SCOTTISH CONSOLIDATED FUND

HC Deb 12 February 1998 vol 306 cc566-641 4.11 pm

Mr. Michael Ancram (Devizes)

I beg to move amendment No. 309, in page 26, line 4, after 'State', insert `, having first taken into account the needs of Scotland in relation to the needs of the United Kingdom as a whole,'.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord)

With this, it will be convenient to discuss the following: Amendment No. 77, in page 26, line 4, leave out from 'shall' to end of line 6 and insert `in respect of each financial year make payments into the Fund equalling the revenue raised by the Exchequer in Scotland and in the Scottish sector of the United Kingdom continental shelf.'. Amendment No. 292, in page 26, line 4, after second `time', insert 'and at least once in every financial year'. Amendment No. 111, in page 26, line 5, leave out from `Parliament' to end of line 6.

Amendment No. 78, in page 26, line 6, at end insert— '(2A) The Scottish Ministers shall in respect of each financial year make payments to the Secretary of State equal to an amount agreed with the Treasury for the Scottish share of United Kingdom expenditure in relation to reserved matters.'. Amendment No. 86, in page 26, line 6, at end insert— '(2A) The total sum to be paid under subsection (2) in respect of any financial year shall be assessed at a figure which takes account of the respective needs of each part of the United Kingdom.'. Amendment No. 112, in page 26, line 6, at end insert— '(2A) The payment referred to in subsection (2), shall consist of the block grant in force at the passing of this Act, as determined on the basis of the Barnett Formula, for the first full year of the Parliament's operation commencing on 1st April 2000. (2B) Adjustments to the Barnett Formula to take account of population changes shall be made following the publication of census and mid-census population figures. (2C) In this Act "Barnett Formula" means the non-statutory mechanism for calculating, on the basis of proportions of population, the equivalent changes to the budgets of the territorial departments following changes to programmes and budgets in England.'. And the following amendment thereto: (a), at end add— '(2D) Any review of the operation of the Barnett Formula shall be carried out jointly by the Scottish Parliament and the Parliament of the United Kingdom.'. Amendment No. 293, in page 26, line 6, at end insert— '(2A) No payment may be made under this section until the Secretary of State has laid before the House of Commons a statement certifying that the payment is based on the needs of Scotland in relation to the United Kingdom as a whole.'. Amendment No. 294, in page 26, leave out lines 15 to 18.

Amendment No. 295, in page 26, line 22, at end add— '(9) Before making any payment into the Fund, the Secretary of State shall consult and invite representations from interested parties, including the Scottish Parliament.'. New clause 12—Review of the funding formula— '.—A joint review of the funding formula for the Parliament shall be completed for implementation in the tenth year following the establishment of the Parliament, with the review being based on the principles of—

1. (a) increasing the proportion of the revenue provided to the Parliament and, under the control of the Parliament, from the Scottish tax base, and
2. (b) reducing the dependency of the Parliament on United Kingdom Treasury grants.'

Mr. Ancram

I shall begin by speaking to amendments Nos. 294 and 295, to clear them out of the way. The former, to leave out clause 61(6), is a probing amendment. I am interested in the provision in the clause, and it would be useful to ascertain the manner and circumstances in which it is envisaged that such a provision will operate. That would demonstrate to the Committee the balance of what is proposed in the clause. I hope that the Minister will be able to help us on that.

Amendment No. 295, in simple terms, requires the Secretary of State to consult before he makes payments into the fund. I am always told in the House that Secretaries of State do consult. However, when I try to take a consultation clause out of any Bill, I am told that if I do so, the Secretary of State will not consult. Therefore, I have yet to be convinced that the absence of a consultation requirement forces, or allows, a Secretary of State to consult.

In this case, that is important. As the provision stands, the Secretary of State is required to consult no one but himself and, obviously, to obtain the consent of Parliament. When he comes to a decision on payments to be made, he should consult the Scottish Parliament, which will certainly have a view as to the level of the payments, as well as other interested parties in Scotland. They may include business groups, trade unions and many others with views on the resourcing requirements. Those interested groups should form part of the process by which the Secretary of State makes his determination.

It is surprising that amendment No. 292 should be necessary. It is a simple amendment that would insert the requirement that a payment shall be made at least once in every financial year". The Minister may say that there will be an annual payment, but that is not specified in the Bill. The amendment would insert a simple and innocuous provision. I hope that adding the words "at least" might make it even more attractive to the hon. Member for Dundee, East (Mr. McAllion), who is sitting at the back. He might want to press the Minister to support the amendment.

The main amendments are Nos. 309 and 293. I argue for them with the utmost seriousness. Amendment No. 309 would introduce a general and deliberately non-formulaic point of reference for the funding of the Scottish Parliament. The Bill sets out no basis for that. I shall explain later why I am not seeking a formula. Amendment No. 293 would strengthen that by requiring the Secretary of State to certify to the House of Commons, whose consent he will have had to gain to make the payment, that the provision was the basis of the payment.

The clause is one of the central elements of the Bill. The project, if I can still call it that, was sold to the Scottish people on the basis that financial provision from the United Kingdom would not change. We have heard that time and again during the referendum campaign and since. That claim was made in the White Paper and has been repeated many times since by the Secretary of State.

We are talking about the future funding and well-being of Scotland. No other source of funding is made available in the Bill, apart from the £450 million that can be raised by adjusting the standard rate of income tax. We may test that when we come to debate taxation. It is not good enough to leave the issue hanging in the air.

I am surprised that the Bill gives no statutory formulation of the Government's assurances. Instead, clause 61(2) says: The Secretary of State shall from time to time make payments into the Fund out of money provided by Parliament of such amounts as he may determine. There is no definition of what "time to time" means. I am sure that the Minister will tell us what he intends, but good intentions in statute are not enough. The phrase could mean anything from several times a year to once every 10 years or beyond.

There is no description of the amounts that will be paid, or any indication of what they are likely to be. There are no criteria for calculating the amounts. Assurances do not answer those points.

Surprisingly, there is also no identification of which Secretary of State the provision applies to. I know that that is not specified anywhere in the Bill, but in this case I imagine that the reference is to the Secretary of State for Scotland, if that office continues after the Scottish Parliament comes into being. However, it could be any Secretary of State in the Westminster Government. The determination of the amount is left to the discretion of the Secretary of State and is not bound around in any way. Nowhere is it specified whether the payment will be annual or what it will relate to, and there is no assurance that it will not be entirely at the whim of the Westminster Government of the day.

We shall be told that such details are not usually put in Bills, but they have not needed to be before. I agree that detailed formulas should not be included in legislation because circumstances and definitions might change. Formula by primary legislation is an inflexible tool, but that does not mean that there should be no criteria in the Bill at all. That is why our amendment advances a basis in the most general terms.

We shall be told that what has gone before will continue and that nothing has changed. That has been the tenor of the comments of the Minister for Home Affairs and Devolution and the Secretary of State for a long time; but a lot will have changed. This is no longer about making financial arrangements and provisions between Ministers and Departments in the same Government; it is about doing so between two different Administrations and sets of politicians, who sometimes might not see eye to eye. There is a substantial difference from what happens now.

We might be told—I suspect that we shall, because we were told it in respect of a similar provision in the Government of Wales Bill—that everything will be agreed in concordats. The more I look at concordats, the more concerned I become. They appear to be becoming a tool of domestic government, although as far as I know, their existence and future have never been debated or agreed anywhere in Parliament. Until I heard about them in this context, I had thought that they were part of the diplomatic mechanisms of the Foreign Office or of papal intromissions from the Vatican. We are now told that they are to become part of our procedures.

Mr. Tam Dalyell (Linlithgow)

Is the right hon. Gentleman sure that he is right to lay such emphasis on the problem of different parties? The pressures from politicians in two different institutions, albeit that they are nominally from the same party, might be very great. Such pressures would put a strain on the concordat.

Mr. Ancram

I shall come to that. Concordats might not matter in instances of little political or economic significance such as cultural or sporting affairs. Indeed, they might be an appropriate way to proceed. In this instance, we are talking not about insignificant matters but about an issue of the greatest importance to the future well-being of the people of Scotland and of the United Kingdom as a whole.

Up to now, my gut reaction has been to condemn concordats as not worth the paper they are written on. Nothing has happened to make me change my mind, but because of the regularity of their appearance in our debates, we must examine them more closely. I start with much scepticism, because when I questioned the Secretary of State's Welsh colleagues, who were purveying the same fare, I got some interesting if disconcerting answers. We are told that concordats, which by their nature must be negotiated and agreed with the Scottish Parliament or Welsh assembly, are already being discussed and drafted. Is that the case in Scotland, too? If so, we are being given reassurances on the basis of concordats or agreements that are being reached by members of this Administration but which will have to be operated and endorsed by the Administration of a Scottish Parliament and of this Parliament. Those two situations could be very different, as the hon. Member for Linlithgow (Mr. Dalyell) pointed out. In competitive language, that might politely be described as taking a flier; in more down-to-earth terminology, it is a false prospectus.

