Scotland Bill

Lord Dunlop Excerpts

Wednesday 24th February 2016 Lords Chamber

[Lord Dunlop]

I am grateful to all noble Lords who have spoken, and in particular to my noble friend Lord Dundee and the noble Earl, Lord Kinnoull. We had a very useful discussion, and we all agreed that it is an important principle that we improve intergovernmental relations. While it is the differences of opinion between Governments that attract the headlines, behind the headlines a lot of very good co-operation is going on between Ministers and the officials of the Governments of all the devolved Administrations. A very good example of that was referred to by my noble friend Lord Dundee, who highlighted the recent co-operation between the two Governments to deliver an Aberdeen region city deal. That is a very good example of good practice, and how the political differences of the Governments can be set aside and people can come together and work together to deliver for the people of Scotland.

As noble Lords are aware, are aware, intergovernmental working is an important element of the Smith commission agreement, and one that this Government take very seriously. As I set out on the first day in Committee, the Government are working collectively with all three devolved Administrations to review the intergovernmental arrangements that we have in place and ensure that they make for effective working relationships. As part of the quadrilateral review, we are jointly considering options for improving parliamentary scrutiny and wider transparency of intergovernmental relations. However, this must be considered in a way that ensures we reach a lasting agreement suitable not just for Scotland but for all four Administrations of the United Kingdom. I shall update the House as that work progresses. I understand that this House and, in particular, the House of Lords Constitution Committee is anxious to see the results of that thinking, and I assure my noble friend Lord Lang that we are thinking very thoroughly. My hope is that a review will conclude shortly. However, final agreement will not be reached until the recommendations can be considered by the heads of each Administration at the next JMC(P). A date for that has yet to be agreed.

The Government recognise the desire of noble Lords and the UK public to understand the relationships between the four Administrations, and we note the importance of ensuring that appropriate processes are in place to do so. None the less, it is sometimes necessary to allow for private space, in which open and honest policy discussions can take place. As part of the ongoing review, we are jointly considering options to ensure that the appropriate balance is struck to meet both those needs.

As noble Lords will appreciate, it would not be possible to report on every aspect of intergovernmental relations. However, regular reports are already made to Parliament, including under the Scotland Act 2012—in particular, on the implementation of the tax provisions. More generally, the Scotland Office and the office of the Advocate-General outline engagement, both routine and exceptional, that they have with the Scottish Government in their annual report, which is of course laid in Parliament. I note the ambition and sentiments expressed by noble Lords, and will take that very much into account when producing these reports. I undertake to the House tonight to look at how we can further improve what information we provide to Parliament.

On the third day in Committee, we had a very interesting debate about welfare, which is obviously a key aspect of the Smith agreement. We are breaking new ground in that area, where there will be concurrent powers. I was somewhat surprised that noble Lords were not aware of the joint ministerial group on welfare, but I take that very much to heart. It is our responsibility to make sure we look at how we can make the process of how these groups work more transparent.

I hope I have given some indication of the Government’s commitment to transparency and co-operation within intergovernmental relations. A statutory duty to report on or implement such measures is unnecessary and would be too prescriptive. For example, the memorandum of understanding has been amended on six occasions. There is a need for flexibility here. I accept the spirit behind this amendment, but I urge the noble Earl to withdraw it.

[The Earl of Dundee]

My Lords, I am very grateful to all those who have contributed to this debate. To summarise, there are three aspects which colleagues have picked up. First, there is the strong support and recommendations of commissions, not least the Smith commission and the Calman commission, to which my noble friend Lord Lindsay referred. It is almost a sine qua non that intergovernmental support should always be canvassed to make things work properly. Indeed, my noble friend Lord Norton pointed out that there is the extra benefit of the discipline that this inculcates so that there can be an efficient focus. Secondly, we have the precedent to which the noble Earl, Lord Kinnoull, referred when he pointed out that in Canada intergovernmental approaches and feedback are most productive. The noble and learned Lord, Lord Wallace of Tankerness, mentioned the third aspect, which is building up good practice, and that the culture of so doing can be part of the proceedings, quite obviously for the better. I am very grateful to the Minister for his undertaking, in the context of the way in which things are moving; in the light of that, I beg leave to withdraw the amendment.

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Moved by

[Lord Dunlop]

17: Clause 5, page 5, line 27, leave out “from the words” and insert “for the words from”

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Moved by

[Lord Dunlop]

19: Clause 10, page 11, line 29, at end insert “and (2C) (date of elections to the Parliament).”

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Moved by

[Lord Dunlop]

23: Clause 11, page 12, line 33, after “decided” insert “on”

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[Lord McFall of Alcluith (Lab)]

My Lords, I endorse the comments of the noble and learned Lord, Lord Wallace, the noble Earl, Lord Kinnoull, and my noble friend Lord MacKenzie. I also pay tribute to the work of the noble and learned Lord, Lord Wallace of Tankerness, on that over the years, and to the local knowledge—the boyhood experience—of my noble friend Lord MacKenzie of Culkein on that.

I remember that at the time of the Scottish referendum there was an interview with a farmer from Shetland. The BBC interviewer asked him if he liked Westminster, to which the answer was, “No, I’ve not much time for Westminster”. He was then asked, “What about Edinburgh?”. He said, “Oh, we hate them. Our wrath is reserved for Edinburgh”. Therefore that makes a point on that quite eloquently, although in common language. It is no surprise that we support the principles behind these amendments and sincerely hope that the Scottish Government are listening. In fact, in the 2014 Scottish Labour Devolution Commission we were very clear that:

“Devolution is not just about powers for the Scottish Parliament. It is about the distribution of powers within Scotland to bring them closer to people”.

If I have any quibble about what has happened in Scotland, it is that we have provided devolution to Edinburgh but we ain’t done very much to disseminate that devolution outwith Edinburgh. Therefore it is time that we did this, and this is quite a timely amendment on that.

In the 1990s, when I was on the Opposition Front Bench for the Labour Party, one of my responsibilities was the Highlands and Islands. I developed a great affection for the isles and for the communities in that area. The point that was made by the noble and learned Lord, Lord Wallace, the noble Earl, Lord Kinnoull, and others, is that these communities are very fragile, and the support we need to give them is essential if we are to generate that community spirit.

In the Labour Party devolution commission that I mentioned we also made reference to local authorities, which,

“should have increased scope to influence economic development”.

When I was an MP along the Corridor I chaired a commission on the closure of the J&B bottling plant in Dumbarton, in my area. I did not want it to be exclusively local authority but wanted it to be public/private. I chaired the task force, and eventually it developed into what was called Lomondgate. Now, 15 years later, it has the BBC and Aggreko, which is a small generator company that was started in Dumbarton, but which is now a FTSE 100 company. We did that with local people and local involvement. I used to say to people in Scottish Enterprise in Glasgow that they did not understand my area even though it was 20 miles away. Therefore that need for that economic development and the need to have those powers in those hands is extremely important. Not only have I been a proponent of that but I have been a practitioner and have seen its success. Therefore with that spirit in mind I support these amendments so that we give the power to the communities and give the support to the Western Isles and others. If there is a lesson and a message here tonight, it is that the Scottish Government must deliver on their promises.

Finally, can the Minister clarify a point that was raised in Committee and which was also raised with him in writing, regarding the timescale of the transfer process of the Scottish Crown Estate to the Scottish Parliament? At the time, the Minister was unable to answer when or how long he anticipated the transfer scheme would take. Perhaps he has an update for the House today. At the very least, I hope he will be able to say when the detailed discussions which he referred to in the correspondence to us are likely to commence. With that in mind, I am delighted to support the principles of these amendments and I look forward to a positive response from the Minister.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, I thank the noble and learned Lord, Lord Wallace, the noble Lords, Lord MacKenzie and Lord McFall, and the noble Earl, Lord Kinnoull, for their contributions. Let me begin by saying that I understand and sympathise with the intention of this amendment and with the island authorities. I also commend the noble and learned Lord, Lord Wallace, the noble Lord, Lord Stephen, the noble Earl, Lord Kinnoull, and my noble friend Lord Dundee, who have shown such resolute commitment to this important issue.

As the noble and learned Lord, Lord Wallace, has said already, I had the opportunity to meet the island authorities and other stakeholders. I found it an enlightening and informative experience to talk through this issue with them. I hope that I have further opportunities to meet them, and I certainly encourage others to do so. When he and I met the representatives of the Western Isles Council recently, it was clear how much appetite they had for the management responsibilities of the Crown Estate to be devolved with as little delay as possible. However, the Smith commission agreement was absolutely clear that:

“Responsibility for the management of the Crown Estate’s economic assets in Scotland, and the revenue generated from these assets, will be transferred to the Scottish Parliament … Following this transfer, responsibility for the management of those assets will be further devolved to local authority areas”,

such as Orkney, Shetland and the Western Isles or other areas that seek such responsibilities. The Smith commission chose these words with good reason. I believe that the devolution of management responsibilities will be quicker, simpler and come with fewer practical difficulties if the UK Government devolve these responsibilities in a single transfer to Scottish Ministers. A consultation can then take place in Scotland to determine the best way to further devolve these assets. I stress that the UK Government’s view is that this should be a consultation about how, not whether, the management of those assets will be further devolved to the island councils.

I note that the Scottish Government are never shy of saying how they will hold the UK Government’s feet to the fire on how they live up to the commitments under the Smith agreement. I assure noble Lords that the UK Government will take every opportunity to press Scottish government Ministers to deliver on the commitments made by the SNP as part of the Smith process. I was glad to note, and to hear the noble and learned Lord, Lord Wallace, repeat today, that the island councils met the Scottish Government on Monday and that some progress, although not complete progress, was made in those talks.

However, the Government do not believe it would be in keeping with the principle or spirit of devolution for the UK Government to determine how the management of the Crown Estate in Scotland should be further devolved. But I take this opportunity to assure noble Lords that the UK Government take this issue seriously. The Exchequer Secretary to the Treasury, who has policy responsibility for the Crown Estate, will make a Written Ministerial Statement to Parliament six months after the transfer of Crown Estate assets. This statement will outline the progress that the Scottish Government have made on the onward devolution of these assets. This is a new commitment which the Government are prepared to make, having been persuaded by the arguments in this House and having met and listened to the group Our Islands Our Future and other passionate voices. I hope that this commitment gives noble Lords comfort. As I have said, we will continue to press the Scottish Government to deliver what was promised to the island communities and other communities in the Smith agreement. I have no reason to suspect that the Scottish Government will not deliver the onward devolution of these assets.

The noble Lord, Lord McFall, asked about timing. Conversations between officials are ongoing, and it is envisaged that Ministers of the UK and Scottish Governments will commence further detailed discussions after the Scottish Parliament elections about the precise timing.

In conclusion, I reiterate that although I respect and understand the intention of this amendment, the Government cannot support it. I ask the noble and learned Lord to withdraw this amendment.

[Lord Wallace of Tankerness]

My Lords, I am grateful to all noble Lords who have taken part in this relatively short debate. I particularly thank the noble Lord, Lord MacKenzie of Culkein, who speaks with personal experience and knowledge about the challenges that face many of our islands communities and about the opportunities that those communities wish to have to be masters or mistresses of their own destiny.

The noble Earl, Lord Kinnoull, made an important point. Oban would certainly be outwith the immediate scope of the provision, but of course, as the Smith commission said, the measure could then go on to cover other coastal communities. He made the important point that in such circumstances, you have officials who know the individual concerned. Also, if you are a developer, you will then have to deal with only one regulatory body and will not have to get planning permission from an islands council and separate permission from the Crown Estate or the body that the Scottish Ministers set up after devolution.

I am grateful, too, for the very constructive and positive response from the noble Lord, Lord McFall. I think it was Lomondgate that he and I went to together during the referendum campaign. It was a very impressive set-up that he had had a considerable hand in developing and promoting.

I welcome the very understanding and sympathetic views of the Minister. He quoted the Smith commission quite properly, saying that following the transfer there would then be a transfer to the islands. That is precisely what our amendment says—that there would be a transfer and, following that, another transfer. However, the significant point is that he said that he would not hesitate to hold the Scottish Government’s feet to the fire, and that it was a question of how rather than whether. I fear that at the moment the Scottish Government have not taken that step. They are still talking about net revenues and not about management. Therefore, it might be helpful in holding the Scottish Government’s feet further to the fire if your Lordships were to agree to the amendment.

If the Minister was able to hold the Scottish Government’s feet to the fire and was able to tell us that they are now committed to the management and not just the transfer of assets, giving some indication of a timetable, no one would be happier than me to accept that positive outcome from the Minister’s efforts. In those circumstances, I think it would be helpful to test the opinion of the House.

Scotland’s Fiscal Framework

Lord Dunlop Excerpts

Wednesday 24th February 2016 Lords Chamber

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, with the leave of the House I will now repeat a Statement made in the other place by my right honourable friend the Secretary of State for Scotland. The Statement is as follows.

“Mr Speaker, with permission I would like to make a Statement about the new fiscal framework for Scotland, which was agreed yesterday by the United Kingdom and Scottish Governments.

I begin by paying tribute to everyone who has worked so hard to arrive at this point: my right honourable friend the Chief Secretary and the Deputy First Minister, John Swinney, who have led these negotiations with skill, and the dedicated teams of officials from Her Majesty’s Treasury and the Scottish Government who have worked tirelessly on behalf of their respective Governments. They can all be proud of what has been achieved and the service they have given.

This is a truly historic deal that will pave the way for the Scottish Parliament to become one of the most powerful and accountable devolved parliaments in the world. We have respected all the principles set out in the cross-party Smith agreement and delivered a deal that is fair for Scotland and fair for the whole United Kingdom. As the noble Lord, Lord Smith, himself said yesterday evening:

‘When the Smith Agreement was passed to the Prime Minister and First Minister, both gave their word that they would deliver it into law - they have met that promise in full’.

Scotland’s two Governments will give more details in the coming days, but I would like to set out a few key elements of the deal.

The Scottish Government will retain all the revenue from the taxes that are being devolved or assigned, including around £12 billion of income tax and around £5 billion of VAT. The block grant to the Scottish Government will be adjusted to reflect the devolution and assignment of further taxes and the devolution of further spending responsibilities. We have kept our commitment to retain the Barnett formula, extending this to cover areas of devolved welfare. For tax, we will use the UK Government’s preferred funding model. Under this model, the Scottish Government hold all Scotland-specific risks in relation to devolved and assigned taxes, just like they do for devolved spending under the Barnett formula. That is fair to Scotland and fair to the rest of the UK.

However, for a transitional period covering the next Scottish Parliament, the Governments have agreed to share these Scotland-specific risks as the powers are implemented. Specifically, the Scottish Government will hold the economic risks while the UK Government will hold the population risks. So the Scottish Government will not receive a penny less than Barnett funding over the course of the spending review simply due to different population growth. By the end of 2021, a review of the framework will be informed by an independent report so that we can ensure we are continuing to deliver Smith in full, with the Scottish Government responsible for the full range of opportunities and risks associated with their new responsibilities.

We have also agreed that the Scottish Government will have additional new borrowing powers. This will ensure that the Scottish Government can manage their budget effectively and invest up to £3 billion in vital infrastructure. In line with the recommendation of the Smith agreement, we will provide the Scottish Government with a £200 million share to set up the new powers that they will control.

The Government have delivered more powers to the Scottish people, ensuring that they will have one of the most powerful devolved parliaments in the world and the economic and national security that comes with being part of our United Kingdom. That is what we have agreed and what we have delivered in full. Now that we have agreed this historic devolution deal, the conversation must move on to how these new powers are to be used.

The Scottish Government will have extensive powers over tax, welfare and spending. They will have control over income tax and be able to change the rates and thresholds. They will be able to create new benefits. The permanence of the Scottish Parliament is also put beyond any doubt.

The people of Scotland voted for these new powers and deserve to hear how parties in Scotland will use them—new powers that, if used well, can grow Scotland’s economy and population, and bring greater opportunity and prosperity. Now that we have agreed this fiscal framework, I hope and trust that this House and the other place will welcome it while of course subjecting it to full scrutiny. I commend this Statement to the House”.

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[Lord Dunlop]

My Lords, I thank the noble Lords, Lord McAvoy and Lord Stephen, for their support and their response to the Statement. This deal provides an opportunity to move the debate in Scotland on from process to policy, as the Secretary of State for Scotland said in the House of Commons earlier. The noble Lord, Lord McAvoy, talked about the rules for Report, and that is a matter to be discussed through the usual channels.

Turning directly to the point about time to scrutinise the deal, again, as the Secretary of State made clear to the House of Commons, my strong expectation is that the agreement will be published tomorrow and available to noble Lords. I will write to all Peers making it available to them. I also take this opportunity to offer an all-Peers briefing tomorrow with the Treasury.

The issue of intergovernmental relations was raised. I know that this is a matter of great interest; the Constitution Committee has issued a report on it. The noble Lord, Lord Smith, said:

“There should be no doubt that this was a highly complex package of measures to agree. It is difficult to imagine a bigger test of inter-governmental relationships … This provides an excellent basis for constructive engagement between the governments long into the future”.

That is what gives me hope that it will be possible to reach agreement when we come to the review in five years’ time. We must use the time in between to build those intergovernmental working relationships. The fact that this review will be informed by an independent report will help in that process. To address directly what the noble Lord, Lord McAvoy, asked, this will be a review without prejudice and a review by agreement, and it will not be imposed.

The noble Lord, Lord Stephen, talked about full fiscal autonomy, and I have to say that I look forward to the day when the SNP tries to reconcile the no-detriment principle with separation.

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[Lord Dunlop]

On that last point, absolutely I believe that this is a deal that is fair to all parts of the United Kingdom. That is what the Smith agreement was all about—being fair to Scotland and fair to the UK as a whole. That is what this deal delivers.

To address directly the first of the two points that the noble Lord raises—and this was a point that came up in the House of Commons—on the cost of the deal to England, Wales and Northern Ireland, there is no additional cost to the taxpayers of England, Wales and Northern Ireland. This deal produces the same outcome as Barnett set out in the comprehensive spending review. There is no adverse impact on UK taxpayers.

On the noble Lord’s other issue—I forget what it was; oh yes, it was the point about transition—the Scotland Bill, that delivers the Smith agreement, is a significant act of devolution. It represents a new world and an opportunity for a new politics in Scotland, one in which blame can no longer be heaped at Westminster’s door. It is absolutely right to have a review on how the far-reaching arrangements are working in practice to ensure that, as my right honourable friend says, they are fair, transparent and effective in line with the Smith agreement.

[Lord Foulkes of Cumnock (Lab)]

While I join in the welcome given to the Statement and the agreement, is the Minister aware that at this very moment HMRC offices in Scotland are being closed and thousands of people put on the dole? Is not this a stupid thing to do at a time when there are going to be more responsibilities on revenue and customs in Scotland?

[Lord Dunlop]

I assure the noble Lord that we are very confident that the delivery of these powers will go ahead as intended.

[Lord Selkirk of Douglas (Con)]

In view of the fact that I asked the second Question yesterday, I feel entitled to give the Minister warm congratulations on his part in securing this agreement on the fiscal framework. Does not this pave the way for the debate in Scotland to move forwards and focus fully on how the new and extensive powers should be used?

[Lord Dunlop]

I thank my noble friend for his words. We are months away from elections to the Holyrood Parliament and, as I said earlier, the deal opens the way to make sure that that debate is on the right terms—about how each of the political parties competing in that election will use those powers, and not the perpetual debate about what those powers are.

[Lord McCluskey (CB)]

At the risk of mixing my metaphors, although they will be well understood by all Members of this House, have we not, for the duration of this Bill, been burying our heads, ostrich-like, in the sand, while turning a blind eye to the elephant in the room? Did we awaken yesterday from our slumber to kick a hornets’ nest into the long grass where we hope that the English will not notice it and the Welsh will be ignored? I shall translate that for those who have not followed this debate. The elephant in the room is, of course, the Barnett formula. The hornets’ nest is also the Barnett formula because if anyone disturbs the Barnett formula, the hornets will fly out. The blind eye is the decision by tame Scottish politicians, supported by the UK Government, to continue Barnett without discussion of its inequities or its notorious unfairness, particularly to Wales. The long grass is the five or six-year period. The question simply is this: will the documents to be published now or in the next five years show clearly the extent to which the rest of the UK is contributing towards this expenditure by the Scottish Government?

[Lord Dunlop]

As I said earlier in answer to another question, there is no additional cost to taxpayers in other parts of the United Kingdom. We have had many debates in this House about the Barnett formula. There are many former Secretaries of State who, when they had the opportunity to get rid of the Barnett formula, did not do so. Indeed, some of those Secretaries of State take great pride in arguing for more resources for Scotland. They were very effective at doing it, and I pay tribute to them for that. However, when proposing a move away from the Barnett formula, with the idea that there is some easy solution that would do away with the hard negotiation that is required with the Scottish Government, I am at a loss to know why we would expect the SNP to fight Scotland’s corner any less strongly than former Secretaries of State did.

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, given that the Prime Minister was able to publish the details of a far more complicated deal with the European Union when he made his Statement to the House of Commons on Monday, why is the full fiscal framework not in front of this House this afternoon? I do not understand why in the light of that the Government cannot be more specific about what will happen in five years’ time if agreement is not reached on this independent review. What will be the status quo at that time should an agreement not be reached?

