Live Fiscal Framework Statement House of Commons

Order, statement the Secretary of State for Scotland, Secretary David

Mundell. 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. And 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 Deputy First Minister

of Scotland, John Swinney, who have led these negotiations with skill.

Lord Dunlop, whose contribution has been invaluable 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 be proud of what has been achieved and

the servers they have given. This is an hugely systolic deal and will

pave the way for the Scottish parliament to become one of the most

accountable the bolt 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 therefore the whole

United Kingdom. As Lord Smith himself said yesterday evening, when

the Smith agreement was passed to the Prime Minister and First

Minister, both gave their word they would love it into law. They have

met that promise in full. -- deliver it into law. You will be more

details in coming days but I would like to set out a future GL and

solve the deal. The Scottish Government will retain all of the

revenue from the taxes being devolved or assigned including

around 12 billion of income tax and 5 billion of VAT. The block grant of

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 the areas of devolved welfare. We will

use the governments preferred funding model. Under this model the

government holds all specific breasts in relation to devolved

taxes just as it does under the Barnett formula. That is fair to

Scotland and fair to the rest of the United Kingdom. However, for a

transitional period covering the next Scottish Parliament there is an

agreement to share the Scottish Pacific risks as these are

implemented. The Scottish Government will hold the economic risk while

the UK Government will hold the population risks. A Scottish

Government will not receive a any less than Barnett funding over the

course of the spending review simply due to different collation growth

and by the end of 2021 a review of the framework will be formed by an

independent report so that we can end Stewart we are continuing to

deliver Smith in full with the Scottish Government responsible for

the full range of opportunities and risks associated with its new

responsibilities. We have also agreed the Scottish Government will

have additional new borrowing powers which will ensure the Scottish

Government can manage its budget effectively and invest up to 3

billion in infrastructure. In line with the recommendation of the Smith

agreement we will provide the Scottish Government with ?200

million chair to setup the new powers will control. The government

has set up more powers to the Scottish people ensuring they have

one of the most our full devolved parliaments in the world, and

economic and national security that comes with being part of our United

Kingdom. That is what we have agreed and that is what we have delivered

in full. Now that we have agreed this story demolition deal the

conversation must move on to how these new hours are to be used. The

Scottish Government will have extensive powers on tax, welfare and

spending. It will have control over income tax and be able to change the

rates and thresholds. It will be able to create new benefits and of

course the permanence of the Scottish Parliament is put the on

any doubt. Mr Speaker, the people of Scotland voted for these new powers

in the deserve to hear from the parties in Scotland how they will

use them. New powers which, if used well, it can grow Scotland's economy

and indeed population and bring opportunity and prosperity. Now that

we've 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. Ian Murray.

Thank you Mr Speaker and I would like to thank the Secretary Of State

for his statement and coming to the House yesterday to indicate he would

be making this statement today. I'd also like to begin by welcoming

unequivocally the news that this agreement has been made. I would

like to thank both governments, the assistant to the First Minister and

the Secretary Of State himself for working so hard to secure this

historic deal. The people from both governments who we now do the deal

work, my heartfelt thanks go out to them.

As Lord Smith said, the agreement sees the recommendations of the

Smith Commission delivered in full. Importantly, they have now

stipulated that the balmy bar met Dutch macro Barnett formula should

remain. I know the secretary of state has said details will be

published by the end of the week. Can he indicate whether this house

will have time to scrutinise it in detail? -- Barnett formula. What

this process has highlighted is that future intergovernmental

relationships must be improved to make these powers work for Scotland.

Lord Smith recommendations that both governments need to work together to

get a more productive, robust, that the bowl and transparent

relationship and that the joint ministerial committee must be

reformed as a matter of urgency, echo in this process. And can he

confirmed this will be done. We all know there was a stumbling block.

Under a compromise, there will be a five-year transitional period, which

will cover a full term of the next Scottish parliament. Towards the

end, an independent review recommendation will be published.

That will form the basis of a more permanent solution. When he gave

evidence, the Secretary of State suggested the period between the

review being publish and the transitional period ending could be

as little as just 12 weeks. If no agreement is reached, what happens

then? In terms of the period itself, it is my understanding that the

Scottish fiscal commission will carry out forecasts for the Scottish

economy. Can he confirmed that? Under the terms, but they will be

fully independent of the Scottish Government, because last week the

Scottish finance committee voted against allowing for this very

independence. There seems to be some confusion over the block grant

adjustments during this period to 2022. The First Minister said it

would be done according to the Treasury's favoured method, but to

the Scottish Government's favoured outcome. Can he confirmed what it

will be? Will it be the tax capacity adjusted levels deduction? I

understand that was his latest offer. Further clarity is also

needed on the demolition of powers. New powers will be available by

2017, he said. The First Minister does not think this is realistic. Is

he able to confirm that the new tax powers will be transferred by April

2017? Today, the Scottish Government in surpassing the Scottish budget.

