I have accepted a request from the First Minister to make an urgent statement to update the Parliament on the fiscal framework. I will allow around five minutes for the statement and perhaps 10 minutes for questions. The First Minister will take questions at the end of her statement. Therefore, there should be no interventions or interruptions.
17:30
I provided an update to Parliament earlier today on the negotiations between the United Kingdom and Scottish Governments to reach a deal on the fiscal framework that is required to accompany the Scotland Bill. At that time, I confirmed that we had made significant progress on a range of issues but the negotiations on the key issue of the block grant adjustment mechanism were on-going and that further proposals had recently been received from the Treasury.
I made it clear this afternoon that, for this Government to sign up to a deal on the basis of a transitional arrangement, we also required there to be a fair review mechanism that did not prejudge the outcome and that would not default to a funding proposal that delivered population-driven detriment to the Scottish budget. I have been clear throughout that I would not sign up to a systematic cut to Scotland’s budget, whether that cut was applied today or by a prejudged review in five or six years’ time.
During the afternoon, negotiations have continued on that basis, and I have spoken to the Chancellor of the Exchequer. As a result of those conversations, I can report to Parliament that there is now an agreement in principle that I believe we can recommend to Parliament. Draft heads of agreement will be published for scrutiny by Parliament by the end of this week.
That agreement, if it is supported by the Parliament, will secure the following outcome. There will be not a single penny of detriment to the Scottish Government’s budget as a result of the devolution of powers during the transition period for the next six years to March 2022. The UK Government will guarantee that the outcome of the Scottish Government’s preferred funding model, which is per capita indexed deduction, is delivered in each of those years. In addition, we have agreed that, at the point of review, the conditions that I set out to Parliament this afternoon will be met in full.
The transitional funding arrangement will be reviewed following the UK and Scottish Parliament elections in 2020 and 2021 respectively. The review will be informed by an independent report, with recommendations presented to both Governments by the end of 2021. Crucially, the fiscal framework will not include or assume the method for adjusting the block grant beyond that transitional period. The two Governments will require to jointly agree that method as part of the review.
We have also agreed that the method adopted will deliver results consistent with the Smith commission’s recommendations, including the principles of taxpayer fairness, economic responsibility and, crucially, no detriment.
The agreement that we have reached on the block grant adjustment ensures that there will be no detriment for the next six years and that there can be no default by the UK Government to a funding model that would deliver detriment in the future. We have secured no detriment now and for the next six years, and we have ensured that there can be no detriment imposed on Scotland at any point in the future.
As the Deputy First Minister and I have made clear, there has been give and take in the negotiations. We did not get everything that we wanted but, when the discussions began in June last year, the Deputy First Minister faced a proposal from the Treasury that would have delivered £7 billion of detriment to the Scottish budget over the next 10 years. During the negotiations, we have made absolutely sure that there will not be £7 billion or £3 billion of detriment; the deal will not allow a single pound or even a penny to be taken from the Scottish Government’s budget. [Applause.]
The deal will ensure that the funding for Scotland cannot be changed without the Scottish Government’s agreement. It protects the Barnett formula and will allow the powers in the Scotland Bill to be delivered.
I very much welcome the statement, and I congratulate both Governments on coming together to deliver on the promises made by all parties in this chamber to deliver powers and protect the Barnett formula. I also recognise, and the Parliament should recognise, the personal commitment that the Deputy First Minister has put into the process. [Applause.]
We have new powers and more powers are guaranteed, and we have a progressive majority in this Parliament. Does the First Minister agree that rather than leaving the powers to gather dust we have a responsibility to use them to break from austerity and build a better Scotland for everyone in it?
I thank Alex Rowley for his question and his support for the position that I have outlined today. I also take the opportunity to record my sincere thanks to the Deputy First Minister. Over the past number of months, he has been absolutely resolute in defending Scotland’s interests. The position that we have reached today is in no small measure down to the perseverance, determination and skill of the Deputy First Minister, and I thank him for it.
It is no secret that I think that the more powers that this Parliament has, the better we can deliver for the people of Scotland. That is why I want this Parliament, in the future, to be an independent Parliament. This Government will continue to do what we consider to be in the best interests of Scotland, and the party that I lead will bring forward a manifesto for the coming election that will seek to win the trust of the people of Scotland on building an economy that is more prosperous and a society that is fairer.
I welcome the First Minister’s statement. Having spoken to the chancellor after the deal was signed, I know that the UK Government welcomes this positive outcome.
The agreement delivers the stronger, more responsible Scottish Parliament that the people of Scotland were promised. It is devolution delivered, and I congratulate our two Governments on agreeing the deal. Despite some rather unhelpful noises off from parties that were not involved in the discussions, which seemed keener to score points than see a deal done, the agreement shows that our two Governments can work together for the good of Scotland. It also provides for exactly the kind of Scotland that most people want: a Scotland that is not separated from our neighbours but has more power and control over its own affairs and is still backed up by the strength and security of the UK.
In the longer term, the agreement also throws a major challenge to the Scottish National Party Government, because grudge and grievance will no longer wash. On tax, welfare and our public services, the buck stops with it. With that in mind, will the First Minister confirm that she will outline at the very earliest opportunity what she plans to do with the powers that will soon make Holyrood the most powerful sub-state legislature anywhere in the world?
Let me tell members one thing that I will never do: describe our national Parliament as a “sub-state legislature”. That probably sums up one of the many differences between me and Ruth Davidson.
