Public Finances: Scotland

Greg Hands Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Stewart Hosie]

As the arguments are complicated, it is so much easier simply to quote in full from the 15 January issue of the new Labour leadership’s favourite newspaper, the Morning Star:

“Labour MP Diane Abbott accused her party’s leaders yesterday of doing working people a ‘great disservice’ by backing Tory plans for permanent austerity.”

The hon. Gentleman keeps getting it wrong.

The key thing is that Scotland’s budget has been cut and will continue to be cut by this Government, which makes the achievements of the Scottish Government all the more remarkable. That makes it all the more important not simply that we get any old fiscal agreement, but that we get it right. We must ensure that the Smith commission principle of “no detriment” is adhered to and that we do not embed unfairness in the system, so that we are not subject to possible additional cuts of about £350 million a year. We need to avoid that outcome so that we can continue to do good things and build on the progress we have seen in health spending, which is up to £12.3 billion this year and will be £13 billion next year, and in education.

[The Chief Secretary to the Treasury (Greg Hands)]

May I bring the hon. Gentleman back to the fiscal framework? I am interested in the amendment that he has tabled, because it seems to quote from the Smith commission—particularly paragraph 95(3) on no detriment, which states that

“the Scottish and UK Governments’ budgets should be no larger or smaller simply as a result of the initial transfer of tax and/or spending powers”.

The amendment carefully deletes some important parts of the Smith agreement. It states that

“Scotland would be no worse or better off simply as a result of the transfer of additional powers”.

Why has he deleted the word “initial”, which is very important in respect of the transfer of powers, and any reference to fairness to the UK taxpayer?

[Stewart Hosie]

For the sake of brevity. Let me be very clear that the negotiations that are under way are founded on a number of principles, including no detriment as a result of the devolution of further powers initially and no detriment as a result of the policy decisions of the UK Government or Scottish Government post-devolution. I would have thought that the Chief Secretary might have known that.

The whole point of getting this right is to avoid a potential cut of an additional £3.5 billion over a decade, so that the Scottish Government can continue their good work. We do not want those additional cuts to be made, because they would weaken our ability to internationalise the economy; hinder our support for businesses seeking to innovate and to do research and development; suck vital resources out of our plans to invest in education and infrastructure; and undermine all the work being done by the Scottish Government to deliver the fall in unemployment and the highest employment rates in the UK.

We understand the trajectory that Scotland’s public finances will take if the wrong block grant adjustment is chosen. As I say, it will perhaps mean the loss of £3.5 billion over a decade.

--- Later in debate ---

[The Chief Secretary to the Treasury (Greg Hands)]

This Government are united in their belief in a successful and prosperous Scotland—a Scotland that is strengthened through being part of the United Kingdom and whose presence makes the United Kingdom itself stronger. It is clear to us that the Scottish people should have greater control over their affairs and that the Government in Edinburgh should be more accountable. The referendum of 2014 was a defining moment in Scotland’s history. The Scottish people’s voice was clear: they wanted to make Britain stronger and not to break Britain up. It is now right that we should deliver a fair and lasting settlement that works for Scotland and for the UK as a whole. The UK Government are committed to delivering the Smith agreement, which, let us remind ourselves, was agreed by all five parties in Scotland, including Labour and the Scottish National party. That commitment has driven every step of our work.

[James Berry (Kingston and Surbiton) (Con)]

What assessment has the Chief Secretary to the Treasury made of Labour’s recently announced plans to put up income tax in Scotland? What impact does he think that would have on the Scottish economy?

[Greg Hands]

I was amazed by Labour’s announcement in the Scottish Parliament yesterday about wanting to increase income tax. I think it would be a disaster for the Scottish economy and for the people of Scotland, so I wholly agree with my hon. Friend.

The Smith agreement was clear: the Scottish Government should bear the economic responsibility for their decisions; or, as the Scottish Deputy First Minister has put it:

“If we take on a responsibility and make a success of it, we should bear the fruit of that; if we get it wrong, we must bear the consequences”.

I want to make three main points. Why are we doing this taxpayer devolution? The answer is to give Scotland one of the most powerful and accountable devolved Parliaments in the world. The stress there must be on the word “accountable”. Since 2010, the amount of taxes raised in Scotland and spent by the Scottish Government will have increased from around 10% to around 20% under the Scotland Act 2012, and to 40% under these proposals. These measures would also allow the Scottish Government the opportunity to grow their economy, to use new devolved powers and to see the fruits of their efforts.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The Chief Secretary to the Treasury is right to say that accountability is at the heart of this matter. That is why we must have a deal, and if we do not get one, we in this House and those in the Scottish Parliament need to be told the reason why. Without a deal, the people of Scotland face the prospect of going to the polls in May not knowing exactly what powers will be given to the Parliament.

[Greg Hands]

I thank the right hon. Gentleman for that intervention, which leads me nicely on to the fact that the UK Government are absolutely committed to getting a deal. I announced earlier today, before the Scottish Affairs Committee, that I will be going to Edinburgh on Monday to continue the negotiations. I am hopeful that we will get—

[Mike Weir (Angus) (SNP)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Question put accordingly, That the amendment be made.