps got to the end of piecemeal devolution. It is time to look at the devolved legislatures as a whole. Perhaps a Welsh voice may be heard in this, although I have to tell your Lordships that my three sons, Andrew, Gavin and Jamie, were all entitled to Scottish passports under the SNP proposals, although curiously my three grandchildren, Angus, Finley and Murray, were not.

Immediately before the Scottish Referendum, the no campaign ran scared. The vow set out in that hallowed constitutional document referred to by the noble Lord, Lord Forsyth, the front page of the Daily Record, contained no pledge to maintain the Barnett formula. In the context of the SNP’s false complaint that the coalition Government intended to slash expenditure on the NHS, the vow was a pledge that the final say on how much was spent by the NHS in Scotland would be a matter for the Scottish Parliament—as, indeed, it already was. The words,

“because of the continuation of the Barnett allocation for resources and the powers of the Scottish Parliament to raise revenue”,

were added. That is the only reference to the Barnett formula in the vow.

On 28 September, on the BBC’s “Sunday Politics”, the Prime Minister said that the Barnett formula would become “less relevant over time” as Scotland’s block grant from Westminster would be cut in proportion to the extra tax-raising powers being devolved. Of course, in the days that followed, before the referendum, Alex Salmond said that the vow was a last-minute offering of nothing. After the referendum, as the noble Baroness, Lady Quin, pointed out, he described it as a trick, a deception and the crucial factor in swinging more than 10% of the votes. This claim was later dismissed as rubbish by Gordon Wilson, the former leader of the SNP, who said that the vow had had “zilch” influence on the result. That conclusion was later backed by all the independent polling evidence.

According to Professor Tomkins of Glasgow University, in his evidence to the Economic Affairs Committee, the Smith commission, of which he was a member, took it as a given that the Barnett formula would survive the process,

“because it was in the Vow, and the Smith Commission was meeting and working in the shadow of the Vow”.

I think we are all in the shadow of the vow in this debate and that is very unfortunate. The Smith report simply said of the Barnett formula, in paragraph 95.1, that,

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

That is all it said. Of course, it was signed up to by the leaders of the political parties, who no doubt did not give their minds to the implications of it all.

The First Minister, Nicola Sturgeon, last week promised to block the Scotland Bill at Holyrood by refusing to introduce a Legislative Consent Motion unless the United Kingdom Treasury agrees a “satisfactory and fair” settlement to underpin the Bill. So, we have these

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protracted talks on the fiscal framework. Her decision as to what is satisfactory and fair no doubt requires the maintenance of the Barnett formula, because it provides 20% more funding for public spending per capita in Scotland than the UK average.

Let us look at Wales. The Wales Act 2014 permitted the partial devolution of income tax to Wales, subject to the endorsement of the people of Wales in a referendum. The First Minister, Mr Carwyn Jones, has refused to hold that referendum until there is a “fair funding settlement” for Wales. By that he means the abolition of the Barnett formula and the introduction of a block grant based on need. He has also complained that as the devolution of income tax on earnings in Scotland does not require a referendum, Wales should not have to put up with one.

The noble Lord, Lord Kerr of Kinlochard, referred to the Select Committee on the Barnett Formula, chaired by the noble Lord, Lord Richard, which concluded that,

“the Barnett Formula should no longer be used to determine annual increases in the block grant for the United Kingdom’s devolved administrations”,

and:

“A new system which allocates resources to the devolved administrations based on an explicit assessment of their relative needs should be introduced”.

I think the noble Lord, Lord Forsyth, was a member of that committee and no doubt he signed up to that conclusion.

The need, therefore, for a constitutional convention to look at the constitutional arrangements for the devolved Administrations is essential. It has been referred to by my noble friend Lord Shipley, my noble and learned friend Lord Wallace of Tankerness, the noble Lord, Lord Foulkes, and others. There will be anomalies, particularly if a fiscal framework agreement for Scotland is based on the retention of the Barnett formula. Those anomalies may be overwhelming. Are we to have a different fiscal framework for Scotland, Wales and Northern Ireland and, as the noble Baroness, Lady Quin, would have it, for the north-east of England, should devolution ever come to those parts? Or are we to have a formula that makes sense wherever it is operated within the United Kingdom?

My late wife Nan came from the mining village of Fauldhouse in West Lothian—she had the answer to the question, as it happens. She would have called this a real stushie. But it can run and run. The Economic Affairs Committee has suggested a delay between Second Reading and Committee. I understand why but what it has failed to grasp is the political imperative of next May’s elections—elections that give the people of Wales and Scotland an opportunity to consider the record of their respective Governments and the outcomes of their policies. It is now to be turned into a wrangle over powers. It is very much in the interests of Labour in Wales and the SNP in Scotland to keep the pot boiling until those elections are over. I say to the noble Lord, Lord Forsyth, that the no-detriment principle is simple: it means whatever you want it to mean. I am sure the Mad Hatter would have approved of that definition.

