Chamber and committees

Last year, the Scottish Government told us that the bill would make just a small administrative change; that it would grant no new rights; that it would not interfere with the operation of the Equality Act 2010; that safeguards were not required; and that there was no evidence of harm to women. All that was wrong.

This sorry and sad episode created a culture in which women were dismissed as transphobes and bigots. The Scottish Government failed in its duty to analyse the potential impact on women, and it misled Parliament. It must provide clarity on next steps, as the bill must never be implemented.

I renew my calls for the Government to apologise, as its conduct has fatally undermined public trust in Government, and it has no one to blame for that but itself.

The budget shortfall is down to the Conservatives choosing to keep children in poverty and to underfund the NHS across the UK. Those are clearly political choices, not economic ones. That funding model is not working for Scotland, and securing independence is the only way out of this mess.

I note that, in the Deputy First Minister’s 30-minute statement, no mention was made of funding to advance the cause of Scottish independence. If spending reflects priorities, the Scottish Government is not serious about independence, is it?

The families of 30,000 children across Scotland are in debt over the cost of school meals, which might have something to do with income thresholds for free school meal eligibility having barely risen in the past 20 years. In 2002, low-income working families with an income of less than £13,230 were eligible; today, the income threshold has risen to just under £19,000. However, if the figure had been adjusted in line with inflation, the income threshold would now, two decades later, be just under £28,000. Will the Scottish Government consider maximising eligibility for free school meals for low-income working families in order to reduce the financial hardship that the minister spoke about, to help end school meal debt and to tackle the cost of living crisis?

To ask the Scottish Government whether it plans to allocate funding to local authorities in its 2024-25 budget to facilitate the cancellation of any school meal debt and expand universal free school meal provision to those age groups that are not currently entitled. (S6O-02876)

The court judgment has vindicated the concerns of women’s rights campaigners that the Gender Recognition Reform (Scotland) Bill would negatively impact the operation of the Equality Act 2010 and, therefore, existing protections for women and girls. Now that the Government has been forced to face the folly of its position, will it take this timely opportunity to apologise to those campaigners for dismissing their concerns as not being valid?

As we have been discussing, the fiscal framework is complicated, but I believe that it is deliberately so. It is the formula for determining Scotland’s funding as part of the UK, via the block grant and Barnett formula, minus abatements or deductions.

Scotland is rewarded if we grow our economy faster than the UK’s and is punished if we do not. However, no region of the UK—other than London and the south-east—ever ends up with higher gross domestic product rises than the UK average. The additional no-detriment clause, which we have been discussing this afternoon, was added to the Smith commission report. That was meant to recognise the fact that, for the most part, Scotland’s economic performance has a lot more to do with reserved UK economic policy than it does with anything that we do at Holyrood.

Recently, during the pandemic, we witnessed at first hand why we need full fiscal autonomy. Much of the financial support that the Scottish Government could provide to back up public health policy could be delivered only if the UK Government decided that those were also the priorities in England.

In my opinion, the no-detriment provisions do not deliver for Scotland as they might. Rather than the Smith commission delivering greater fiscal control and responsibility for Scotland, it has, unfortunately, left us in the position of having greater accountability but, crucially, without the fiscal levers to back it up. Greater responsibility without power is never a good position to be in.

In recent years, the Scottish Government has chosen to increase tax slightly. That should mean more money being raised to invest in better public services, which I think we would all welcome—I am sure that the Scottish public would welcome it very much. However, that is not what happened. The Scottish Parliament information centre reports that the Scottish public paid £900 million in higher tax over a three-year period, but the Scottish budget rose by only £170 million over that same period. Therefore, £730 million was lost because of the fiscal settlement. That would be enough to raise the Scottish child payment to £40 a week several times over.

Scotland is in the unfortunate position of raising tax in order to fill a black hole in the block grant that was created by the fiscal framework.

In my opening remarks, I set out the concept of having responsibility without power being a very dismal situation in which to find oneself. My amendment speaks about VAT, so I will take a little bit of time to talk about that, because it goes some way towards reinforcing that concept.

The Scotland Act 2016 states that receipts from the first 10p of the standard rate of VAT and the first 2.5p of the reduced rate of VAT in Scotland would be assigned to the Scottish Government’s budget, which would make VAT the second-largest source of tax revenue for the Scottish Government after income tax. However, despite that, the new framework has not managed to navigate a path that would deliver that. Of course, the key word is “assigned”.

I understand that, but there is a metaphor in that for the fiscal framework as a whole. It is complicated and difficult to get the framework to work in Scotland’s favour, which we have heard from across the chamber during the debate.

VAT being assigned rather than devolved means that, even if the promises of the Smith commission were delivered on, the Scottish Government would not have any direct policy control over VAT. If the framework allowed for VAT to come to the Scottish budget, as it is supposed to, VAT would continue to be collected by His Majesty’s Revenue and Customs at UK level, and the amount of tax that would be assigned to Scotland would require to be estimated using a model to be developed by HMRC, the Treasury and the Scottish Government. Liz Smith just made a point about VAT assignment being complex.