[Lord Dunlop]

As I said, today is the final day of the Scottish Budget. That is why we do not have the fully published document today. There are a few minor technical and implementation issues from the agreement that need to be finalised. However, I have given a commitment to the House, and my strong expectation is that that agreement will be published tomorrow.

[Lord Tebbit (Con)]

My Lords, will there be anywhere a cash limit upon the amount of money which English taxpayers will be required by this agreement to pass across the border for the benefit of Scottish consumers?

[Lord Dunlop]

I can only repeat what I said earlier: there is no additional cost to the taxpayers of England, Wales and Northern Ireland.

[Lord Beith (LD)]

My Lords, while there is general support in the north-east of England for Scottish devolution and its progress to date, does the Minister recognise that there will be real resentment if it becomes apparent over time that there is substantially more money available for public services on the Scottish side of the border than on the English side and that that resentment will undermine English support for the maintenance of the United Kingdom, which would be very unwelcome if it happened?

[Lord Dunlop]

I absolutely understand what the noble Lord is saying. That is why we have sought a deal that is fair to Scotland and to the rest of the UK.

[Lord Lang of Monkton (Con)]

My Lords, I compliment my noble friend on his modesty on leaving out of the Statement the one line in which the Secretary of State for Scotland in another place complimented him on his invaluable contribution to these matters. I welcome the fact that the conclusion of the negotiations has been reached, at least to the extent that it now enables the legislation to pass into law once it has finished its progress through this House and, at long last, bring the Scottish Government to a degree of accountability for their actions before the Scottish people. My noble friend referred to the review to take place in five years’ time. Can he confirm that when that review is produced by this independent body, it will be implemented without any further interruption or interference by either the Scottish Government or the UK Government?

[Lord Dunlop]

Once the review is complete, it will be for the two Governments to reach an agreement. However, I need to say to my noble friend that this is a very significant act of devolution. In future, more than 50% of the Scottish budget will be financed from taxes that are raised in Scotland, and that is a major development.

[Lord Anderson of Swansea (Lab)]

My Lords, with the current concentration on Scotland, there is a danger that Wales will be sidelined. Perhaps we too should have had a referendum. Is the Minister aware that Cardiff University has just produced research for the Welsh Government suggesting that Wales will lose out massively as a result of the Chancellor’s personal tax allowance changes? Will we be compensated for that?

[Lord Dunlop]

Obviously discussions are going on between the UK Government and the Welsh Government about the fiscal arrangements for Wales. I am sure, as this deal has been successfully concluded, that they will be successfully concluded as well.

[Lord Higgins (Con)]

My Lords, the Statement concludes by saying that the fiscal framework should be subject to full scrutiny. How is that to be achieved in your Lordships’ House when the Scotland Bill has already reached Report stage and we will be operating under the restrictions that we always do on Report and at Third Reading? Should those restrictions not be removed, given the situation that we are now in? Secondly, the perpetuation of the Barnett formula means that the injustice between England and Scotland is going to be perpetuated as well. That cannot possibly be regarded as fair.

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[Lord Dunlop]

I think I have covered the rules of Report in an earlier answer. As I say, with the funding arrangements we have sought to strike a balance that enables these powers to be transferred to the Scottish Parliament while respecting the “taxpayer fairness” principle that applies across the rest of the UK.

[Baroness Janke (LD)]

My Lords, in the light of what others have said, along with the fact that the Barnett formula is seen to be extremely unjust and unfair to other parts of the UK, will an analysis be produced of the impact of the new fiscal arrangements in Scotland on the other parts of the UK? Many local authorities are now suffering such dire cuts that public services are in severe danger of being lost in many parts of England, to my knowledge. With this announcement, there ought be a proper analysis of what impact it will have on local services in England and the rest of the UK.

[Lord Dunlop]

The review will look at how the funding arrangement is operating against the Smith agreement. I remind the House, because this is often forgotten, that the Smith agreement says that it should,

“aim to bring about a durable but responsive democratic constitutional settlement, which maintains Scotland’s place in the UK and enhances mutual cooperation and partnership working”,

and should,

“not cause detriment to the UK as a whole nor to any of its constituent parts”.

That is something that the review in five years’ time is going to have to take into account.

[Baroness O'Neill of Bengarve (CB)]

My Lords—

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[Baroness O'Neill of Bengarve (CB)]

My Lords, is the implication of this agreement that the Barnett formula is, as it were, the acquis communautaire which provides the baseline against which fairness is judged?

[Lord Dunlop]

During this transitional period, the protection that is put in place ensures that what was the case with regard to the numbers in the comprehensive spending review will be delivered over this period.

[Baroness Goldie (Con)]

My Lords, I, too, commend my noble friend Lord Dunlop for his perseverance, stoicism and patience in bringing these important negotiations to a conclusion. Does he consider that the real clout to be delivered to Scottish politics by the Bill and this fiscal framework agreement is to relish the prospect of a very reluctant SNP Government being compelled to accept fiscal and economic responsibility for their political decision-making, and that one of the most important components of any review will not be what happens in this place, the other place or in the Scottish Parliament but will be the views and expressions of the Scottish electorate, who may be suffering from the impost of some of the Scottish Government’s policies?

[Lord Dunlop]

I very much agree with my noble friend. The whole purpose behind this is that the Scottish Government should be held fiscally accountable for the decisions they take so that they should be able to reap the rewards of the good decisions they take and bear the risks and costs of their bad decisions.

[Lord Elder (Lab)]

My Lords, on that last point, the Calman commission, of which I was a member, tried to find a way to ensure that the success of the economy in Scotland led to an increase of government funds and tried to tie in revenue for the Scottish Government to the success of the Scottish economy. The Statement appears to be saying that whatever goes on in the background, it is all down to Barnett and that however the numbers are made up, it ends up being Barnett. In what substantive terms is that a change?

[Lord Dunlop]

As the Statement made clear, if the Scottish economy grows more slowly than the UK economy as a whole, that risk will be borne by the Scottish Government.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, can the Minister help us by expanding a little on set-up costs; he mentioned a figure of £200 million. Would that apply to the departmental expenditure limit from the DWP on the costs of the administration of the new social security powers that will be available to the Scottish Government in the future?

[Lord Dunlop]

The figure I mentioned is a one-off implementation cost to transfer the powers over and the systems that go with them. It is not an ongoing cost.

[Lord Elton (Con)]

My Lords, I leave policy to others better qualified than myself, but process is important. So that my noble friend shall not forget the intense interest on this and other sides of the House in that process and the ability of this House to scrutinise what will be put before it, I remind him that a simple procedure and a way of satisfying that would be to take parts of the Bill in the same order as they were in Committee, and that when we get to Parts 2 and 3, the Bill should be recommitted to Committee for those two parts.

[Lord Dunlop]

I thank my noble friend but I cannot commit to what he asks. We have already moved a Motion to consider on Report the Bill in the same order in which we considered it in Committee, which was precisely to allow time for this agreement to be reached and published, and to allow your Lordships’ House to scrutinise it.

[Lord Berkeley (Lab)]

My Lords, in answer to a previous question the Minister rather proudly announced that 50% of the revenue under the new arrangement would come from the Scottish taxpayer. Does that mean that the rest of the revenue will come as a subsidy from the UK Government?

[Lord Dunlop]

No. It has always been the case—right from the start of these discussions—that a block grant would continue. However, we are providing for more of the budget to be financed from the tax revenues raised in Scotland.

[Lord Sutherland of Houndwood (CB)]

My Lords, I live on the other side of the border from my noble colleague Lord Beith but not far from the border. I share his perception from that side of the border of the impact of not talking about Barnett. Will the review’s terms of reference include looking at the consequences of retaining the Barnett formula?

[Lord Dunlop]

As I said earlier, this is an open review and it does not establish a default position. It will be for the Governments to set the terms of reference and the remit, and those will be decided in due course.

Scotland Bill

Lord Dunlop Excerpts

Tuesday 23rd February 2016 Lords Chamber

Moved by

[Lord Dunlop]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 12, Clauses 34 to 41, Schedule 2, Clauses 42 to 64, Clauses 13 to 18, Schedule 1, Clauses 19 to 33, Clauses 65 to 70, Title.

[Lord Higgins (Con)]

My Lords, my noble friend the Minister has not given any explanation as to why the clauses of the Bill should be taken in that particular order. More particularly, in the earlier exchanges, he declined—I think that would be the right way to put it—to give a guarantee that, before we proceed to debate amendments on Report, the fiscal framework will be before the House in such a way that we can appraise the extent to which it is fair between the various parts of the United Kingdom.

The Minister will be well aware that the suggestion was made in the debate yesterday that, if we do go straight to Report, we should alter the way in which proceedings go ahead on that occasion so that we could at least speak more than once, and perhaps one should give further consideration to the situation. We will not, of course, have the opportunity to debate any clauses stand part on Report.

The way in which this matter has been proceeded with is quite intolerable. Parliament is being prevented from holding the Government to account in the proper way, and we are not being given the information on which we are bound to rely in deciding whether this is a sensible measure or not. It has gone through the House of Commons with no scrutiny at all of the fiscal framework, as I understand it, and we have had no discussion on the details of the framework in this House. It is really dreadful, given the magnitude of what is at stake here, in terms of the effect on individual constituencies and constituents, that we should not have a proper debate on this issue.

I hope that the Government can come forward with a clear assurance that we are not going ahead. I understand all the political implications with Scotland and so on, but the fact of the matter is that we are not being allowed to carry out our duty properly. I believe that this is an appalling state of affairs and has to be put right.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

I thank my noble friend, and will make three points in response. First, the purpose of the Motion that I have just moved is to ensure that we take Report in the same order that we took Committee. Secondly, to address the central point that he makes, we have done that precisely to meet the intent of what he is seeking: to give more time to reach agreement on the fiscal framework and to ensure that, when we come to the second day of Report on 29 February, we have an opportunity to scrutinise that framework. Thirdly, it was suggested yesterday that the rules of Committee should apply to Report, and I know that is being discussed through the usual channels.

Motion agreed.

Scotland Bill: Fiscal Framework

Lord Dunlop Excerpts

Tuesday 23rd February 2016 Lords Chamber

[Lord Selkirk of Douglas]

To ask Her Majesty’s Government what progress has been made on the Fiscal Framework that accompanies the Scotland Bill.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, significant progress has been made, not least over the course of the last week, in the discussions with the Scottish Government. As I told the House yesterday, although nothing is certain, a deal is within reach. Discussions between the two Governments are continuing this afternoon and are at an advanced stage. The UK Government remain focused and committed to delivering a fiscal framework that is fair to all parts of the UK. We all want to see the debate in Scotland move from what the powers of the Scottish Parliament are to how those powers can be used. The UK Government are confident that, used well, these powers can further help Scotland to prosper within our United Kingdom.

[Lord Selkirk of Douglas (Con)]

In light of the Statement being made by the First Minister in the Scottish Parliament at 2.30 pm today, which may still be going on, will the Minister continue with discussions, however difficult the circumstances may be? Will he keep in mind that this House wishes all parts of the United Kingdom to be treated with fairness and that, if there are to be increased powers, these have to be matched by increased accountability? Finally, I wish to say that I have known the Minister for 30 years as a person of great integrity and ability and I wish him every success in whatever discussions lie ahead.

[Lord Dunlop]

I thank my noble friend for his kind words. I am aware that Scotland’s First Minister is making a Statement in the Scottish Parliament as we speak. The Government will obviously take very careful note of what she says and we will continue to engage constructively until a deal is done. That is what people in Scotland and all parts of the United Kingdom expect us to do. I very much agree with my noble friend that any deal must be fair to Scotland and all parts of the United Kingdom. It is in the interests of all parts of the United Kingdom to have a Scottish Parliament that is more responsible and accountable to the taxpayers of Scotland. I think that, in this House, we can all agree that with power comes responsibility.

[Lord Bruce of Bennachie (LD)]

My Lords, can the Minister acknowledge that, while he negotiates quietly, the Scottish Government are orchestrating their responses in the full glare of the Scottish media? In those circumstances, there are people in Scotland, including those who want the union to continue, who have some suspicion of the UK Government. Does he not agree that when an agreement is reached—and I hope it will be soon—we have to ensure that an independent commission can assess the fairness across the UK, so that the whole of the UK, including Scotland, can be reassured that a deal will not just be agreed but will be monitored to ensure that it is fair to all sides?

[Lord Dunlop]

On the noble Lord’s first point, in any negotiation there is always a balance to be struck between keeping the public informed and providing the private space to get the deal done. Our priority has been to do all we can to reach an agreement, rather than to adopt public positions that in some way make it more difficult to reach agreement. With regard to independent scrutiny, I very much agree with the noble Lord, and I am sure that that will be part of any agreement we reach.

[Lord Higgins (Con)]

Will my noble friend guarantee that we will not proceed with further consideration of the Scotland Bill until we have a clear idea about the financial framework and can judge whether it is fair? It would be quite monstrous, given the history of this affair so far, if we were not to have adequate time to debate the matter.

[Lord Dunlop]

Obviously, this is a negotiation between two parties, and I cannot give a guarantee on an outcome to a specific timetable. What I can say is that both Governments understand the pressing parliamentary timetables, both here and in Holyrood, and our desire and commitment to see full scrutiny of this fiscal framework.

[Lord Wigley (PC)]

My Lords—

--- Later in debate ---

[Lord McCluskey]

Can the Minister confirm that the United Kingdom Government will not agree to a deal on the fiscal framework that makes permanent the benefits to Scotland of the Barnett formula, while preserving the disbenefits of that formula to taxpayers in the rest of Great Britain?

[Lord Dunlop]

My Lords, as I said at the outset, we are very conscious that this deal must be fair not only to Scotland but to the other parts of the UK. We will certainly not, because of the pressure of parliamentary time, do a deal at any cost.

[Lord Wigley]

My Lords, with regard to the fairness to all parts of the UK, will the Minister accept that no deal will be regarded as acceptable in Wales unless it does away with the iniquitous Barnett formula, as has been recommended by a committee of this House, and replaces it with a needs-based formula as soon as possible?

[Lord Dunlop]

The noble Lord will be aware of the commitments that were made by all of the UK parties at the time of the last election with regard to the Barnett formula, and I do not have anything to add to that.

[Lord McAvoy (Lab)]

My Lords, it is accepted that this is a difficult and complicated situation, but there is a duty on the UK Government and the Scottish Government to come to an agreement. We in the Labour Party are confident that a deal will be made in good faith by the UK Government and the Scottish Government and, in the words of Ian Murray, we urge both parties to “get on with it”.

[Lord Dunlop]

I say to the noble Lord that we in the UK Government are determined to go the extra mile to ensure that we get a deal.

[Lord Lawson of Blaby (Con)]

Will my noble friend confirm his answer to my noble friend Lord Higgins? Will he give an undertaking that the Scotland Bill will not proceed any further until the fiscal framework has been published?

[Lord Dunlop]

Our priority is to get a deal done so that we have a fiscal framework that this House can scrutinise. That is our first priority.

[Lord Spicer (Con)]

Is my noble friend aware that, in the end, the one person who did not agree with the Barnett formula was Joel Barnett himself?

[Lord Dunlop]

I understand that that is a matter of public record, so I will certainly not disagree.

[Lord Grocott (Lab)]

The Minister referred to a timetable that must be recognised and adhered to. The one part of the timetable that is within the Government’s control is the passage of legislation through Parliament—not entirely of course, because one can never predict debates, but it is within the Government’s power to decide when legislation will be brought forward and even to extend legislation from one Session to the next. Can he please explain that aspect of the timetable, to which he referred earlier?

[Lord Dunlop]

We are absolutely committed to getting the Bill through in this Session, and I think that we need to operate to a timetable that will achieve that outcome.

Scotland Bill

Lord Dunlop Excerpts

Monday 22nd February 2016 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I add support to my noble and learned friend Lord Wallace of Tankerness’s amendment in this regard. It was Baldwin who said that democracy was government by explanation but, as we discussed in the previous debate, there has not been much explanation of the development of the fiscal agreement. We need to ensure that when it comes to two broadly competing interests—the Scottish Government and the UK Treasury—there are mechanisms for the agreements and their operation to be reviewed in future.

I was a member of the finance committee in Holyrood for five years when it did not have the role of scrutinising the revenue powers of the Scottish Parliament, and I think it will be a positive thing for it to have those powers. In many regards, though, the processes that exist in Holyrood are not fit for the purpose of the powers that are coming its way. The operation of this power, especially and most importantly in the first five years of operation, will therefore be critical. That is why the amendment is of value.

Of course, I agree with the noble Earl about the benefit of building longer-term structures; my party has proposed one potential option for that, which is what the Canadians would recognise as a federal fiscal commission. When there has been a protracted process of discussions between the Scottish Government and the Treasury, not wholly because of a difference in fiscal policy or a different approach to budgetary discipline but because of a political imperative, that is not going to disappear once agreement has been reached. Indeed, it may be compounded once it is in operation, given the difficult situations that may arise.

This afternoon we have all been reading at pace from the Chief Secretary’s letter, and I think we have all registered with the Minister our complaint that we should not be having to do that as well as discussing the relevant legislation. However, the recommendation to take forward the Scottish Fiscal Commission into a more independent body is worth while, and I would be interested to hear what the Scottish Government’s position is. The problem is that it has already been legislated for in Holyrood, and we will be asking the Scottish Parliament to go back on what it has just agreed to establish a structure that this Parliament will perhaps argue is not fit for purpose. It makes for an interesting dynamic that the SNP chair of the Scottish Affairs Select Committee is proposing this to the SNP chair of the Holyrood committee, which has a different view on this, but that is for them to resolve and we will be interested in their conclusion. Ultimately, as has been referred to before, the experience of the referendum is that the people are asked to believe figures and facts that are put forward by one Government and those that are put forward by a competing one. That puts civil society and the public in an invidious position. If we are locking this into a long-term approach, that does not bode well for the future.

My final comment is that I know it has been hard to separate the politics from the constitutional practice in this. It has been very hard for those who argue for independence, because this is the final aspect of their arguments. They have lost their argument through the people of Scotland voting for Scotland to stay part of the UK, and in many respects they have lost the argument for full fiscal autonomy. The only argument that is left on the table is the long-term form of devo-plus that we have with this Bill. It is quite hard for those who are passionately in favour of independence to recognise that there are structures that could be long-term and stable and could work for the union, because if they accept it then they are undermining their own fundamental approach, so we are asking them to do something that is exceptionally hard for them. So I am not surprised that, to some extent, there has been this to-and-fro.

However, do we want that to be a permanent feature of our constitution and of the relationship with the Scottish Parliament, of which taxpayers on both sides of the border will be the victim? In common with all colleagues in this House who are resident in Scotland, I have received my letter from the Inland Revenue saying that we are now designated Scottish taxpayers and that this is now a real process that is under way. If we want to move away from the situation where the two blocs perpetuate this interest, then we need a regular review mechanism, combined with joint working between the Parliaments, not the Governments—the critical part of my noble and learned friend’s amendment. In addition, by taking out the only bodies that are responsible for making the forecasts for revenue and population growth being the two respective Governments, we will be locking in the kind of difficulties that we have been seeing over the past nine months. I hope that the House endorses my noble and learned friend’s amendment.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, we have had a detailed debate with many authoritative contributions, and I welcome the contributions from all parts of the House. We have covered a lot of ground. I will try to do justice to all the issues that have been raised. No detriment, block grant indexation, borrowing, review, scrutiny, commencement—there is a plethora of them, and I hope that the House will bear with me as I try to cover each one. I shall pick up on the points that individual Peers have made on each of those issues.

To start off, I shall remind us of what we are trying to achieve here. We are trying to rebalance the devolution settlement and to give the Scottish Parliament greater responsibility for raising more of what it spends. Currently that is around 10% of the Scottish budget and, once the Bill is in operation, it will be over 50%. That will lead to a Scottish Parliament that is more financially accountable to the people who elect it. The Scottish Government should be able to reap the rewards, and bear the risks and costs, of the policy choices that they make. That is something that the UK Government think is important, and something that John Swinney, the Deputy First Minister of the Scottish Government, has publicly accepted. The noble Lord, Lord McFall, talked about grievance politics. This is an opportunity to move Scottish politics on from the familiar blame game.

Why does the fiscal framework matter? A lot of noble Lords have said that this is central. I certainly agree with the House of Lords Economic Affairs Committee, which said:

“The fiscal framework will be central to future devolution arrangements”.

It is the fiscal framework that provides the financial tools and controls to support the operation of the Scottish Government’s new powers. As with the Smith agreement as a whole, this is about striking the right balance: giving the flexibility to the Scottish Government to take their own decisions, while retaining those fundamental UK strengths. That is what the people in Scotland voted for in September 2014 by a clear and decisive majority. Therefore, it is our duty to deliver a Scottish fiscal framework that is sustainable and consistent, as the Smith agreement says, with the overall UK fiscal framework.

I am sure that noble Lords are on the edge of their seats because we have talked a lot about my next topic: the no-detriment principles. The noble and learned Lord, Lord Wallace, said that he had no idea of what the UK Government’s view was of no detriment. Other Peers—the noble and learned Lord, Lord McCluskey, and my noble friend Lord Forsyth—raised the no-detriment principles. The House of Lords Economic Affairs Committee highlights the importance of principles, and the Smith agreement sets out a range of principles against which the fiscal framework must deliver. I would be the first to recognise that these principles set out in the Smith agreement are high level, and it is for the two Governments to agree on how to apply them in practice. Central to the negotiations that have been taking place is how the Scottish block grant adjusts to account for new tax and welfare powers and meets these no-detriment principles.