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The target of the Welsh Government in 1999 was to raise the level of the economic indicator of gross value added per capita in Wales from 73% of the UK average to 90%. The latest figures show that the level has declined to 72.2%. We remain bottom of the league. As the noble Baroness, Lady Liddell, pointed out in a passionate speech, the latest Scottish survey of literacy and numeracy finds that the education system, which was the pride of my mother-in-law, Dux of Bathgate Academy in her day, is in decline. Performance in reading dropped in primary schools between 2012 and 2014, and there is a dramatic decline in standards of numeracy. This is the Scottish education of which you were proud and the situation matches my feelings about the state of Welsh education. It is the records of these Governments that we should be attacking before the May elections, not which powers are being granted or what the fiscal framework should be.

The essential thing is that the Bill be subject to proper scrutiny in this House, but also that it be passed. If the SNP does not wish to exercise the powers this Bill presents to it on a plate, its demands for full fiscal autonomy will be hollow. The people of Scotland should not be diverted by wrangles over a fiscal framework, which is a smokescreen for the record of that Government, which fails Scotland as the Labour Government fails Wales.

Finally, I was delighted to hear the maiden speech of the noble Baroness, Lady McIntosh of Pickering. I hope we hear a lot more from her. I was completely impressed by the assertion of the value and the values of the United Kingdom by my noble friend Lord Campbell of Pittenweem. He calls for a new act of union and a federal United Kingdom. I have been asking for that since 1964.

7.58 pm

Lord McCluskey (CB): My Lords, I was privileged to be part of Lord Elwyn-Jones’s Front-Bench team in 1978 when this House fully debated every detail of the Government’s Scotland Bill that was enacted that year. In 1998, I took part in the debates on the Scotland Act 1998. I helped to persuade this House to reject the disgraceful legislative proposal that that Bill contained to allow the Scottish judges—senior judges—to be dismissed by a political vote in the new Assembly.

In 2012, having been invited by the then First Minister of Scotland to chair a group to consider problems that had arisen—at least in his mind—between the Supreme Court and the Scottish courts. I was able to play a significant role in this House in persuading that the reforms suggested by the group that I had led be enacted into law. That was done by way of amendments to the Scotland Act 2012, with the extremely valuable assistance of the noble and learned Lord, Lord Wallace of Tankerness, who was then serving as Advocate-General.

I refer to these matters because in each instance I had direct personal experience of the many valuable improvements that this House has made to devolution legislation over the years. It is because of the outstandingly valuable work done in this House in relation to these matters that I am saddened by the absence from the House of any Peers placed here to speak as official representatives of the SNP. In the other place SNP Members put down many amendments to the Bill and

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might even have voted for one or two of them. However, in the absence from this House of any Peers speaking officially for the SNP, it is difficult to have the fullest and most convincing debate possible on the SNP’s ideas—in Committee or otherwise.

That is a pity because the merits of the SNP’s proposed amendments and ideas—and, indeed, its whole approach —deserve the kind of critical analysis that this House uniquely makes. The legislative debates here are seldom dominated by political point-scoring. Regrettably, too many Bills coming from the other place contain numerous provisions—as indeed this one does—especially technical ones that have never been debated at all. This House, with all its faults, invariably debates the entire Bill and every single amendment. In 1978 there was no time limit on any speeches and we often sat until 1 am, but we got the business done. We also have a very large number of experts in every field who have no political axe to grind, whose best days are behind them but who have not left their experience or learning behind them. They are well qualified to contribute to a fuller understanding of how our democratic institutions work—or, indeed, fail to work. They are able to analyse, critically and free of political bias, the technical merits of the many new and untested proposals contained in this extraordinary Bill.

As your Lordships have said, the proposals in the Bill emerged in the past few months as a result of hasty compromises that have left many of the participants, and others, deeply unhappy. How much better informed would our consideration of the Bill be if we had the advice of some of the experienced members of the SNP to respond to the analysis and criticisms that are likely to emerge? How much more satisfactory would it be if the amendments put on paper in the other House by the SNP were able to be moved in this House by persons committed to them and convinced of their value, and then tested by the experience of your Lordships? I do not pretend to have any inside knowledge as to why the SNP appears to have set its face against having party representatives contributing as Members of this House but I think that it is a mistake. The absence from this House of SNP Peers lends weight to a frequently repeated charge against the SNP—that it does not respond to reasoned criticisms of its policies but seeks instead to divert attention from the criticisms by attacking the process that yielded them. Too often its response to reasoned criticism appears to be, “Ignore the message, just shoot the messenger”.