Ten months from now, we want them to have full control of passenger duty,

and tax. We also want to have powers over welfare, which will allow us to

design a new social security system for Scotland. Onto the review, I

welcome it and that it will be fully independent. I have stated that

partial oversights and arbitration should be an established part of

relations. Can you tell us how the review body will be chosen and

confirm it will be done in the spirit of consensus with the full

agreement of both governments? Kenny also tell us what extent the review

will implement the decision taken on the long-term decision for Rock

grant adjustment. -- can he also tell. Today marks and historic day.

The creation of one of the most powerful devolved parliaments in the

world. The demands have been met. Barnett protected, power was

transferred, the Val delivered. Scottish politics will never be the

same again, thanks to these new powers. We have entered a new and

exciting era of devolution. -- the promise was delivered. My party will

grab it with both hands. Thank you. I agree with most of what he said.

In relation to the opportunity it presents and I think the people of

Scotland, what they want, is to see us move on from discussing the

process to discussing policies and the difference we can make for them

with these extensive new powers. I would indicate that it is my full

expectation that the agreement and associated details should be

available tomorrow and I very much hope that that will afford them the

maximum amount of scrutiny. It will be open to committees of this house

to scrutinise the arrangements as they see fit. He makes, and for

understandable reasons, reference to intergovernmental relations. I think

it's important to look at what Lord Smith said, in relation to how this

agreement was arrived at. He said, "It is difficult to imagine a bigger

test. Whilst it was obvious they are very tough negotiations, what

matters is an agreement has been reached". I accept that the leave. I

believe that when the transition period is over, when the independent

report has come forward, it will be possible to reach an agreement. And

he has asked many times why it has taken so long. Many important

agreements are reached at the 11th hour just by the very nature of

doing a deal. I am sure that we will be able, on the basis that were set

out to ensure that this is the case at the end of the transitional

period. The independent review, which he refers to, will indeed be a

matter of agreement between the two governments. As he is aware, there

are many people in Scotland who perhaps ruled themselves out being

independence, who aren't as independent as they seem. I think it

is important that there is agreement between the two governments as to

how that independent review should go forward. And then ultimately, in

relation to the fiscal commission, yes, the agreement with the Scottish

Government is that its forecast will be fully independent. And finally,

this government will place no impediment in relation to the

transfer of powers. So obviously we cannot impose the tax powers on the

Scottish Government, we wouldn't seek to do so. But I would have

hoped that they want to take them on as soon as possible and that is the

end to which we will be working. May I congratulate the Right Honourable

friend on his apparent success in achieving a settlement. Can he

assure the house that this settlement, when it is implemented,

not only gives a strong Scottish Government the power that needs to

conduct its devolved affairs properly, but also it does nothing

whatever to impair the ability of the United Kingdom governments to

maintain financial discipline and healthy public finances for the

British economy in future, because surely it's an essential condition

for the future of growth and prosperity of the English, British,

Welsh, Irish, United Kingdom economy? I am very happy to give my

right honourable friend the assurance he seeks. The Scottish

fiscal framework will be consistent with the UK fiscal framework. I will

thank the Secretary of State for his statement and the conversations he

had yesterday given the constraints of Parliamentary time and only being

able to make a statement. I speak in behalf of all SNP members on

welcoming the news fiscal framework. We all look forward to the draft

heads of agreement being published for Parliamentary scrutiny. My

colleagues and the Scottish Government were clear throughout

these negotiations. They said they would not sign a deal which would

include a threat to the Scottish budget. They promise of no detriment

was made and it is a promised that the SNP has made sure was delivered.