The first no-detriment principle is that the Scottish Government and the UK Government budgets should be no larger or smaller simply as a result of the initial transfer of tax and spending powers. As the noble Lord, Lord Darling, said, in many ways this is a very straightforward calculation. We have the data, use actual figures for the final year prior to devolution and apply whatever indexation method is finally chosen.

The second no-detriment principle is that there should be no detriment as a result of Scottish Government and UK Government policy decisions post-devolution. There are two legs to this no-detriment principle. The first is that decisions by one Government that directly affect the revenues or spending of the other should be compensated. What does that mean in practice? It means direct effects: so if the UK Government were to increase the personal allowance, that would obviously have an impact on the tax revenues of the Scottish Government that was totally outwith their control. Looking at it in another perspective, if the Scottish Government used their welfare powers in a way that automatically and in a direct way affected benefit passporting in the reserved welfare system, that would be a direct effect. However, the principle is explicitly not to compensate the Scottish Government for the economic consequences of the policy choices that they make: so, for example, if higher tax rates lead to an increase in net migration from Scotland, that would be a consequence of the decisions that the Scottish Government had taken.

The Smith report is very clear about economic responsibility, saying that,

“the revised funding framework should result in the devolved Scottish budget benefiting in full from policy decisions by the Scottish Government—”

[Lord Wallace of Tankerness]

If there was migration from Scotland as a result of higher tax rates, clearly the population ratio would change, and we are being told that there was much discussion around the concept of per capita. How would the United Kingdom Government and the Scottish Government agree on how many of those who have left Scotland have left as a result of higher taxation as opposed to having to look after elderly parents?

[Lord Dunlop]

As I was saying, that is an indirect, or behavioural effect. It is not a direct effect: that is the point that I was making. What the adjustment mechanism takes into account is these direct effects. They are things that can actually be calculated, but I will come on to talk about behavioural or spillover effects, which is what I think the noble and learned Lord is talking about.

[Lord Forsyth of Drumlean]

Before my noble friend does that, will he actually answer the question? It was: how do you tell which is a direct effect and which is an indirect effect?

[Lord Dunlop]

One is a direct consequence of a policy decision, so in the example I gave of personal allowances, that is a direct consequence of a policy decision that is outwith the control of the other Government. It is not the behavioural or indirect effect, which is about how people react to a decision that is taken. That is the distinction that we are making.

[Lord Forsyth of Drumlean]

I am most grateful to my noble friend. May we just take the example that he gave—that was raised by the noble and learned Lord, Lord Wallace—of people leaving Scotland? If we have an SNP Government who decide to put the top rate of tax up to 60% and a lot of the WILLIEs and other people decide, “We are going to move south” and they tell their neighbours, “Actually we are moving south because we want to be closer to our children”, how will the Government know how much of the tax base has been reduced as a result of the Scottish Government putting up tax and how much as a result of domestic or other normal movement? There is no way that you can tell that effect. Why would it be appropriate to compensate in those circumstances?

[Lord Dunlop]

My noble friend misunderstands what I am saying. I am not necessarily saying that those should be compensated for. In the evidence that the Chancellor of the Exchequer gave to the Treasury Select Committee, he said:

“My personal view is that tax competition is something that we should allow”.

He is effectively saying that if there are different tax rates north and south of the border, that is something that we should not automatically try to compensate for. Another example relates to childcare. We all remember that at the time of the independence referendum White Paper, central to the retail offer being made by the SNP was its childcare policy. It was a matter of complaint that, were that policy to be successful and increase income tax revenues, the benefit of that would actually flow to the Treasury and not to the Scottish Government. Under the Smith package, if such a policy succeeded in increasing participation by women in the labour market, the benefits of that would flow to the Scottish Government.

[Lord Wallace of Tankerness]

Teasing this out, may I give an example that is hypothetical in one sense, because it is historic? During the 1990s, the Conservative Government privatised the water industry in England, and, I think, in Wales. Clearly, the decision was taken by the then Conservative Government not to do so in Scotland. However, after that privatisation had taken place, there were no further consequentials under the Barnett formula for Scotland. The money had to be found to fund the water industry in Scotland in public hands. If the arrangements that we are now talking about had been in place then, and the UK Government had decided to take the water sector into private ownership in England and Wales, which would have led to a decrease in the funding for Scotland, would that have been a detriment for which the Scottish Parliament would have had to be compensated?

[Lord Dunlop]

No, I do not believe that that would be a detriment in the sense that the UK Government would have to compensate the Scottish Government. The situation would apply; the Barnett formula would apply; the equivalent departmental spending from England would flow through to Scotland. I do not think that this package changes that at all. Although the ownership structure north and south of the border is different, the cost of this on both sides of the border is met in water bills.

[Lord Forsyth of Drumlean]

The Smith commission report says in paragraph 4a:

“Where either the UK or the Scottish Governments makes policy decisions that affect the tax receipts or expenditure of the other, the decision-making government will either reimburse the other if there is an additional cost, or receive a transfer from the other if there is a saving. There should be a shared understanding of the evidence to support any adjustments”.

On my understanding of what these words mean, with the precise example of the water industry, which I have repeatedly asked about in the past, how can my noble friend say what he has just said from the Dispatch Box when the words have a different meaning? Are we to understand that the Government are departing from the meaning of the no-detriment principle as set out there?

[Lord Dunlop]

No; we are not departing from the Smith agreement at all. It is the function of the negotiations. As I say, these are high-level principles, and the two Governments have to work out how these principles are applied in practice. That is what we are doing. The Barnett formula will continue to operate and determine departmental spending and how that flows through in Barnett consequentials. That will not change.

[Lord McFall of Alcluith]

The noble Lord mentioned the issue of WILLIEs—people who work in London but live in Edinburgh. If the Scottish Parliament put up the rate of tax and these individuals then decide to pay themselves in dividends, that would be tax competition, and therefore the Scottish Government would not be compensated. Am I correct?

--- Later in debate ---

[Lord Dunlop]

As I said, as regards tax competition, that would not be counted for in terms of compensation. I hope that I have made that clear.

[Lord McCluskey]

May I ask about a point on the language used by the Minister? He drew a distinction between direct and indirect detriment but I look in vain in the Smith commission report for these adjectives. I know that my noble and learned friend has a copy here, as do I. What is the basis for the Minister drawing a distinction between direct and indirect detriment?

[Lord Dunlop]

As I said, the Smith agreement is a set of high-level principles. The negotiations are about how the two Governments apply those principles in practice. When, as I hope, the fiscal framework is agreed shortly, the noble and learned Lord will see how the two Governments have reached an agreement as to how these principles will apply in practice. That is what the discussions that have been going on for the past months have been all about.

[Lord McCluskey]

Is that expression “high-level principle” a euphemism for low-level politics?

[Lord Dunlop]

No; it is the responsibility of the two Governments to work out this package of powers and how the fiscal framework will work in practice, which is what we are doing.

[Lord Purvis of Tweed]

I am anxious to make time before the Minister moves on from this specific aspect of indirect detriment—I know that he will come on to behavioural aspects soon. Will there be one body which will define what these indirect impacts are, with choices north and south of the border, or will we see a perpetual process of two Governments having disputes about how they will define what the indirect consequences are of policy choices north and south of the border?

[Lord Dunlop]

No; we will not see disputes, because that is the process we are involved in at the moment, which is to reach an agreement on how all these aspects operate. That is what we are doing. When I say that I am optimistic that we will reach an agreement, that is on the basis of the discussions we have had so far and the issues that remain outstanding.

I will move on to the second leg of the second no-detriment principle, which is to do with taxpayer fairness. Changes in devolved Scottish taxes—for example, income tax—should affect public spending only in Scotland, and vice versa for equivalent taxes in the rest of the UK. What does that mean in practice? It means that taxpayers in Newcastle and Liverpool will not fund even higher levels of public services in Scotland not available to them. The noble and learned Lord, Lord McCluskey, touched on some of these issues in his recent Herald article, which has already been referred to. The other aspect is that Scotland does not inadvertently gain a double benefit, via Barnett consequentials and a fixed proportion of any growth in tax revenues from the rest of the UK.

In conclusion, therefore, in this part of what I intend to say, some block grant adjustment mechanisms work better against different principles, and the UK Government’s approach is to find a mechanism that performs well against all of them. Each principle is not perfectly met in every respect, which is what we are trying to deal with in the negotiations that are going on at the moment.

[Lord Kerr of Kinlochard]

Has the Minister looked at that bit of the Economic Affairs Committee report, where the committee comes to the view that it is easy to understand the first no-detriment principle at the outset—the ab initio principle—but that the attempt to legislate for or to operate a no-detriment principle down the years is a will-o’-the-wisp: it cannot work? If this is what is holding up the fiscal framework, call it off—it will not work. You cannot distinguish over time whether the tax take went down because of the tax measure, a change in the Scottish economy or in the world economy, or in the oil price, so you have a recipe for a continued debate, with the argument going round every time if you are trying to say that there must be no detriment down the years. Abandon it—it will not work. The Smith commission did not say how it would work, and I do not for a moment believe that it thought it would work. It is a lovely principle to get people to agree and then they can go home, but we are doing something different now.

[Lord Dunlop]

We very much recognise what that report says, which is that if you interpret the no-detriment principle as applying absolutely literally to all effects, whether behavioural or indirect, it is very difficult to arrive at a single solution. However, these are the issues that are being addressed in the negotiations, and when the framework agreement is published the noble Lord will see how the two Governments have addressed those issues.

On the block grant indexation mechanism, Smith says that,

“future growth in the reduction to the block grant should be indexed appropriately”.

There has been much talk about the need to avoid endless wrangling. We are therefore trying to make this process as mechanical as possible. The issue is how much of the growth in relevant taxes in the rest of the UK will benefit Scotland post-devolution.

With new powers come new responsibilities, and, as has already been mentioned this evening, the debate is around appropriate allocation of responsibilities between the UK and Scottish Governments and what is a fair division. The UK Government continue to manage UK-wide risks and the Scottish Government manage marginal Scotland-specific risks. To give an example, if there is a UK-wide recession, there will be a smaller block grant deduction to shield Scotland from UK-wide impacts because the growth in UK taxes will be lower. We have achieved agreement before with the Scottish Government for the Scottish rate of income tax, which is indexed against movements in corresponding UK Government tax.

The key issue, which has been raised in the debate by the noble Lord, Lord McFall, and other noble Lords, is how population change is managed. The UK Government will continue to manage the impact of UK-wide population change in all devolved areas. We are looking for the Scottish Government to manage marginal Scotland-specific changes. The Scottish Government already manage these changes within Barnett, and John Swinney, when he appeared before the Scottish Parliament Finance Committee last summer, accepted this.

The UK Government’s proposal, which is contained in the Chief Secretary’s letter, addresses this population concern and we are prepared to share the risk. The model we have tabled recognises that Scotland’s share of income tax revenue is less than its population share and it ensures that, like Barnett, the tax adjustment takes account of changes in Scotland’s population. So if Scotland’s population share falls then so will the tax deduction.

However, let me be clear: we cannot agree something where the Scottish Government are not accepting their fair share of population risk. Why? If it is right that Scotland retains all the growth in its own tax revenues, then it is difficult to explain as fair that a fixed proportion of growth in the rest of the UK’s own devolved tax revenues is added to the Scottish budget irrespective of how good or bad are the policy choices of the Scottish Government and the relative performance of the Scottish economy as a result.

[Lord Wallace of Tankerness]

This is the point I was trying to get at before. The Minister has just said it; he may correct me, and I apologise as it is complex. He said that, if the Scottish population falls and is a lower proportionate share of the population, there would be a lower tax deduction. But if that population has fallen because of the tax policies of the Scottish Government, why should there be a lower tax reduction?

[Lord Dunlop]

I think we are reflecting at the outset that Scotland produces a lower proportion of total UK income tax. We are applying that comparability factor from the outset. The Scottish Government will still bear population risk. If there is deviation from that initial situation—whether it is a result of their policy choices—that is how they would bear the population risk.

[Lord Darling of Roulanish]

Can the Minister explain another point he raised? I am puzzled how it will ever be possible within a reasonable timescale to properly assess whether a measure taken by either the UK Government or the Scottish Government resulted in higher growth and therefore a higher tax rate or the other way round. The Minister must know that most of these matters are in dispute, sometimes for years, because no one can be really sure why a tax take went up or down. There can be a hunch or a feeling, but these things are contested maybe even decades after they happen. Given that this is a settlement that has to fix the grant every year, I am just wondering how you do it.

--- Later in debate ---

[Lord Dunlop]

As I said, the agreement will set out the mechanism by which these matters are determined, so in that sense we will have reached agreement. That will avoid the perpetual wrangling. If you like, that is one of the complexities that we have been wrestling with and why it is taking time—

[Lord Darling of Roulanish]

I have one more observation. I am just wondering how, in the case of the SNP, perpetual wrangling can be written out of the script.

[Lord Dunlop]

A good start is if we actually get an agreement that, I hope, we can announce in the not too distant future.

[Lord McFall of Alcluith]

Can I press the Minister on this? We have three models in front of us—the per capita index deduction, the index deduction and the levels deduction. Do I take it that the Minister has ruled out the per capita index deduction because there is too much of a bias to Scotland in terms of its population going down and it being rewarded excessively? Looking at the Chief Secretary’s letter, it would seem that the Government from paragraph 13 onwards have looked at the levels model and the index model and decided to provide another hybrid model to the negotiations for the SNP. Is that what the Government are doing? Given paragraph 13, I asked earlier what the response of the Scottish Government has been. Are they warm to that hybrid model now?

[Lord Dunlop]

The Committee will understand that at a very delicate time in the negotiations I do not want to comment on the state of the negotiations in detail. It is clear from the Chief Secretary’s letter that we have indeed tabled what the noble Lord described as a hybrid model.

I shall pick up on a point made by the noble Lord, Lord Forsyth. We are seeking to avoid—I think the Secretary of State for Scotland put it this way in a recent debate—the Scottish Government wanting to have their cake and eat it and have a slice of everyone else’s cake while they are at it.

I now turn to borrowing, which was raised by the noble Lords, Lord Kerr, Lord Darling and Lord Turnbull. I should say at the outset that we have a lot of sympathy with what this amendment seeks to achieve.

[Lord Forsyth of Drumlean]

I have a question before my noble friend moves on. I accept we have had a good go on this but I am still—perhaps I am just not smart enough to understand this—struggling to understand the Government’s position. It once was that, if Scotland is responsible for particular services, it should be responsible for raising the money and have direct accountability. What appears to be happening now is that the Government are trying to find some kind of Barnett-like top-up to the tax base. How is that going to go down with people in England? How will it take account of changes in England? For example, suppose a large number of migrants come into the country and live in the south-east of England and increase tax revenues and the tax base relative to Scotland, will that mean that there has to be money sent north of the border to maintain some kind of parity? I just do not understand how this will work. Can my noble friend explain?

[Lord Dunlop]

If there is faster population growth in the rest of the UK, that obviously will not just increase tax revenues. It will also increase demand for public services. This negotiation is all about a fair allocation of risk. As I said, at this delicate time of the negotiations I do not want to comment in detail about particular aspects. We will publish this agreement if and when we can get it and I will be very happy at that point to discuss and debate with my noble friend on these matters.

I have great sympathy with what the amendment tabled by the noble Lords, Lord Kerr and Lord Turnbull, seeks to achieve. It is centred on the Scottish Government’s resource and capital borrowing powers and this is an important part of the negotiations. The noble Lord, Lord Kerr, asked whether this is a matter of great controversy. I do not anticipate—if we can reach agreement soon—that this issue will cause great controversy. In detail on resource borrowing, Smith talks about sufficient and additional powers to,

“ensure budgetary stability and provide safeguards to smooth … public spending in the event of economic shocks”.

The current powers of the Scottish Government are that they can borrow up to a total cap of £500 million for this purpose and an annual limit of £200 million for cash management and forecasting error in devolved tax revenues. The rationale for more in this area is the increased risk and volatility from a greater scale of tax devolution, although I again stress that this is a marginal Scotland-specific risk. This needs to be proportionate. Mindful of the need to deliver sustainable UK public finances, as the noble Lord, Lord Turnbull, said, Scottish borrowing is included in UK borrowing.

When we look at these borrowing powers, we need to look at the other tools that are available to help manage the risks—the possibility of building up a rainy-day fund and the block grant adjustment mechanism itself. We also need to cater for Scotland-specific shocks if the Scottish economy is in recession while the UK economy continues to grow. That is a relatively rare event—I think it has happened three times in the last 20 years. We need to do this to protect against relative underperformance leading to worse economic outcomes through higher taxes or lower spending during recession. I pick up on a point that the noble Lord, Lord Darling, made: it is explicitly not a facility for the Scottish Government to borrow to fund current spending in normal times. That would absolutely undermine fiscal responsibility and accountability.

On capital borrowing, Smith talks about sufficient borrowing powers to support capital investment. He asked the two Governments to look at a similar prudential borrowing regime used by local authorities. The current powers involve a total cap of £2.2 billion and an annual limit of 10% of the capital grant, which is currently about £3 billion, so we are talking about £300 million per annum. All borrowing needs to be complemented by fiscal rules to ensure consistency with the overall UK fiscal framework.

The noble Lord, Lord Kerr, specifically asked about legislation. The Scottish Government’s existing borrowing powers are provided for in the Scotland Act 1998 as amended by the Scotland Act 2012. Any changes to the purposes and circumstances for which the Scottish Government have permission to borrow to reflect the transferred risks may require amendments to primary legislation. I assure noble Lords that we will review further what primary and secondary legislative changes may be needed in the light of a fiscal framework agreement, including additional independent scrutiny of the Scottish Government’s public finances, to which the noble and learned Lord, Lord McCluskey, referred. Both Houses of the UK Parliament will have an important scrutiny role.

[Lord Turnbull]

Will the Minister clarify a matter for me? When he talks about additional primary legislation, is he talking about bringing forward an amendment to this Bill or about a new Bill to be brought forward on some other occasion? It really belongs in this Bill.

[Lord Dunlop]

As I said, it depends on the timing of an agreement. Obviously it would be preferable, if possible, to provide amendments for this Bill, but that depends on our reaching an agreement and the timing of that agreement.

[Lord Kerr of Kinlochard]

The noble Lord said that this is not the most controversial element. In fact, he implied that it was not controversial at all. In that case, do we have to wait for all the difficult bits of the fiscal framework to be agreed before we see the easy bits coming out if there are outcomes there? My noble friend Lord Turnbull is right that this Bill would be better if there were a provision in it on borrowing. I do not know whether my language is correct but this is different from the 1998 Act. We are explicitly laying down the mechanism for settling these limits because it is a reasonable assumption that there will be much more borrowing. I think it is desirable to amend the 1998 Act and, if we are going to do that, why not do it in this Bill?

[Lord Dunlop]

The difficulty is that you cannot separate out one element of what is an overall package. Both Governments have agreed that nothing is agreed until everything is agreed. Therefore, I do not think it is possible to pluck out just one aspect and to move ahead with it on a different timescale.

[Lord Forsyth of Drumlean]

Perhaps I might get the politics of this right. The proposal is that we absolutely have to get this Bill on the statute book before the Scottish elections but, come those elections, we will be able to say that there is another Bill coming down the track to deal with these matters, and we may or may not have the detail on that. Is that not going to defeat the object? Was not the position of both Front Benches earlier this afternoon that we had to deliver the vow and say that we had delivered it? If another piece of primary legislation is coming and as yet we do not know what it is going to say, does that not undermine the whole strategy?

[Lord Dunlop]

No, I do not believe that it does. My noble friend is asking me to comment on hypotheticals. We are engaged in trying to reach an agreement in as timely a fashion as we can to ensure that we have proper scrutiny of the fiscal framework in the context of the passage of this Bill.

I am conscious that time has been moving on and I shall be very happy to return to some of these topics on another occasion. However, I just want to pick up on a couple of points.

[Lord McFall of Alcluith]

There does not seem to me to be a need for separate legislation on borrowing. It is very important that the Minister clarifies that point now, otherwise we will just be chasing shadows afterwards.

[Lord Dunlop]

As I said, what we require in terms of legislation for borrowing depends on the final agreement. I do not think I can say more than that at the moment.

I shall conclude on a couple of points. Smith calls for a review and the Government support that idea. We are in a new world and it is right to assess how the fiscal framework and fiscal devolution work in practice and whether they impact fairly and equitably on the finances of Scotland and the rest of the UK.

I have already mentioned independent fiscal scrutiny, and the amendment from the noble and learned Lord, Lord McCluskey, addresses this. It is certainly the case that the UK Government strongly support a robust independent Scottish Fiscal Commission. That would include the capacity for that body to undertake independent forecasts—it would not just, as it were, be marking the Scottish Government’s homework. That is one of the key issues in the fiscal framework negotiations.