I also regret to say that I am seriously disappointed by the quality and the capacity of the Members of the Scottish Parliament to scrutinise the Scottish Government’s measures sufficiently. I do not know if that was always so but those are the fruits of my observation over the past few years. There is a widespread perception in Scotland that pre-legislative scrutiny by committees in the Scottish Parliament does not work well at all; in fact, it works badly. There is also a public sense that too few of the Members of that Parliament have the expertise properly to assess and criticise the measures that are put before it by the Scottish Government, especially those of a technical character.

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Those weaknesses are seriously compounded by two features of the Scottish Parliament. The first is that the Opposition are electorally weak and, because of a lack of numbers and resources, do not provide the vigorous and informed critique that a unicameral legislature needs. The second is that the Scottish National Party exercises an iron discipline over its Members in the Scottish Parliament because, as the noble Lord, Lord Foulkes, has reminded us, the overriding imperative of the governing party is to promote the cause of independence. Within the Scottish Parliament no dissent from government initiatives is permitted. The facade of unwavering unity must be maintained.

For example, I and a number of others recently welcomed the U-turn by the Scottish Government when they abandoned their previous policy of scrapping the long-standing evidential rules governing the use of corroboration in Scots criminal cases. The SNP MSPs first voted unanimously for the legislation abolishing the old rules. But when the former First Minister retired, the unanimous condemnation of corroboration as a bad thing turned overnight into a unanimous acclamation that corroboration was, after all, a good thing. Why was that? Simply because the new First Minister said so. The unquestioning obedience to the central diktat on each occasion was disturbingly sheepish. Radio 4 told us the other day of the local butcher who died and the organist at his funeral played, ironically, “Sheep May Safely Graze”. I will take the matter no further.

Finally, I am concerned that the weak Scottish unicameral Parliament will have real difficulty in dealing with the new and untested powers contained in the 2012 Act and the present Bill. The devolved Government will exercise greatly enhanced powers of which they have little or no experience. The Scottish Parliament itself is not well equipped, as we have said. Additionally, as others have pointed out, there is no second Chamber to allow an informed examination and critique of the new machinery and procedures required. There is no constitutional culture of conventions, never mind this particular convention, to govern the exercise of those powers. I hope, for the good of Scotland, that the SNP will not—as usual—lightly dismiss the advice that this expert House is sure to offer.

I conclude by expressing my real fear that once the Bill is enacted and brought into operation, it is more likely to compound our constitutional problems than to solve them. I am not an enthusiast for this Bill.

8.07 pm

Lord Griffiths of Fforestfach (Con): My Lords, I feel very humbled to take part in this great debate, not least after our two maiden speakers, who were excellent and regaled us with their Scottish credentials. I am not Scottish and have only a modest knowledge of Scottish politics. My reason for taking part is that I am a member of the Select Committee on Economic Affairs, which for the past four months has been looking at the issue of the fiscal framework and financial devolution, something that professionally—I hope at least—I know something about. In that context, I would like to say, along with other members of that committee, how much we owe to the noble Lord, Lord Hollick, who did an outstanding job of chairing the committee.

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His speech today, while in parts quite technical, nevertheless was a very fair assessment of an all-party agreement on the way forward.

I have three concerns with the Bill but I will preface my remarks by saying that I wholly support the objective of the Bill; namely, to extend devolution in Scotland and, in time, maximum devolution to Scotland, in a way that I hope will become a template for maximum devolution in Wales and Northern Ireland, with its implications for England.

My first concern—this has been said before but it has to be said again because it is so important—is about our ignorance of the fiscal framework. For some people, the fiscal and financial aspects of the Bill may seem simply technical details best left to economists and Treasury officials to work out together. That would be a great mistake, because hidden in the fiscal and financial details—what taxes you devolve, how you adjust the block grant, exactly what the terms are on which you can raise debt—are political time bombs which, if detonated, will have disastrous implications for the UK. We chose A Fracturing Union? as our title, and I believe that these issues will ultimately lead to the break-up of the UK if they are not dealt with.

The reason for that is that a new fiscal settlement for Scotland will, after a few years, directly affect the living standards of Scottish people, not least in health and education. It will also affect the living standards of people in Wales, in Northern Ireland and in England. More than that, the terms of fiscal devolution between Scotland and the rest of the UK will almost certainly become a template for devolution in other countries. Therefore, after a few years, if electorates in the various countries which make up the United Kingdom decide that because of the terms of this settlement their standard of living has worsened, either absolutely or relatively, they will almost certainly feel a sense of grievance and betrayal. I believe it would be very difficult to rebuke in any way the Scottish people for saying that the only way forward would be independence. That is not just my personal view. Our committee, having taken evidence from academics, economists, constitutional experts, businesspeople, accountants and politicians, came to a unanimous conclusion. Because of this, until Parliament knows the details of the fiscal settlement and the financial devolution, we should really not proceed to pass the Bill. Publication of the details, with full transparency, is essential.

