Speech

Scotland Bill: the second reading

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The second reading of the Scotland Bill in Parliament. The Bill will begin a new phase of devolution in Scotland.

Mr Speaker, I beg to move that the Bill be read a second time.

Over the past decade, the devolution of power and decision making from this Parliament to the Assemblies of Wales and Northern Ireland, and to the Parliament in Scotland, has transformed the constitutional arrangements of the United Kingdom.

With this Bill we begin a new phase of devolution in Scotland.

A phase we enter with cross party support and the support of individuals and organisations across the country.

The Scotland Bill is, of course, an important step in the coalition government’s programme to modernise and reform the United Kingdom’s constitution.

But its origins lie in the Scottish Parliament itself and in the support given by the previous government, which I am happy to acknowledge.

Mr Speaker, this Scotland Bill will further empower the Scottish Parliament and make it more accountable to those who elect it. In doing so, it will strengthen Scotland’s position within the United Kingdom.

But let us reflect on how we got here.

The late Donald Dewar famously said, whilst quoting from the first line of the Scotland Act 1998:

“There shall be a Scottish Parliament”

‘I like that’.

He was not alone.

His sentiments were, and continue to be, widely shared in this House, and throughout Scotland.

I think it is important to pay tribute to Donald Dewar for his historic role in shaping modern Scotland.

He was a true statesman, serving both as Secretary of State for Scotland and Scotland’s original First Minister.

In the creation of the Scottish Parliament he has a fine legacy.

But he would be the first to insist on recognition for the countless others, across different parties, and, crucially, from many different backgrounds in Scotland - who patiently built the case for devolution over many years, indeed decades.

Likewise, we should acknowledge those in this place, in the Scottish Parliament and beyond who supported the early years of the devolved institutions, building their capacity and establishing their credibility.

Today we build on that work.

When taking the original Scotland Bill through this place in 1998, Donald Dewar said that the creation of a Scottish Parliament was not just for Scotland.

Nor was it just routine tinkering with the detail of our political system.

Rather, it was a fundamental, radical reform of the UK’s constitution.

After more than a decade of devolution, the Scottish Parliament is firmly established as part of the fabric of Scottish life.

More than that, devolution - not just in Scotland, but right across the United Kingdom - is now part of our national life too.

The Parliament was established to bring power closer to the people of Scotland.

To make government more responsive to their needs.

To put their priorities at the heart of Scottish governance.

And it has succeeded: decision-making, on education, health, the environment, among many things, is closer to the people those decisions affect.

The experience of Scottish devolution has changed the terms of the debate. Few would seriously now argue that there should be no Scottish Parliament.

Mr Speaker, the Bill that we debate today builds on the achievements of the original Act.

It builds on the experience of devolution.

And it further strengthens Scotland’s place within the United Kingdom.

Just six months after being elected, we introduced the Scotland Bill on St Andrew’s Day.

In doing so, we made good our formal pledge, in our Programme for government, and in the Queen’s Speech, to implement the recommendations of the Commission on Scottish Devolution, the Calman Commission as it is more commonly known.

But this was not our commitment alone.

The party opposite also pledged in its manifesto to implement the recommendations of the Calman Commission.

And I welcome their ongoing support - without in any way seeking to compromise the important role they will perform in scrutinising the detail of the Bill.

Once again, however, the measures brought forward to this House, on a major piece of Scottish constitutional legislation, are founded on support from across this Chamber and within Scotland.

Mr Speaker, after the first decade of devolution, it was right to review the Scotland Act.

To assess how devolution was working.

To ensure that the Scottish Parliament had the right powers to deliver for people in Scotland.

In December 2007, the Commission on Scottish Devolution was established by vote in the Scottish Parliament.

Chaired by Professor Sir Kenneth Calman, the Commission included Conservative, Labour and Liberal Democrat representatives: but it was independent of any political party.

And it embraced representatives from business, education, the wider public sector and across civic Scotland.

The Commission gathered evidence from a wide-range of sources and engaged directly with people in Scotland and elsewhere in the United Kingdom - through detailed consultation, public engagement events, oral evidence from a spectrum of interests in Scottish public and business life, and survey evidence.

