Lords calls on PM to halt Scotland Bill amid worries over fiscal framework

In its report A fracturing Union? The Economic Affairs Committee said there is a lack of adequate information and transparency about the process, stating: “Nobody knows what is going on”.

Peers expressed particular worry about the “fiscal framework” – the arrangement ministers in London and Edinburgh are working out to determine the amount of money raised by new devolved taxes and Scotland’s share from UK-wide taxes.

So far, the two governments have failed to agree on the mechanism for reducing Scotland’s annual block grant from the Treasury when the new powers to raise taxes come into force.

The bill is due to be debated at a second reading in the Lords next week.

Peers would like the Scotland Bill to be halted before the committee stage next month so they can scrutinise the fiscal framework when it is eventually published.

Labour peer Lord Hollick, chairman of the committee, said peers wanted the UK government to “see the merits of the case we have made” and stop the legislation until after the publication of the fiscal framework.

He said: “Without being able to understand how the fiscal arrangements work, it is most unwise that this bill should be enacted.”

“This very significant process of devolution…will impact not only on Scotland but on the other nations of the UK. We are at a moment of time where a very significant, long-term decision is being taken and in the absence of a fiscal framework, it is being taken, frankly, in the dark.”

Lord Hollick warned that “the public finances of Scotland could be seriously damaged and seriously undermined” if a poor system were introduced.

The peer referred to remarks made to The Herald by Professor Anton Muscatelli, principal of Glasgow University, in which he suggested Scotland could be short-changed to the tune of hundreds of millions if the wrong framework mechanism was brought in.

Under one option, the peer noted the block grant Scotland receives would “fall to a very, very low level indeed…in 2015/16 from £19.4bn to potentially £12.8bn in 2035”.

He added: “So over a 20-year period there would be a very substantial decline, which would place Scotland in a very, very disadvantaged position. We are talking hundreds of millions of pounds here, which would affect the ability of the Scottish government to provide the services it wants to provide…They would be seriously circumscribed and curtailed.”

John Swinney, the Deputy First Minister, said: “We have made it clear, we will only support a Legislative Consent Motion on the Scotland Bill if there is a satisfactory and fair fiscal framework agreed between the Scottish and UK governments. We will never sell the people of Scotland short.”

A spokesman for the UK government welcomed the report and said discussions on the framework had been “constructive”.