Another 15 per cent of the Scottish budget would be based on VAT revenues that were raised in Scotland, but we need to think about that. That would be 15 per cent of the entire Scottish budget, but there would be no control—that is the key point—for the Scottish Parliament and the Scottish Government over the level at which VAT should be set. That illustrates somewhat the difficulty for Scotland of the fiscal framework—the previous version or the revised one.

I remember, some time ago when I was a member of the Finance and Constitution Committee, as it was called in 2016, listening to presentations from experts who were setting out the previous fiscal framework. I understood that the way in which the framework was constructed made it extremely difficult, if not impossible, for Scotland to succeed under it. I am afraid that nothing that I have heard since then and nothing that I have heard in the debate today has convinced me otherwise.

I will take a little time to talk about the debate. Michael Marra gave a fairly dispiriting speech. However, he made some interesting and important remarks about timing, secrecy and scrutiny of the review process.

I know that we have said that the subject is quite dry, but it is very important to Scotland. Potentially, there should be more involvement by the public, parliamentary committees and experts. That was picked up by Kenny Gibson, who spoke about the need for more involvement by the Scottish Parliament and—I am sure—the committee that he is on.

Michelle Thomson echoed my comments when she spoke about PPP and the poor value for the public purse that it represents, and the fact that, although the UK is now in the privileged position of being able to move away from that model of funding public infrastructure, Scotland is not, and the fiscal framework is locking Scotland into a position in which it must use PPP. That should be of interest to everyone in the chamber.

Ivan McKee spoke about Jim Cuthbert, and referred to Mr Cuthbert’s view that tax cuts are the only way to grow the economy. He admitted that he is not sure whether that is what Mr Cuthbert meant, and I do not believe that it is. I think that, in the relevant comment in his paper, Mr Cuthbert was reflecting the Treasury’s view: the Treasury believes that the only way in which Scotland can minimise economic harm to itself via the fiscal framework is to accept the economic straitjacket that the Conservatives offer Scotland.

In my earlier speech, I focused on my view that, compared with the full flexibility that fiscal autonomy would give us, the fiscal framework review represents a bad deal for Scotland. No amount of tinkering around the edges will change my view on that. I am sure that members on the Scottish Government party’s benches will agree that only with the powers of independence can Scotland truly flourish and grow, and that only with economic separation from Westminster can we ensure that our policy priorities—those of the Scottish people—are matched by the fiscal levers of the Scottish Government. However, we can have those levers, and Scotland can have that power, only by becoming an independent country.

Michael Marra might not remember this, but I was in the justice department. I certainly did have conversations with colleagues, particularly about funding settlements for justice, but I was not responsible for broader financial decisions.

My opinion is that there was not a good deal for Scotland, and the new fiscal framework is worse still. I believe that it is a trap—an economic trap and a political trap—that the Scottish Government has acceded to, either knowingly or unknowingly. The fiscal framework is a means of forcing the Scottish Government to pursue a low-tax, small-state approach to government. That is against the values of the Scottish Government and, of course, of the majority of Scots who elected that Government. The new framework also has built into it the real danger of relative economic decline.

Separating economic impacts that come from UK policy from those that are from policy that is created in this Parliament is now an almost impossible task, which was alluded to earlier in the debate. However, the new deal seems to be an acceptance that it is just too difficult. As a result, Scotland just accepts that it will be responsible for both. Disastrous economic choices that are made in London are heaping misery on a Scotland that is running just to stand still against factors such as soaring inflation and Brexit carnage.

Dr Jim Cuthbert, formerly of the Scottish Office, explains that it is nigh on impossible for the Scottish Government to develop a successful fiscal policy under the arrangement. Therefore, it is very easy to see why the Conservatives are happy with the settlement. I do not think that they should be, by the way, because it harms their constituents as much as it harms my constituents.

However, it is less easy to understand why the Scottish Government has agreed to the settlement. Is it really in the best interests of Scotland, or is it, in fact, damaging? One reason why I believe that it is damaging is that it is forcing Scotland into sub-optimal decisions on capital spending. For example, the poor-value public-private partnership is a model of financing public sector infrastructure that the UK Government has now moved away from, because it can; however, Scotland cannot, because our choices are very limited.

I am concluding now, I am afraid.

It is clear that devolution can deliver to us only so much and that the powers of independence will enable Scotland to create a thriving economy, a wealthier nation and higher living standards for all of us.

I move amendment S6M-11546.1, to leave out from “believes” to end and insert:

“notes that although VAT assignment was recommended by the Smith Commission, several years later, half of VAT raised in Scotland that was to be assigned to the Scottish Budget is still not included in the updated fiscal framework, and believes that only with the full powers of independence will the Scottish Parliament have all the fiscal levers required to reduce poverty, grow the economy, tackle climate change by investing in the future of carbon capture technology in the North Sea, and invest in public services.”