Nevertheless, we are asked to risk Scotland's future financial provision on so-called concordats or informal agreements; we need to dig a little deeper. Who will the concordats or agreements be between: the Westminster Parliament and the Scottish Parliament, or the First Minister or Executive of the Scottish Parliament and the Westminster Government? There is a substantial difference in how things might operate. Will they be laid before the respective Parliaments and ratified or remain as private agreements? Will they be enforceable? That is of great importance to the people of Scotland if they are being asked to rely for their funding on them. If so, how and in what jurisdiction? What protection will there be against unilateral breaching of them? What long-term guarantee can they provide to the people of Scotland that the Government's firm undertakings as to the assured nature of their future funding arrangements will be realised?

Those are all crucial questions and on the answer to them hangs the future financial security of a devolved Scotland. It would be one thing to have a binding contract to underpin Barnett and the historic costs and needs base on which it operates; it would be the same if there was some firm parliamentary ratification and endorsement of the agreement, which had the force of law in both parts of the United Kingdom; but it would be something frighteningly different if the agreement or concordat was nothing more than a private agreement between Governments, with nothing to give it legal or parliamentary status. It would be unilaterally breachable and, as I said earlier, it would not be worth the paper it was written on.

There is a more sinister aspect. Opposition Members and Back Benchers on both sides of the House often complain when provision is made in legislation for a plethora of secondary legislation. We all know the arguments—we say that it is time-limited and unamendable, and describe it as the heavy hand of the Executive being brought to bear on parliamentary procedure—but at least it forms part of the parliamentary process. Concordats, on the other hand, avoid Parliament, and if they have effect—I have already expressed doubt about that—it will be effect without benefit of Parliament. They will be the Executive bypassing Parliament, which will be the first step on a road to sideline Parliament altogether. If we allow concordats to develop in that way and to be slipped into the Scottish and Welsh legislation by sleight of hand, we may well come to regret that we have allowed a process to develop that is no longer subject to scrutiny by the House.

We all rather casually refer to this debate as the debate on the Barnett formula, but, on closer examination, it is not. Barnett is not, as is sometimes thought, the whole mechanism for determining levels of spending in Scotland; it is only the determinant of changes to the total. To use a drinking analogy: it is not the beer, but the head on the beer. We must be careful to take that into account. Barnett does not affect the baseline provision; it provides that, where comparable, changes to programmes in England result in equivalent changes in the budget of Scotland, calculated on the basis of population shares.

When in government, we operated both Barnett and the block, occasionally generously, but generally accepting that the two elements reflected the level of need. Since the referendum, and as we warned during the referendum campaign, the principle and practice of the Barnett formula and the whole basis of funding within the component parts of the United Kingdom have come into question. It is interesting that, to a large extent, those questions have come not from my right hon. and hon. Friends and Conservatives in the country, but from Labour sources. We have heard from Labour Members of Parliament demands from the north-east for the formula to be reviewed, because, in the light of devolution, they feel that they are unfairly treated by the way in which the formula operates. The Select Committee on the Treasury called for a needs assessment, to show whether Barnett remained the best way of allocating increases. Lord Barnett himself argued before the Committee that there was a case for a review of the formula.

The fact is that devolution has rubbed the lamp, and the genie of questioning needs has been let out. It will not be easily put back into the lamp, despite the Treasury's bold attempt to do so in its document published on 8 December, because all that it said was that the formula would continue, but would be amended to meet the requirements of devolution. It went on to say that there would be a future annual update of Barnett to take account of mid-year population estimates. I noted with interest that that was to start in 1999–2000, which I calculate is safely after the first assembly elections are out of the way.

Mr. Dalyell

The right hon. Gentleman has forgotten to give credit to those who love the Bill most—the Liberal Democrat party. It was the hon. and learned Member for North-East Fife (Mr. Campbell) who, on 20 December, coined the phrase—he may have used it before: the ever-escalating size of the block demanded from Westminster". That comes from someone who is a mad enthusiast for the Bill.

Mr. Ancram

I am grateful to the hon. Gentleman for reminding the Committee of the words of the hon. and learned Member for North-East Fife (Mr. Campbell). I think that what the hon. and learned Gentleman said is correct. However, he was talking about the block as a whole. As I said earlier, two elements are involved—the Barnett formula, which adjusts the top of the block in terms of comparable changes, and the block itself.

We were told in the publication, "A guide to the Scotland Bill" that the formula is regarded as an "administrative arrangement". It will not be prescribed in legislation. It is only an administrative formula, nothing lasting, and certainly nothing in enforceable form, let alone in tablets of stone. That is why I am concerned that the issue should not be left hanging as it is according to the present provisions of the Bill.

At paragraph 12 of its report, the Treasury Committee said: all Governments would subscribe to the fact that spending should broadly reflect need. We suddenly find that certain questions are being asked about that. The Government will have to face up to the fact that most of those questions will be asked by Labour Members and that they will be about not just the Barnett formula, but the basis of the core block. In the end, I believe that we would all agree that where one has such blocks within a state, as is the United Kingdom, those blocks must broadly reflect need.

4.30 pm

Mr. John Swinney (North Tayside)

The right hon. Gentleman is laying great emphasis on the report of the Treasury Committee into the Bartlett formula. I am a new Member, and I am not familiar with the frequency with which individual members of a Select Committee find it necessary to dissociate themselves from their Committee's report, but the hon. Member for Gordon (Mr. Bruce) found it necessary to do so. He made that decision because he considered that the Treasury Committee report was unrepresentative of the subject that had been originally tackled by it. Much store has been put on a document that does not have a great deal of credibility.

Mr. Ancram

I hope that I am not putting store on it, but certain questions are now being asked. When we consider how the core block will be calculated in the future, we must note that it will not be calculated according to the Barnett formula, which is the assurance given, because there is nothing in the Bill to say how that core block will be calculated.

The fairest way in which such blocks can be calculated—I suspect that it was the basis of the core block in the first place—is by making some reference to relevant need. We have tabled our amendment because the Bill is silent about the calculation.

If someone came to me and asked whether it would be wise to sell his birthright on the basis of an assurance that could not be written in contract—which is what is essentially provided for in the Bill—I should have to advise that person that it would be distinctly unwise to do so. All that we are trying to do is to use the Bill as the contract between the Scottish people and Westminster so that something more concrete is offered than a bland assurance that cannot be put in statute.

Mr. James Wallace (Orkney and Shetland)

Does the right hon. Gentleman recall that, in June 1995, when he was in government, the then Secretary of State for Scotland, now his noble Friend Lord Lang, was asked in the Select Committee on Scottish Affairs about the need to reappraise the formula used to calculate the block, to guarantee its fairness? He said: I do not see the need for it at the moment because I am confident that expenditure per head reflects fairly well the relative differences between Scotland and the United Kingdom. What, if anything, does the right hon. Gentleman believe has changed with regard to the relative need of Scotland and the United Kingdom since the former Secretary of State, who obviously had all the inside information, was able to provide such an answer to the Scottish Affairs Committee?

Mr. Ancram

I am not saying that anything has changed, but if that is correct, let us make sure that that fact is used as a basis in the legislation for making the necessary calculations. That is the only purpose of the amendment.

At the moment, after the Bill has been passed, the hon. and learned Member for Orkney and Shetland (Mr. Wallace) could cite that quotation until he was blue in the face, but if a Government did not want to follow that particular formula, they could say that they were not required to do so by the legislation. We believe that there should be some reference to precisely what the hon. and learned Gentleman has quoted from my noble Friend Lord Lang, in 1995. On that basis, I should have thought that he would want to support the amendment, and I look forward to seeing him doing so when we conclude the debate.

It is important to ask the Government whether they intend to reformulate Barnett, as Lord Barnett has proposed. I know that they will make reformulations on the population basis, but is there an intention to go further than that? The comprehensive spending review that the Government are carrying out is not a needs-based assessment, but it will provide indications of need in various areas. Alongside that, do they intend to examine the relative needs in the United Kingdom? I noticed in note 12 of the Treasury note of 8 December on the Barnett formula that that was not ruled out as a prospect. It was said there that that could be carried out only in consultation with the Scottish Parliament. Will that be considered in the longer term?

Do not those questions underline the fact that the Bill is so silent? It offers no comfort, reassurance or stability—just the transient whim of a Westminster Government and the Secretary of State of the time. Our amendment deliberately does not prescribe, but it provides a hook of reassurance and comfort for people in Scotland that the Westminster Government must have regard to the relative needs of Scotland within the United Kingdom. It creates a discipline that does not currently exist.

Given the assurances that we received during the debates in the autumn, I find it astounding that the Bill leaves Scotland hanging out to dry. Scotland is fobbed off with talk of unenforceable agreements. It is asked to put its faith in all things being perfect in a perfect world. I hope that Scottish Members are too canny to be bought so easily. The Conservative Opposition will not be bought by bland assurances. I ask the Committee to support the amendments, for the reasons that I have given.