Finally, on commencement, my noble friend’s amendment is relevant in proposing a sunrise clause if we are unable to agree a fiscal framework. As we have already discussed, we are working hard to agree a fiscal framework. As I said earlier, I do not think that it is helpful to speculate what options would be open to us if an agreement cannot be reached. My noble friend suggested one option, and other options have been suggested as well. We will take those ideas away and set out our conclusions on Report. I therefore ask noble Lords not to press their amendments.

[Lord McFall of Alcluith]

I beg leave to withdraw my amendment.

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[Lord Dunlop]

I thank the noble and learned Lord, Lord Davidson, for raising the amendments in his name and that of the noble Lord, Lord McAvoy. I also thank the noble Lord, Lord Kirkwood, for setting out the areas where he hopes for clarification. I will try to address the points that have been raised.

Turning first to the definition of disability, the purpose of Clause 20 is to devolve the policy space and to provide financial support to meet the extra costs arising from disability. The clause is designed to give flexibility to the Scottish Government to design their own approach with regard to policy, the criteria that are applied and the scope. The way we have done this, and implemented what Smith called for, is to define the main common features of existing benefits and the circumstances in which benefits are “normally payable”. To give the noble and learned Lord, Lord Davidson, the assurance he seeks, this is not intended to impose restrictions or obligations on the Scottish Government; they should be free to set their own agenda.

I understand that stakeholders are concerned that Scottish Ministers will interpret this clause more narrowly—for example, with regard to whether it covers terminal or fluctuating conditions such as cancer or MS. I assure the noble Lord that there is sufficient flexibility in the clause to address exceptional cases—for example, to relax conditions for the terminally ill. The term “significant adverse effect” is designed to be a very broad definition. It is not completely limitless but does not include something that is minor, trivial or negligible, and will be for the Scottish Government to determine. The clause is also drafted to prevent payment of benefit where a person is in receipt of fully funded care in a care home, for example.

Amendment 79 seeks to expand the Scottish Parliament’s employment support powers to include discretionary awards under the Access to Work scheme. The UK Government do not support this amendment for two principal reasons. Access to Work is one of the key tools available to Jobcentre Plus to provide practical support to overcome work-related obstacles arising from disability and is not a centrally contracted programme. As a result of changes made in the last spending review, there will be a real increase in the Access to Work budget that will allow support for an additional 25,000 disabled people nationally.

I will address one of the noble Lord’s further questions and get back to him in writing on some of the others. Access to Work is integral to the Jobcentre Plus offer. It is a grant scheme assisting disabled people in paid employment or with a job or work trial and is awarded for a period of three years. In some cases, the DWP and employers share costs. It is important to have consistency of treatment where big employers have employees receiving support under the scheme in different parts of the country. There is, of course, nothing to stop the Scottish Government choosing to introduce similar forms of support for disabled people in addition to Access to Work, should they wish to do so.

Amendments 77C, 77D, 77E and 77F, in the name of the noble Lord, Lord Kirkwood, concern the topping up of reserved benefits. Again, I recognise the concern that has been expressed that Scottish Ministers will interpret the term “discretionary” too narrowly and apply it on a case-by-case basis rather than this being left to the discretion of the Scottish Parliament. I stress that the Scottish Parliament will have discretion with regard to these payments. As the noble Lord mentioned, this issue applies in the context of a whole range of measures where the Scottish Government are able to fill in any perceived gaps in UK provision and to tailor welfare to specific Scottish circumstances. The range includes top-ups to reserved benefits, discretionary housing payments, other discretionary assistance and the power to create new benefits in devolved areas.

Clause 22 gives the Scottish Parliament power to legislate for top-up payments to people in Scotland entitled to any reserved benefits, including universal credit, tax credits and child benefit. These payments are outwith the UK social security system and all that that entails. The Scottish Parliament does not need to obtain prior permission from the UK Government to make these top-up payments. However, in accordance with the Smith agreement, conditionality and sanctions within universal credit will remain reserved, so the Scottish Parliament will not be able to legislate for top-ups to offset a reserved benefits reduction as a result of an individual’s conduct, whether that is non-compliance with work-related requirements or recovery of benefit overpayment.

I can reassure the noble Lord that just because someone is sanctioned it does not mean they cannot get a payment for other reasons, such as emergencies. That is absolutely clear from what this clause is trying to do. I can also reassure the noble Lord that there is no automatic offsetting of top-up payments with reductions to reserved benefits, as per paragraph 55 of the Smith agreement. The Secretary of State for Scotland has written on this matter and said that,

“the UK Government agrees with the principle of not automatically off-setting new benefits with reductions elsewhere, as set out in para. 55 of the Smith Commission Agreement”.

I turn to Amendments 77J and 77K, about other discretionary payments and assistance. The purpose of Clause 24 is to broaden the exception of the 1998 Act to the social security reservation governing how the social welfare fund operates. There are two new exceptions here: Exception 7, relating to discretionary payments, gives short-term financial or other assistance to avoid risk to an individual’s well-being. Exception 8 gives occasional payments to help vulnerable people establish and maintain a settled home. The difference from the existing exception is that the requirement is only short-term. It does not also have to be immediate and arising from an exceptional event or circumstance. However, the payment could be to meet an immediate need. This is not intended to reduce the powers of the Scottish Parliament. To give a practical example, if a cooker breaks then this would cover the immediate food vouchers that might be required as well as help for repair of the cooker itself. However, the term “short-term” is needed to ensure that this provision does not stray into reserved territory in providing an ongoing entitlement.

I turn to the power to create new benefits in devolved areas, covered by Amendments 77L and 77M. The purpose of Clause 26 is that, under the 1998 Act, the Scottish Parliament has wide powers to legislate in any area of devolved responsibility, including the provision of new benefits. Examples of how this has been used include the provision of educational maintenance grants, free school meals, free prescriptions and the council tax reduction scheme. However, the Scottish Government would have to engage with the UK Government if they wished to create new benefits that strayed into the reservation under F1 of Part 2 of Schedule 5 to the Scotland Act 1998. Clause 26 inserts a new Exception 10 into F1 of the 1998 Act to put it beyond doubt that the Scottish Parliament can create new benefits in areas of devolved responsibility without the need to engage the UK Government. So the Scottish Parliament and the Scottish Government will have freedom to design and deliver welfare provision tailored to meet the needs of the people of Scotland.

Amendments 77N and 77R relate to the operation of concurrent universal credit regulation-making powers. Smith was very clear that universal credit remains reserved. It is, after all, a key part—with pensions—of the social union. However, it provides the Scottish Government with limited powers to vary certain aspects. Therefore Clause 27 gives the Scottish Government regulation-making powers to vary housing costs within universal credit for claimants who rent and to allow payments direct to landlords. Clause 28 gives Scottish Ministers regulation-making powers to change the frequency of universal credit payments to claimants, usually once a month, otherwise twice or four times a month and also to decide in what circumstances a single payment to a claimant couple could be split, for example if one partner has a drink or a gambling problem.

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[Lord Kirkwood of Kirkhope]

The Minister is being helpful but this is important. I do not see any escalation mechanism. I supported some of these universal credit changes that the Scottish Government are now seeking to win back—flexibilities in Clauses 27 and 28. However, if we are to use this mechanism, there needs to be some way of resolving disputes in situations where agreements simply cannot be reached. Postponing the introduction of changes indefinitely is not an answer to that question.

[Lord Dunlop]

The first thing to say is that we do not anticipate problems. That is why I go back to this being a backstop power. The powers to vary are discrete. We shall come on to talk about the amendments regarding a welfare commission, but already close intergovernmental working has been established both at ministerial and official level and a lot of work is going on through visits and teach-ins and the like. Given where we are with universal credit rollout—it is already fully rolled out in Musselburgh; by June it will be rolled out in Inverness and by autumn in another five centres across Scotland—there is an opportunity to look at how these changes and the flexibilities that the Scottish Government have got might actually work in practice. There is a good dialogue between the two Governments to establish what the Scottish Government want to do with these powers and what draft Scottish Parliament universal credit regulations might look like. In terms of dispute resolution, we have already established a joint ministerial group on welfare. That has already proved an effective mechanism for resolving any issues between the two Governments.

I turn to the government amendments. Amendment 77B is technical in nature and ensures that executive competence will be transferred to the Scottish Ministers so that they can make payments of Sure Start, maternity grants, funeral payments, cold weather payments and winter fuel payments when Clause 21 is commenced. Clause 21 provides the Scottish Parliament with legislative competence to create a scheme that would allow it to make payments or provide other assistance for funeral and maternity expenses, and expenses incurred due to cold weather. Without the amendment to Clause 21, executive competence would not be transferred to Scottish Ministers when the clause is commenced. This would prevent Scottish Ministers being able to make payments in respect of Sure Start, maternity grants and all the other payments to which I have referred. This amendment therefore ensures that people in Scotland can be paid these benefits by Scottish Ministers and that payments will be made out of Scottish funds.

Our amendments between Amendment 77P and Amendment 79ZB are again technical amendments. They deal with the way in which existing social security legislation will apply after the transfer of powers under the Bill. The amendments to Clauses 27 and 28 relate to universal credit and put beyond doubt the intention that where regulations are made by Scottish Ministers under the new powers, the Scottish Parliament’s procedure for negative instruments applies. Clause 31 is a technical provision that requires legislation to universal credit to be read as if references to the Secretary of State were references to Scottish Ministers. After careful consideration and since universal credit will remain a reserved benefit administered by the DWP, this clause is not required.

The noble Lord, Lord Kirkwood, mentioned the Social Security Advisory Committee and its role to advise the Secretary of State on relevant matters relating to social security. The Industrial Injuries Advisory Council advises the Secretary of State on matters relating to industrial injuries benefit and its administration. The roles of the SSAC and IIAC are to remain unchanged. Scottish Ministers, however, will not be able to refer their draft regulations to these bodies for consideration. Once legislative competence has been given to the Scottish Parliament it may, if it wishes, put in place separate scrutiny bodies to consider legislative proposals made by the Scottish Government within the scope of the legislative competence and report back to Scottish Ministers. It is for this reason that we do not support Amendment 79ZC, which seeks to change the role of the SSAC to give it a duty to advise Scottish Ministers. We would of course want to put in place arrangements to facilitate information and co-operation between the two Governments.

Finally, Amendments 79ZE, 79ZF and 79ZG will ensure that UK Parliament procedure is converted into Scottish Parliament procedure in relation to the secondary legislation that Scottish Ministers will be able to make in relation to welfare foods. I will move these government amendments and I ask noble Lords to withdraw or not move their amendments.

[Lord Davidson of Glen Clova]

I express my gratitude to the Minister for the clarifications that he has given in relation to disability benefit and its definition. In relation to access to work, I will reflect on the answer he has given and eagerly await the Written Answers. In these circumstances, I beg leave to withdraw my amendment.

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Moved by

[Lord Dunlop]

77B: Clause 21, page 24, line 42, at end insert—
“( ) In section 138 of the Social Security Contributions and Benefits Act 1992 (payments out of the social fund) after subsection (4) insert—
“(4A) This section has effect in or as regards Scotland as if—
(a) references in subsections (1)(a) and (2) to the making of payments out of the social fund were to the making of payments by the Scottish Ministers,(b) the reference in subsection (2) to the Secretary of State were to the Scottish Ministers, and(c) the reference in subsection (4) to regulations were to regulations made by the Scottish Ministers.(4B) Where regulations are made by the Scottish Ministers under this section—
(a) sections 175(2) and (7) and 176 do not apply, and(b) the regulations are subject to the negative procedure (see section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010). (4C) The power to make an Order in Council under section 30(3) of the Scotland Act 1998 is exercisable for the purposes of this section as it is exercisable for the purposes of that Act.””

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Moved by

[Lord Dunlop]

77P: Clause 27, page 29, line 3, leave out “43” and insert “43(1)”

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Moved by

[Lord Dunlop]

77S: Clause 28, page 29, line 35, leave out from beginning to “not” in line 36 and insert “section 189(3) of the Social Security Administration Act 1992 does”

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The committee would bring together national and local representatives, politicians and voluntary organisations with the sole purpose of making the transition as effective, collegiate and positive as possible. I look forward to hearing the Government’s response, and I beg to move.

[Lord Dunlop]

I thank the noble Lord, Lord McAvoy, for his amendment. With this Bill we are moving into a new world of two parallel systems, and it is absolutely the responsibility of both the UK Government and the Scottish Government to ensure that there is a seamless transition from the current situation to that new world and that there are no cracks for people to fall between. We have an important duty in that regard. There is very much a common interest in the UK Government and the Scottish Government working together.

The Government are very sympathetic to the intent behind the amendment but we argue that it is unnecessary because there are existing arrangements in place. However, I agree with the noble Lord on the principle of co-operation, and there is a good level of intergovernmental co-operation in this space already.

The first example of that is the joint ministerial group on welfare, which was proposed by the Prime Minister to the First Minister when they first met after she was elected to her post in November 2014. This body is jointly chaired by the Secretary of State for Scotland and the Scottish Government Cabinet Secretary for Social Justice, Communities & Pensioners’ Rights. Its membership includes not just Scotland Office and Scottish Government Ministers, but is also attended by DWP and Treasury Ministers as required and their Scottish equivalents: for example, the Finance Secretary and the Cabinet Secretary for Fair Work, Skills & Training.

Since February 2015, the ministerial group on welfare has met four times and its agenda covered very practical issues that one would expect as a part of inter-governmental co-operation: information sharing, policy issues, operational and transitional issues and, crucially, dispute resolution. To give some examples, two issues that were resolved through this mechanism were the Work Programme contract extensions and the facilitation of the early introduction of UC flexibilities.

[Lord Kirkwood of Kirkhope]

That is an important group; I confess that I did not know that it met and dealt with those things. How do people find out about this? Are there minutes on websites of decisions taken? If people are trying to find out about this important work that the Minister is telling us about, how do we find out about it?

[Lord Dunlop]

The noble Lord raises a good point. One thing that I will take away from this debate is to see how we can promote a better understanding of how this group works and the issues that are being discussed. If I can give him this reassurance, I will certainly take that away.

Along with the ministerial group, there is also a senior officials’ group, which covers very much the same agenda of issues as the ministerial group. It is jointly chaired by the DWP director of devolution and the Scottish Government director of welfare, housing and regeneration. It has a remit to meet quarterly; I think that the next meeting is coming up very shortly, on 1 March. As other examples of co-operation, the DWP has seconded officials to the Scottish Government and, as I mentioned earlier, there is a programme to brief Scottish Government officials and get them up to speed on how the existing system works, so that the Scottish Government are in a much better position to determine how they are going to develop the powers that are coming to them.

In terms of parliamentary scrutiny, DWP Ministers and officials obviously appear before the Scottish Parliament Welfare Reform Committee and are available to appear before the committees of this Parliament. On local authority and other stakeholder engagement, the DWP runs three stakeholder forums in Scotland per year to provide operational updates and improve joint working. It engages with a range of stakeholders from CoSLA, Citizens Advice Scotland, the Scottish Federation of Housing Associations, the Prince’s Trust and the Scottish Council for Voluntary Organisations. CoSLA and the Scottish Government are both represented on the universal credit partnerships forum, chaired jointly by the DWP and the Local Government Association.

As to reporting, I am happy to take on board and explore with the Scottish Government how we can improve reporting on the working of the joint ministerial working group on welfare, and our intent would be to provide annual reports on implementation.

Therefore, we regard the amendment tabled by the noble Lord as unnecessary, but it also confuses executive and scrutiny functions and perhaps lacks a clear objective—what outcome are we looking for here? One difficulty is that there is no precedent that I am aware of to fall back on. To whom will this body report? As I have explained, there are better ways to achieve the intent behind this amendment, to which, as I say, I am sympathetic. Therefore I ask the noble Lord to withdraw it.

[Lord McAvoy]

My Lords, I thank the Minister for his positive response, particularly with regard to his response to the noble Lord, Lord Kirkwood of Kirkhope. I share the Minister’s surprise that he was not aware of it, because he seems to know everything else about social security. However, I am pleased, not by the concession—it is not a case of wanting concessions—but by the confirmation from the Minister that he will look at ways at following up the proposal from the noble Lord, Lord Kirkwood.

As the Minister was outlining all the ministerial and civil servant involvement, I thought that something was glaringly missing, which was the users, the public—some sort of public consultation and representation. He then went on to list a whole host of organisations that the Government have some kind of link with. However, I still feel that there is a case for more direct involvement by users groups and local organisations. I get the feeling that the links with the organisations are perhaps a bit perfunctory. I hope that I am wrong about that but nevertheless there is still a bit of a case for more direct users’ involvement. The system always needs to hear what went wrong and what went right, and so on. Nevertheless, with that little prevarication, I beg leave to withdraw the amendment.

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Moved by

[Lord Dunlop]

79ZB: After Clause 30, insert the following new Clause—
“Social Security Advisory Committee and Industrial Injuries Advisory Council
(1) Section 53 of the Scotland Act 1998 does not apply in relation to any function of a Minister of the Crown under the legislation relating to social security and industrial injuries advisory bodies.
(2) Section 117 of that Act does not apply in relation to any reference to a Minister of the Crown in that legislation.
(3) In this section—
“the legislation relating to social security and industrial injuries advisory bodies” means any provision of sections 170 to 174 of, and Schedules 5 to 7 to, the Social Security Administration Act 1992 (Social Security Advisory Committee and Industrial Injuries Advisory Council);“Minister of the Crown” includes the Treasury.”

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Moved by

[Lord Dunlop]

79ZE: Clause 65, page 73, line 20, after “24,” insert “25,”

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[Lord McAvoy]

My Lords, I join in the debate and fully endorse all of the speeches made, particularly by the noble and learned Lords, Lord Hope of Craighead and Lord Wallace of Tankerness. As most of my comments have already been made as quotes from the Delegated Powers Committee, I will concentrate on one aspect of this, although I also completely endorse the comments of the noble Lord, Lord Forsyth of Drumlean. It gives me such pleasure to do so.

The comments about scrutiny were made far more eloquently than I could make, so I will just endorse those comments of the noble Lord, Lord Norton of Louth. I want to concentrate particularly on the provision-making policy because it affects a significant amount of social security legislation, which can be of an extremely complicated nature.

In a letter, the Minister said:

“Although extensive checks have been carried out as to the effect of the provisions of this Bill and the interaction with social security legislation, it is possible that, in implementing the provisions of the Bill, consequential amendments are found to be necessary to fulfil Parliamentary intention”.

As the noble Lord, Lord Norton of Louth, mentioned, there is an important constitutional role for the House, even at this time of night.

The memorandum concerning the delegated powers in the Bill states:

“Furthermore, Social security has, until now, broadly remained reserved across Great Britain and delivered on a GB-wide basis by the UK Government. In operating a system where responsibility for the different social security benefits paid in Scotland is split between the UK and Scottish Parliament there may be some areas where the respective Governments may wish to make mutually beneficial agreements relating to delivery which may require consequential amendments to existing legislation—for example to facilitate fraud investigations, debt recovery and compliance issues arising out of overpayments in respect of both reserved and devolved benefits”.

I conclude by joining the comments made by many Members of your Lordships’ House who have spoken tonight. There has got to be a reason—is it laziness, bad draftsmanship or is there a purpose behind it? Were they thought out, were they put down specifically? I join other noble Lords in asking why it was felt these powers were necessary.

[Lord Dunlop]

First, I thank noble and learned Lords for their contribution to the debate about Clause 68. These provisions have been well scrutinised by the Delegated Powers and Regulatory Reform Committee and I am grateful for the Committee’s examination and subsequent report. Of course, Bills of this nature do require necessary powers to ensure that the powers that are transferring to the Scottish Parliament transfer effectively. That is one point that the committee recognised in its report; it is therefore to retain those aspects of Clause 68. However, having considered the report, the Government accept that the ability to amend future enactments and prerogative instruments, and any other future instruments or documents, and Welsh and Northern Ireland legislation whether made in the future or the past, is unlikely to be required for Parts 1, 4, 5 and 6 of the Scotland Bill. Therefore, we intend to bring forward an appropriate amendment on Report, amending the provisions.

More broadly, powers to make consequential provision are commonly found in primary legislation. Section 105, read with Section 113 of the Scotland Act, provides similar powers. The Bill contains consequential amendments identified as necessary during the course of its preparation. However, given the nature of the Scotland Bill and the significant devolution of legislative and Executive powers, it is difficult to anticipate the full extent of the consequential amendments required once the Bill has been commenced. Further, the nature of the Bill means that it effects both Westminster and Scottish Parliament legislation and it is possible that officials in either Administration may in future identify additional necessary amendments to either primary or secondary legislation.

I turn specifically to the use of the consequential power in relation to welfare provisions:

“In operating a system where responsibility for the different social security benefits paid in Scotland is split between the UK and Scottish Parliament there may be some areas where the respective Governments may wish to make mutually beneficial agreements relating to delivery which may require consequential amendments to existing legislation—for example to facilitate fraud investigations, debt recovery and compliance issues arising out of overpayments in respect of both reserved and devolved benefits”.

How feasible it is to make such arrangements will depend,

“to some degree on the provision that the Scottish Parliament puts in place and any agreements would need to be considered and agreed between both the UK and Scottish Governments”.

Therefore, it is necessary to have appropriate consequential provision in the Bill. However, as I said, the Government intend to bring forward an appropriate amendment on the basis that I have set out.