When they first began, negotiations, Scotland's budget faced a cut of ?7

million. This week, it was 3 million. Yesterday, it was ?2.5

million. Last night, they got a deal that ensures we will not be a pound

or even a penny worse off. New powers were promised and will be

delivered. I pay tribute to Nicola Sturgeon and John Swinney for

standing up for Scotland and being stronger for Scotland. I welcome

that the UK Government will guarantee that the outcome of the

funding model is delivered in each of the next six years. I understand

that a transitional funding arrangement will be reviewed

following the UK and Scottish Parliamentary elections in 2020 and

2021 respectively. The review will be informed by an independent

report, the recommendations presented to both governments by the

end of 2021. Let me say this. The Smith report was crystal clear that

the fiscal framework had to be agreed by both the UK and the

Scottish governments. The Treasury tried to engineer an agreement that

would have allowed them to impose a model of indexation in five years'

time. Those are the facts of the matter. That would have seen

billions cut to the Scotland budget. May I ask the following questions.

Will he confirm that the Treasury no longer has the power to impose a

method of indexation? Will he confirm that the review will go

ahead without prejudice to the outcome? Will he confirm there is no

default indexation option? And that the Scottish Government's agreement

is required before any new indexation model can be adopted? I

thank the honourable gentleman for the parts he welcomed in relation to

the agreement. This has been a negotiation and it is a point that

has been arrived at. It's not possible for the Treasury or UK

Government to have engineered an agreement. What was needed was the

agreement of the Scottish Government. That has that has what

has been achieved. They have been able to agree on framework that is

fair to Scotland and fair to the people of Scotland. I can reassure

him that the review will go ahead on an independent basis. Without

prejudice or predetermined outcome and it will be concluded by the end

of 2020. There will be no imposition of any formula at the end of that

period and what happens there will be by way of agreement. As I said,

greeting Lord Smith, I believe this process, in some of the most

difficult types of negotiation, gives us constants that UK

Government and Scottish Government will be able to reach an agreement.

Extrapolating recent population trends, what is the additional cost

to England and Wales and Northern Ireland of the transitional

arrangements on population? There will be no additional cost to

England and Wales and Northern Ireland in relation to the powers

being transferred. If we were not proceeding with this devolution

settlement. Because some is being delivered to the Scottish Government

is the same as would be delivered under the Barnett formula -- the

amount. The Scottish Government has pledged to halve passenger duty. It

leaves Newcastle Airport at risk. Following the statement, when can we

expect a decision from the government on support for regional

airports, as promised by the Prime Minister, as ongoing uncertainty is

very damaging. I note for the honourable lady says. People in

Scotland will note that the SNP position used to be to abolish

passenger duty completely. So they're somewhat of a change there.

But she makes an important point. There is a review and I'm sure these

issues will be issues that are considered as the budget process

goes ahead. It's not the measure of giving to others what you demand

yourself. Why should the Scottish people feel any different? Doesn't

the Secretary of State realised there must be some merit in the

argument that as long as we maintain the outmoded, outdated and unfair

Barnett formula, which is disadvantage for the English, we

will stoke unhappiness on both sides of the border.

My honourable friend as we well know is staunch in this chamber. When he

moved his amendment for complete fiscal freedom my response to that

is that I think the people of Scotland would not respond well to

having a ?10 billion annual Black hole in their finances and that fool

fiscal freedom is not the answer. Further freedom assets set out

within the Scottish bill to create a power Parliament is what the people

want and what this government is delivering. Washer. Can I

congratulate all involved for the principle of no detriment. Can I

also thank the chief Secretary for attending and the Deputy First

Minister and hope they come again to explain more about the details of

this fiscal framework. Can I just ask the Secretary Of State, at the

beginning of the process we have heard this figure 7000000000 pounds,

Devon billion the Treasury intended to cut from the Scottish budget, why

was it the Treasury 's intention to cut billions of pounds from the

Scottish budget and what did he, as the Scottish Secretary for Scotland,

a ten to do about it? Mr Speaker Rhino the honourable gentleman does

not understand the concept of negotiation where to sides work

together to get an agreement. Assertions and sound bites sound

good but they do not deliver for the people of Scotland. What delivers is

to produce a sustainable agreement. to produce a sustainable agreement.