My second concern is that the Bill does not start with a clean sheet of paper. We have the referendum result, the vow and the commitments of the main political parties, all of which, crucially, have raised the expectations of the Scottish electorate about the Bill and further devolution. I thought the noble Lord, Lord Reid, hit the nail on the head when he said that we are between a rock and a hard place. However, we have to start from where we are. The Barnett formula, which has been mentioned already this afternoon, attempts to do something very difficult: to reallocate resources between countries and individuals who are in real need. It has its advantages—which we should not neglect—in terms of simplicity, stability and a lack of ring-fencing but, as has been mentioned, after 37 years, it really needs to be modernised. The failure

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of the Barnett formula is seen, as I am sure the noble Lord, Lord Thomas, will agree, in the fact that because the allocation in Wales is so unfair, the Government—as we shall see tomorrow in the Statement by the Chancellor —has had to put a floor under it. The Barnett formula has not delivered what is necessary.

The Barnett formula is not, in our judgment, and certainly in my opinion, a solid basis for a sustainable, long-term settlement for adjusting the block grant to Scotland, Wales and Northern Ireland. Because of the commitments that have been made, we have to start with the Barnett formula. But while starting with it, is it not possible, when the fiscal statement comes out, to make a commitment to carry on and say that we need to change it during this Parliament to take account of the things it should if it is to be considered and widely accepted as fair?

My third concern is that the fiscal and financial framework should not create expectations which cannot be delivered. My noble friend Lord Forsyth has mentioned many times this afternoon the no-detriment principle. To take the example of borrowing in the capital markets, which has been mentioned, Scotland will clearly benefit if it is able to access the capital markets in its own right, particularly for long-term investment. But what if Scotland is unable to repay interest on its bonds or even to repay its debt at all? In that case, Scotland, as other noble Lords have said, must face up to the consequences of its actions. However, including an explicit no-bailout clause in the Bill would be provocative to the people of Scotland and contrary to the spirit of devolution. More than that, it is inconceivable that the capital markets would ever believe it. However, this means strict limits to the amount that Scotland is able to borrow and limits placed on the ratio of Scotland’s national debt to national income. The Bill therefore has to make it very clear, through the fiscal arrangements, exactly what the potential for borrowing is.

In conclusion, we need an explicit and detailed fiscal framework. We start with the Barnett formula, but it must be amended during this Parliament. We also need rules for borrowing and debt to be set out clearly. All of these are within our reach. I have great confidence in the Minister, having had the privilege of being a colleague of his for some years during the second half of the 1980s in the policy unit in 10 Downing Street. The noble Lord, Lord Dunlop, is a person of great ability and integrity and all I ask for is greater openness, greater clarity and greater transparency. As a result, this Bill, when scrutinised, will be workable and ensure a United Kingdom, not a divided one, which I feel is what all Members of your Lordships’ House would wish.

8.17 pm

Lord Gordon of Strathblane (Lab): My Lords, I welcome in particular three speeches: first are the two maiden speeches this afternoon from the noble Lord, Lord Campbell of Pittenweem, and the noble Baroness, Lady McIntosh of Pickering; the third is the speech of the noble Lord, Lord Smith of Kelvin. In a debate on the Smith report, it is vital that one of the key issues to consider is whether the Bill meets in full what the report—adopted by all five parties—called for. It was vital that we heard directly from him that it does.

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I congratulate him on a very fine speech and it was very nice to see him back in the Chamber. I will also say that the three former Secretaries of State for Scotland did not do badly this afternoon, either; all of them made very good speeches.

We are where we are. The vow, the panic of the three party leaders, was frankly ludicrous but we are where we are. I judge this Bill partly by how far it meets the recommendations of the Smith commission but also by how far it genuinely delivers accountability. When you get into accountability, it is impossible to decide whether the Bill is good, bad or indifferent until we have the full fiscal framework. That does not mean delaying the Bill; it may mean asking the people who are examining this to maybe work a wee bit harder. Meetings once a month is frankly rather leisurely. What is wrong with once a week? Why can we not get them moving on this? It is impossible to reach a decision and the SNP are quite right. It is a disgrace that the Bill left the House of Commons without this ever being debated. I said to one of the SNP MPs the other day, “You guys should surely have made sure that this was fair to Scotland before you passed it,” and he said, “We’re leaving it to the Scottish Parliament to do that for us.”

That is fine for the SNP but it is not actually fine for either the Conservatives or the Labour Party to have allowed it through without scrutinising it properly. I hope that we will have that scrutiny here.

Lord Forsyth of Drumlean: Does the noble Lord think it is conceivable that it might have dawned on the SNP that in moving from a block grant, which is 20% more per head of population than the rest of the UK, towards a point where a large part of that is substituted by a tax-raising power where the tax base is not 20% higher, there is going to be a gap? Does he think that they are deliberately not reaching agreement because they do not want to face an election telling the Scottish people that there will be less money?

