Chamber and committees

I am grateful, Presiding Officer.

It may help Mr Cole-Hamilton on the point about VAT assignment if I note that the drift of the conversation in the Smith commission was entirely about assigning VAT for the purposes of show, so that the proportion of revenues that were supposedly under the control of the Scottish Government and the Scottish Parliament could be demonstrated to be more than 50 per cent. That was a fig leaf.

Will the member give way?

Will the member give way on that point?

Having negotiated the inaugural fiscal framework, in 2016, I know and appreciate how difficult a challenge it is for the Scottish Government to secure a broadly acceptable set of financial arrangements with the United Kingdom Treasury. I therefore warmly commend the Deputy First Minister for securing the agreement that was announced some weeks ago, which is the subject of today’s debate.

In essence, the agreement builds on the agreement that was put in place in 2016. Crucially, the agreement embeds on a permanent basis the use of the indexed per capita mechanism for calculating block grant adjustments. That was the key issue of negotiation in 2016. I say to Brian Whittle that there would have been no fiscal framework agreement in 2016 if that provision had not been in place, and I constantly made that expressly clear to committees of this Parliament.

I am very sorry that Willie Rennie is not here for my speech, because I am going to mention him. I am reminded that, in 2016, he said to the First Minister at the time that the Scottish Government had made a fundamental error in accepting the model, because we would never be able to protect it at the point of review. The Deputy First Minister has not only protected the model at the point of review but has embedded it permanently, which we were unable to secure in 2016. That is a formidable achievement.

The model that underpins the fiscal framework is essential in protecting Scotland’s public finances, because we already carry population risk in the Barnett formula, and the indexed per capita mechanism was necessary to provide long-term stability.

Mr Marra says,

“if indeed it is the right one”.

I rest my case that he is speculating on what the right outcome is. He should go back and look at what Alex Rowley, Jackie Baillie and—crucially—Malcolm Chisholm said in 2016. Malcolm Chisholm was my strongest ally in negotiating that outcome in 2016, because he could see the dangers for us of a rampant UK Treasury with the comparable method that Mr Marra is now embracing. If Mr Marra is to be at the helm of negotiations in the future, heaven help Scotland—that is all that I can say.

One of the reasons why the Scottish Government was able to negotiate what was, in my view—this is where I disagreed with Ash Regan earlier in the debate—a broadly acceptable fiscal framework in 2016 and protect that at the point of review was down to one word, and that word is “agree”. The Smith commission concluded that the Scottish Government and the UK Government must agree a fiscal framework—not that the UK Government should consult the Scottish Government, which were the usual weasel words, and not that there should be a discussion, but that the UK Government and the Scottish Government must agree a fiscal framework.

I kept the Smith commission meeting late into the night to make sure that that single word got into the final wording of the agreement, because my experience told me that, if we were not treated as an equal in that conversation, we would be steamrollered by the UK Treasury.

We now know that agreement mattered, because the independent report that was published on the agreement made it clear that the fiscal framework arrangements and securing the indexed per capita mechanism—which I consider to have been a mighty achievement and essential for Scotland—have prevented the loss of approximately £500 million per annum from Scotland’s public finances.

For me, there is a deep lesson for Scotland in that respect. Unless we are treated as an equal, we are likely to lose out. Look at what has happened in other areas of intergovernmental relations. The passage of the United Kingdom Internal Market Act 2020 without our consent has undermined devolution. The passage of the Subsidy Control Act 2022 without our consent has undermined devolution. Where we are not equals, we will lose out. That has been demonstrated in the autumn statement. We are losing out badly because we are at the mercy of decisions that are taken to suit the political agenda of the United Kingdom Treasury, where it can use its power to overwhelm the interests of Scotland and where we are not treated as equals.

I draw the simple lesson that Scotland will prosper only where we are treated as an equal, and I want us to be treated equally as an independent country.

Can I help Mr Cole-Hamilton on that point?

I am not making a constitutional point. I am making a point about the substance of the autumn statement, because that fuels, in general, the size of the public finances that are available to the Scottish Government to deploy. The point that I am making is that the failure of the Conservative Government to take adequate account in the autumn statement of the enormous effects of inflation will have a profound and unavoidable effect on the pressures on public finances and public services in Scotland. That has nothing to do with the constitution; that is about the existing arrangements just now, which are a result of the policy choices of the Conservative Government.

Could Liz Smith develop the argument about whether the revised fiscal framework adequately provides for the scale of financial shocks that we are experiencing? The finance secretary is having to wrestle with significant levels of inflation that we have not experienced for about 45 or 50 years. The crucial lack of response in the autumn statement demonstrates that, although the fiscal framework can provide all the rules that it wants, if the underlying financial position, as demonstrated by the autumn statement, is not sufficient to support public expenditure, public services in Scotland will feel the pressure as a consequence of Westminster decision making.

Yes, I disagree with that point of view and I will come on to explain why.

I cannot decide whether Mr Marra’s contribution was curious or churlish. Mr Marra speculated that he wanted more time to decide whether the indexed per capita mechanism was preferable to the comparable method. The comparable method is the proposition of the Conservative Treasury. Mr Rowley, on the Labour benches, had the good grace, in 2016, to recognise the Government’s achievement in seeing off the comparable method. Here, Mr Marra is inviting the Conservative Treasury to inflict it on us. I have never heard such folly in my life.

Will Mr Leonard give way?