That is what we've done, we got an agreement that underpins the

Scotland Bill which means Scotland can get these powers over tax and

welfare. People want to move on from the process debate, they want to

view the holiday ideas. Maggie Throup. The enquiry into the fiscal

framework shows into the new welfare powers devolved to Scotland, has my

right honourable friend find any details from the Scottish Government

on how the plan to use the new powers? I very much welcome the fact

the First Minister and Deputy First Minister have indicated they do land

to set out how they intend to use the powers. I think it was very

interesting some of the media reports in Scotland in particular

that indicate the SMP land to significantly increase the tax

burden on those middle-income earners in Scotland but obviously we

will have two weight. The detail in the manifesto what will be the cases

there will be no excuses now, Mr Speaker, the honourable members

opposite can come here to this Parliament and complain about

certain welfare changes that they will have the ability within

Scotland to set their own welfare arrangements. The Scottish

Government have been able to achieve their chosen deduction method

through to a skilled strategy what advice will he get to the Welsh

government when it comes to negotiating the fiscal framework for

Wales? What I am Cleon is that the position in Wales will be as in

Scotland, the people of Wales will benefit most when the Welsh

government and the United Kingdom government work constructively

together for their benefit. Isn't it time, Mr Speaker, that we heard from

the Scottish Government detailed plans to devolved our down to the

Scottish communities? Revolution should not stop at Holyrood. I

absolutely agree with my honourable friend and I am sure he will have

read my speech of the 21st of November delivered in Glasgow city

Chambers, making exactly the case for devolution within Scotland.

Unfortunately, in recent times, Scotland has become one of the most

centralised countries in terms of government. I believe the news that

if government elected in May should be devolving further powers and the

best way to achieve that is to elect more Scottish Conservative MPs under

the leadership of Ruth Davidson. Thank you, how great to follow that

remark from the Secretary Of State. How does the cost can be a to the

government current calculations for implementing a deal agreed at last

weeks EU summit for foreign workers in the UK? I welcome the question,

it she and I were both Scottish candidates bodies cottage Parliament

in the dim and distant past. I am sure the details I am sure the

details will stand up to scrutiny. It is an unedifying spectacle when

large numbers are quite so visit this. He's even graces that all of

them do have a very notable smile on their faces so at least there is

humour in the chamber. Mr Alan mac you wish to give us the benefit of

your views? This new agreement does show that Scotland's government can

work together and the details of how the world use these new powers? I

certainly do and I do since yearly hand have on a number of occasions

in this chamber, paid particular tribute to the Deputy First Minister

of Scotland, John Swinney. He and I have had numerous conversations like

this process and twilight times we have been in disagreement, they have

always been cordial and civil and that is the basis of the

relationship I want to see with the Scottish Government. I think the

honourable gentleman is right and what this agreement means is that

the Scottish bill can pass through the House and hopefully received

consent motion at Holyrood and what that will mean is the will be no

hiding place on these issues bodies cottage government. If they want to

spend more they will have the tax powers to do so and if they want to

have higher welfare they will have the ability to do so. My

constituents will welcome this agreement and the fact the Scottish

Government was able to persuade the Treasury to abandon its initial

position which would have meant seven pounds -- ?7 billion of cuts

in the Scottish finance and come to the Smith position that there should

be no detriment. At this been the original possession of the secretary

we could have got this done before Christmas rather than spend so much

time with that. Is now the case beyond doubt that principle of no

detriment to the Scottish budget is enshrined both now and in the

future? Yes, as is the other point in the Smith commission, it is not

just in Scotland but across the UK. I was very clear that Barnett would

be retained, that has been done and it is right it has been done. The

starting point for public spending in Scotland now is 115% of the UK

average. Can the Secretary Of State tell the House in terms of his

modelling what that percentage per capita will be at the end of this

Parliament? Certainly, since the honourable gentleman asked for

complex calculation, I will be happy to write to him in that regard. What

I would say and I do respect his strongly held views an allusion to

the Barnett formula, the government division is clear, the Barnett

formula is being retained. Following yesterday's devastating votes on the

Lord amendments for the Welfare Reform Bill, and the Secretary Of

State say more on cams of when powers will be transferred to

Scotland so that at least in Scotland we can do something to

prevent the appalling effects of poverty on children and disabled

people? Obviously I do not agree with her perspective in relation to

specific policies but she is right the Scottish parliament will have

specific and detailed policies in relation to welfare. We have a joint

ministerial group on welfare which includes myself and Scottish

ministers Alex Neil and Roseanna Cunningham and what we need to do is

work through that group in terms of the transfer of specific powers.