Ruth Davidson talks about the Scottish and UK Governments working together. I am glad that we have got to the point of a deal in principle today, but let me say this: it has been much harder work than it should have been to avoid the Treasury trying to cash grab from the Scottish Government to the tune of £7 billion. Perhaps the biggest tribute of all to the Deputy First Minister is the fact that, as a result of what I have just announced to Parliament, he is probably the person who has had more success than anybody else in seeing off a cash grab from Her Majesty’s Treasury.
I look forward to bringing forward proposals in a manifesto that I will put to the people of Scotland in just a couple of months’ time. Ruth Davidson must do likewise. She likes to parade herself as a tax cutter, notwithstanding the fact that she wants to reintroduce prescription charges and charge a graduate tax on our students. The responsibility that she faces is that, if she wants to go around saying that she will cut taxes, she must tell us from where in our public services that money will come.
On the substance of the agreement, does the First Minister not accept that it will be a lot more difficult to get the Treasury model out of the fiscal framework in 2021 when it has been inserted into it today? Why has she therefore agreed to that Treasury model in the fiscal framework when she has rightly opposed it for months? Surely we should not have given way on that important principle.
Willie Rennie should have listened more carefully to what I said. We have not allowed the Treasury model—any Treasury model—to become a default position. That was actually one of the points we were seeking to secure before signalling agreement in principle.
The fiscal framework will not include or assume the method for adjusting the block grant beyond the transitional period, and the two Governments will require to jointly agree that method as part of the review. That was one of the tests that I set this afternoon—that, at the end of the transitional period, when we go into a review, there should be no default model. We have been successful in securing that, as well as successful in securing not a single penny of detriment. I would have thought that Willie Rennie might want to welcome that.
I am very pleased that the agreement has been reached by the two Governments.
Does the First Minister agree that it is now time for the Devolution (Further Powers) Committee to comprehensively scrutinise the contents of the agreement and come to its own conclusions on whether it represents a good deal for Scotland? In the light of that, will the First Minister also commit to publishing the full details of the agreement as early as possible? Does she also agree that it is important that the Deputy First Minister comes before the committee again at the earliest possible date?
I am sure that the Deputy First Minister is already looking forward to that date with the Devolution (Further Powers) Committee. [Laughter.] Of course, the Deputy First Minister will appear before the committee.
The Parliament needs to have time to scrutinise the deal, which is why I am glad that we have reached the point that we have today, as that does afford that time. The Devolution (Further Powers) Committee, the Finance Committee, other committees and the Parliament as a whole will want to look at the detail of the deal.
As I said in my statement, we will publish the draft heads of agreement by the end of the week, and that will allow scrutiny to take place. The Scottish Government will recommend a position to the Scottish Parliament. Ultimately, it is for the Parliament to decide whether it constitutes a good deal for Scotland. I believe that it does.
I offer my congratulations to both Governments, and in particular I single out the Deputy First Minister, who did much of the heavy lifting in the negotiations.
There is one piece of unfinished business. The Smith commission called for independent scrutiny of Scotland’s public finances. Will the First Minister think again and give the fiscal commission teeth with responsibility for forecasting and for reporting on the sustainability of our public finances? I see the Deputy First Minister shaking his head. What a disappointment that is. I hope that on this occasion the First Minister might overrule him.
As I said this afternoon, and have said again now, there has had to be give and take on both sides in reaching the agreement. When the draft heads of agreement are published, Parliament will be able to see the positions that have been reached on all of the issues. Although it no doubt pains me to say it, I suspect that Jackie Baillie will not be too disappointed.
Every Chief Secretary to the Treasury since 1999 has sought to erode the funding of this Parliament, and every single First Minister has faced that situation on occasion. This time, the Treasury has been sent homewards to think again, thanks to the experience of the finance minister and the strength of the First Minister. They deserve the thanks and congratulations of every single member of the Parliament.
I am not sure that there was a question there, First Minister.
I heard a question, Presiding Officer. I thank Alex Salmond for those comments and simply say, in a completely dispassionate and objective way, that I am only building on the legacy that I was left.
I, too, thank the Deputy First Minister and all those who have worked hard to reach this point. Concerns have been raised, though, about the way in which much of the discussion has taken place behind closed doors. I ask the First Minister to commit to an inclusive, participative process in the run-up to the review in five years’ time.
I thank the member for the assumption—I gratefully receive it—that I will still be First Minister at that time. I certainly give an undertaking to do that, should I still be First Minister then.
By necessity, much of what has been discussed in the past weeks and months has been behind closed doors in the private space of negotiations. However, the Scottish Government has, over the past few weeks in particular, deliberately decided to flush much of what was being discussed into the open because we felt that that was a healthier place for it to be.
We have to learn lessons ahead of a review and ensure that the review process, as well as being independently informed, is as transparent as possible.
In relation to that agreed review, will the First Minister reconfirm that, just as in the Smith process, decisions will rely on joint agreement, the Scottish Government and the Westminster Government being equal partners in the review process?
The principle of joint agreement is extremely important. As I said, beyond the transition period that we are agreeing—which of course guarantees the no-detriment position that has been so important to us—we have built into the agreement the principle of joint agreement. The fiscal framework does not make an assumption about the model that will follow the transitional arrangement. The two Governments will require to jointly agree that method as part of the review. That principle of joint agreement is so important, not just to this issue but to all of the other issues that require to be discussed and decided between our two Governments.
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