Let me record my thanks to Professor Sir Kenneth Calman and his Commissioners for their thorough, inclusive and well-evidenced work. I would also like to acknowledge the impressive and detailed work of Professor Anton Muscatelli and the Independent Expert Group on Finance, which supported the Commission.

The Final Report of the Commission was submitted jointly to the Scottish Parliament and the UK government in June 2009.

It was widely welcomed.

Based firmly on the Commission’s findings, the Scotland Bill seeks to implement its key recommendations.

The Commission’s first and overarching conclusion was that devolution has been a real success; that it is here to stay: and that the balance between reserved and devolved policy powers and functions is, broadly, in the right place.

But it also concluded that there is a shortcoming in terms of the way the Parliament is funded - and specifically in terms of accountability.

So, at the centre of the Commission’s Report and of this Bill are measures to improve the financial accountability of the Scottish Parliament.

We have a Parliament in Scotland that can determine policy on a wide range of subjects. It can determine how and where money is spent.

But at present it cannot be held effectively to account for raising the money it spends.

The Commission recognised this imbalance.

The Scotland Bill addresses that imbalance by providing a package of taxation and borrowing powers that will see the Scottish Parliament become accountable for over a third of the money it spends.

In doing so, the Bill represents the largest transfer of fiscal powers from central government since the creation of the United Kingdom.

It is a radical but responsible step.

Most significantly, we will create a Scottish income tax.

We will create that tax by cutting 10 pence off the basic, higher and 50 pence tax rates for Scottish taxpayers, adjusting the block grant in proportion, and allowing the Scottish Parliament - indeed, obliging it - to apply a Scottish Income tax at a level of its choosing to meet its spending plans.

This will give Scottish Ministers and the Scottish Parliament a much more significant stake in the performance of the Scottish economy.

The level of the Scottish rate will be Scotland’s to decide. And those who set the rates will answer directly to those affected by them. Power will rest with the Scottish people.

In addition to income tax, the Scotland Bill will devolve to the Scottish Parliament responsibility for stamp duty land tax, and landfill tax.

This will complement its policy responsibilities for housing, planning and the environment.

The Bill will also allow the Scottish Parliament to propose new devolved taxes, to sit alongside its other powers.

But the fiscal powers are not limited to tax. They extend to borrowing powers, too.

The Scotland Bill will allow Scottish Ministers to borrow up to £500 million for current spending where tax receipts fall short of those forecast.

At the other end of the scale, we will provide for a Scottish Cash Reserve so that they can bank and save money where tax receipts exceed those expected.

These provisions will allow for effective financial management to deal with fluctuations in its new revenue stream of tax receipts.

We also set out in the Bill a brand new capital borrowing power, of up to £2.2billion. This will provide the Scottish government with new means to invest in major infrastructure and other projects.

It will be for Scottish Ministers and the Scottish Parliament to decide whether to borrow, and if so for what purpose - a new Forth crossing, or new hospitals, or new schools. Maybe even a railway.

And it will be for them to account to the Scottish people for those choices.

As a consequence of increasing the financial freedom and accountability of the Scottish Parliament to raise its own revenues, there will be a reduction to the existing block grant.

The grant will continue to make up the remainder of the Scottish budget.

This will ensure financial stability. It will ensure continuity of public service provision.

And it will maintain the economic union that is so central to our United Kingdom.

I know that views differ, both in this House and further afield, on the broad issue of the block grant, and specifically on the Barnett formula that underpins it.

I do not expect those differences to be resolved today.

Indeed, the funding formula is not part of the Bill.

The government has set out its position on the Barnett formula in its Programme for Government.

Whilst recognising the need to review the arrangements in time, our overriding priority is to tackle the deficit and we will not consider a review until the public finances are returned to good health.

But let me be very clear.

Nothing in this Bill prejudges future changes to the funding formula.

Rather, the effect of the Bill will be to make the Scottish Parliament more reliant on its own revenues, and less reliant on the block grant, to fund public spending in Scotland.

