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Scotland Bill

To paraphrase my hon. Friend the Member for Penrith and The Border (Rory Stewart), I rise with passionate moderation to speak in favour of Lords amendment 18, although I will ask for some clarification of those provisions and of the legislative consent motion from the Scottish Parliament. For the avoidance of doubt, the proposed new clause in Lords amendment 18, for which many claims have been made in the debate, is concerned with the implementation of the financial aspects of the Bill. It is extremely welcome that we are going to have a yearly review of those aspects. My points relate to some of the wording in the Secretary of State's statement in March and to the prior negotiation between him and the Scottish Parliament. Members have mentioned the Barnett formula, but it is not my intention to talk about it, other than to say that I do not apologise for being a proponent of a needs-based formula. I agree that moderate language should be used, but I would like to put on the record the fact that I feel that the current settlement is wrong. It is not a question of subsidy or largesse. The Scottish economy pays for the money it receives through oil revenues. I accept that. My point is, however, that for a nation or country such as the United Kingdom, revenues should be allocated on the basis of needs, not of where the oil is to be found. I put on the record again that the current arrangements have no element of subsidy. The working of the Barnett formula merely ensures that Scotland is whole, as it were, in respect of the Scottish oil revenues. Let me deal now with the statement of 21 March, which I think provided the basis of the proposed new clause. The Secretary of State said that he would like to reflect in the new tax-raising powers the proposal recommended by Holtham, which would shield Scotland from macro-economic shocks. There would also be a no-detriment principle. The hon. Member for Perth and North Perthshire (Pete Wishart) said that he felt the House of Lords debate on this subject was poor. I have read their lordships' comments and I have also read those of the Scottish Parliament—and I would say that it is pretty much 50:50 in length and quality. I thought both debates were good, but I want to speak further on the issue of no detriment. This no-detriment provision represents a change to the working of the Bill between now and the last time it was discussed in this House about a year ago. I hope that Ministers will put my mind at rest as to how it will work. To recap, the last time we discussed this matter, we were going to adjust the block grant for the amount of income tax raised in Scotland. That was to be a once-and-for-all adjustment, and then we would be able to move forward. If Scotland were to raise more income tax, it would have more revenue, enabling it to spend more on public services and so forth. That position has now changed. The House of Lords called it a fudge. Essentially, the change relates to the principle of no detriment. My question is this: no detriment to whom? My understanding is that the allocation will be reviewed each year, as advocated in the proposed new clause. If, as a consequence of how the system works, Scotland loses out due to its income tax revenues not having risen as expected, an adjustment will be made to ensure that Scottish taxpayers are not out of pocket. That, as I understand it, is the no-detriment principle. There could be detriment, however, as this is a zero-sum game. I welcome the transparency of an allocation of that type, but its consequence will be a movement of resources from the UK to Scotland. That does not seem to me to be equitable, but perhaps Ministers will be able to put my mind at rest on that point. Let me raise three questions about the proposed new clause in Lords amendment 18. First, is there a fear that the no-detriment principle reduces the accountability of the Scottish Parliament? I think it was Mr Crawford who, during the debate in Scotland, suggested that, had the principle been introduced over the past four or five years, there would have been an increased transfer to Scotland of many billions of pounds. That may or may not be true, but we should certainly not simply nod the measure through without its being understood. I hope that the Minister will give me some reassurance. I think that we have all been present when Members of the Scottish National party have described the Bill as a dog's breakfast and a pig's ear. I apologise if I have got that the wrong way round and it was a pig's breakfast and a dog's ear. However, the transcript of the Scottish debate suggests that there was a lot more enthusiasm about the Bill there, much of it in respect of the no-detriment principle. So was Mr Crawford right? Is it true that, had the principle been introduced three or four years ago, there would have been a transfer differing by billions from what was discussed a year ago on the Floor of the House? If that is the case, there should be a transparent discussion about it. Finally, I should like to know whether the no-detriment principle implies a two-way flow. Does it work in both directions? According to my understanding of its operation, if income tax in Scotland as a proportion of the total UK income tax becomes less important, there will be an adjustment. Will that adjustment also take place in the opposite direction? I repeat that, notwithstanding the fairly technical points that I have raised, I support the Bill and the Lords amendments, particularly Lords amendment 18. Whatever else it may do, it will increase transparency.