Mr. Dalyell

Lord Barnett—Joel Barnett as he then was—was one of my closest friends over 30 years in the House of Commons, when he was the right hon. Member for Heywood and Royton. It must be put on record that it never occurred to Lord Barnett that the so-called Barnett formula to which he gave his name would have any kind of permanency. It was an ephemeral and convenient formula, but no one would have been more astonished than he to have thought that it would be a lasting formula into eternity.

I want to ask, as is my wont, some fairly concise questions. First, what additional taxes can be raised by the Parliament, over and above the specified income tax power, in circumstances in which the Treasury restricts the amount of additional revenue available to the Scottish Parliament as a result of possible future changes to the UK tax structure? There is a lack of clarity on that point. Unless those matters are clarified before the Bill becomes law, businesses and individual taxpayers will be condemned to perpetual uncertainty.

My second question goes back to the civil service. I will be excused if it refers to clause 47, but it particularly refers to any discussions that may take place in relation to tax. I find it hard to see how continued membership of the home civil service will work, when it comes to civil servants arguing about money. Does the United Kingdom head of the service—at present Sir Richard Wilson—have the right of recommendation or any other say in senior appointments? Is there still to be a right of approach to him? Are terms and conditions of service still to be Whitehall-controlled? Depending on the answer to those questions, we can get some idea of how the delicate and doubtless sometimes fraught negotiations on money will take place.

My third question goes back to the reference by the hon. and learned Member for North-East Fife (Mr. Campbell) to the ever-escalating size of the block demanded from Westminster". There will be such demands, because expectations have been aroused in Scotland. They will not be fulfilled by new laws, let alone speeches in Holyrood. Our constituents' expectations will be fulfilled by the provision of money. Therefore, heaven help the Members of the Scottish Parliament if they cannot deliver on some of the expectations that have been aroused. They will ask for more and mor—I would be part of that chorus if I were elected a Member of the Scottish Parliament. Members from all parties will be part of the chorus; they will have no other choice. That is what they are for: their purpose is supposedly to improve the lot—the health, education and housing—of the Scottish people. That can be achieved only through money.

So we come to the nub of the argument. The question is: how long can Members of Parliament who represent English constituencies be expected to vote 24.3 per cent. or 19 per cent.—as some say it is now—more identifiable public expenditure per capita to a part of the United Kingdom where they have no control over the money? That flies in the face of all the laws of human nature, and certainly against the laws of political nature. Do not pretend that those negotiations can be settled by some sort of concordat. There is no chance of achieving amiable solutions—it does not work like that. There will be hard bargaining.

Therefore, it is imperative to establish clarity as to how the formula will work. It is true that, throughout the referendum campaign, it was said as a matter of course that the Barnett formula would continue to apply into the foreseeable future. I wonder how many weeks it will be—and it will be weeks rather than months—before tensions surface. When Holyrood is set up, Members of the Scottish Parliament will realise that many goodies—improved health, housing and education and more resources for local government—are expected of them. However, they will then find that they cannot produce them. This is a vital discussion, and I hope that the Minister will address those very important matters.

Mr. John MacGregor (South Norfolk)

I follow the general drift of the speech by the hon. Member for Linlithgow (Mr. Dalyell). I must confess that, when I was Chief Secretary from 1985 to 1987, I had my doubts as to whether the Barnett formula would constitute a fair way of settling future expenditure issues in Scotland. Like the hon. Gentleman, I note that Lord Barnett now questions whether it is right to use the formula in that context. My right hon. Friend the Member for Devizes (Mr. Ancram) was entirely right when he described how it operated: we took the Scottish block as a block and, when the negotiations had been completed with the equivalent English Departments, the formula was applied automatically to add to the Scottish block.

That may have been right for the 1970s, but several questions now arise for the 1990s and beyond. The first is whether the formula will assess Scotland's needs properly. I have grave doubts about that. I believe that the need in many regions of England is as great, if not greater, than in Scotland in light of the growth and development of the Scottish economy. Above and beyond that is the question as to whether it is right to take as the base a block that was settled in the 1970s when conditions were very different.

Although I appreciated the convenience of using the Barnett formula in complex public expenditure negotiations, I always wondered whether it was a fair way of approaching the matter. The Labour Government have initiated a new fundamental expenditure review. Such a review should look at the needs and demands of all Departments, assess whether the current expenditure levels are correct, and then make adjustments. If we cannot do that to the full Scottish block, we will not achieve a proper fundamental expenditure review for Scotland.

Let us take roads expenditure, for example. The present Government are decimating roads expenditure in England. However, let us suppose that they decided, like the previous Government, to spend more on roads in line with the needs in particular English regions. It is well known to people who travel frequently around the United Kingdom that the roads in Scotland are very much better than those in England. [Interruption.] I have travelled around the whole of the United Kingdom and I would love to take Scottish Members to several parts of England where it can take hours to travel six miles. I know many Scots who say that the biggest bottlenecks for the Scottish haulage industry are the M6, the M1 and the M25. I am happy to argue that point for ever because the road system in Scotland is unquestionably better than that in many parts of England.

Ms Roseanna Cunningham (Perth)

Will the right hon. Gentleman confirm whether he is talking about traffic conditions in England compared with Scotland or the physical state of the roads?

4.45 pm

Mr. MacGregor

I am talking about both. I well recall the time that I addressed 200 business men at a business breakfast in Aberdeen. In his introduction, the chairman said that those business men were very glad that I was there, as the Secretary of State for Transport, because it gave them a chance to complain about the state of the roads from Aberdeen to the south of England. The chairman castigated me on the ground that a small number of miles of single-carriageway roads remained between Aberdeen and Paris. I told him that he could promote Aberdeen by highlighting the fact that the roads communications between Paris and Aberdeen were very much better than those in many parts of England, which did not have dual carriageways. There is no doubt that the roads are better in Scotland, but I could use any example. I must come to my point, which has a general application.

When decisions were taken in England to expand substantially the roads programme or any other aspect of departmental expenditure and the conditions were entirely different in Scotland, things would have been different if the Chief Secretary had had the freedom to examine underneath the Scottish budget and point out the relevant differences between roads expenditure in England and Scotland. We could then have argued for that part of the block to be scaled down. There are problems with the block. I suspect that, if there were no prospect of a Scottish Parliament and the current Chief Secretary undertook the fundamental expenditure review properly, he would have to go underneath the Scottish block to examine such issues.

In my day, we talked about zero-based budgeting, which meant that we looked at every aspect of budgeting and then started from scratch. It was never possible to begin to do that with the Scottish block because we could not even look at it. The Barnett formula applied automatically on top of that. I do not think that the present situation is ideal or even satisfactory. I believe that the Barnett formula is out of date and should be re-examined. I agree entirely that the Scottish block should be distributed more on the basis of need according to a proper calculation.

That is the position that I start from: I do not believe that the Barnett formula will provide the correct basis for allocating funding to the Scottish Parliament from the United Kingdom Budget in the years ahead. Like the hon. Member for Linlithgow, I can go even further. There can be no doubt that, even if the same party is in power in Westminster and in Edinburgh, that will be one of the biggest sources of future friction. People will demand to know that the allocation has been calculated fairly on the basis of need. I shall leave aside the points that we will come to later regarding the Public Accounts Committee. There will be great political tension.

My right hon. Friend the Member for Devizes is correct when he says that it is not only the Opposition party in Westminster that will query the formula—many Labour Members, if there is a Labour Government, will draw attention to the disparities to which I refer.

The distribution must be based on a fair assessment of needs. If it is not, and different political parties are in power in Westminster and Edinburgh, the tensions will increase. We will have to move to a system which it is transparently obvious to everyone is based on a fair assessment of need and is properly audited. At the moment, we are long way from achieving that.

Mr. DaIyell

Who will undertake the assessment of needs? In a unified civil service there would be the difficulty of divided loyalties, some civil servants being loyal to the Scottish First Minister. We come back to my question about the home civil service. Does the right hon. Gentleman, with his experience as Chief Secretary to the Treasury—I used to ask the right hon. Gentleman many hostile questions when he was a member of the Treasury Bench—have any comment on the home civil service problem?

Mr. MacGregor

I do not. Nor do I recall all that many hostile questions. Such issues—leaving aside the question of the block—were resolved within a unified Cabinet, reporting to the House and based on a majority party in government. I do not recall the kind of issues that the hon. Gentleman is talking about arising. Of course there were disputes between Ministers with the relevant Departments arguing their case, but I do not think that that is quite what the hon. Gentleman has in mind.

In the new situation, with the Scottish Parliament, given that there will be endless pressures on public expenditure—the hon. Gentleman is right about that—and all sorts of problems being raised by hon. Members here, from their own English regions, we must find a system for the allocation of the budget that both Parliaments consider to be fair. In addition, it should be audited by those in the Westminster Parliament who, at the end of the day, are fundamentally agreeing the sum of money that goes to the Scottish Parliament.