Lord Gordon of Strathblane: If the noble Lord waits until the end of my speech he will find that on this, as on so many other things, we are totally of one mind. The problem is that we had a very narrow escape last year. The fall in the oil price is not the fault of the SNP but had the vote gone 10% the other way we would have been landed in a situation where Scotland would be heading for bankruptcy very quickly. We lost our independence through bankruptcy way back in 1707 and the Darien scheme and we could well have been returned to it. It is vital that we put a cost on things.

Everyone has concentrated on the no vote and whether the vow mattered. I am rather more interested in the 45% of my fellow countrymen who voted for independence on a false prospectus because this document—the White Paper—which I imagine every Scot read cover to cover before using it as a very convenient doorstop, predicated oil revenues in 2016-17 of £6.8 billion. The oil revenues are of course a lot smaller. They then sneaked out a document without any ministerial statement, published in Oil and Gas Analytical Bulletin two hours before the Parliament closed for the summer recess,predicating oil revenues of £0.6 billion in 2016-17. That is a hole of very nearly

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£6 billion and compared to the proportionate effect of anything that George Osborne has in mind in welfare, it is six times worse than anything George Osborne is thinking about. We are heading for super austerity in Scotland if we are going to balance the books. It amazes me that my fellow countrymen are not constantly quizzing the SNP saying, “What taxes are you going to raise or what services are you going to cut to bring the books into balance?” They need not exactly balance—I fully accept that you can borrow—but you cannot go on borrowing for ever and ever.

It is very important that we put price tags on things, and there is a price tag I invite the Minister to consider. There was an amendment in the House of Commons asking for the Government to appoint a body, including representatives nominated by the Scottish Parliament, to estimate the effect of full fiscal autonomy. I think it should be possible to do that. It was voted against by the Government on the premise—mistaken, in my view—that we have done the sums already and we all know that. The trouble is that the Scottish people do not believe you. It is a tragedy and it is very unfair but I am afraid it is true. We need something that people believe in. The SNP rejected it because they did not think that anything appointed by the Conservative Government would be impartial because they are against full fiscal autonomy.

Now I am fairly certain that full fiscal autonomy is a disaster and I agree with the noble Lord, Lord Forsyth. I think the SNP feel it is a disaster as well but do you think they are going to admit it is a disaster? If full fiscal autonomy is a disaster then full independence, which goes one step further, is even worse. The SNP is unlikely to do that. It is more likely to pick holes in the way that the sums were calculated. That is why the report of the committee chaired by the noble Lord, Lord Hollick, is so important and that it is so important that we debate it.

Reference has been made, particularly by the noble Lord, Lord McCluskey, to the absence of the SNP. It is not our fault that it is not here: it has been given ample opportunity to have representatives here. It is very important that we hear the SNP viewpoint on what methodology is used to calculate the reduction in the block grant. I am quite prepared to take representations from the SNP and put them forward as amendments on the block grant here, if only to give them an airing. However, who knows? I might even agree with them. Nobody knows, because we do not know what the block grant reduction system will look like. It is very important that we get adequate information on that.

Likewise, we must make sure what the fiscal framework actually means. It is very complicated, and I entirely respect and do not mock the idea of it being negotiated behind closed doors. That is perfectly sensible. I think that we will have to wait for a complete package before either party wants to admit what they are negotiating on, because there will be trade-offs and compromises. I do not regard compromise as a dirty word in politics; it is what politics is all about. I am quite happy to wait until the conclusion of the process, but the parties must be told that there is no deal without the process being complete. Why should it be singularly the Scottish Parliament which can reject this purely on the grounds of the fiscal framework being wrong?

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There was an interesting article last week just before the committee of the noble Lord, Lord Hollick, reported, from Anton Muscatelli, the principal of Glasgow University. He said that, depending on which system is chosen, there could be a disastrous effect on the block grant. That was echoed by the committee in its report. To be honest, my concern is that whatever system is chosen, there will be a bad deal for Scotland, because the economics of independence, or of much more devolution, do not work. It is better to have a system where we spread risk throughout the entire United Kingdom.

I fully accept that the Scottish Parliament is elected; I am not. If its Members choose to go for that deal, that is entirely up to them and I will respect that decision—I will not leave Scotland as a result, or anything like that—but they must tell the Scottish people first. It is all very well accepting a bad deal if you think you will feel better about it because you are independent and doing it yourself. That is fine, I fully respect that, but to deceive the Scottish people would be totally wrong. So there is quite a lot we could go for here, but it is very important that we nail in advance any suggestion that the Treasury is choosing unfavourable methods of calculation—otherwise, the SNP will blame that for the breakdown of negotiations.

