Scotland Bill: Peers want to halt legislation until fiscal rules are agreed

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Media caption,

The House of Lords is currently scrutinising the details of the Scotland Bill

A House of Lords committee has called for the Scotland Bill to be put on hold until issues over the funding package that accompanies it have been resolved.

The bill completed its journey through the House of Commons earlier this month, and is now in the Lords.

But an agreement on the fiscal framework has yet to be reached by the UK and Scottish governments.

The framework includes the adjustment that will have to be made to Scotland's block grant funding from Westminster.

The UK government said discussions on the fiscal framework had been constructive and both sides aimed to complete them "as soon as possible".

Scotland's Finance Secretary John Swinney said the Scottish government would only approve the bill if it had a "fair fiscal framework agreement".

Seven problems

The Economic Affairs Committee set out its concerns in a report on the legislation, which hands a raft of new powers to Holyrood.

It identified seven problems with the bill, stating the future of the UK "could well be at risk" if they are not solved.

The legislation is due for its second reading in the House of Lords on 24 November.

The committee has said the bill should not proceed to the committee stage - the first stage where amendments can be made - until the devolution fiscal framework is published.

Analysis by Brian Taylor, BBC Scotland political editor

Their noble Lordships are notably unhappy with the Scotland Bill. They want it put on hold until they get answers to a few minor matters. You know, wee things like the entirety of the Scottish budget for the foreseeable future.

So will there be a delay to the implementation of the bill? Yes, but perhaps not directly as a consequence of their Lordships' warning.

Rather, the problem is that the accompanying Fiscal Framework - who funds what and how - is still lodged in discussions between the Scottish and UK governments. No deal on money, no finality for the bill.

Specifically, the Scottish Parliament will not sign off on the Scotland Bill until John Swinney says he is happy with the accompanying cash package. And, right now, he is - like their Lordships - less than content.

But this is a Westminster bill. Why does it matter what Holyrood says? It matters because of the agreement that Holyrood has to signal consent before Westminster legislates on such issues.

The committee also said:

  • the UK and Scottish governments should agree "simple and clear borrowing rules" and establish the "maximum" for Scottish government debt
  • the "no-detriment" pledge where neither the Scottish, nor the rest of the UK would be worse off after the new devolution settlement, was unworkable and a "recipe for continuing conflict"
  • the Barnett Formula was not a sustainable method to calculate funding and should be replaced with a "needs based" funding formula
  • there should be much greater transparency and scrutiny of how funding is allocated to the devolved parliaments.
  • the chairpersons of the finance committees of the Westminster and devolved parliaments should meet regularly to ensure "effective and coordinated scrutiny".

Committee chairman Lord Hollick said: "Parliament is being asked to pass the bill before we are told full details about the fiscal arrangements that will underpin this new era of devolution - that cannot be right.

"We are calling on the progress of the bill to be halted until the details are agreed and published. That would at least allow peers the opportunity that MPs were denied of scrutinising and amending this important legislation as informed participants."

Image source, PA
Image caption,
New financial powers, including on tax and borrowing, are due to be handed to Holyrood

Scotland Office Minister Lord Dunlop said: "There is a huge amount on which John Swinney and I, and indeed both of Scotland's governments, agree about on this issue, so now is the time to deliver what we have both committed to - the best possible deal for Scotland.

"As a number of Peers and academics have pointed out, there are issues which will need to be resolved, but one thing is clear - both governments want a deal which will stand the test of time. We both want to retain the Barnett Formula. And we both want the parliamentary process which will deliver the Scotland Bill to continue."

Mr Swinney said he did not agree with "many" of the conclusions of the Lords committee, including its proposal to remove the Barnett formula.

'Crystal clear'

However, he did agree that the fiscal framework was "essential" to delivering the Smith Commission proposals "in both letter and spirit".

Speaking on BBC Radio's Good Morning Scotland programme, Mr Swinney said: "I would be against there being a delay in the House of Lords because I think fundamentally we need to make progress on the Scotland Bill so that the Scottish Parliament can take its final decision on whether the bill is to be adopted before we get to the Scottish Parliament elections next May.

"I'm making my position crystal clear. The fiscal framework has to be fair to the people of Scotland and consistent with the Smith Commission report before I will recommend to parliament that it gives its legislative consent to the Scotland Bill."

Scottish Labour MSP Iain Gray said a negotiated framework which met the framework of the Smith agreement was "eminently achievable".

He said: "It is the job of the first minister and her deputy to get that deal for Scotland, and we have to assume that they are up to that job. They should stop wasting time with threats to walk away and refuse to accept the powers Scotland wants and is now entitled to."

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