That is a difficult issue and will give rise to great tension. But it is clear that, at present, we do not know how the matter will proceed. If it is to be on the basis of the Barnett formula, that will be questioned and will have to be changed. Somehow or other, if we are not to have precisely the sort of difficulties that the hon. Member for Linlithgow raised, how the allocation is made must be much more transparent. I have been worrying about that for some time, so I am grateful to be able to make this short contribution today. I can imagine a lot of analysis being done in my constituency and, once there is a separate Scottish Parliament and English Members cannot vote or speak on issues concerning the Scottish Parliament, this matter will be raised time and again.

The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish)

Like many hon. Members, I respect the right hon. Gentleman's long experience in the House. He said that he had been reflecting on the matter for some time, but has he been reflecting on it for the past 20 years? The key question is: why is the right hon. Gentleman raising the matter now in terms of the devolution settlement? We have had 20 years of Conservative government and the system seemed to work well. Comments throughout the ages could be quoted. The right hon. Gentleman held a pivotal position in that Government, in the Treasury.

Mr. MacGregor

I gave away my position in my opening remarks. When I was Chief Secretary, I queried the Barnett formula, although not on the Floor of the House, for obvious reasons. However, I worried about the Barnett formula even then. As I have said, it is interesting that Lord Barnett himself now feels that the basis of the allocation needs to be updated and reviewed.

It is the introduction of the Scottish Parliament that adds a different dimension and tension to this, and that is why the matter should be considered openly and transparently so that we know on what basis the allocation will be made.

Mr. Wallace

Yet again, Lord Barnett's own querying of the formula has been brought into play. But does the right hon. Gentleman accept that Lord Barnett said that national income per head in Scotland compared with the rest of the United Kingdom was such that he questioned the justification for keeping the present formula? As someone who has had to apply the formula, does the right hon. Gentleman accept that national income per head has nothing to do with the formula, and basically, Lord Barnett forgot what he set up?

Mr. MacGregor

That is probably correct in that the formula was based on other things, but Lord Barnett is right in his general point. The principle of the formula was established in the 1970s and, since then, there has been a substantial change in the relative position of the Scottish economy and the levels of income per head of many Scots compared with a number of English regions. There have been substantial improvements. I argue that, as a result of having a block grant, which at that time was favourable to Scotland, plus the Barnett formula ever since, there has been much higher public expenditure per head in Scotland than in England. That, too, has made a difference to the position in Scotland. Therefore, not just the formula but the size of the grant in the 1970s needs to be reassessed. That is why I say that the assessment should be made on the basis of need. We shall have to consider the allocation to Scotland based on need as a whole, not just the Barnett formula, in the years ahead.

Mr. Swinney

The right hon. Gentleman referred to per capita expenditure in Scotland. There is understandable concern in many quarters, as has been quoted in various submissions to the House and to the Select Committee on the Treasury, that to carry out such a needs analysis one must consider both sides of the equation, examining some of the expenditure that is defined as unidentified expenditure in the United Kingdom which is often channelled into one part of the United Kingdom—the area around the House and the south-east of England. To get to the nub of the distribution of public expenditure, it must be a transparent exercise to consider expenditure in Scotland and the rest of the United Kingdom.

Mr. MacGregor

I would not disagree with that. That must be considered not only as between England and Scotland, but as between the various English regions. That is where many of the pressures will come from. The English regions will feel themselves disadvantaged. We have already seen examples of that in the House. We must also consider individual departmental expenditure, not just the block as a whole.

That will be one of the crucial areas where we will need changes and greater transparency in future if we are to avoid immense friction. I am still not clear how the Government intend to move ahead during the next few years in deciding the block grant that goes to the Scottish Parliament, and I look forward to hearing what the Minister has to say about that.

However, future Governments will not feel bound by anything this Government do, hence another area of friction and another reason why we need to think carefully about how, rather more transparently and based on need, these allocations are made.

Mr. John McAllion (Dundee, East)

I sat up and began to take notice when the right hon. Member for South Norfolk (Mr. MacGregor) began his remarks by saying that he was a former Chief Secretary to the Treasury. I thought that surely his contribution would be worth listening to and taking note of. Then he made the ludicrous statement that the road system in Scotland is infinitely superior to that in England. On occasion, I have driven from Scotland to England using both road systems. One knows that one is leaving Scotland and entering England when one leaves the dual carriageway behind and joins a three-lane motorway. That is how we recognise that we are in England. We see little of three-lane motorways in Scotland. Unfortunately, at that point, the right hon. Gentleman lost me, and I suspect, many others listening to the debate.

I do not want to be completely anti-Tory—

Mr. MacGregor

How often has the hon. Gentleman driven down the M74 on to the M6 coming here to the House and found himself constantly held up on the M6 and the M1?

Mr. Dennis Canavan (Falkirk, West)

That is because there are too many cars down here.

Mr. MacGregor

I hope that the hon. Gentleman will not add to them. But that is a sign that the roads in Scotland are much better than in England. There are some good roads in Scotland with few cars on them and there are not many of those in England.

Mr. McAllion

The right hon. Gentleman is mistaken. He is confusing the roads system with the number of cars on them. My hon. Friend the Member for Falkirk, West (Mr. Canavan) got it in one. There are far too many cars in England because England is infinitely richer than Scotland. That should be considered as part of the background to the debate on Scotland's share of expenditure compared with the rest of the United Kingdom.

One thing I am prepared to agree with—

Mr. Bernard Jenkin (North Essex)

rose—

Mr. McAllion

I was about to agree with something, but there is no chance that I will be able to agree to any intervention by the hon. Gentleman.

Mr. Jenkin

Has the hon. Gentleman ever driven from London to Colchester on the Al2? However few cars there may be in Scotland, the road system has been built to enable people to get from A to B efficiently, particularly between the major population centres. For example, the A9 is a superb road. However many cars we have on the Al2, or on the A 11 to Norwich, the same quality of roads do not seem to be built in East Anglia.

5 pm

Mr. McAllion

Nothing would persuade me to drive from London to Colchester, so I shall never discover the quality of the A12.

Mr. Swinney

Both the hon. Gentleman and I have appeared in Dundee's The Courier and Advertiser this week complaining about parts of the A90 around our respective constituencies, and the Minister will be aware of my complaints about the A9 and other roads in my constituency. The point is therefore well made about the difficulties of the road network in Scotland. Perhaps a real debate about the financial position of Scotland would benefit the House.

Mr. McAllion

The hon. Gentleman is absolutely right. Ten years ago the Tory Government set out to put central barriers on the A90 between Dundee and Perth. They said that the work would be completed within 10 years, but it has still not been completed because money has not been spent on roads in Scotland to anything like the extent that it has been spent in England.

I want to agree with something that the Conservative party said in this debate, which is what I have been trying to get to for the last few minutes. I agree with what the right hon. Member for Devizes (Mr. Ancram) suggested in amendment No. 292. The Bill says: The Secretary of State shall from time to time make payments into the Consolidated Fund, and the amendment seeks to add the words: and at least once in every financial year". I hope that it would be at least once in every financial year. If my hon. Friend the Minister confirms that "from time to time" means that the Scottish fund gets two £14 billion lots in a single year, I shall certainly settle for that and would not oppose my hon. Friend if he chose to accept the amendment.

My purpose in speaking in this debate is to support my amendment (a), to amendment No. 112 tabled by the Liberal Democrats. They have not yet had the chance to discuss their amendment, which seeks to preserve the Barnett formula. My amendment seeks to honour the commitment that the Labour party made within the Scottish Constitutional Convention that any review of the Barnett formula will be a joint review conducted by the Westminster and Scottish Parliaments.

The final document of the Scottish Constitutional Convention entitled "Scotland's Parliament, Scotland's Right" was agreed to by all members of the convention. Under the heading, "Secure and Stable Finances" on page 27, it says: We recognise that any formula will need to be jointly reviewed from time to time. I hope that when my hon. Friend the Minister replies to this debate he will make it clear that any future review of the funding mechanism for a Scottish Parliament will be conducted jointly between the Westminster and Scottish Parliaments, not purely by the Westminster Parliament and then imposed on the Scottish Parliament.

Mr. Wallace

In the spirit of the convention document, may I inform the hon. Gentleman that his amendment distinctly improves ours?

Mr. McAllion

I am grateful to the hon. and learned Gentleman for saying that. Actually, I tabled the amendment on the advice of one of the Clerks, so he should take the credit for it. I provided the purpose of the amendment and he framed it for me.

What lies behind this debate is the perception, particularly among Conservative Members, that Scotland gets an unfair share of public expenditure. We must tackle that argument head on. The right hon. Member for Devizes said that the Barnett formula is really the head on the beer. He is absolutely right, because it can work only at the margin of public expenditure in Scotland. It is a way of allocating increases in identifiable public expenditure; it does not affect the core budget.