8.26 pm

Lord Sanderson of Bowden (Con): My Lords, I welcome the arrival of the Bill in this House. I also welcome the arrival of my neighbour here, my noble friend Lady McIntosh of Pickering, whom I congratulate on her very excellent speech. As somebody who served in a Scottish regiment, I was particularly struck, in the speech of the noble Lord, Lord Campbell of Pittenweem, by what he said about the referendum campaign: we are better together and safer together. The noble Lord brought a very important point to bear in his maiden speech, and I hope to hear from him many times more.

I was also pleased to hear from the noble Lord, Lord Smith of Kelvin, who fully approves the Bill as presently constituted. As he said, if the powers are used wisely, it will be of great benefit to everyone in Scotland. I support the Bill because I believe that taxation must go hand in hand with representation if a Parliament or Assembly is to have any democratic legitimacy, although I must say that devolving 100% of income tax is a very big step indeed.

I congratulate the committee which published this splendid report last week, and particularly draw attention to the paragraph on borrowing powers, which makes it very clear:

“We recommend that the UK and Scottish Governments agree simple and clear rules for borrowing including”—

most importantly—

“a ceiling on Scottish Government debt”.

I turn to scrutiny, because this is one area where the Scottish Parliament has not shown much progress up to now. I want an assurance from the Minister that the arrangements agreed for the operation of the Scottish Fiscal Commission are sufficiently independent to ensure that forecasts about the financial state of the Scottish scene are accurate. The way that the OBR has been put in place and is now working should be the

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model for the Scottish equivalent. Is the Minister confident that his Scottish counterparts will indeed appoint independently minded members to that body who will have the statutory backing to speak out on a regular basis? In order to promote harmony within the UK, would it not be appropriate to suggest that one member of the OBR also be a member of the Scottish Fiscal Commission—or, better still, a joint OBR-SFC committee for endorsing forecasts?

Having looked at some of the forecasts made by members of the Scottish Government on oil prices, particularly Alex Salmond at the time of the referendum, I am afraid that I do not believe much of what I hear from them: certainly, when Alex Salmond talked about $112 a barrel, it makes a nonsense when we see today it standing at $45 a barrel. As we go forward, we must be assured that these sorts of forecasts are a thing of the past and not the future.

Can the Minister tell us when we are likely to see the results of these financial matters, as many people have asked, and whether they will come to this House, as they certainly ought to do, before this Bill receives Royal Assent? Agreement on these matters is essential if this huge transfer of power is to succeed.

I should add—and I believe that it was mentioned by the noble and learned Lord, Lord McCluskey, and the noble Lord, Lord Smith, in an article—that Holyrood would do much better to have a serious look at the way Select Committees operate in Westminster. It is quite clear that the way scrutiny is carried out in the Scottish Parliament is not up to standard and must be improved if those of us who live in Scotland are going to believe anything they say.

Due to my past involvement with the Highlands and Islands, I am interested to note that in paragraph 33 of the Smith commission report, it says that the Crown Estate assets,

“will be further devolved to local authority areas such as such as Orkney, Shetland”,

and the Western Isles. I know how much importance is attached to this part of the Bill by those people who live in that area. Given the tendency of the Scottish Government to centralise—and we have seen that with the police forces in Scotland—can the Minister give us any indication of how the Smith commission’s request is to be put into practice? It is, I imagine, a red line, as they say, for those who live in the Highlands and Islands.

I have one other thing to say about the Crown Estates: it is a very successful and well run property company. It has many joint-venture partnerships with sovereign funds and others. You only have to walk up Regent Street to see how much they own there. Joint ventures are essential to the continued success of that company. I would not wish to see the confidence of their global partners upset in any way by the terms of this devolution Bill, as there are partnerships whose interests straddle the border.

I have no time to speak about the energy measures in the Bill; that will have to wait for Committee. I look forward to the passing of this Bill and to seeing the terms of the first Scottish Budget, but we must see the terms of the fiscal framework before a green light can shine for this Bill.

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8.33 pm

Lord Purvis of Tweed (LD): My Lords, it is a pleasure to follow the noble Lord, Lord Sanderson of Bowden, not only due to his very strong Borders links, to which I have great affinity, but since he raised some of the aspects that I will try to pick up in my own contribution in the wee small hours of this long debate.

Before I start, I, too, wish to add my congratulations to the noble Baroness, Lady McIntosh of Pickering, on her maiden speech, and to my noble friend Lord Campbell of Pittenweem. So successful was his maiden speech that the noble Lord, Lord Foulkes, even named myself after my noble friend’s adopted area of Pittenweem when he referred to me. My noble friend Lord Campbell’s work as chairman of my own party’s commission, following in the footsteps of the Steel commission, is relevant to this debate. There is obviously something about the Lib Dems that we have the great benefit of our former leaders to chair constitutional committees—noble Lords may draw their own conclusions about that for their own parties—and his work established the fundamentals of our approach to this Bill.