Next I would like to address the concern of the noble and learned Lord, Lord Wallace, related to,

“any other instrument or document”,

which I think has been proposed by the Law Society. The Government intend to retain the power to amend current instruments or documents. Let me offer the rationale for that. Section 117 of the Scotland Act 1998 provides that, so far as may be necessary for the purpose of or in consequence of an exercise of a function by a Member of the Scottish Government in devolved competence, any pre-commencement enactment or prerogative instrument and any other instrument or document shall be read as if references to a Minister of the Crown were or included references to Scottish Ministers. The effect of the gloss by Clause 30 of the Bill of references to pre-commencement enactment in the Scotland Act 1998 is that instruments or documents such as the contracts entered into by the UK Government for the provision of welfare that refer to a Minister of the Crown will be glossed appropriately to refer to Scottish Ministers.

However, other amendments or transitional arrangements may be required to ensure the efficient and effective transfer of contracts. For example, the gloss converts references only to a Minister of the Crown to Scottish Ministers. There may be other references that need to be amended. Accordingly, a power to amend, repeal, revoke or modify any other instruments or documents whenever passed or made is required for Part 3. We accept that the power to amend any other future instruments or documents is unlikely to be required, as I have said, in relation to Parts 1, 4, 5 and 6, and we will be bringing forward an amendment to address this issue. We are retaining the power to amend existing instruments and documents on the basis that that is likely to be required, given the scale of the powers being devolved to the Scottish Parliament and Scottish Ministers.

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[Lord Purvis of Tweed]

It is welcome to hear the Government’s view as regards potential amendments on Report. However, in light of the Minister’s remarks, how does Clause 68 sit with Clause 2 when it comes to areas where the Government may have the power to amend Acts of the Scottish Parliament and devolved legislation? Would a legislative consent Motion mechanism be required for that, and equally for the National Assembly for Wales?

[Lord Dunlop]

I am happy to take the noble Lord’s point away and reflect on it, and I shall either write to him or discuss it.

[Lord Forsyth of Drumlean]

Can I take my noble friend back to the debate we had earlier when the noble Lord, Lord Turnbull, argued that it was important to have in the Bill specific provisions relating to borrowing powers? I think that my noble friend indicated that more primary legislation would be required; he used the phrase “primary legislation”. Can we take it that these powers would not be used, for example, to put in place a borrowing regime for the Scottish Parliament, taking into account what he has just said now with what he said earlier this evening?

[Lord Dunlop]

I absolutely stand by what I said earlier. There may be some aspects of borrowing that could be done through secondary legislation, and that will be made clear when we agree and publish the fiscal framework.

[Lord Hope of Craighead]

Before the Minister sits down yet again, I am not quite sure from his explanation that he has fully taken on board the points made by the noble Earl, Lord Kinnoull, and me about the nature of this legislation—in other words, that the purpose of the legislation is to give effect to the Smith commission report. What concerns us is the opportunity that the provisions as framed—and, indeed, as forecast by the Minister—would give for straying outside the scope of the commission. I do not know whether the Minister’s brief has really addressed that point. If not, perhaps he will be kind enough to say that he will give further thought to it. It is an important matter because we really need to keep faith with the Government’s undertaking when they introduce legislation as to what it is all about.

[Lord Dunlop]

I will certainly give further thought to what the noble and learned Lord has said and come back to him on it.

--- Later in debate ---

[Lord Wallace of Tankerness]

On the important point made by the noble and learned Lord, Lord McCluskey, about having to table amendments again to maintain the sequence, and, indeed, in relation to the point made by the noble and learned Lord, Lord Hope of Craighead, on the last group of amendments, perhaps the Minister will take this opportunity to clarify whether, when we come to Report, the order of consideration will be as in Committee; in other words, that Parts 2 and 3 will be taken at the end—I think next Monday is the day currently set down for that—and the other parts will be debated on Wednesday.

[Lord Dunlop]

Yes, I can confirm that.

[Lord Hope of Craighead]

I am sorry to intervene on the same point but we have today debated Part 7, in which Clause 68 appears. I am not quite sure in which order it will appear on Report. That affects what we do in terms of tabling further amendments. Will it be in the first stage of Report or the second?

[Lord Dunlop]

This obviously has to be discussed through the usual channels but my understanding is that we will consider the Bill on Report in the same order that we have considered it in Committee.

[The Deputy Chairman of Committees]

Does the noble and learned Lord, Lord McCluskey, now wish to withdraw his amendment?

--- Later in debate ---

[Lord Wallace of Tankerness]

My Lords, it certainly had not been my intention to take part but I do so given the comments of the noble Baroness, Lady Hayter, and the contribution of the noble and learned Lord, Lord Hope, because I took part in the debates in the other place on the 1998 legislation. Indeed, I tabled an amendment to devolve abortion—the argument being that abortion law is a matter of health and the criminal law, both of which are themselves devolved. It therefore seemed anomalous that abortion should not be. The noble and learned Lord may correct me if I am wrong but I think that prior to 1967, the criminal law in relation to abortion was different in Scotland from what it was in England. So there have been many years, probably decades, in which there were differences on different sides of the border.

Having spoken for the devolution of abortion in debates in the other place in 1998, I recall that when the then Secretary of State spoke, there was a conscious decision that the Government’s position was that abortion should not be devolved. So the late Donald Dewar spoke very coherently, as your Lordships would expect, putting the case for a continued reservation of abortion. However, when we came out of the Chamber later he said to me, “I’m glad you did not read my speech during the debates on the 1978 legislation”. So before Committee on this Bill, I went back and looked at Donald Dewar’s speech when he advocated the devolution of abortion during the passage of the 1978 legislation. It made a compelling case for its devolution.

[Lord Dunlop]

I thank the noble Baroness, Lady Hayter, and the noble Earl, Lord Kinnoull, for the amendments that they have tabled. I hope that the Committee will indulge me if, given this late hour, I am relatively brief in responding to them.

As has already been explained, Amendment 80 would require the Secretary of State to lay a statement before Parliament stating that the Scottish Government and Scottish authorities have made appropriate arrangements in relation to the exercise of the powers which have been devolved to them before parts of the Bill are commenced. The Government regard this amendment as against the spirit of how devolution operates. Moreover, this is an enabling Bill: constitutional legislation which transfers legislative competence to the Scottish Parliament and executive competence to the Scottish Ministers. There will be no change in law until such time as the Scottish Parliament and Scottish Ministers use the powers devolved to them. It will therefore be for them to decide whether they have made appropriate arrangements before doing so. I have discussed this point with the noble Earl—namely, how we ensure an effective transition. It requires the co-operation of the two Governments to discuss those issues. A number of mechanisms are in place to support a smooth transfer of powers and joint working. We have already debated how that works in relation to welfare and I expect similar joint working with regard to the Crown Estate.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

Before the Minister sits down, the noble and learned Lord, Lord Hope, who I thank for his intervention, made clear that we were not at all questioning the Scottish Parliament’s ability to take this decision. I very much trust Scottish women to get their views heard strongly, although, as the Minister says, it has been officers, officials and Ministers having those debates so far, not the people who are mostly involved, who are of course women.

The question that I asked is one that we all need answers to, regarding funding: should there be a difference in whether the NHS funding will cover women who travel between the two jurisdictions when those jurisdictions have different laws on this? I do not expect the Minister to be able to answer that tonight but, given our experience in Northern Ireland, I think that this is a really big issue. If he cannot answer tonight, I hope that he will write to us before we reach this part of the Bill on Report.

[Lord Dunlop]

I am very happy to write to the noble Baroness on that point.

[The Earl of Kinnoull]

I thank the Minister for what he said. I was rather ungracious earlier on: he spent a lot of time with me on this issue, and has gone a long way to giving lots of assurances about my essential concern, which is the private citizen as opposed to political expediency. I am grateful to him and I note that he has organised a drop-in on the issue of the British Transport Police tomorrow afternoon; I shall be dropping in for sure. That said, and putting down a marker that I feel that the interests of the private citizen as opposed to political expediency is something that this House should have regard to, I beg leave to withdraw the amendment.

Scotland Bill

Lord Dunlop Excerpts

Monday 22nd February 2016 Lords Chamber

Moved by

[Lord Dunlop]

That the House do now resolve itself into Committee.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, in light of the amendment to the Motion tabled by my noble friend Lord Forsyth, I want to set out the reasons why we should consider Parts 2 and 3 of the Bill today. I start from the proposition that there is a consensus in this House that wants to see the Bill reach the statute book and the fiscal framework to be agreed, and why should that not be the case? The Bill implements not only the manifesto commitments of the Conservative Party, but the commitments made by the Labour and Liberal Democrat parties as well. Indeed, as my noble friend so rightly reminded us on referendum night, the unionist parties must deliver on the commitments that they made.

Like my noble friend, I understand that the first step in strengthening bonds of trust in Scotland is to keep your promises and to be seen to keep them. The Government want to see a Scottish Parliament that is more financially responsible and accountable than it is today, and to meet the overwhelming desire of the majority of people in Scotland for a Scottish Parliament with more powers within the United Kingdom. I therefore ask the House to consider carefully whether agreeing to this amendment will help or hinder the passage of the Bill in the process of achieving an agreed fiscal framework that is fair to Scotland and to the UK as a whole. I submit to your Lordships that it would not help. Indeed, it would put both in considerable jeopardy. The fiscal framework negotiations are at a sensitive and critical point. There have been intensive discussions between the UK and Scottish Governments throughout last week. These have continued over the weekend and today. Significant progress has been made and, while nothing is ever certain, a deal now seems within reach. Both Governments are very conscious of pressing timetables for both this Parliament and the Scottish Parliament to scrutinise the fiscal framework before the Bill reaches the final amending stages in this House, and to enable the Scottish Parliament to consider a legislative consent Motion.

My noble friend Lord Forsyth is fond of angling analogies. He has suggested that this is a fishy business and the UK Government are being played by the SNP because it has no intention of ever doing a deal. If my noble friend is right, and I do not think that he is, then the effect of his Motion is to let the SNP off the hook. Why? Because it will become clear to the Scottish Government that in legislative terms—I hope I am not stretching the angling analogy too far—we are running out of line. I therefore ask the House not to let the amendment frustrate what must surely be our priority today: to do all we can to support the achievement of a successful outcome.

I understand, of course, the frustration and that discussions are protracted. I am sure noble Lords will understand that this is a challenging negotiation and it is important to do the right deal. The UK Government cannot be pressured to sign a deal at any cost to meet a parliamentary deadline. I believe it is possible to consider in Committee today, and on their own terms, the merits of parts 2 and 3 of the Bill, and to discuss in detail the outcomes the fiscal framework is intended to achieve. This will help to identify issues we can return to on Report, and I assure the House that there will be ample opportunity on Report to scrutinise the fiscal framework if it can be agreed by then. There is no shortage of information on these issues to inform our debate, whether it is independent analysis or information provided to the House by the Treasury.

I also understand noble Lords’ frustrations at the confidentiality of the process. However, I do not believe that conducting negotiations in public is conducive to reaching a deal. All that happens is that each party paints itself into a corner, making it more difficult for compromise to be reached. Once the fiscal framework is agreed, the Government are committed to providing Parliament with every opportunity to scrutinise it. In particular, any changes to borrowing and fiscal institutions will require legislation and debate.

While I accept that Smith is a substantial devolution package, I note, finally, that it is not without precedent to consider devolution provisions without all the details being available. The last Scotland Bill—a significant devolution package—was considered and agreed by the House before the block grant adjustment mechanism was agreed. I therefore ask my noble friend not to press his amendment and to help secure the passage of this important Bill and a successful outcome for fiscal framework negotiations. I beg to move.

Amendment to the Motion

Moved by

--- Later in debate ---

[Lord Mackay of Clashfern (Con)]

My Lords, I would like to say a word or two about the fiscal framework, which I agree is fundamental. The difficulty of it cannot be underestimated. This is a situation in which an authority has a grant-making power, and a power to raise taxes in order to raise the money for that grant—but at the same time, it is making a grant to a body that has a power to raise taxes itself. We have had this problem in the United Kingdom for a long time in relation to local authorities. Nobody needs to be told that every year local authorities have difficulty in accepting what central Government allocate to them. The Scottish Government have had that problem too, with refusing to allow local authorities to use their tax-raising powers under the community charge.

This is a very difficult situation, and I am not at all confident that it is possible to arrange things in a way that will work for all time in this fiscal framework. There is an element of prophecy involved, as we can see from what has been said about the need to take account of how the Scottish population is ageing; of course I am very much part of that factor myself, and I am very conscious of it. The important thing is that there are various powers, and it is difficult to see that they could be effectively regulated for all time coming. I know of no country in the world that has a very satisfactory arrangement for local government. Germany, for example, has inter-state relationships, and relationships between the states and the federation. The United States has problems of that kind too. We have before us the same sort of problem, in a different context. This is a very difficult thing to do—and I do not believe that the powers can be granted without knowledge of what that power arrangement is going to be, if it is possible to reach it.

On the other hand, as the noble and learned Lord, Lord McCluskey, said, it would be a mistake for us to use the power of this House to get the Bill in place before the deadline for the parliamentary elections in Scotland. If we were to do that, I think it would be regarded as something that the House of Lords had done to destroy the vow.

[Lord Dunlop]

I thank all noble Lords who have taken part in the debate for their contributions. Before I address some of the points that have been raised, may I first make a correction? It came as something of a surprise to me to hear that I had not responded to the noble Lords, Lord Lang and Lord Hollick. I certainly signed lots of letters and I understand that those were sent off in early February, and copied to the leaders and Chief Whips of the main political parties and the Convener of the Cross-Bench Peers.

[Lord Forsyth of Drumlean]

I apologise to my noble friend if that is the case, but I asked the Clerk to the Economic Affairs Committee if we had received a reply to the letter from the two chairmen and was told last week that we had not. Certainly, it has not been circulated to committee members.

[Lord Dunlop]

Well, it was certainly signed off by me, and my understanding was that the letters had gone off, but we will check that.

We want to secure the passage of the Bill and reach agreement on the fiscal framework. We can all agree that we want the focus at the Holyrood election to be on how the powers in the Bill are used. A number of noble Lords said that this House’s holding up consideration of the Bill would hinder the outcome that we all want and put the Bill’s timetable at unnecessary risk.

A number of noble Lords, including my noble friend, raised substantive points about the fiscal framework. One strong reason for proceeding today into Committee is so that we can have a debate and consider these matters in more detail. I very much agree with the noble and learned Lord, Lord Hope, that Report gives us an opportunity to consider these matters further. I was particularly interested in the suggestion by the noble Lord, Lord Hollick, which was also made by the noble Lord, Lord Turnbull, about using Committee rules at Report. I undertake to ask my noble friend the Chief Whip, who has been listening very closely to this debate, to speak to the usual channels to see if using Committee rules at Report can be agreed.

The Government are working flat out to get a fiscal framework agreement. As I said in my opening speech, there has been intensive discussion, which continues today. I remain optimistic that a deal can be reached soon. But today is not the day to speculate about what happens if we do not reach agreement and what options we might have to consider in that scenario. I therefore ask my noble friend not to press his amendment.

[Lord Forsyth of Drumlean]

My Lords, was that it? We have had a splendid debate with a lot of suggestions. I think there was a consensus that we could not put this Bill on to the statute book without having discussed the fiscal framework. It is interesting that former judges such as the noble and learned Lords, Lord Hope, Lord McCluskey and Lord Mackay of Clashfern, are advising us on the politics of the situation in Scotland and I am arguing about the constitutional implications. I feel that my expertise is more limited than theirs on both counts.

Of course, I understand why the noble Lord, Lord McAvoy, feels that if we were to delay consideration of the Bill, the SNP would complain that unelected Peers were interfering in the democratic decisions of the Scottish people and the Prime Minister’s vow—which, incidentally, was the Daily Record’s vow—had not been delivered. The noble Lord questioned my motives and said that I wanted to kill the Bill. I understand that the Bill will go on to the statute book; that will happen. But I want a stable, lasting framework that will end this business of the nationalists pretending that Scotland gets a bad deal out of the union and, at the same time, the other parts of the United Kingdom to feel that they are treated fairly. That is the objective, and the fiscal framework goes to the heart of that. Far be it from me to give advice to the Labour Party, but perhaps it should stop running away in Scotland and confront the nationalists for what they are and on what they say.

My noble friend said that the fiscal framework may be agreed before Report. The noble Lord, Lord Darling, for whom I have considerable admiration and respect, suggested that perhaps we might consider it on Report, but Report is the day after tomorrow is it not? Is the fiscal framework going to be agreed tomorrow? If so, perhaps it might have been sensible to delay Committee until Wednesday and then we could have had Committee with the fiscal framework. If my noble friend is right that the fiscal framework is imminent, clearly, it would be silly to delay Committee today and to accept my amendment—I am still speaking in favour of it, by the way—I can see that.

However, it was then suggested by the noble Lord, Lord Turnbull, and others, that perhaps we could change the rules. It is perfectly open to me or any other Member of the House to bring forward a Motion on Report to say that we should recommit the Bill to Committee. Therefore, there is no reason for me to press my amendment today if, indeed, we are going to get the fiscal framework on Report. If we are not, and if the view of the House is that the Bill ought not to reach the statute book without an opportunity for the House of Commons particularly, as well as ourselves, to consider the fiscal framework, then it is open to my noble friend to accept an amendment in Committee today. There are several amendments—I have one of them—stating that there should be a sunrise clause whereby the Bill will not come into effect until the fiscal framework has been agreed by both Houses of Parliament.

The noble Lord, Lord McAvoy, thinks that that would provoke hysteria in Scotland. I do not see why. The Bill will get on the statute book and they will get what they want. If it does not get on the statute book, it will be because of the intransigence of the SNP in agreeing the fiscal framework. One of the most important speeches was made by the noble Lord, Lord Stephen, who talked about the importance of transparency. We have also had speeches from a former Chancellor of the Exchequer, a former Permanent Secretary to the Treasury, a former Cabinet Secretary—they are both the same person—and all have advocated that we look at this issue.

Scotland Bill

Lord Dunlop Excerpts

Tuesday 19th January 2016 Lords Chamber

I hope that the Government will give careful consideration to these proposed very detailed and technical amendments, which could improve the regulation of solicitors in Scotland and improve circumstances for consumers in Scotland in these important areas.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

The noble Lord, Lord Stephen, has spoken on a number of amendments which relate to the amendments put forward by the Law Society of Scotland. I echo what the noble Lord said about the role played by Michael Clancy and all his hard work. I can see that he is sitting in the Box this evening, and I met him last week to discuss these amendments.

Your Lordships will be aware that the context of this Bill is, as we have discussed many times, the implementation of the Smith commission agreement. The commission considered a range of areas for devolution, and the amendments spoken to this evening do not fall within the scope of that agreement. If noble Lords permit, I will briefly explain why, in addition to this, the Government do not support these amendments.

Principally, the UK Government are committed to ensuring that the UK is one of the best places to start up and run a business. To devolve legislative competence for the creation of new business entities or health and safety to the Scottish Parliament would add complexity and confusion to the business landscape in areas where we are already considered world-class. We are also committed to protecting consumers, and to devolve one aspect of the regulation of estate agents would lead to fragmentation of the approach across Great Britain. The Government consider that this would be ineffective and could harm consumers. We are striking the right balance of powers in the Bill while maintaining the strength and security and benefits for British business and for our consumers.

Amendment 59 would allow the Scottish Parliament to legislate for partnerships and unincorporated associations and allow the Scottish Parliament to create various new forms of enterprise in Scotland. The pressures that businesses face are generally the same throughout the UK and, therefore, when considering whether new business entities are appropriate, it is right that we should take a UK-wide view. It would not be right to have competing regimes of business regulations north and south of the border, and therefore I urge the noble Lord to withdraw the amendment.

Amendment 60 is unnecessary because regulation of the legal profession in Scotland is not a matter reserved by Schedule 5 to the Scotland Act 1998. However, the legal profession in Scotland advises on a diverse range of issues, including matters such as consumer protection, for which this Parliament retains responsibility for legislating. The Scottish Parliament does not have the legislative competence to make provision that relates to a reserved matter or modifies the law on reserved matters. This means that the Scottish Parliament cannot make provision specifically targeted, as the amendment proposes, at the regulation of insolvency practitioners, which is reserved by Section C2 of Schedule 5 to the Scotland Act 1998. Given this explanation, I urge the noble Lord not to press this amendment.

Finally, in addition to Amendment 61 being outside the scope of the Smith commission agreement, it is inappropriate. The Estate Agents Act 1979 is just one of the pieces of legislation that apply to the regulation of estate agents in order to protect consumers. Devolving this aspect of consumer protection policy while reserving other aspects, such as unfair and misleading practices, would lead to fragmentation of the approach across Great Britain. This would be ineffective and could harm consumers. Therefore, I urge the noble Lord to withdraw the amendment.

[Lord Stephen]

I thank the Minister for his response, although clearly he does not agree with me or with the Law Society of Scotland on this issue. He mentioned fragmentation. Another word for that is devolution. The same argument about areas that are considered to be world-class could apply equally strongly to health, education, transport or housing. I can see no inconsistency whatever in saying that throughout the United Kingdom we will have world-class health and world-class education but with differences—substantial differences in some cases—between the Scottish system and the system in other parts of the UK.