Of course, there is another set of financial arguments which has been put forward as an alternative to the measures in the Bill.

In recent months, there has been some discussion in the Scottish Parliament and the Scottish press about other approaches to fiscal devolution - and specifically about the idea of ‘fiscal autonomy’.

However, its proponents have failed to come up with any credible proposals - indeed, any detailed proposals at all while the economic arguments advanced in support of ‘fiscal autonomy’ lack any firm evidence to support them.

The proposals in this Bill are the only practical and sensible way forward for Scotland and for the UK.

Rather than taking a leap into the unknown, our proposals introduce significant changes which build on established practice from elsewhere in the world. I look forward to the scrutiny they will receive here and the continuing scrutiny from the Scottish Parliament.

Of course, implementing these new financial arrangements will require detailed work by the UK government, the Scottish government and a range of other stakeholders. We will approach the task in a carefully planned and phased way.

The Bill provides the overall framework for the new arrangements: but more than legislation alone will be needed to give effect to the measures set out there.

The Command Paper published alongside the Bill sets out the key stages in this process, with milestones, so that the full package of powers is in place in time for the tax year 2016-17.

But the Bill and the Command Paper are not just about finance.

The Calman Commission examined the whole of the devolution arrangements and found that the division of policy responsibilities in the original Scotland Act worked well.

It did, however, make recommendations to improve it further.

These are reflected in the Bill

In the area of justice, we will give the Scottish Parliament the power to legislate on air weapons. And give Scottish Ministers the power to set the drink-drive limit and a Scottish national speed limit.

In the area of health, we will give Scottish Ministers the power to decide which doctors in Scotland should be able to use drugs for the treatment of addiction.

We will give the Scottish government a formal role in key appointments to the BBC Trust and the Crown Estate.

And we will give the Scottish Parliament more powers over the administration of its own elections, and its own processes and procedures.

There are also some areas where, for good and practical reasons, the Calman Commission recommended re-reservation of powers to Westminster. These too are included in our Bill - for example, the regulation of healthcare professions and corporate insolvency.

Finally, we have taken the opportunity to address the question of the official title of the devolved administration - the ‘Scottish Executive’ or the ‘Scottish government’. The term ‘Scottish government’ has now become broadly recognised. We propose to make that official.

Not every proposal from Calman is set out in this Bill. In some cases, legislation is not required.

For example, the Commission recommended much closer co-operation and communication between administrations and between Parliaments.

Many of the proposals require change to working practices - change to which this government, for its part, is committed.

And I know, Mr Speaker, that you, the Lords Speaker and the Presiding Officer will determine the appropriate basis on which to develop relationships between our Parliaments.

In fulfilling our commitment to implement the Calman recommendations there are some cases where we have deviated from the precise recommendations because the policy context at UK level has changed - for example, in relation to air passenger duty, which this government is reviewing.

In other cases, however, we have gone further than the Commission - building and strengthening its recommendations.

Mr Speaker, this is the first time since the creation of devolution that a government has brought forward legislation with such wide-ranging effect on the current settlement.

Indeed, this Bill will fundamentally change the powers and responsibilities of the Scottish Parliament.

For that reason, this government will only proceed with this Bill with the formal and explicit consent of the Scottish Parliament.

It is right and proper that the Scottish Parliament should examine the measures that we set out in the Scotland Bill. I welcome the thorough way in which it is going about its business.

And I look forward to returning to discuss the provisions with the Bill committee in the Scottish Parliament next week.

Conclusion Mr Speaker,

Devolution breathed new life into Scottish politics and Scottish society.

It brought government closer to the Scottish people.

And it shaped a more confident Scotland in a more secure United Kingdom.

The Scotland Bill extends that settlement for the future.

The first chapter of devolution began with the Scotland Act 1998.

The second chapter opened on St Andrew’s Day when we published the Scotland Bill.

This Bill reflects the work of many across this chamber and in Holyrood.

Work that we have undertaken together, with consensus.

Strengthening Scotland’s future within the United Kingdom.

I commend it to the House.