Holyrood demands explanation for UK-Scotland fiscal talks deadlock

22 Feb 16

Senior ministers from both the Scottish and UK governments have been warned to come armed with good explanations for their difficulties in agreeing a fiscal framework for Scotland’s new devolved powers when they face MSPs in Edinburgh tomorrow.

Finance secretary John Swinney and Scottish secretary David Mundell will face separate grillings tomorrow from Holyrood’s devolution committee, which had hoped to have the framework in place by last week to allow MSPs proper time to consider and assent to the Scotland Bill before they disperse ahead of May’s Holyrood election.

Despite a joint communique insisting that an agreement had moved closer, Swinney and chief secretary to the Treasury Greg Hands failed to reach agreement at a tenth round of talks last Friday.  Officials of the two governments have maintained contacts over the weekend, and both first minister Nicola Sturgeon and UK chancellor George Osborne are understood now to be involved.

Writing in today’s issue of the National newspaper, devolution committee convener Bruce Crawford warns Swinney and Mundell to come armed with full accounts of their respective governments’ positions and how they see prospects for settling the framework, which will replace the Barnett Formula in determining Holyrood’s Westminster block grant after Scotland gains new tax powers.

“The committee will rightly expect nothing less than a full and detailed explanation of their respective positions and where they go from here,” Crawford writes. “Any further delay beyond Tuesday will have a substantial impact on the Scottish Parliament’s ability to scrutinise the detail of any agreement.”

The most intractable of the issues that have separated the two governments arises from the “no detriment” provision conceived by the Smith Commission and enshrined in the Scotland Bill. This stipulates that devolving powers should result in neither Scotland nor the rest of the UK suffering any fiscal disadvantage beyond those arising from differentials in the tax rates set.

This raises many problems, notably how the residual block grant paid to the Scottish Government by the UK Exchequer should take account of projections that Scotland’s population will grow more slowly than the rest of the UK and that its elderly population will be relatively bigger.

Swinney and Sturgeon, supported by Labour’s Scottish leadership, say that the “levels funding” formula proposed by Hands would leave Scotland at least £3bn adrift, but their alternative of a “per capita indexed deduction” has been rejected by London. The two sides have also produced widely different figures for the cost to Scotland of setting up a new devolved welfare regime.

“The clock is ticking and we need to know if the promises made are going to be delivered; and our Scottish parliament has only four weeks remaining properly to consider any deal on the table,”  Crawford says.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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