It seems to me that the point about business and partnerships was well taken by the Government of 1890 in this country, who made separate provision, as I said in my previous speech. Back in 1890 there was a Partnership Act—I am sure that the Minister will be able to get briefing on this in due course—that recognised the differences between Scotland and the rest of the UK, so what is being proposed here is in no way ground-breaking. It would be interesting to find out the colour of the Government back in 1890 when this measure was introduced, but it was long, long before the introduction of the new Scottish Parliament through the Scotland Act in 1999.

I also differ with the Minister in relation to going no further than, or implementing only, the Smith commission proposals. I think it is fair to say that that has been a pretty constant reference from the Government Front Bench. In quite a few respects the Government already have gone further—for example, the amendment in relation to abortion was not contained in the Smith commission report—so why not go further when it is a sensible measure, when it could be of advantage to Scottish consumers and Scottish business, and when it is something that is quite technical and detailed but has been given a lot of thought by the Law Society of Scotland and would make for sensible, better devolution?

I hope that the Minister might see sense and come back to us at the next stage with some amendments in this area but, for the moment, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord McAvoy (Lab)]

I am so used to my noble and learned friend Lord Davidson speaking for me that I almost mistimed rising to move this amendment, which would allow for the scrutiny and review of previous tendering arrangements. Amendments 63 and 64 in this group stand in my name and that of my noble and learned friend Lord Davidson of Glen Clova. They are minor but important amendments, which would alter Section 25 of the Railways Act 1993 by removing the prohibition on public sector operators bidding for a franchise in relation to a Scottish franchise agreement. They would also establish legislative review and evaluation procedures.

The Smith commission report states that,

“power will be devolved to the Scottish Government to allow public sector operators to bid for rail franchises funded and specified by Scottish Ministers”.

The amendment would go a small but significant step beyond that by allowing not-for-profit operators also to bid in the process, echoing what the right honourable Gordon Brown proposed prior to the referendum. The Scottish Government are already responsible for letting and funding the ScotRail franchise. The legal framework for letting the franchise is provided by the Railways Act 1993, the Transport Act 2000 and the Railways Act 2005. These collectively preclude state-controlled organisations from bidding for franchises.

The paradox is, however, that state-controlled bodies from other countries are not precluded from holding a franchise. Members of your Lordships’ House will no doubt be aware that as a result of this anomaly, Abellio, an offshoot of the Dutch national state railway, was recently awarded the ScotRail franchise by the Scottish Government. A number of concerns were raised in response to this decision, not least from trade unions because, given the forthcoming proposals outlined in the Bill, the tendering process could have been delayed, after which the franchise could have been awarded to a public or not-for-profit operator. There has been a number of problems, most notably the cancellation of services after pay talks with the train drivers’ union ASLEF stalled and staff being offered voluntary redundancy despite Abellio guaranteeing that this would not happen. As the general secretary of the RMT has said:

“Scotland could have taken control of its own railways”.

Labour has stated that it believes that:

“The best deal for Scotland is a People’s ScotRail, a railway company whose commitment is not to a group of shareholders or a foreign Government, but to the people of Scotland”.

In the light of this evidence it is vital that while we move forward in the devolution process we learn from the decisions that were taken in the past. The amendment would facilitate this by allowing the scrutiny and review of previous tendering decisions, not to cause any uncertainty or rock the boat in any way but to learn lessons from how things were conducted. I believe that this is a genuine opportunity to enshrine in legislation the value of critical evaluation in the decision-making process. I beg to move.

[Lord Dunlop]

It is nice to welcome back to the Dispatch Box the noble Lord, Lord McAvoy. Clause 54, to put it simply, will allow public sector operators to bid for and be awarded rail franchises specified and let by the Scottish Ministers. This will provide greater freedom to decide which organisations are eligible to bid for franchises in Scotland and fulfil the Scottish Government’s aspiration to allow public sector operators to participate in the rail franchising market in Scotland. At present, and as with the rest of the UK, not-for-profit entities are not precluded from being rail franchises under the Railways Act 1993. Once Clause 54 is commenced, not-for-profit entities, irrespective of whether they are public or private organisations, will be able to bid for rail franchises, just as other public sector operators will also be able to. As such, the Government do not consider that Amendment 63 is necessary.

Amendment 64 would allow discretion as to whether public sector operators, on commencement of Clause 54, can bid in respect of live procurements where an invitation to tender has already been issued. There are currently no live procurements for Scottish rail franchises. There are two current Scottish franchises: the Caledonian Sleeper services and the ScotRail services. It is the responsibility of the Scottish Government to manage the tendering of these contracts. The ScotRail franchise, for example, the biggest in Scotland, operates over 2,200 train services each day, delivering 92 million passenger journeys each year. In December, it announced a £475 million investment in its rolling stock over three years.

[Baroness Quin (Lab)]

I am listening carefully to what the Minister has to say. Under the arrangements that he has just described, would it therefore have been possible for the east coast main line to bid for running the east coast franchise, which of course it was disbarred from doing? That is, of course, a cross-border railway and it was operating very efficiently, although it was not allowed to submit a tender to run the railway into the future.

[Lord Dunlop]

Obviously the noble Baroness has stated the facts. I do not want to add to that because she is a great expert in these matters. I am simply talking about this amendment and what would be possible in the future.

To go back to what I was saying, both existing Scottish-related franchises have been in operation since April 2015 and their contracts are for 15 and 10 years respectively. The ScotRail franchise has a break clause after five years—

[Baroness Quin]

I am not clear about the implications of what the Minister is saying. He seems to be saying now that it is possible for not-for-profit and public companies to bid for tender to run a railway. Is that the case? It was certainly not the case recently when the east coast railway was not allowed to bid for the continuation of the east coast service. Is he simply describing the situation as it will be in Scotland or as it exists at the moment, not just for Scotland but for the UK? Is he also describing the situation for a cross-border service, which is what the east coast main line is?

[Lord Dunlop]

Just to clarify, the clause that we are talking about relates to Scotland-only franchises. As I said earlier, not-for-profit entities are not precluded from being rail franchisees under the Railways Act 1993.

To return to what I was saying, both franchises have been in operation since April.

[Lord McFall of Alcluith (Lab)]

If a not-for-profit enterprise is allowed in Scotland, could that not-for-profit enterprise bid for a cross-border railway to the Department for Transport, or would that be disallowed? That is the issue.

[Lord Dunlop]

I think we are talking about devolution to the Scottish Government and the Scottish Parliament. Therefore, we are talking about only rail services that are in the province of the Scottish Government, not ones that are let through the Department for Transport’s process.

[Lord McFall of Alcluith]

If that is the case, and given the potential decision-making for the Scottish Parliament, it is important for the Minister to go back and get clarification on this issue. This could become a live issue in a short period of time.

[Lord Dunlop]

I am happy to give the noble Lord the assurance that we will get clarification. I am happy to write to him on that.

To complete what I was saying, the ScotRail franchise has a break clause after five years, but in practice that means that a new competition for either Scottish rail franchise will not occur until 2020 at the earliest. For those reasons, the Government consider Amendment 64 to be unnecessary and that it would only add uncertainty to the clause. Therefore, I urge the noble Lord to withdraw it.

[Lord McAvoy]

I thank the Minister for that answer. I particularly welcome his indication of interest from the Scottish Government in discussions and negotiations. That shows that sensible and calm negotiations—not looking for aggressiveness on either side—will deliver to the Scottish Parliament and therefore the Scottish Government the powers that he just outlined. That is an important statement to come out tonight.

A couple of things tonight could almost have been interpreted as doubting the ability of the Scottish people to run the services proposed for devolution in the Bill and hopefully in the fiscal framework—time after time. It is a little insulting to the Scottish people to suggest that we cannot run services in a proper and efficient manner. Doubt has been cast on that, denigrating the ability to come forward and run these things. So I welcome the Minister’s statement and the positive notes coming from the Scottish Government. I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Steel of Aikwood (LD)]

My Lords, I shall speak to Amendments 68A and 69 in this grouping. They are quite different. Amendment 68A simply seeks to put into the Bill a reference to hydro-electricity. I mention this because it is the poor relation of the renewable energy sources. Solar and wind power are mentioned a lot; hydropower is hardly ever mentioned. I am talking about not the big hydro-electric schemes in Scotland, which have made a big contribution to our energy needs, but small hydro-electric schemes. For example, in none of the three big reservoirs that feed Edinburgh, from the old ones, Talla and Fruid, to the new one, Megget, which was built during my time as the local MP—I never thought to raise this at the time, so I plead as guilty as everybody else for overlooking this—was a turbine added to the dam outfall so that energy could be produced.

The argument is that these small schemes produce only enough energy for local consumption, but added together they can be very significant. I recently visited two quite new ones on the River Ettrick and the River Yarrow in my old constituency. I was very impressed by the contribution that they can make to local communities. It is true that, when the wind does not blow there is no energy produced from wind power and that when the sun does not shine solar power does not work, but the water is flowing all the time—rather excessively, as we have seen in recent days, but it is there all the time. Added together, small hydro-electric schemes can make a major contribution to the energy needs of the country. That is why I would like to see it in the Bill in the way I suggest in Amendment 68A. It is a modest amendment but one that I hope might find favour with the Government.

Amendment 69 is the same as the rather more sweeping one that my noble and learned friend has just put forward. Amendment 69 seeks to take out the extraordinary new subsection (3), which says that the Secretary of State does not need to consult Scottish Ministers about introducing any levies for renewable electricity incentive schemes. I simply do not understand why that provision is there. In my view, the more consultation we write into this Bill and the more we make it essential for the Scottish Government and the Secretary of State to consult, the better. I am surprised that this provision appears in the Bill at all and I support my noble and learned friend in seeking its removal.

[Lord Dunlop]

The noble and learned Lord, Lord Wallace of Tankerness, is very interested in these energy schemes and very knowledgeable about them, and has spoken on other pieces of legislation in this connection. He raised a number of specific points in the debate. I am, of course, very happy to meet him to discuss those further.

Clause 58 creates a formal consultative role for the Scottish Ministers in the design of renewable electricity incentive schemes that will apply in Scotland. Our aim is to ensure the Scottish Ministers are able to comment on the design of new incentives to support renewable electricity generation that will apply in Scotland, or the redesign of existing schemes as they relate to Scotland. The new arrangement provides for a general duty to consult the Scottish Ministers on the design of incentive schemes for renewable electricity which will apply with respect to the existing schemes as they relate to Scotland, and any new schemes that will apply in Scotland.

The noble and learned Lord has tabled amendments that would extend the scope of Clause 58 to heat incentive schemes. We have exchanged correspondence and discussed it further. He has put on the record the response that I gave in my letter, so I will not repeat what he has already said. However, we believe that these amendments would duplicate existing regulations and are therefore unnecessary.

Amendment 67 seeks to amend Clause 58 to require the Secretary of State to consult the Scottish Parliament, in addition to consulting the Scottish Ministers, on renewable electricity incentive schemes, treating the Scottish Parliament as a conventional stakeholder rather than a legislative body. The amendment requires the Secretary of State for Energy and Climate Change to statutorily consult all 129 Members of the Scottish Parliament when making changes to renewable electricity incentive schemes. In our view, this would lead to overly complex and time-consuming consultations that would affect the smooth operation of renewables schemes. For example, were the Scottish Parliament in recess, this could delay the conclusion of a consultation, delaying the implementation of UK government policy. The Government consider the inclusion of consultation with the Scottish Ministers is appropriate. However, Members of the Scottish Parliament are already able to make their views known during public consultations.

Amendment 68B seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers on amendments to renewable electricity support schemes which are of a minor nature or are made only for technical or administrative reasons and to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. The noble and learned Lord took on board the de minimis aspect of the first part of that. As drafted, Clause 58 excludes the requirement to consult the Scottish Ministers on minor, technical or administrative issues. In general, this exclusion will apply to changes unlikely to have a significant impact on generators or potential generators, such as making changes to references to technical documents, or making changes to an application procedure. This amendment would, therefore, lead to overly complex and time-consuming consultations that would affect the smooth operation of the schemes.

Amendment 69 also seeks to amend Clause 58 to require the Secretary of State for Energy and Climate Change to consult the Scottish Ministers about any levy in connection with a renewable electricity incentive scheme. I note what the noble and learned Lord said about that and I am very happy to discuss this further with him. Levies on particular companies—for example, electricity suppliers—are sometimes created to sit alongside renewable energy incentive schemes as a way of funding them. An example is the supplier obligation which requires electricity suppliers to pay for the contracts for difference scheme. Levies to fund renewable support schemes are considered to be a form of taxation and taxation is generally a reserved matter. Devolution of specific tax powers is dealt with elsewhere in the Smith commission agreement

[Lord Wallace of Tankerness]

I am grateful to the Minister for giving way. My first question is: where in the Smith agreement is provision made for such an exception? Secondly, even allowing for what he says— and I would want to read it and consult on whether it is a legitimate point—does the Minister not think this is drafted very widely? It says “any levy”, and could completely negate what is set out in subsection (1).

[Lord Dunlop]

As I have said, I am very happy to meet with the noble and learned Lord to discuss this specific point and I undertake to do so.

Similarly, Amendment 68A is also unnecessary as the phrase “a renewable electricity incentive scheme” would include a hydropower incentive scheme. I met and discussed this with the noble Lord, Lord Steel, last week. I put on record the importance of small-scale hydro installations. Some 500 of these have been built in Great Britain since the start of the feed-in tariff scheme in April 2010. These installations represent a doubling in the number of hydro sites across the country but a significantly smaller proportion in terms of capacity, as none of these new sites is above 2 megawatts in size. The majority of these are in Scotland, where hydro accounts for 16% of the capacity of all feed-in tariff installations, with solar on 44% and wind on 39%. Going forward, the tariffs should still offer sufficient incentive for well-sited installations, with an estimated return of 9.2%, based on costs supplied by the industry. It is therefore estimated that around 500 further installations could be installed in the next three and a quarter years, to April 2018-19.

Clause 58 ensures that Scottish Ministers will have a formal consultative role on contracts for difference, the renewables obligation and feed-in tariff schemes, all of which incentivise the deployment of hydropower. Therefore, we do not believe it necessary to make specific provision for any of these amendments within the Scotland Bill and I ask that this amendment not be moved.

Amendment 73 would duplicate existing arrangements. The Energy Act 2013 already gives Scottish Ministers a clear, formal consultative role in the development of the Ofgem strategy and policy statement, which gives them an opportunity to influence its content. Section 135 of the Act makes the Scottish Ministers “required consultees” on drafts of the statement and Section 134 also requires the Secretary of State to consult them on the action that she proposes to take following any review of the statement. The current strategy and policy statement arrangements give effect to the Smith agreement and therefore the amendment is unnecessary.

Amendment 73A seeks to introduce a new clause to transfer powers to the Scottish Ministers to award contracts under the contracts for difference scheme and to set the level of feed-in tariffs in respect of electricity generation from renewable sources in Scotland. Publishing such proposals, as well as the transfer of any such powers, goes well beyond the Smith commission recommendations, as the noble and learned Lord himself said, which relate to consulting on establishing and amending schemes that apply or relate to Scotland. In addition, both contracts for difference and feed-in tariffs are Great Britain-wide schemes and do not currently operate in a regionally specific way. This is linked to the fact that we have a GB-wide integrated energy system on which those schemes rely, which has been shown to work well over many years and from which all energy consumers benefit.

Scotland has more than proportionally benefited from financial support from all GB bill payers under current energy policies. Around 9% of the UK population is in Scotland, but we estimate that just over 20% of the support under the renewables obligation as a whole—around £760 million of the total—will go towards funding Scottish renewables projects. For feed-in tariffs, Scotland represents over 10% of the renewable electricity capacity installed to date, particularly in the wind and hydro sectors. In conclusion, I urge the noble and learned Lord not to move this amendment.

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[Lord McAvoy]

My Lords, I rise to congratulate my noble friend Lady Quin, who is a long-standing friend of Scotland, and tonight has epitomised concerns not only for her own north-east homeland and heartland but also of her fellow citizens in Scotland. She has been a great supporter of Scottish causes throughout the years and a doughty champion for her own north-east area. It is a tribute to her commitment to both these areas that she has been here so long waiting patiently—or maybe impatiently—as the night wore on.

As was the case on the first day in Committee, on the face of it a review is reasonable enough. I accept that these are probing amendments, but we have mild objections on the grounds that they afford no agency to the Scottish Parliament when it comes to the parties to be consulted and the general scope and remit of the review, and it is generally left to the discretion of Secretary of State. When there is a lack of parameters or involvement with the Scottish Parliament, that provides the Secretary of State with considerable scope to set the terms of any convention and what is reviewed.

We think that the answer, or at least part of it, lies in the constitutional convention that we support, which would involve every nation and region in the country being engaged in a dialogue with the people about how power needs to be dispersed, not just in Scotland, Wales and Northern Ireland but in England, too. Quite rightly, there are concerns, particularly in the north-east and Cumbria, and maybe in other parts of England as well, that there is no detriment to their areas with the passing of more devolution to the Scottish Parliament. It is quite right that these concerns are raised; they are representing their areas well in bringing these concerns.

I do not know the noble Lord, Lord Shipley, that well, but I certainly know my noble friend and know that she will be motivated. As the noble Lord, Lord Shipley, said, it is a concern not just for one side of the border but for both sides so that we can all come to a mutual way of working and find forums for agreeing matters of dispute or interest, or problems causing particular tension. I welcome the discussion from both my noble friend Lady Quin and the noble Lord, Lord Shipley, and I commend both of them for bringing this forward for discussion.

[Lord Dunlop]

First, I echo what the noble Lord, Lord McAvoy, said about the noble Baroness, Lady Quin, who I know to be a doughty champion for the north-east. I support the sentiment behind the amendment; Governments should always consider the impact on the union and, in particular, the economy, when they make decisions. Likewise, before and after making policy, Governments should as a matter of course assess whether any particular region is impacted disproportionately. That is not just my view; it is this Government’s stated policy and our approach in practice. Not only that, but there are opportunities for Parliament to scrutinise the Government as they do this and hold us to account. I welcome and encourage that scrutiny.

The UK Government have considered carefully the impact of devolution on the union as a whole throughout the development process for this Bill. The commission set up by the noble Lord, Lord Smith of Kelvin, had that at its heart. One of the principles under which the commission operated was to,

“not cause detriment to the UK as a whole nor to any of its constituent parts”.

As the Committee will be aware, the UK Government and the Smith commission rejected candidates for devolution—for example, the devolution of national insurance. I believe it is right that they did, precisely because devolution of such areas could undermine the union. However, the UK Government also believe that devolution to the Scottish Parliament will make it more accountable to the people who elect it. Our objective has always been to encourage that accountability without undermining the union. Let me reassure the Committee that this Government do not require a legal requirement in the Scotland Bill to ensure that we take these considerations into account.

I hope I can give similar reassurance on how the UK Government consider the impact of policy-making on specific regions and locations. This Government are committed to rebalancing growth across the country, from creating a northern powerhouse to strengthening our great city regions. A number of noble Lords mentioned this. To give a specific example, the UK Government are well aware of the potential impact of the devolution of air passenger duty. That is why we have issued a discussion paper and consultation to engage stakeholders and find a workable solution. There are procedures in place. These policies are scrutinised in Parliament and open to challenge, especially in the other place where MPs can represent their constituency interests in Parliament.

The noble Baroness suggested joint working on projects on both sides of the border. I entirely agree with that sentiment. The borderlands initiative is a good example of that sort of work. The noble Lord, Lord Shipley, raised reporting. I am very happy to look at it as a subject and at how it could be further improved. I am always happy to meet, and I would be very happy to meet him.

While I fully support the sentiment behind these amendments, I do not believe requirements in legislation are necessary. The UK Government are committed to this approach. The fiscal framework and how we put into practice the no-detriment principle were raised by a number of noble Lords. I am certain that we will return to them on our next day in Committee. I urge the noble Baroness to withdraw the amendment.

[Baroness Quin]

My Lords, I am grateful to the Minister for his reply and to noble Lords who spoke in favour of the amendments and their spirit. I am also grateful to my noble friend Lord McAvoy for his sympathetic reply to the concerns that have been raised. I hope that the Government’s commitment to the union and to cross-border projects and ventures will be translated into reality in many practical ways. We look forward to seeing the results of that in coming months and years.

The noble Lord, Lord Curry, mentioned concern that we sometimes have in the north-east that the northern powerhouse seems to be concentrating on areas to the south of us, particularly on Manchester and Leeds. I wish them every success, but we wish to be fully part of the initiative. I am glad that the noble Lord made that point. I am glad that these issues have been aired. I hope that the Government will take them to heart. I beg leave to withdraw the amendment.

Scotland Bill

Lord Dunlop Excerpts

Tuesday 19th January 2016 Lords Chamber

[Lord Mackay of Drumadoon (CB)]

As my name can be found in some proximity to the amendments that are being discussed in this opening round of speeches, I do not intend to go into any great detail about what we have heard. I am, however, struck by the fact that people are talking as if the best way forward will involve a significant measure of respect and agreement and will not give any excuse for a deterioration in the relationship between the voters, which was to some extent apparent when devolution came along.

It falls to me, in view of one of the speeches that we have heard, to declare an interest that during a period of years when I was actually a Member of your Lordships’ House, prior to becoming a High Court judge in Scotland, I spent quite a lot of my time working with companies in the electricity industry. It fell to me to give them advice when they sought it and to work with them on a practical basis when they set about seeking the erection of a new power station or some other building associated with a power station or the erection of new electricity wires to take electricity to different parts of Scotland and, indeed, further afield.