In the last two decades, in the two referendums there have been in Scotland, the people have spoken very clearly. They want a Scottish Parliament and they want it to operate within the United Kingdom. That beguilingly simple opinion is complicated by the fact that, since the Act of Union, we have lived in a unitary state. Furthermore, the Treasury has developed really quite enormous centralised power over the decades. Also, when we developed the welfare state in the 20th century, it was by and large geographically blind for understandable reasons.

Creating a system of governance that changes the core elements of this unitary state has not been easy, and I for one never thought it would be. The consequences of trying to balance choice and affordability in Scotland with a different profile of economy in other areas, as well as changing the British state, has not been straightforward. It proved to be complex both politically and practically. In many respects, it will continue to be so, but that should not necessarily cause any great surprise to us. Securing consensus has sometimes been very difficult and often led to a lowest common denominator for constitutional reform. However, gladly, it has not presented a block to change.

We have debated many aspects of reform but all without the wider narrative as to the future of the union overall. Change has, therefore, proven to be what was expedient for political agreement rather than set within a wider settlement. The establishment of the legislature in 1999 without commensurate fiscal power or a fully formed Government was a clear example of that. We still see remnants of an outdated concept of Westminster parliamentary sovereignty, which we have heard referred to in this debate, rooted in an imperious parliamentarist view rather than the more compelling concept of citizenship sovereignty that we now have across our lands.

In this regard, the noble Lord, Lord Smith of Kelvin, deserves considerable commendation. He is remarkably modest, given his achievement in finally bringing about what can be the fundamentals of a home rule settlement, where we bring fiscal power commensurate with legislative

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power, and start to establish that we will need much greater transparency in intergovernmental relations and also that Governments must work together across both devolved and reserved interests. That is finally establishing some of the principles on which the future generations of our governance must be based.

I was grateful to the Minister for referencing in his opening remarks the devo-plus reports that I authored after I served in the Scottish Parliament, for five years of which I was a member of the Finance Committee there. I think that we will finally see the functions of a tax and welfare system in Scotland, but this will also bring about difficulties because it will not be easy. It will also add pressure on my former institution in Holyrood. As the noble and learned Lord, Lord McCluskey, and others said, the current way that the Scottish Parliament operates will need to change. Again, that should cause no surprise. I believe it is positive.

There has been much concern about the lack of publication of the fiscal framework. By and large, I share that concern. At the very least, it would have been helpful for the Government to have published the statement of principles, especially on this now famous or notorious concept of no detriment. That would have been helpful and would have framed the debate much better. My noble and learned friend Lord Wallace of Tankerness outlined very clearly the principles underpinning why such a concept exists, but greater clarity would have been more helpful. Again, it would be helpful to know whether the fiscal framework is simply another iteration of the Statement of Funding Policy. There have been six versions of that since 1999 —that is how the devolved areas are funded—and it would be helpful to know if the framework is based on that.

Finally, there has also been comment on the need for a wider consideration of a narrative of the union going forward. I passionately believe that that is necessary, and I brought forward a Bill to your Lordships’ House to try to help to bring about space in which we can debate that, in a Constitutional Convention Bill. That would be citizen led and try to establish some of the fundamental principles, as well as establishing a narrative. I have talked about the need for a statement of the new union, and others have called for a new Act of Union, but the common thread is that this Scotland Bill deserves to be passed—we need it on the statute book; it corrects many of the areas where we have been piecemeal in the past—but, without such a binding statement, a core element, on why this union of these nations exist, I think that we will still struggle. Once this Bill passes, as I hope that it will, we should give our absolute focus to bring about either a new Act or new statement for the generations to come.

8.41 pm

Lord Turnbull (CB): My Lords, I join others in welcoming the noble Baroness, Lady McIntosh of Pickering, and the noble Lord, Lord Campbell of Pittenweem, to this House. Their arrival could not have been better timed.

As a member of the Economic Affairs Committee, ably chaired by the noble Lord, Lord Hollick, I naturally endorse the criticisms that he made of the process for scrutinising the Bill. The Bill is full of holes; for example,

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Part 2 lists the taxes to be devolved or assigned but tells us nothing about how they will interact with other parts of the settlement—for example, the highly complex but vital indexation mechanism for uprating revenues and for calculating the abatement of a block grant. That sounds a mouthful and it is very complicated, but I predict that it will be the single most powerful mechanism in this new settlement. We will have to find some way in which to understand it.

The Bill also tells us nothing about the borrowing and debt regime. The UK Government have an objective to eliminate the budget deficit by the end of this Parliament. In a country with a single currency, exchange rate and monetary policy and a unified public debt market, the fiscal policy of the devolved Administrations must be consistent with the national policy. The argument that Scotland should be free to set its own borrowing, subject to a no-bailout rule if it gets it wrong, is simply not plausible. There must be clear statutory limits to debt. So this Bill is like buying an Ikea flat-pack with no instructions on how the pieces fit together, or a mobile phone with no operating manual.