What we do not want to do is order to be a transfer of power without

new arrangements being in place cause obviously goes able in receipt

of the benefits have to be our prime concern. We are going to work

closely together. An enormous amount of work has been done by officials

to date and I am confident once we know the cause we do not fully now,

of course, what the Scottish Government proposal la, once we know

what the RB will be able to make an effective transition. The Secretary

Of State in his reply to my honourable friend the member for

Perth and North they are sure seemed to confirm that the Treasury is

opening bed in these negotiations, a so-called level deductions approach

which would have led to a ?7 billion debt in Scottish spending, the

opening bed was merely a negotiating ploy. If that is the case will be

Secretary Of State confirm that it was disrespectful for negotiations

to start with the position so far from the doubt and will he confirm

that will ever happen again? Mr Speaker, what complete and utter

nonsense! A deal is done that is good for Scotland, good for the UK

and honourable members opposite had to trawl through newspaper reports

to find something that they can complain about! This is a good deal

for Scotland, it gets Scotland new powers, like stock about how we use

those powers or the benefit of Scotland and let the grievance

agenda to bed once and for all! I have no desire to sour the tone of

consensus on what is and the story date for Scotland. It is a fact and

many of my constituents leave that funding for Scotland and parts of

the Barnett formula art and fear to the north of England. That is the

acknowledged that grievance and how does this new fiscal framework James

that? I acknowledge that people have those feelings and a number of

people on both sides of this House have raised issues about the Barnett

formula. In my view that is their job as representatives of different

parts of the United Kingdom. My position is quite clear, the Barnett

formula is good for Scotland and this over at is keeping the Barnett

formula. And the Secretary Of State name some of the devolved assemblies

around the world that will now be less powerful than the Scottish

Parliament? I can produce them a list and I will send him that lest

because I am not focused on other assemblies around the world. I am

focused on the Scottish parliament and making it a powerhouse

parliament with the powers that make a difference in Scotland. That is

what the state of the debate is. I think his constituents want want to

hear about parliaments in South America and other parts of the

world, they'll want to hear about what his party intends to do on

income tax and wealthier. -- welfare. We have had a particularly

mild November, December and January, two G, going forward, let us know

when he expects this will to finish its passage in the House of Lords,

when he expects it go back to the House of Commons and when he expects

it to get consent? In relation to the first two questions I expect

that to be Marge and I hope Royal assent will be achievable within

March but it may be April but I am also respectful of the Scottish

Parliament process and the need for a legislative consent motion. I

thank the Secretary Of State for advanced sight of his statement. I

note the Secretary makes mention of the UK Government holding population

risks. Will he concedes that the limited powers available to the

Scottish Government do not allow for population growth and will he now

listen to calls for a cottage posts by the work scheme? In relation to

the latter I have had the pleasure to appear before the Scottish

appears select committee and be grilled on the issue of student work

visas. I made very clear that I would look closely at the work the

committee has produced and I repeat that undertaking. What I do not do

is I do not accept the premise of her question. I believe that

properly used the tax and other powers that the Scottish Government

have will allow it to grow the Scottish economy, create jobs and

grow the population of Scotland. He talks a lot negotiations, but

this is a point. When they first considered making cuts, could be

Secretary of State, the man in the Cabinet, see what measures he made

to protect Scotland? I have been closely involved in these

discussions throughout. But they are negotiations. They are not about the

Treasury imposing. As Smith himself recognises, they are about the two

governments coming together in a difficult circumstance to negotiate

about money, which is often the most contentious thing that is the

subject of negotiations. What we have demonstrated is that both

reach a deal which is good for both. reach a deal which is good for both.

Thank you. He has just confirmed that the initial proposal put

forward by the Treasury of a ?7 billion cut to Scotland's budget was

not an opening negotiation position, but a serious proposal. In the light

of that, I would like to ask, does he consider himself Scotland's man

in the Cabinet or the Cabinet's man in Scotland? What complete and utter

nonsense. This is an investigation. It was conducted by John Swinney. He

adopted a completely different tone. Civil and cordial throughout. I

respect his objective of getting the best deal for Scotland. That is my

objective, too, but we have to get an agreement. And we got one. It is

a good one. It is an opportunity to move away from the grievance agenda.

I am afraid this afternoon's proceedings leave me in doubt that

even with these extensive new powers, the S NP will be able to

leave that grievance agenda behind. He has repeatedly criticised the

party for failing to set out how they will use the new powers. But

barely an hour ago, the Prime Minister floundered badly when asked

whether the Scottish Conservatives would reduce the tax rate on high

earners. I'm sure he would like to avoid suggestions of hypocrisy and

extend his criticism to his boss. I have nothing but admiration for Ruth

Davidson. She's the one person in the Scottish Parliament that can

stand up to the SNP and hold them at her account. And if people don't

want a 1-party state in Scotland, the way to achieve that is by voting

Scottish Conservative. The Prime Minister didn't flounder. He told

you the position. Ruth will set out what the tax proposals are and they

certainly won't be the same as the SNP's proposals revealed in the