I appear in this debate having received a brief from the Law Society of Scotland, which takes an interest in these matters. It is clear from what has been suggested to me that it is not alone in encouraging agreement. On that basis, I invite Members of your Lordships’ House to rely on the proposals which, as I say, are proximate to my signature.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, I thank all those who have contributed to this debate: the noble and learned Lords, Lord Davidson, Lord Wallace, Lord McCluskey, Lord Hope and Lord Mackay; the noble Earls, Lord Kinnoull and Lord Dundee; and the noble Lord, Lord Sanderson, and the noble Baroness, Lady Liddell. We have had some very good contributions and I am very sympathetic to the intent of many of the points that have been raised.

The Bill’s provisions on the Crown Estate were debated at length in Committee in the other place and some of the points raised then have also been raised today. As has already been mentioned by a number of your Lordships, the Law Society of Scotland, which I met last week, has also taken a close interest in these clauses and has suggested amendments, some of which have been taken up by noble Lords. In particular, noble Lords have raised issues around the way in which we have sought technically to give effect to the Smith agreement, the importance of establishing an arm’s-length body, double devolution, and specific issues around Fort Kinnaird and other topics. I welcome this opportunity to set out the Government’s position and approach to these clauses.

As noble Lords will be aware, the Smith commission agreed that responsibility for the management of the Scottish assets of the Crown Estate would be devolved. The agreement also stated that the Scottish Government should receive the revenue generated from the management of those assets, as has already been referred to. The Bill therefore provides for the existing Scottish functions of the Crown Estate commissioners to be transferred to Scottish Ministers by way of a transfer scheme, which will be set out in a statutory instrument made after the Bill receives Royal Assent. The Bill also provides that the revenue from the Scottish assets will be paid into the Scottish Consolidated Fund after the transfer.

In readiness to take over the management functions after the transfer has taken place, the Bill also enables the Scottish Government to make arrangements in advance of a transfer, for example to establish a management body and appointments to that body—I will return to that in a moment to pick up on what the noble Earl, Lord Kinnoull, said—via an Order in Council made by Her Majesty, and subject to the affirmative procedure before the Scottish Parliament. Following the transfer, the Scottish Parliament will have competence to legislate about the management of the Scottish assets, which will enable it to legislate in particular for further devolution to the islands and other areas seeking such responsibilities, as the Smith agreement recommended. At this point I can confirm to the noble and learned Lord, Lord Wallace, that I would be very happy to meet the islands councils. I will come back to double devolution in a moment.

Turning first to some other points that have been raised, in looking at Amendment 43 I liked in particular my noble friend Lord Lang’s comment about dynamic junior Ministers and the distinction, if there is one, between “may” and “must”. The parties opposite are seeking to make it mandatory for the Treasury to make the transfer scheme. Amendment 44 would make it mandatory for the scheme to be made, following agreement with the Scottish Ministers. First, I reassure noble Lords that the clause already provides, at subsection (17) of new Section 90B, that the Treasury cannot make the scheme without the agreement of Scottish Ministers. The majority of the scheme is not expected to be contentious but for those aspects which need to be negotiated, we think it right that agreement is reached between the Treasury and Scottish Ministers.

The clause as drafted, with the use of “The Treasury may” together with the requirement for the consent of Scottish Ministers, provides the right incentives for both parties to reach agreement and for a level playing field in the negotiations. The UK Government represent the interests of all people in the United Kingdom and, if this amendment were made, the ability to represent these interests would be constrained as the Treasury would be under a statutory duty to make a scheme, the discharge of which could be fulfilled only with the co-operation of a body beyond its control. As the scheme contains important protections for defence and national security, it is imperative that both sides are able to come to an agreement on the detail.

Secondly, the Treasury still cannot necessarily make the scheme even after the agreement of Scottish Ministers, since both Houses of Parliament must also approve the draft scheme before it can be made by the Treasury. I reassure the Committee that the Government are committed to making a scheme. Implementing in full the Smith commission agreement is a manifesto commitment; the provisions relating to the Crown Estate are an important part of that. However, actions speak louder than words. For example, we made an outline of the scheme available to the House last summer and in November we placed a copy of a draft scheme and memorandum of understanding in the Libraries of both Houses. Officials are currently in discussion to reach agreement on the detail of the draft scheme. After the draft scheme is agreed, it will be brought before both Houses of the UK Parliament and, if it is approved, it will be made by the Treasury and the transfer will occur on the date specified in the scheme. I hope that I have been able to reassure noble Lords on the Government’s commitment in this regard.

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[Lord Wallace of Tankerness]

I am grateful to the Minister for giving way and for the way he is responding. Does he accept that there is a difference between the amendment moved by my right honourable friend Alistair Carmichael in the other place, Amendment 48, which was withdrawn, and the one we are now debating, which provides that the scheme for double devolution would be a Section 90B scheme, which, as the Minister has been at great pains to emphasise, will take place only with the agreement of Scottish Ministers? The amendment makes subsequent provision that it will be Scottish Ministers who make the transfer. So Scottish Ministers would be very much involved. Indeed, if the Minister were to accept my amendment to,

“leave out ‘C’ and insert ‘A’”,

the Scottish Parliament would have a role, too.

[Lord Dunlop]

I note what the noble and learned Lord says, and I will reflect on his point; I am sure that we will continue to discuss it.

The clause enables the Scottish Parliament to make its own legislation about the management of the Crown Estate in Scotland after the transfer—and beforehand, should it wish to have arrangements in place in readiness for transfer. The Scottish Government have already made commitments to devolution to island communities. In the document Empowering Scotland’s Island Communities, which has already been referred to, the Scottish Government have committed to ensuring that 100% of the net income of the islands’ seabed is passed to island communities. The Scottish Government have also said that they intend to consult on the future arrangements of the Crown Estate. Therefore, as I said, although I am sympathetic to the sentiments that have been raised about this issue, the Government do not believe that it is appropriate for the Bill to set out any onward arrangements for devolution to local communities. That is a matter for the Scottish Parliament. I look forward to hearing more from the Scottish Government on their further plans as they develop them.

I turn to Amendment 46. Clause 34 provides for a transfer scheme that would transfer all the existing Scottish functions of the Crown Estate commissioners to Scottish Ministers or to a person nominated by them. The amendment seeks to change the entity to which the transfer of those executive functions is made from Scottish Ministers to the Scottish Parliament; several noble Lords referred to this.

I note that the right honourable colleague of the noble and learned Lord opposite also tabled this amendment in the Commons in Committee. The Smith commission agreement stated that responsibility for the management of the Crown Estate and the revenue generated from those assets would be transferred to the Scottish Parliament. However, the Scottish Parliament is a legislative rather than an executive body, as I have already said, and for that reason it is not equipped to undertake the management functions that are currently exercised by the Crown Estate commissioners. The Law Society of Scotland also observed that the transfer is to the Scottish Ministers rather than the Scottish Parliament, and noted that there are good practical reasons why this should be so—not least that the Parliament does not exercise its executive powers.

[Lord McCluskey]

The Smith commission report states in paragraph 32 that what was to be transferred to the Parliament was not the management but the “responsibility for the management”, so Parliament would then decide what agency, if other than the Scottish Executive, would manage the estate. Surely, that is the important point.

[Lord Dunlop]

We feel that in the clause, in giving the Scottish Parliament the legislative competence but then facilitating the executive competence of the Scottish Government, we have got the balance right.

As I was saying, the clause transfers management functions relating to the Crown Estate to the Scottish Ministers, which means that the Scottish Parliament has the ability to legislate in relation to such management functions. That gets the right balance and gives effect to the Smith commission agreement in what it intended to achieve.

I turn to some of the specific points that were raised —in particular, Fort Kinnaird, which I believe some people thought was a Ministry of Defence base but turns out to be a shopping centre in Edinburgh. I very much agree with what my noble friends Lord Lang and Lord Sanderson have said about this and the importance of not upsetting joint arrangements built on trust. The management of all the Crown Estates, wholly and directly owned Scottish assets, will be transferred under the transfer scheme. Fort Kinnaird, as has already been said, is not wholly and directly owned by the Crown; it is held by an English limited partnership in which the Crown Estate commissioners manage interests alongside other commercial investors. The partnership owns property in other parts of the United Kingdom, and Fort Kinnaird has never been wholly and directly owned by the Crown. It was brought into the partnership by the commissioners’ joint venture partner, the Hercules Unit Trust, and is managed by British Land. Revenue from the Crown Estate’s interests in Fort Kinnaird will therefore continue to be passed to the UK consolidated fund for the benefit of the UK as a whole.

I am very happy to confirm for the noble Baroness, Lady Liddell, that I shall take her specific point away and write to her on the offshore renewables catapult. The noble Earl, Lord Kinnoull, talked about protections for the assets of the Crown Estate. The current managers of the Crown Estate commissioners are under an obligation to maintain an estate in land, so it is appropriate to pass on this obligation as part of the transfer of management. The new manager may make changes to the pool of assets that make up the estate under its management; it can sell some assets but must reinvest the proceeds, bringing new assets into the estate. But the new managers must maintain an estate in land; they cannot convert the estate in its entirety to liquid assets to fund public spending. An estate in land in the ownership of the Crown must be retained for the future; that is an important point of stewardship.

I hope I have been able to provide some clarity on the approach and reassurance on the Government’s commitment to make a scheme. Therefore, I ask the noble and learned Lord to withdraw his amendment.

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[Lord Stephen (LD)]

My Lords, I shall speak to the amendments in my name and that of my colleague, my noble and learned friend Lord Wallace of Tankerness. As has been stated, Clause 35 relates to the important issue of protection from discrimination and the promotion of equality of opportunity. These are fundamental markers of a fair and decent society. The protections in the law should be strong, and the meaning and effect of Clause 35 must be clear. I believe that we have not yet achieved the parity that is both important and required.

The Equality Act 2010 is widely held to be perhaps the best anti-discrimination law in the world. Thanks to the Act, wherever you live or work in Great Britain, you have a right to fair treatment regardless of your sex, race, age or sexual orientation or if you are disabled. Clause 35 needs to be explicit that the important protections in the Equality Act will be maintained right across Great Britain, and that modifications should be permitted by the Scottish Parliament only where they enhance the protections in the present legislation. As currently drafted, Clause 35 does not yet achieve that. While there is an attempt to differentiate between modifications to the Equality Act 2010, which are not permissible, and additions, which are, these provisions lack the required clarity. I thank the Equality and Human Rights Commission for its support and advice in framing these amendments.

Amendment 52A would make it absolutely clear that the Scottish Parliament had powers to increase protection from discrimination, harassment and victimisation by Scottish public bodies by, for example, adding new protected characteristics, prohibiting dual or multiple discrimination or enhancing remedies. It would also ensure that existing productions could not be eroded in Scotland.

The public sector equality duty is a positive duty, requiring public authorities and those delivering public functions to have regard to how they can promote equality of opportunity. It has great potential to play a transformative role for those experiencing disadvantage and discrimination. Amendment 52A would give the Scottish Parliament greater freedom to require Scottish and cross-border bodies that deliver public services in Scotland to do more to tackle entrenched inequality. We have already seen how the stronger specific equality duties in Scotland have driven greater transparency on the pay gap, for example, which means that it is clearer where action now needs to be taken. To devolve legislative competence for the general equality duty would give the Scottish Parliament far greater freedom to require its public service providers in Scotland to do even more positively to promote equality of opportunity.

The amendment would also ensure that the Smith commission commitment on gender quotas is delivered, while ensuring that the Scottish Parliament could not go beyond the extent to which positive action is permitted by EU law. We want to increase the efforts made to ensure that women have fair representation on public boards, in Scotland and elsewhere in Great Britain, but this must not be achieved through disproportionate barriers to participation by men.

On political representation, Amendment 52A, taken together with Amendment 52E, would enable the Scottish Parliament to allow political parties to take stronger action to ensure greater diversity in their selection of candidates for the Scottish Parliament and Scottish local government elections. However, the Scottish Parliament would not be able to legislate to extend the use of shortlists restricted to those sharing other protected characteristics. While this approach may be appropriate for women, who make up over 50% of the population, it would be disproportionate if it were to be used for far smaller groups, as it would thereby exclude very large sections of the population from such shortlists. These amendments reflect the position in the Equality Act 2010, which was widely debated and agreed by all parties at the time to be a proportionate, fair and appropriate position.

Amendment 52B relates to diversity on public boards. It would remove an interpretation of the term “protected characteristic” which would limit the ability of the Scottish Parliament to encourage diversity on public boards with regard to any characteristics not currently protected by the Equality Act 2010, such as marital status. The Scottish Parliament should have the power to go further than the current protections, should it wish, on this important issue. Amendment 52C may be covered by the government amendments, and I look forward to the Minister’s clarification on this and his response to the other issues that I have raised.

[Lord Dunlop]

My Lords, I echo what the noble and learned Lord opposite and the noble Lord, Lord Stephen, said. The Government are committed to safeguarding equality, tackling discrimination where it arises and promoting transparency; for example, in pay. That is not to say that supplementary initiatives and protections in addition to those offered by the Equality Act do not have a part to play, as the Smith commission saw.

The equality provisions in the Bill relate to public sector bodies in Scotland and will enable the Scottish Parliament to make provision for the promotion and enhancement of equality in the public sector without any extension to the private sector. That is an important point to make; I know that that issue was raised by the House of Lords Constitution Committee. It is important to remember that the Smith commission was explicit that the Equality Act 2010 as a whole is to remain reserved. The Government are confident that the Bill ensures that the benefits of a cohesive framework of discrimination law remains across Great Britain.

In delivering Smith, the equal opportunities clause strikes the right balance between conferring greater competence on the Scottish Parliament for safeguarding and promoting equalities in public bodies and the importance of preserving a GB-wide legal framework. The Government’s delivery of paragraph 60 of the commission agreement ensures that we continue to reserve the 2010 Act while providing the Scottish Parliament with the ability to legislate for specific provisions such as gender quotas. Through the general exception that we are providing, the Scottish Parliament will be able only to add to and supplement the 2010 Act. It will not be able to reduce protections but, instead, will be limited to increasing and promoting protections in relation to public bodies.

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Moved by

[Lord Dunlop]

52AA: Clause 35, page 37, line 14, leave out “the Equality Act 2006 or”

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Moved by

[Lord Dunlop]

52CA: Clause 35, page 37, line 32, leave out from first “Act” to “are” in line 33 and insert “2010 and any subordinate legislation made under that Act”

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[Lord Berkeley (Lab)]

My Lords, perhaps we need an amendment stating that all road signs about broken pavements should be in two languages.

To return to the issue of broken pavements, I thought that the noble Lord, Lord Lyell, was beginning to imply that there were not many pavements in Scotland and you had to walk on the muddy verges or get splashed by cars. I do not think he meant that. There are just as many muddy roads in England, Wales and everywhere else as there are in Scotland, I am sure. There is an argument for saying that issues such as broken pavements and enforcement should be devolved locally. Why should we here decide on the legislation for parking offences such as causing a broken pavement or double parking? The incidence of it is just as bad in Scotland as in England.

I commend the amendment, and Living Streets for giving us some very good information on it. It is relevant that the consultation in Scotland received the fifth-highest number of responses of any Scottish Parliament Member’s Bill; 95% of responses were in favour of this parking legislation. That demonstrates a lot of interest in having the change proposed in the amendment. I see no reason why the local Edinburgh government should not be allowed to prohibit parking on footways and pavements and at dropped kerbs, and double parking of vehicles. Clarification is needed of what the offences are and who should enforce them.

There is a similar issue in England and the situation is awful, actually. We have had many debates about what enforcement is carried out for various alleged crimes. It is like the PCSOs, who are allowed to fine bicycles for going through stop lines but are not allowed to fine cars. They are all going through stop lines—what is the difference? It would be nice if one day, the UK Department for Transport got on to this but in the mean time, I cannot see any reason why the Scottish Government should not be responsible for these local issues.

[Lord Dunlop]

My Lords, first, I pay tribute to the noble Lord, Lord Foulkes, for his ingenuity in taking the debate in a different direction from the one I was expecting and on which I have been briefed. In social media Twitter-speak, road signs are trending in the House of Lords.

Returning, with the House’s indulgence, to the new clause proposed in Amendment 53, introduced by the noble and learned Lord, Lord Davidson, this seeks to address questions that have been raised about the Scottish Parliament’s ability to tackle the issue of inconsiderate parking on pavements. This issue was raised by the shadow Secretary of State for Scotland, the Member for Edinburgh South, who was at the Bar earlier to listen to the debate. He tabled an amendment in the other place, which has been re-tabled for consideration by this House.

It is clear, as the noble and learned Lord, Lord Davidson, said, that this is a matter of great concern to many people, including people with disabilities, as well as the elderly and parents with pushchairs, who can find their way blocked by vehicles parked without due consideration for others who require access to the pavement.

Your Lordships may be aware that this is a complicated issue for which the devolution settlement has not been clear. There have been a number of attempts to bring legislation forward in the Scottish Parliament to tackle this, but they have not succeeded due to doubts over the legal competence of the Scottish Parliament in this area. In September 2014 the former Member for Edinburgh North and Leith, Mark Lazarowicz, tabled a Private Member’s Bill in the Commons to attempt to address this issue. At the time, the Government gave assurances that we would do what we could to address it, although we explained that the Scottish Government would need to be clear about what measures and powers they would support.

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Finally, can I ask the Minister a question which I do not think anybody else has asked tonight? What discussions have he and his colleagues had with their counterparts in the Scottish Government to be assured that the changeover does not have the teething problems referred to by the noble Earl, Lord Kinnoull?

[Lord Dunlop]

I thank your Lordships for what has been a set of powerful and knowledgeable contributions to this debate. Many of the points raised by noble Lords have great force. To address directly and upfront what the noble Lord, Lord McAvoy, asked, I can say that we meet regularly with Scottish Ministers—later this week the Secretary of State is meeting Deputy First Minister John Swinney—and these matters are obviously the subject of those meetings. I will ensure that the strong feelings that have been expressed in this House are conveyed to the Deputy First Minister and to other relevant Scottish Ministers.

The task of policing the railways in Great Britain is carried out by the British Transport Police, as has already been discussed, the priorities of which include tackling crime on the railways, minimising disruption to the railway as a result of crime or other incidents, and ensuring that passengers feel safe and secure on the network.

I was going to touch on history, but the noble Lord, Lord Faulkner, has already beaten me to it, and when it comes to railway or transport history I am very wary of tangling with him.

The BTP currently polices the national rail network in England, Scotland and Wales, as well as the London Underground and some other light rail networks. It operates under a divisional structure, comprising three geographically defined areas: Scotland, London and the south-east, and the remainder of England and Wales. Today a large proportion of the rail network in Scotland is self-contained and is currently policed by just over 200 BTP officers out of a total BTP staff of 3,000 officers.

[Lord Wallace of Tankerness]

The Minister said “other light rail networks”. Does the BTP have any responsibility for the Edinburgh trams?

[Lord Dunlop]

That is a very good question to which I do not know the answer, but I will be very happy to clarify that point for the noble and learned Lord. Noble Lords have raised a range of important issues, and I will try to cover as many of these as I can in my response.

[Lord Forsyth of Drumlean]

Could my noble friend tell the House what he thinks is meant by the words in paragraph 67 of the Smith commission report:

“The functions of the British Transport Police in Scotland will be a devolved matter”?

I read them to mean that the British Transport Police will continue and that its functions will be subject to some kind of oversight by the Scottish Parliament, which is not what the Bill provides for. Does he have a different interpretation?

[Lord Dunlop]

If my noble friend will let me continue, I hope to set out what our approach is here and address some of the points that were raised by the noble and learned Lord, Lord Wallace.

[Lord Forsyth of Drumlean]

Of course I want my noble friend to address the points that have been made, but could he just answer that point? The noble Lord speaking for the Opposition said that whatever the Smith commission report says is written in stone, but what is in the Smith commission is not consistent with that. Can my noble friend explain what he thinks the commission meant?

[Lord Dunlop]

What the Smith commission meant is precisely what it said. If my noble friend will allow me to continue, I will expand upon that. To return to the point that was raised about the Edinburgh trams, I understand that they are not obviously policed by the BTP.

The Smith commission agreed that the functions of the BTP in Scotland should be a devolved matter and, as the noble Lord, Lord McAvoy, has already said, that was supported by all five of the political parties which took part in the commission, including the parties opposite. Clause 42 devolves legislative competence in relation to railway policing in Scotland to the Scottish Parliament by adding an exception to the Scotland Act 1998 for the policing of the railways and railway property. Clause 43 specifies the BTP bodies as cross-border public authorities. The designation of the BTP bodies as cross-border public authorities will result in functions relating to those bodies being modified so that future appointments to the BTP bodies will be made in consultation with Scottish Ministers. Other functions with regard to the BTP bodies will similarly be exercised in consultation with the Scottish Ministers unless their effect on Scotland would be wholly in relation to reserved matters.