The Barnett formula is designed to ensure that Scotland gets less public expenditure in the future. The only reason that it does not work to that effect is that Scotland is losing its population. Had Scotland maintained or increased its population, it would have received less of the share of public expenditure year on year. The Barnett formula is therefore designed to meet what many of its English critics now say.

Under the Barnett formula, Scotland receives 10.66 per cent. of any increase in departmental spending in the UK, whereas Wales gets 6.2 per cent., Northern Ireland 2.9 per cent. and England 80 per cent. If England thinks that Scotland is getting more than its fair share under the Barnett formula, I would be happy to exchange our 10.66 per cent. of the increase in spending for its 80 per cent. When one looks at the figures in the stark, cold light of day, one realises that England is getting a very fair deal under the Barnett formula, and Conservative Members should stop complaining about it.

The real purpose of amendment No. 309 is to complain that no mechanism in the Bill relates public spending to relative need, not only in Scotland but in the rest of the UK. The Opposition want such a mechanism in the Bill because they believe that Scotland receives an unfair share of public expenditure. The right hon. Member for Devizes referred to the Treasury Select Committee report, which implied that Scotland receives an unfair share of public expenditure within the UK. I warn him that if the Treasury Select Committee report continues to be used to batter the Scottish Parliament proposals, I shall suggest that the Scottish Affairs Select Committee, of which I am a member, conducts its own inquiry into relative spending between Scotland and the rest of the UK. I suspect that we would come up with a very different report from that of the Treasury Select Committee.

Mr. Oliver Heald (North-East Hertfordshire)

Is not the hon. Gentleman prepared to concede that the Treasury Select Committee is dominated by Labour Members, that Lord Barnett is a Labour peer and that the cries of, "Oh, this is unfair to England" come from Labour Members from northern England? Will he acknowledge that Labour Members, not Opposition Members, are raising the issue?

Mr. McAllion

Yes, certain Labour Members have been making that complaint, but neither the Labour Government, to their credit, nor the vast majority of Labour Members who support the Government, are raising the issue. Scottish Members of Parliament are certainly not raising it. Indeed, the only Scottish Member on the Treasury Select Committee dissociated himself from the tone of the report and from its findings—and he is not a Labour Member.

If we are to have such a mechanism, it should look not only at identifiable public expenditure in Scotland and the rest of the United Kingdom but at all public expenditure. The Barnett formula does not deal with spending on agriculture, social security, defence or public administration. The £200 million building being constructed across the road is not included in the formula that compares public spending in Scotland with that in the rest of the UK. We could build four Scottish Parliaments for the price of that block of offices, yet people complain that the Scottish Parliament is wasting money in constructing a new building. It is a ridiculous argument that I hear from Opposition Members.

If we take into consideration all public spending, a different ratio appears, particularly between the south-east of England and the rest of the United Kingdom, including Scotland. If that is the kind of review that the Conservative party wants, I should be happy to support it.

This Saturday sees the establishment of a constitutional convention for the north. The cross-party campaign for a northern assembly is setting up its own constitutional convention along the lines of the Scottish Constitutional Convention, and I hope that it will lead to the same successful conclusion. Campaign members have suggested working with Members of Parliament to expose the notorious hidden subsidies to the south-east of England, such as the uneven allocation of defence contracts to the south-east of England, which goes on all the time. Conservative Members never say that that should be looked into. Another example is the uneven gain from income tax. For the past 18 years, very rich people, the majority of whom live in the south, have enjoyed massive income tax cuts handed out to them by the Government. Those hidden subsidies should be debated, but they rarely are.

I remind hon. Members that, when the Barnett formula was set up, it was meant as a fix to avoid the rows that took place every year within the Cabinet between the Secretary of State for Scotland and all his colleagues about the spending share that Scotland should get within the Budget. Those rows take place in Cabinet behind closed doors between members of the same party, all of whom were appointed by the same Prime Minister and therefore loyal to that Prime Minister.

Conservative Members may want an annual, open, public and bitter row between the Scottish Parliament in Edinburgh and the Westminster Parliament about Scotland's share of public expenditure, but that would create constant friction between the two Parliaments, and would lead to the Scottish Parliament being distanced from the rest of the United Kingdom. The crazy mechanism that they are trying to establish would achieve the very end that they claim they do not want.

Mr. Eric Forth (Bromley and Chislehurst)

Let us accept for a moment the hon. Gentleman's argument that the formula was designed to eliminate such annual squabbles. Does he concede that the establishment of the Scottish Parliament has opened up this issue? It is surely not only legitimate but essential that all of us, north and south of the border, face the issue squarely in the context of the Scottish Parliament and try to produce a new and proper financial basis. Perhaps we should have another formula to eliminate annual squabbles; we cannot assume that the Barnett formula will continue unchanged after the establishment of a Scottish Parliament.

Mr. McAllion

No one is assuming anything. We are dealing with the immediate aftermath of a Scottish Parliament coming into power in 2000. It is not sensible for the Scottish Parliament to be locked into conflict with the Westminster Parliament over its share of the Scottish Office block grant before it has a chance to get its feet under the table and start providing the services for which it is responsible. We are trying to get the Parliament up and running.

In due course, both Parliaments may come to the conclusion that they should review the allocation of public expenditure between Scotland and the rest of the United Kingdom and within Scotland. It should be a joint review, which is the purpose of my amendment. It should also examine all public spending and all subsidies to every corner of the United Kingdom, not just identifiable public expenditure. I do not hear Opposition Members making such points.

Mrs. Eleanor Laing (Epping Forest)

The hon. Gentleman will not be pleased to hear that I agree with his general argument about the inherent conflict in the Bill. He said that the conflict will continue to get worse. If it is not resolved by the adoption of our amendment, the logical conclusion of his argument is that instead of a devolved Parliament there will be a separate Scotland. Is that what the hon. Gentleman wants?

Mr. McAllion

Nothing in this world is inevitable: I have discovered that after living in it for a very long time. Of course, there will be conflict if the Westminster Parliament tries to take money away from Scotland. If Westminster takes the attitude that Scotland should be punished for having its own Parliament and should have a smaller share of public expenditure, it will pull Scotland down the separatist path. Luckily, the Government do not have that attitude towards Scotland or towards public expenditure. I have every confidence that under a Labour Government we will have increased public spending in Scotland. I say that with gusto and enthusiasm.

Mr. Wallace

And with a straight face!

Mr. McAllion

I really mean it. I have great hopes that the Government will loosen up expenditure after two years. I am not convinced of the honesty or integrity of Opposition Members when they say that they want public spending to be related to need. They want Scotland to receive a smaller share of public expenditure, and to be punished for daring to have its own Parliament. I shall not support their amendments. I hope that my hon. Friends support my amendment to the amendment tabled by the Liberal Democrats, and that they also support that amendment.

Mr. Wallace

I welcome the fact that the hon. Member for Dundee, East (Mr. McAllion) tabled an amendment to amendment No. 112, because it improves our amendment. He listed a number of items that are not included in the Barnett formula. He omitted the glorified wigwam that is the dome in Greenwich. I do not think that Scotland is getting its percentage Barnett formula share of that venture.

Mr. Ancram

Would the hon. and learned Gentleman tell us how he knows that, whereas we have not managed to get any information about the dome out of the Minister without Portfolio?

Mr. Wallace

That is 1:0 to the right hon. Gentleman; it is a fair point.

When additional expenditure for the health service was announced in October last year, we discovered that the increase for England was not matched by a Barnett formula 10.66 per cent. increase for Scotland. Mid-term increases in expenditure for England do not necessarily trigger off an equivalent increase for Scotland. So the formula is not always strictly applied.

The debate is useful, because it was inevitable that this issue would be raised. I am glad that the comments of the right hon. Member for Devizes (Mr. Ancram) when introducing his amendments were more rational and conciliatory than were the utterings of his party in the period up to the election. It is not right for the right hon. Member for Bromley and Chislehurst (Mr. Forth) to say that devolution has brought this issue to the fore. Under the Conservative Government, plenty of Tory Back Benchers whinged about the amount of money spent in Scotland, and that was not in a devolutionary context, because the Tories were opposed to devolution.

5.15 pm

I found the Conservative party's attitude in the run-up to the election, during the election campaign, and at times during the referendum campaign, distasteful. The Conservative party behaved like the school bully saying, "If you vote for a Scottish Parliament, we will take some of your money away." That was not a particularly helpful approach from a party that prides itself on its commitment to the Union. Surely, it recognises the principle of equalisation not just for Scotland but for all parts of the Union.

I take the point made by the hon. Member for North Essex (Mr. Jenkin). Perhaps the A11 and A12 roads in East Anglia are not particularly good: I do not know, because I have not driven on them for a long time. That perhaps says more about differential spending within England than it does about spending in one part of England compared with Scotland. Expenditure on roads also varies greatly in different parts of Scotland. Local government settlements, which account for a substantial part of public expenditure, show vast differences in England. Under the previous Government, spending per head in Westminster or Wandsworth was massively greater than spending in many places in the north of England. If they were trying to apply the principle of equalisation, they did not succeed.