I therefore welcome the Minister’s assurances, as far as they go, that it is the Government’s firm intention that the fiscal framework should be made available to Parliament before the passage of the Bill is completed. But that does not tell us what happens if negotiations drag on. In my view, the Bill is of such importance that its proper scrutiny should not be sacrificed to the timetable. Like the noble Lord, Lord Gordon of Strathblane, I think that the answer is not to delay the Bill but to start work right now on accelerating work on the framework.

This is a very important Bill, which seeks a major advance in the degree of devolution in Scotland, taking it from a very low level by international standards to among the highest in the world. The settlement transfers responsibility for revenues approaching £16 billion and should give Scotland the incentive to develop its revenues and spend them wisely, rather than simply moaning about the inadequacy of the block grant. It is also trying to establish a settlement that lasts. The Smith commission used the word “durable”, while the White Paper seeks an “enduring settlement” and the Bill uses the term “permanent”. The success of the Bill is important for the union but if the settlement is poorly designed and collapses in confusion and acrimony, the union will be put in peril.

As well as serious flaws in process, the Economic Affairs Committee has highlighted a number of concerns of substance. A key feature ofthe proposal is the retention of the Barnett formula by assertion rather than detailed justification. I am grateful to the noble Lord, Lord Thomas of Gresford, for pointing out the rather oblique way in which the Barnett formula appears as obiter dicta in a Statement which appears to be about health funding. Does the Smith commission really believe that every jot and tittle—every parameter—of the Barnett formula should be immutable for all time? By adopting the stance of “What we have, we hold”, Scotland seems to think so.

The defects in the Barnett formula are well known to this House. It was thoroughly reviewed by a Select Committee in 2009, and its report set out some principles

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for a new system: it should consider both the baseline and any increment to funding; it should be fair, and be seen to be fair; and it should take account of relative need. None of these conditions is being satisfied. The current allocations are grossly and, as they might say in Wales, grotesquely unfair. Scotland has a gross value added—that is what we used to call GDP—per head 29% higher than that of Wales. That is a significant gap in its prosperity. It has the highest GVA per head of any region of the UK after London and the south-east, and identifiable spending per head 4.5% higher than Wales.

There is nothing in the Barnett formula which has regard to the baseline and nothing to promote any convergence towards a fairer reference point. A settlement whose starting point is so unfair cannot prove to be durable, permanent or enduring. It will embed a festering grievance which will lead to the breakdown of the settlement and, in this way, imperil the union. An enduring settlement will, over time, have to adopt needs funding as its reference point, even if it takes many years to get there. Some witnesses argued that calculation of needs would be too complex even though, ironically, need is one of the factors by which the devolved Administrations divide up the direct grant once they have it.

I have two further observations to make. First, the House of Commons has just amended its procedure to provide for English votes for English laws. Study of the finances of the devolved Administrations, even after the changes now proposed, tells us that their finances and those of the national Government are closely intertwined. The pure English law which has no consequences for tax or spending beyond England will turn out to be a rare beast indeed. Secondly, the work of the Economic Affairs Committee has demonstrated that there is little transparency in the current arrangements and a poor public understanding of them. We need mechanisms and organisations—maybe the OBR or something like it—not to make decisions, as in the Australian grants commission, but to keep the numbers honest and document the methodology.

Let me include one final point on this famous second detriment. Suppose that health spending in England increases by 4% this year and the Government plan to increase it by 3% next year. Is that a 3% increase —or is it a 1% cut, which has to be compensated for? I do not think you would get agreement on that and if you cannot get agreement on something so simple, I do not see how you can make this thing work. We are therefore drifting into dangerous waters. We should heed the warnings of the Constitution Committee about piecemeal change, inadequately scrutinised by Parliament.

8.48 pm

The Marquess of Lothian (Con): My Lords, it is a pleasure to follow the interesting speech of the noble Lord, Lord Turnbull. It will certainly deserve re-reading tomorrow to get its full impact and I shall certainly be doing so.

My family’s Latin motto is “Sero sed serio” which, translated into English, means “Late but in earnest”. That is fairly appropriate for my position in this debate. This does, however, have its disadvantages

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because I had written a speech for this occasion before I knew the running order. During the course of the debate, every line of my speech has been delivered in one part or other of the House, so I am going to restrict myself to a number of observations. Before I do, I should like to congratulate the two maiden speakers. The noble Lord, Lord Campbell of Pittenweem, is an old colleague of mine at the Bar in Scotland and served with me for a long time in the other place. My noble friend Lady McIntosh of Pickering made another very fine maiden speech. She was also at the Bar in Scotland, as I was, and also served with me in another place. We had two excellent maiden speeches. I look forward to hearing much more from them.