The designation of the BTP bodies as cross-border public authorities is to ensure continuity before the Scottish Parliament legislates for policing of railways in Scotland. Enacting the clause will not impact on the current operational arrangements for policing of the railway. The BTP will continue to police the railways in Scotland until such time as a transfer of functions is effected. If and when the Scottish Parliament exercises the new legislative competence conferred by Clause 43, it would be necessary that the BTP bodies be designated cross-border public authorities so as to facilitate the appropriate transfer of BTP property, staff, liabilities and contracts in Scotland.

The noble and learned Lord, Lord Hope, asked for other examples of cross-border authorities; one that comes to mind is the Forestry Commission, although I will write to him with other examples.

Upon the completion of the transfer of policing of railway functions to the new Scottish model devised by the Scottish Government, the designation of the BTP bodies as cross-border public authorities will be removed and the BTP will exercise functions of policing for railways only for England and Wales.

[Lord Faulkner of Worcester (Lab)]

On that point, can the Minister describe to me what will happen with trains that travel between England and Scotland, of which there are hundreds a day? Does the policing of that train change at the border? Does the British Transport Police no longer have any responsibility for ensuring order on that train, and does it then have to rely on Police Scotland to do that?

[Lord Dunlop]

We anticipate that the BTP will continue to have limited functions in that scenario; I will come on to address that later in my remarks.

Amendment 53A was tabled by the noble Lord, Lord Empey, who spoke with great authority from his Northern Ireland experience. Regardless of how the Scottish Government legislate with regard to railway policing, the British Transport Police and the British Transport Police Authority will continue to exist in England and Wales. There is no question of abolishing or dissolving the British Transport Police. We also anticipate, as I have just said, a limited but continuing role for the BTP in Scotland, particularly in relation to cross-border services—a point raised by the noble Lord, Lord Faulkner—working alongside the new Scottish model. There is already existing co-operation and collaboration between the BTP and Police Scotland. The BTP uses Police Scotland police stations, for example, and Police Scotland can be first responders to rail-related incidents. Inter-force co-operation will be one of the many important issues to be agreed between the UK and Scottish Governments before the BTP’s current role and function are changed. The need for this sort of collaboration between different police forces is not confined to railways; it happens every day in other fields.

It is the BTP’s Scottish division—its functions, staff and contracts—which would be transferred if the Scottish Government decided to implement a new operational model, and which would be legislated for by the Scottish Government once the necessary legislative competence had been provided through Clause 42 in order for us fully to deliver the Smith commission agreement.

The debate this evening has highlighted the complexities. Both Governments are aware of the complexities of such a transfer and of the need for close collaboration and engagement to work through the details. I reassure your Lordships that this work is already under way and we will keep the House informed as it progresses. The starting point is for the Scottish Government to determine the operating model and to legislate for future policing of the railways. The aim of both Governments, working together, is to ensure an orderly transfer of property, assets and liabilities. Clearly the UK Government will work to ensure continued co-operation during the transfer and afterwards to achieve the best possible outcome. Many of the issues raised by noble Lords this evening—in particular, the noble and learned Lord, Lord Wallace—will be determined as part of this process.

The need to maintain high levels of service should be at the forefront of any planning for an efficient and effective transfer of functions. As the noble Lord, Lord Berkeley, mentioned, BTP officers have a wealth of knowledge and important skills, which it will be important to retain and ensure are reflected in any new Scottish structure. The expectation from the discussion we have had so far with the Scottish Government is that a specialist transport policing unit will be established within Police Scotland. The transfer of experienced officers from the BTP will help ensure that these valuable capabilities are appropriately shared, and we will continue working with the Scottish Government during this important period.

I note what my noble friend Lord Forsyth said about Police Scotland, but I make it clear that, as is consistent with the nature of devolution, it will be for the Scottish Parliament to legislate in relation to the policing of the railways in Scotland and for the Scottish Government to decide how they want the new structure to operate in practice. I think that this echoes what the noble Lord, Lord McAvoy, said. The Scottish Government will be held to account for that by the people of Scotland, as they are currently being held to account for the performance of Police Scotland. That is leading to a review of the governance of Police Scotland.

The noble Earl, Lord Kinnoull, talked of teething problems. The importance of getting this right, both for maintaining the standards of railway policing in Scotland and for preventing any adverse effect on the BTP regarding the rest of England and Wales, will not be overlooked. Given its importance, we expect the transfer of the BTP’s property rights and liabilities to take between two and three years.

The noble Lord, Lord Empey, raised an important practical point when he asked whether the BTP would have powers to operate and arrest in Scotland, should it need to follow a criminal across the border. It is a point that I am confident both Governments will discuss and on which they will agree an effective approach as part of the transfer and set-up of new collaborating arrangements so that criminals can effectively be pursued across the border.

I accept that the devil will be in the detail. However, there is no reason in principle why the high standards of railway policing in Scotland cannot continue under a devolved model, and the Government will continue to work with the Scottish Government to achieve this. For those reasons, I urge noble Lords not to press their opposition to the clause.

[Lord Wallace of Tankerness]

I raised a number of questions, one of which concerned funding. I know that the devil is in the detail but, from his discussions thus far with the Scottish Government, can the noble Lord give us some indication of the United Kingdom Government’s ideas regarding the funding arrangements that will be put in place?

[Lord Dunlop]

As I have just said, this is about devolution to the Scottish Parliament. Following devolution—and this matter will form part of the discussions—it will be for the Scottish Parliament to determine what the charging arrangements will be. However, perhaps I may end on this point. Democratic accountability is absolutely key here. I do not think that the voters of Scotland would be very pleased if the Scottish Government, through the train operating companies, increased costs to the travelling public in Scotland. For all the reasons I have given, I urge noble Lords to agree to the clause.

--- Later in debate ---

[Lord McCluskey]

Perhaps the Minister would take a short question from me. Is he advising the Committee that Clauses 42 and 43 enact the provision contained in paragraph 67 of the Smith commission report and nothing else?

[Lord Dunlop]

I am saying that these clauses provide the framework that allows us to go forward, but the Scottish Government have to decide what operating model they want for the policing of the railways in Scotland. I said that I anticipated that it would take two to three years before these functions were devolved, and that is because all sorts of contracts with third parties are involved here—the noble Earl, Lord Kinnoull, talked about pensions. I do not underestimate the complexity involved and I hope the Committee will understand if I do not have specific answers to all the questions; we will be working with the Scottish Government to clarify them over the next two to three years.

[Lord Forsyth of Drumlean]

I do not understand why the Government are bringing proposals to this House which have not been thought through. It is no good saying, “Oh well, the Scottish Government will need to work this out over the next two years”. Does my noble friend not recognise that this matter affects the rest of the United Kingdom? This is about maintaining a perfectly adequate system of policing upon which the larger proportion of the population depends. My noble friend is a Minister in the United Kingdom Government. If he brings forward legislative changes, surely he has a responsibility to explain to us how they are going to affect the United Kingdom. It is a case of the tail wagging the dog if we say, “This is a matter for the Scottish Parliament to decide. You just pass the legislation and we’ll try to work something out”. Surely my noble friend can see that he is not responding to the points that have been made, which concern the security of the United Kingdom and England in particular.

At the beginning of his speech I asked him a specific question, which has been asked again by the noble and learned Lord. It was whether he thinks that these clauses provide for what is contained in the Smith commission report, which says simply:

“The functions of the British Transport Police in Scotland will be a devolved matter”.

It does not say that there will be legislative control over the British Transport Police or that the British Transport Police will be broken up and there will be a separate Scottish force—it does not say that at all. The noble Lord, Lord Empey, indicated earlier that it would be perfectly possible to give the devolved Parliament some involvement in the British Transport Police without breaking the BTP up.

The clauses we are being asked to support tonight are completely vague as to the outcome. Does my noble friend recognise that he has not responded to the debate and has not dealt with the fundamental question that is being put: what will happen to England and Wales and the rest of the country, and why is it necessary to break up a perfectly efficient organisation in order to meet the requirements of paragraph 67 of the Smith commission report? As the noble Lord, Lord Empey, said, the Smith commission report is not a treaty; it is advice to Parliament and we are discussing a Bill.

[Lord Dunlop]

In answer to my noble friend, the function of the BTP is the policing of railways, which is the subject matter of these clauses and what we are devolving in this Bill. That is what the Smith report stated and we are committed to delivering that agreement.

[Lord Berkeley]

Will the Minister answer the question that I put to him a few minutes ago, please, on the financing of the British Transport Police north of the border?

[Lord Dunlop]

I did answer it, to the extent that there is a plethora of detail that lies behind this. However, it requires, as I said, the Scottish Government, in discussion with the UK Government, to specify what their operating model is. Until we have that, we cannot answer in a lot of detail. I come back to the fundamental point that we are devolving something, and it is for the Scottish Government and Parliament to decide how that will work within Scotland.

[Lord Wallace of Tankerness]

On that point, and in reflecting on his answer to the noble Lord, Lord Berkeley, and his earlier answer to me, which he has just repeated, does that mean that the Scottish Parliament and Government could load up the charges on Network Rail, which is a pan-UK body, and would that therefore have implications for transport rail users in England and Wales, as well as in Scotland? Does he not think that that is a matter on which the United Kingdom Government should have a view?

[Lord Berkeley of Knighton (CB)]

Just before the Minister answers that question, and at the risk of throwing another Berkeley into the hat and confusing life still further, I have listened to the debate this evening and am confused by the point that the noble Lord, Lord Forsyth, wishes to clarify: how this will affect members of the United Kingdom. I do not really feel that I have got an answer to that. It seems to me that it will affect them, and I wonder what the Minister feels about that. Although I understand it, the answer he gave does not quite elucidate the problem we have here.

[Lord Dunlop]

I hesitate at this point in the evening to introduce the concept of no detriment, and I look forward to Committee day 3, when I am sure we will cover this in great detail. However, the UK Government absolutely have an interest in ensuring that whatever devolution takes place in this space does not cause detriment to the rest of the United Kingdom.

[The Earl of Kinnoull]

The noble Lord, Lord Empey, and I suggested that a solution to this could be a dual reporting structure. I would be happy to explain that afterwards, as I am sure the noble Lord would be. In view of the fact that three or four years of work is stretching before us, which sounds very expensive to me, it might be cheaper just to ask the opposite numbers at Holyrood at one of the forthcoming meetings in the next few weeks whether the pragmatic suggestion of going down the Empey/Kinnoull route might cut the mustard. If it does, it would be a heck of a lot cheaper and, I believe, much more effective. It is a free question. Will the Minister consider at least asking, to see whether they might accept this slightly different approach?

[Lord Dunlop]

I will certainly reflect on the points that have been raised in this passionate debate. No doubt we will return to this subject.

[Lord Empey]

My Lords, the noble Lord, Lord Dunlop, is a very capable Minister but, throughout his contribution this evening, not even he has been able to offer one scintilla of rationale for doing this. There is no advantage to be gained; we all know that. It is an ideological path that people have set themselves on and we are dealing with the consequences of that. This is not the opportunity to elaborate on the point that the noble Earl, Lord Kinnoull, made. However, the solution we found was to have the police authority receive regular reports, including personal questioning, and to have responsibility for the actions that would be taken by the NCA in Northern Ireland, which would be answerable to the authority but ultimately under the control of the national Government. A solution can be found somewhere in there. As I said, it is not a matter of depriving the Scottish Parliament of any interest—of course it has an interest—but I feel that we should now proceed to Report. I hope that the Minister will wish to discuss the matter with some of us between now and then. In those circumstances, I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Dunlop]

My Lords, perhaps I may set the scene for Clause 49, which refers to gaming machines in licensed betting premises. The provision will give the Scottish Parliament the power to vary the number of high- stakes gaming machines permitted by betting premises licences in Scotland. This power applies to all gaming machines on which players can stake more than £10 per play, which was referred to by the noble and learned Lord, Lord Davidson. At present this is possible on sub-category B2 gaming machines only. These are the machines that are widely referred to as fixed-odds betting terminals. Further, the power conferred by the Gambling Act 2005 on the Secretary of State to vary the number of such machines permitted by new betting premises licences will be transferred to Scottish Ministers.

FOBT machines are located almost exclusively in high street betting shops, and it is these machines with a maximum stake of £100 and a maximum prize of £500 on which recent public interest and debate have centred. This implements paragraph 74 of the Smith commission report which was explicit in saying that the Scottish Parliament should have,

“the power to prevent the proliferation of Fixed-Odds Betting Terminals”,

and this clause achieves that.

The Smith commission agreement was explicit in saying that the Scottish Parliament should be able to exercise new functions under the Gambling Act 2005 to increase or decrease the number of FOBTs which are authorised by new betting premises licences. The power is sufficiently broad to permit the Scottish Parliament or Scottish Ministers to reduce the number of FOBTs authorised to zero in a new betting licence. The Scottish Parliament will be able to prevent increases in the number of FOBTs created by the opening of new betting premises, as Smith proposed. Gambling and its impact on society is a topic which the Government understand and take seriously, and we remain alert to the changing dynamics of the wider debate and will act in this area as appropriate.

I turn to Amendments 54 and 56, which seek to extend the scope of gaming machines covered by the clause. These proposals go substantially further than what the Smith commission referred to. They would bring within the scope of the clause all gaming machines regardless of stake size. At present, a betting premises licence issued under the Gambling Act 2005 authorises its holder to make up to four gaming machines available for use. The Categories of Gaming Machine Regulations 2007 provide that this entitlement is limited to gaming machines which fall within sub-categories B2, B3 and B4 and categories C and D. The Smith commission agreement relates only to FOBTs, and the term FOBT cannot be found in the Gambling Act 2005, but it is commonly used to describe category B2 machines by the Government as well as the Scottish Parliament’s Local Government and Regeneration Committee. The Smith commission’s use of the term FOBT is not shorthand for all gaming machines. FOBT machines are located almost exclusively in high street betting shops, and it is on those machines that the recent debate has centred. As such, the Government consider that the intentions of the Smith commission agreement have been delivered and that it is unnecessary to bring other gaming machines, which have far lower stakes and prizes, within the scope of this clause.

I am grateful for the contribution that was made on Amendment 58. As I have said, the Smith commission sought powers to prevent the proliferation of FOBTs, and the Government have interpreted this to mean the ability to restrain any future increase in the number, thus preventing proliferation—and hence the focus on new licences. Amendment 58 would extend this power to include existing licences as well as new ones. In conjunction with the extensive planning powers which have already been devolved, the clause as drafted will give the Scottish Parliament sufficient levers to tackle high street gambling and the extent of FOBT terminals, as Smith envisaged and which is the focus of public debate. The Government’s approach is appropriate and therefore I hope that the amendment will not be pressed.

The noble and learned Lord, Lord Davidson, proposed Amendments 55 and 57, which would allow the Scottish Parliament to include licensing standards officers in Scotland as authorised persons who may exercise inspection and enforcement functions under the Gambling Act 2005. There is already a well-used and straightforward mechanism in Scotland whereby licensing standards officers may be authorised persons for the purposes of the inspection and enforcement of functions under the Gambling Act 2005. The Gambling Commission has very helpfully issued guidance on this. Local authorities are already responsible for determining how their existing officers discharge their duties. Clause 49 does not change that. As such, we consider that the amendments are not necessary.

Again, I urge the noble Lord to withdraw his amendment.

[Lord Bruce of Bennachie]

I am grateful to the Minister. As he will know, these amendments were proposed by the Law Society. While his response has made clear that he believes, in accordance with the Smith commission, that it is giving the power to regulate new licences for high-value machines, it creates a dilemma, which means that some machines in Scotland will be regulated by the Scottish Government and others would still be regulated by the UK Government. Would it not be more sensible to have a single Government, the Scottish Government, responsible for the regulation of all machines rather than have certain machines over which the Scottish Government have power and others which remain with the United Kingdom Government, causing potential confusion and future conflict?

That was the purpose of the amendment. All I ask of the Minister is that he reflects on the fact that, while I understand the reasonings for the amendments—I am happy to withdrawn mine on that basis—he should recognise that this could create an anomaly in the future which might require him to come back with future legislation. There is some logic in doing it all in one rather than having to come back on another date. I beg leave to withdraw the amendment.

Scotland: Fiscal Framework

Lord Dunlop Excerpts

Wednesday 16th December 2015 Lords Chamber

[Lord Purvis of Tweed]

To ask Her Majesty’s Government, in the light of talks on 14 December between the First Minister and the Prime Minister, when the fiscal framework agreement between the Scottish and United Kingdom governments will be finalised and published, and how it will be ratified.

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, the Prime Minister and the First Minister met on Monday 14 December to discuss a framework which is fair both to the taxpayers of Scotland and the rest of the UK. The Joint Exchequer Committee will meet again shortly to continue discussions, with the aim of reaching final agreement in the new year. Once agreed, a framework would be signed by both Governments.

[Lord Purvis of Tweed (LD)]

My Lords, the Government said in the summer that agreement would be reached in the autumn, and in the autumn they said it would be reached in the winter. In the communiqué from the Joint Exchequer Committee last week, reference was made to the new year, but the First Minister of Scotland said after the meeting with the Prime Minister that the target for reaching agreement would now be mid-February—long after the proposed scheduling of the Committee stage of the Scotland Bill. When will agreement be reached? Given that this is of such significance for taxpayers across the whole United Kingdom—not just for those of us who are resident taxpayers in Scotland—is it not appropriate that, before Christmas, the underlying data for these discussions be published to enable much wider debate across civic Scotland and the UK, and indeed in Parliament?

[Lord Dunlop]

The Government want an agreement as soon as we can achieve it. I cannot offer any guarantees as to the end date, because there are two parties to these negotiations. However, I was very encouraged by what the First Minister said on Monday after the meeting with the Prime Minister. She and the Scottish Government want to reach an agreement, and she is optimistic that a deal can be done and is very keen that we should get on with it. That is absolutely what the UK Government want as well. Clearly, the fiscal framework will be a very detailed public document when it is agreed, and obviously, it will be made available to this House. We welcome full scrutiny of that agreement.

[Lord Forsyth of Drumlean (Con)]

My Lords, has it occurred to the Government that a sturgeon might be playing them like a salmon?

[Lord Dunlop]

I know that my noble friend is suspicious of the Scottish Government’s motives. We are entering and taking part in these negotiations in good faith. The discussions we have had so far have been constructive, and we are confident that a deal can be reached.

[Lord Gordon of Strathblane (Lab)]

Does the Minister agree that it is nothing short of ludicrous that the Bill should have passed all its stages in the House of Commons before the full fiscal framework has been spelled out in detail? Will he give an assurance that it will not pass all its stages in the House of Lords before we know all the details of the full fiscal framework?

[Lord Dunlop]

As I have said, we want to reach an agreement as soon as we can. I cannot give guarantees as to the end point—we have debated these matters fully at Second Reading—but I can assure the House that once an agreement has been reached, there will be an opportunity for it and the other place to give full scrutiny to that agreement.

[Lord Lexden (Con)]

What are the main factors that are delaying the conclusion of the agreement?

[Lord Dunlop]

This is a very important agreement and all sides are agreed that this is a critical part of the overall settlement. It is important to get this agreement right. We want an agreement that is fair to Scotland and to the UK as a whole, and which is built to last. The important thing is to get the agreement right.

[Lord Reid of Cardowan (Lab)]

As my noble friend Lord Gordon pointed out, the fiscal framework underpins every important implication of the decisions that this House and the other House have been asked to take. If it is wrong, it will have the most serious consequences not just over a period of time but over decades. I am afraid that the Government are approaching this with all the alacrity of their deciding on additional airport capacity. However, the difference is that this House has been asked to consider this before we know the fiscal framework on which it will all be based. Can he not at least assure us that there will be no concluding stages of this legislation until the fiscal framework is available to Members of both Houses of Parliament?

[Lord Dunlop]

We have reordered the Bill so that the parts most relevant to the fiscal framework will be dealt with at the end of Committee. As I said at Second Reading, that gives us the time and space to reach agreement, so that this House can give the agreement full scrutiny.

[Lord Howell of Guildford (Con)]

Can my noble friend explain what the effect will be on the fiscal framework of the continuing slide in the price of crude oil and the likelihood that it will go down considerably further?

[Lord Dunlop]

Clearly, the reduction in the price of oil shows how wise the Scottish people were in their vote last September, and it underlines the key importance of pooling and sharing risks and resources across the United Kingdom. We really are stronger together.

[Lord McAvoy (Lab)]

My Lords—

Scotland Bill

Lord Dunlop Excerpts

Tuesday 1st December 2015 Lords Chamber

Moved by

[Lord Dunlop]

That it be an instruction to the Committee of the Whole House to which the Scotland Bill has been committed that they consider the bill in the following order:

Clauses 1 to 12, Clauses 34 to 41, Schedule 2, Clauses 42 to 64, Clauses 13 to 18, Schedule 1, Clauses 19 to 33, Clauses 65 to 70, Title.

[Lord Forsyth of Drumlean (Con)]

My Lords, I thank the Minister for agreeing to take Parts 1 and 2 of the Bill at the end, but could he give us an assurance that we will have the fiscal framework by the time we get to Parts 1 and 2, as recommend by both the Economic Affairs Committee and the Constitution Committee of this House?

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

I know that this is a matter of great importance to my noble friend and the whole House. We debated the fiscal framework very fully at Second Reading, and there is nothing further that I can add. However, I can confirm that the relevant parts of the Bill will not be taken in Committee until after the new year, and that gives us space to make progress with the fiscal framework negotiations.

Motion agreed.