It is important to emphasise the substantial variations in expenditure within England. It is not always fair or accurate to give an overall picture of spending in England compared with spending in Scotland.

Mr. Dalyell

May I say that I was in no position to bully anyone? There was no bullying. The issue was put in the form of the Bury, North question, which is very serious. Given the new circumstances, how can my hon. Friend the Member for Bury, North (Mr. Chaytor), in that not over-rich Lancashire constituency, justify to his voters for eternity—because that is what we are talking about—the fact that Scotland gets more public expenditure per head than England? In candour, we must at least face up to that issue.

Mr. Wallace

I would never accuse the hon. Gentleman of bullying: that is not his approach. He fairly posed the question, but some Conservative voices were raised that were much more threatening and hectoring. The previous Secretary of State for Scotland used regularly to raise the spectre of what would happen after devolution.

The hon. Gentleman asked how I would explain the position to the hon. Member for Bury, North (Mr. Chaytor). Let me refer perhaps not to Bury but to Barnsley. In the last financial year, the local government settlement was £1,244 per head for Tower Hamlets, £864 per head for Westminster, and £368 per head for Barnsley. That is a greater differential in spending per head than the differential between Scotland and England.

When making an accurate and fair assessment of spending per head in Scotland compared with England, we should take account of the huge geographical differences between Scotland and the rest of the United Kingdom. [Interruption.] The right hon. Member for Bromley and Chislehurst groans, but he cannot run away from the fact that Scotland contains 59 per cent. of the surface area of the United Kingdom and has 10.6 per cent. of the population. [Interruption.] The right hon. Member for Bromley and Chislehurst is making sedentary remarks in a very childish way. He must know that it is more expensive to build a mile of road in the highlands than to build a mile of road in Kent, and that a mile of road in the highlands will inevitably serve fewer people.

Moreover—regrettably—people's health is worse in Scotland than in the rest of the United Kingdom. There are more long-term problems such as heart disease and cancer in Scotland than in England. There are far more pupils in state schools than there are in England, and a higher post-16 staying-on rate. There is less take-up of private provision, and transport costs are higher. A police car belonging to, for example, the Northern constabulary must travel many more miles to cover its patch than the equivalent in parts of England. All those factors must be taken into account, but there is more to it than that.

Mr. Swinney

There is another aspect of the argument, which the hon. and learned Gentleman may come on to. I am talking about the way in which money is spent in the rest of the United Kingdom, and the fact that Scotland does not receive its fair share—especially in relation to some of the substantial write-offs that followed water privatisation in England and Wales.

Mr. Wallace

There is also consumer expenditure on defence contracts in the south of England, and mortgage interest tax relief benefits England more than Scotland.

The so-called excess has been calculated at about £3.7 billion, but that does not take into account the fact that spending on such matters as agriculture and social security is demand led: the money will be spent, regardless of where the people are. In fact, Scotland has a larger agricultural population than England. I believe that it has been estimated that one of the main contributors to the difference in expenditure per capita between now and the late 1970s, when the Barnett formula was agreed, is the increase in agricultural expenditure, some of which has been European Union driven.

Scotland also has higher local taxation. The average band D council tax in Scotland is £783 in the current financial year, compared with £689 in England. Once we have taken demand-led expenditure and higher local taxation into account, the difference drops from £3.7 billion to £2.7 billion—about £1.45 per person per day. When we take account of Scotland's greater demand for health services, and its related greater demand for social services, the figure falls to £1.9 billion. If that were distributed among everyone else in the United Kingdom, there would be an extra 10p per person per day. That, I think, is a relatively small amount to take account of all the factors, such as geography and weather, that I mentioned earlier.

As I said when I read a quotation to the right hon. Member for Devizes, as recently as June 1995 the former Secretary of State for Scotland—now Lord Lang—thought that the funding formula was pretty fair. I do not think that much has changed since then in terms of relative need. The right hon. Member for South Norfolk (Mr. MacGregor) said that when he was Chief Secretary to the Treasury he had his doubts, but his doubts never prevailed. I suspect that the majority of Cabinet Ministers thought that the formula was fair; if they had not, they would surely have done something about it, but the same arrangement obtained year after year.

The right hon. Member for Devizes asked us to back his amendment, but it does not take matters much further than the Government's proposals. It states that the Government should take need into account, but not that they should do anything about it. Nevertheless, the right hon. Gentleman has a point. I fear—and our amendment addresses this—that, as it stands, the Bill will leave a blank cheque. It could be a cheque for only a fiver: the clause refers to a sum that the Secretary of State may from time to time determine". The Minister owes it to us to explain why the proposal is couched in such open terms. There is neither a basis for the original funding formula, nor a basis for any annual variation of it. Our amendment improves on that of the right hon. Member for Devizes by taking the existing grant formula—which already embodies the consideration of need that Lord Lang recently found acceptable—and applies the Barnett formula to it, on an annual basis. If the amendment were accepted, the Bill would establish the way in which the Scottish Parliament should be funded.

We think that any change in the population formula should not be made on an annual basis—on the basis of figures that, at best, can be described as guesstimates—but should follow the census that takes place once every five years. That would provide accurate material on the basis of which to change the formula. In new clause 12, we propose a joint review of the funding formula involving the Scottish Parliament and the House of Commons, to be completed for implementation in the tenth year following the establishment of the Parliament".

Mr. Swinney

Is that proposal in any way inspired by the hon. and learned Gentleman's concern about the Government's refusal to take on board some of the reasonable arguments about the Scottish Parliament's ability to interview members of the Westminster Government in cross-border discussions about issues of mutual interest?

Mr. Wallace

I think that the new clause was tabled before those debates took place; at any rate, it was quite separate from them. It can, in fact, be directly attributed to the passage from the Scottish Constitutional Convention agreement which was quoted by the hon. Member for Dundee, East. It accepts that the present block grant, the Barnett formula and the tax-varying powers that we shall discuss another day provide a secure and stable basis for the Parliament. That was certainly the arrangement struck between us in the constitutional convention. The convention said: We recognise that any formula will need to be jointly reviewed from time to time. In time such discussions will undoubtedly lead to a greater transparency in, and understanding of, the economic situation across the different parts of the United Kingdom. I think that I am supported on that.

We propose that more revenue should come from the tax that is raised in Scotland. We believe that a Treasury grant will still be needed, but if more can be seen to be coining from Scotland itself, so much the better. That, I believe, will lead to transparency and to more accountability. If the Scottish Parliament is to receive a share of the revenue, it will have an incentive to introduce policies in relation to its economic and industrial powers that will increase buoyancy in the Scottish economy. If the amount is to be shared, the United Kingdom Treasury will also benefit. I think that that will lead to a better rapport between Westminster and the Scottish Parliament.

In its publication "Scotland's Parliament", the constitution unit says: Tax sharing could well come to play a larger part in the financial arrangements if devolution is established throughout the UK. But that is not the case now, and nor is there sufficient confidence yet in the reliability of the figures for tax yields in the territories and regions to allow it to deliver the benefits in 'fiscal psychology' described. Nevertheless the option of incorporating some element of tax sharing in the financial settlement should be kept open for the future. We are saying that it should be recognised that, at some stage in the future, a reassessment will be needed. If we move further towards a federal solution, as I think we inevitably will, we shall need some kind of federal exchequer board—a far more transparent mechanism, of the sort that exists in countries where a federal settlement has been reached. This will not necessarily be the last word, but, as things currently stand, it is a good starting point for the Scottish Parliament. Our worry is that nothing in the Bill reflects either the Government's commitment in the White Paper or the commitment in the constitutional convention agreement. I do not accuse the Government of wanting to back off or of bad faith, but, as I asked in a debate on Tuesday: how will these powers stand when they are being exercised by an opponent? There is too much flexibility and opportunity for someone with a much more malevolent will towards the Scottish Parliament to create conflict and tension. Therefore, I hope that tight parameters that will ensure that money is delivered to the Scottish Parliament can be introduced into the Bill.

Mr. Canavan

During the debates in the Scottish Constitutional Convention, I argued for complete fiscal autonomy for the Scottish Parliament, whereby a Scottish Treasury, accountable to the Parliament, would be responsible for the raising of all revenue within Scotland and for paying a certain amount to the United Kingdom Treasury for shared services such as defence and overseas representation. However, I accept that I lost that argument in the convention.

5.30 pm

The White Paper proposal, which was put to the people of Scotland in the referendum, is for the Scottish Parliament to be financed by means of a block grant and of the limited power of raising, or lowering, the basic rate of income tax by up to 3p in the pound. The size of the block grant will presumably be affected by the Barnett formula, which has been around for a long time, as has its author. I recently spoke to Joel—now Lord—Barnett across the road in the gym. I assure the Committee that the good Lord is in good shape, but some concern has been expressed as to whether the Barnett formula is as robust as its maker. The Treasury Committee recently had some things to say about it.

We have to remember that there is no mention of the Barnett formula in the Bill. In fact, there is no specific mention of the formula in any statute and, unless the Liberal Democrat amendment or amendment (a) in my name and that of my hon. Friend the Member for Dundee, East (Mr. McAllion) is accepted, that will remain the case.

The Select Committee said: The Committee was disappointed that no Government studies have been made in relation to the appropriateness of the Barnett Formula and how it relates to needs … it is time to bring the needs assessment up to date". The last official needs assessment was made about two decades ago in an interdepartmental study led by the Treasury. The exercise examined the six main services that were, at that time, to be devolved to the proposed Scottish assembly and Welsh assembly. As a matter of interest, those services were health and personal social services, education, excluding universities, housing, other environmental services, roads and transport, excluding the railways, and law and order and protection services, excluding the police.

The people conducting the study used a large range of "objective factors", including the age distribution of the population, the length of roads, recorded crimes and the number of substandard dwellings, to estimate the cost of providing equivalent service levels in Scotland; they did the same exercise for Wales and Northern Ireland. The overall result was that per capita spending in Scotland would need to be some 16 per cent. higher than in England to provide comparable service levels.

Since then, the definition of public expenditure has evolved considerably and it is difficult to apply those conclusions to the current situation. According to recent reports, per capita spending in some regions of England is considerably higher than that in Scotland. However, do the Government have any plans to update the needs assessment and/or the Barnett formula? If there is any review of the Barnett formula—and I think that Lord Barnett has said that it is not going to survive for ever—it should be a matter for the Scottish Parliament as well as for this Parliament: it should be a matter for negotiation between the Scottish Executive and the UK Government.

That is what amendment (a) tries to ensure. If there is failure to reach agreement, the Scottish Parliament may demand and achieve the sort of fiscal autonomy that I argued for in the Scottish Constitutional Convention.

Mr. Swinney

The financing of the Scottish Parliament is obviously a controversial issue; we have had some controversy already tonight. The hon. and learned Member for Orkney and Shetland (Mr. Wallace) referred to the Scottish Constitutional Convention proposal on assigned revenues. That proposal was formulated in the early days of the convention and goes some way towards the proposals on fiscal autonomy that form the heart of amendments Nos. 77 and 78.

I listened with interest to the hon. Member for Falkirk, West (Mr. Canavan), who made a rational case for fiscal autonomy, which would be in the interests of achieving clarity in the public finances not only of Scotland, but of the UK; fiscal autonomy would address some of the issues about transparency that were raised by the right hon. Member for South Norfolk (Mr. MacGregor). Unless there is a stable solution in the Bill, the issues that we have been discussing will come back time and again.

I concede that, in this debate, the comments of Conservative Members about funding have been more measured; they could not be less measured than the comments of the hon. Member for Billericay (Mrs. Gorman), who has been saying some pretty outrageous things about Scottish public finances in the past few weeks. In the run-up to various elections in recent years, comments have been made about subsidy junkies in Scotland and the Scottish community being heavily subsidised by the rest of the UK. As I have listened to this debate, I have been intrigued by the fact that more and more of those myths are beginning to be tackled by not only people who represent the politics that I support, but Labour and Liberal Democrat Members. They are prepared to challenge some of those myths, which have been presented as the holy grail.

Government expenditure and revenue estimates have also been used to examine the public finances of Scotland. Those estimates are produced annually now and were first introduced as a party political exercise by the former Secretary of State for Scotland, now Lord Lang. Their original purpose was to try to use the Scottish Office and its instruments to show how subsidised Scotland was; it was the most curious piece of political suicide one could find. Those figures are now in the public domain annually.

Some of the details have been rehearsed in the past. The most recent assessment by the Scottish Office suggested a headline deficit for Scotland of more than £7 billion. As with all such analyses, it conveniently ignores the fact that the statistics include a certain share of the general United Kingdom deficit, foisted on Scotland not by decisions by Ministers in Scotland but by the incompetence of various Chancellors of the Exchequer in the past. Additional factors missed from the statistics are the share of oil and privatisation proceeds to which Scotland would undoubtedly be entitled.

The hon. Member for Dundee, East (Mr. McAllion) referred to the assessment of income tax; other aspects of the statistics question whether the lack of transparency in the debate allows us to get to the truth of the public finances of Scotland. That must surely be the basis on which any long-term judgments are made. In that respect, I can comprehend the amendment tabled by the right hon. Member for Devizes (Mr. Ancram), but I do not understand how far forward it takes us. It assesses the issue of need—which we all acknowledge should drive the analysis—but puts no solution in place.

We have had extensive contributions about the Barnett formula. I do not intend to rehearse the issues; nor do I intend to claim any intimate understanding of the origins of Lord Barnett's formula, the intimacies of the Cabinet's discussions or Lord Barnett's current thinking on the issue. I wish to quote from a submission made to the Treasury Select Committee by Professor Arthur Midwinter of the university of Strathclyde. I see an expression on the Secretary of State's face—I am not sure what it means.

The Secretary of State for Scotland (Mr. Donald Dewar)

It is one of pleasure.

Mr. Swinney

An expression of pleasure from the Secretary of State? I hope he finds the following words to be of comfort. Professor Midwinter made a number of important remarks. He said: The Barnett formula remains a simple pragmatic and defensible means of determining Scottish public expenditure. His next remark relates to the comments made by the right hon. Member for South Norfolk: Needs assessment models in the public domain are imprecise and rest on political acceptability and judgment more than technical feasibility. In this analysis, there has to be some acceptance that, however much digging one does through national and regional statistics, some political judgment will ultimately be applied. That is the nature of this debate.

Mr. Dalyell

Political judgment by whom, could we be clear?

Mr. Swinney

I quoted Professor Midwinter's remarks and I would not venture to put words into his mouth. I think it means that, ultimately, there will be debates and a process of negotiation which some believe can be extracted from the process, but which I do not believe is practical from what we have heard tonight.

Professor Midwinter added: There is no compelling evidence to suggest that the present levels of public expenditure in Scotland are excessive relative to the rest of the UK. In the UK context, the sums available for redistribution through any attempt to reduce the Scottish 'excess over needs' as calculated by HM Treasury would be small. That is a piece of informed analysis which it would be wise for the Committee to remember.

The debate on public finances has to be driven by transparency; that is the why we tabled amendments Nos. 77 and 78. We want the Scottish Parliament to be accountable and responsible for the raising and spending of public finances. No Member of this House could desire anything other than that. However, the Scottish Parliament is being established with very limited flexibility and responsibility. Local authorities in Scotland, by and large, have the power to raise about 15 per cent. of their revenue, whereas the Scottish Parliament will have some degree of discretion in relation to the raising of only 3 per cent. of its revenue. To me, that puts in context the limitations applied by the Government in the Bill.

5.45 pm

A system of financial autonomy for the Scottish Parliament would operate in a simple way, and the hon. Member for Falkirk, West referred to that. Revenues raised in Scotland would be placed under the control of the Scottish Parliament. The last estimate by me and my colleagues of the total revenues raised in Scotland was something like £28 billion in the fiscal year 1996–97. The Scottish Parliament would thereafter be responsible for meeting the costs and agreeing the expenditure of public services within its responsibilities in Scotland, and then for agreeing with Westminster to pay a sum of money in relation to the exercise of reserved powers.

Mr. Wallace

Will the hon. Gentleman give a breakdown of that £28 billion?

Mr. Swinney

The breakdown of the £28 billion was published in a document in advance of the last general election. I have the document, which contains a formidable amount of detail, and I suspect that it is already in the Library. I suspect also that it is in the filing cabinet of the Liberal Democrats in Edinburgh, as I can remember fending off a savage attack—if one can have such a thing from a Liberal Democrat—on this very subject. The information is in the public domain, assumptions and all. Many of the assumptions are provided by the Library, which provides a certain amount of independence to the analysis.

Mr. Ancram

Is it still the hon. Gentleman's assumption that a separate Scotland would receive 90 per cent. of North sea revenue, despite the fact that Professor Neil MacCormick—who, I understand, is a supporter of his party—has questioned that?

Mr. Swinney

The right hon. Gentleman can provide me with the reference. If one applied the principles of the Geneva convention to the demarcation of boundaries between Scotland and England—a very common assumption which, I suspect, has been debated on many occasions in the House—one would find that the 90 per cent. figure was sustainable.

Mr. Ancram

The hon. Gentleman invited me to provide him with the reference. It comes from a review of a book called "Independence and Devolution: The Legal Implications for Scotland", edited by J. P. Grant, in the Scots Law Times in 1976. Professor MacCormick wrote: A much needed shaft of light upon the vexed question of present rights and future allocations of rights to exploit the resources of the Continental Shelf is cast by the editor Mr Grant himself. He wholly demolishes the view, which I for one once held, that the present demarcation of the 'Scottish Area' in the North Sea north of the 55 degrees 50 minutes parallel would continue in the event of Scottish Independence.

Mr. Swinney

That is one legal opinion and, as the right hon. Gentleman will know, one legal opinion is as good as the next until the matter is settled by the courts of the land. I expect Professor MacCormick, as always, to exercise his wise judgment over all the issues.

Mr. Andrew Welsh (Angus)

Is it not interesting that the Conservatives are willing to give away Scottish assets which are clearly laid out in the Continental Shelf (Jurisdictional) Order 1968—signed by the British Government—which clearly shows where Scottish territorial waters are?

Mr. Swinney

That is a clear explanation from my hon. Friend and a welcome intervention in the debate.

In relation to financial autonomy, the Scottish Parliament would be responsible for paying to Westminster a sum in relation to the reserved powers and the services provided under the reserved powers to Scotland. The result of all this would be to force transparency on the Scottish and Westminster Parliaments—which is where transparency is sadly lacking. Our amendments would advance the debate in a way that the Conservative amendments would not.

Let us consider, as the hon. Member for Dundee, East did, some aspects of hidden public expenditure in south-east England, which contradict the contention that Scotland somehow benefits from formidable additional per capita public expenditure. The millennium dome, for example, will cost more than £700 million; the Jubilee line extension will cost £2.1 billion; the British library has cost £511 million; and the Heathrow to Paddington rail link will cost £440 million. Consider those enormous capital projects in the heart of London and the south-east of England against the background of our debate on financing Scotland.

Our amendments would enable the Scottish Parliament to engage Westminster in a debate on paying for reserved powers and on the amount of resources that will truly be allocated to Scotland. Transparency would undoubtedly benefit if our amendments were made.

The hon. Members for Dundee, East and for Falkirk, West have tabled amendment (a) to amendment No. 112, which would require the Scottish Parliament and the Westminster Parliament to undertake a joint review of Barnett, if that is the future mechanism of financing the Scottish Parliament. Their amendment would deal with the concern—which I suggested to the hon. and learned Member for Orkney and Shetland—that the dice that are loaded in favour of Westminster in deciding many financial issues will simply be entrenched in the legislation.

There is a very strong case for financial autonomy, to give responsibility and accountability to the Scottish Parliament. I hope that the Minister will have something positive to say about the strong arguments that have been made by hon. Members on both sides of the Committee in favour of financial autonomy, not only in this debate but on many occasions.

Mr. Forth

I began listening to this fascinating debate feeling somewhat depressed, but I have cheered up considerably. I felt depressed because—although such debates are, perhaps inevitably, dominated by hon. Members from north of the border—those who will undoubtedly study the debate will be in danger of getting an entirely wrong slant on the issue.

To set the matter in context, I repeat what I said in an earlier intervention: the tragedy is surely that, for as long as any of us can remember, the issue has only rarely before broken the surface in the United Kingdom. Although we can disagree about or debate the amounts of the transfers or differentials north and south of the border—there is little doubt that they exist—the people of England have largely been content for that to happen because the issue has not been raised and thrust in their face.

Now, with the referendum and legislation to establish a Scottish Parliament, the issue has had to be confronted. Surely we cannot have the possibility of a Scottish Parliament, with all that means, grafted on to long-standing financial arrangements that have gone unchallenged—because they were seen to be a part of a United Kingdom dispensation with which all the people of the United Kingdom were broadly content.

Mr. McAllion

The right hon. Gentleman, probably unintentionally, is misleading the Committee. In the previous Parliament, the convention of using the Barnett formula was seriously challenged by the Conservative party. Michael Forsyth. the then Secretary of State for Scotland, publicly said that the Barnett formula would be changed over his dead body—which is now politically dead. The Conservative Government and the Conservative party challenged the Barnett formula, and the Scottish Conservatives defended it.

Mr. Forth

I must bow to the hon. Gentleman's superior knowledge of what happened inside the Conservative Government. I seem to recall that I spent about nine years in that Government—albeit in the foothills and in a very humble role—but I do not recall a debate on the formula, which I wish had been held and resolved in the way that I should have preferred. However, perhaps that is history; we are now, properly, faced with a debate on allocating funds in the United Kingdom in the context of an imminent Scottish Parliament. That debate is being held against the background of the generally acknowledged fact that there is a difference in the moneys available from the Exchequer to people in Scotland and to people in England.

The common ground that has emerged in this very encouraging debate is on transparency. The hon. Member for Dundee, East (Mr. McAllion) and the hon. and learned Member for Orkney and Shetland (Mr. Wallace) have argued—I agree with them—that it is essential that we have a much better understanding of the origins and expenditure of funds in the United Kingdom, so that, regardless of what we decide to do in the future, our decisions will be based on an appreciation of, and broad agreement on, what is happening.

I support the belief expressed in the debate by hon. Members that the calculation should not necessarily be based on the rather narrow Barnett formulation but should be as wide as possible, and include matters such as agriculture and social security. I have no fear of that happening. As a London Member, I am very conscious that, for example, unemployment in London is now, regrettably, considerably higher than it is in Scotland. Therefore, the impression made in the debate of a deprived and exploited Scotland, which so desperately requires all that extra money, must be balanced with other realities.

I could make some very interesting comparisons between Greater London and Scotland—which have broadly similar populations—and between, for example, their expenditure and generation of tax revenues. You, Mr. Lord, and the Committee will be pleased to hear that I will not go into them now. The hon. Member for North Tayside (Mr. Swinney), however, mentioned capital projects. We all have thoughts one way or the other on those, but they are a reality and should also be factored into our analysis. Those matters form the context of the debate.

My spirits have been raised because of the concept of financial autonomy that was mentioned by the hon. Member for Falkirk, West (Mr. Canavan) and repeated by other hon. Members. If I properly understand the idea, I think that it is very attractive and may well form the basis of the way forward, and that it would receive surprisingly broad agreement. If the hon. Gentleman is proposing that a Scotland with its own Parliament, with all that that means in political and decision-making autonomy, is prepared to countenance raising and being responsible for spending its own revenues within the Scottish context, I welcome the proposal. It would be a very significant step forward.

I made a modest speech in our recent debate on an English Parliament—a matter on which I think that I can extend a hand of friendship to the Liberal Democrats. I believe that the debate that has been initiated on the Scottish Parliament and the Welsh assembly will inevitably have to be extended to resolving representation also in England, perhaps in a federal context.

I draw into the debate on an English Parliament and the developing constitutional arrangements—I am now very much availing myself of your generosity, Mr. Lord—the issue of what we should do with the other place. Although I will not say any more about that, because that is not what the Committee is considering, I believe that all those issues should be combined. The difficulty is that, until now, we have been asked to consider only purely and very narrowly the constitutional implications of a Scottish Parliament, without considering the other implications.

Sir Robert Smith (West Aberdeenshire and Kincardine)

I think that the right hon. Gentleman's argument should lead him to support our amendments—which would create a temporary sense of stability while we sort out the other structures that he realises have to be changed, and propose how subsequently to make progress consensually.

Mr. Forth

I understand what the hon. Gentleman is saying and I hope that he does not want to divert me from this rarest of rare moments—I am in a conciliatory mood trying to hold out a hand of friendship to hon. Members on both sides of the Committee. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) appears alarmed at my new persona, but I can assure him that it will not last long.

I cannot accept the hon. Gentleman's suggestion, as I do not believe that it would be right to accept the Scottish Parliament on the basis that we accept one part of it and we will deal with the other problems later. If we do not take the opportunity to address the problems now, the moment will pass and we will find them difficult to resolve in the context of a new constitutional arrangement.

Mr. Dalyell

The right hon. Gentleman, who is extending a hand of friendship, also has the hand of friendship of The Scotsman leader writers. He and I attended the debate on the Friday when the hon. Member for Billericay (Mrs. Gorman) raised the issue. How would he propose that the revenue should be raised? Would it be on a purely Scottish basis?

6 pm

Mr. Forth

I must admit that my thinking on the matter is not fully developed, although the hon. Gentleman, as ever, raises an extremely important issue.

If we are to contemplate a federal approach—and we are discussing the establishment of regional Parliaments within a United Kingdom federal context—I assume that we will look to either the German or the United States model, where some revenues are raised for federal purposes and allocated to that, and others are raised within different areas and allocated to expenditure on that basis. That would be my starting point, and I assume that it is the basis on which we would seek to proceed. It would fit in well with what I understand to be the proposal by the hon. Member for Falkirk, West for what he described as financial autonomy.

I have described the basis of a way forward that would make the people of England feel much more content with the way in which matters are developing. I fear that, at present, there is a risk that when the people of England realise fully what is happening, and when the issue becomes more developed in their minds, there may be what could be described as an English backlash with English people saying, "Hold on a moment—the Scots seem to be getting everything their own way. They are getting a Parliament and the continuation of existing financial arrangements. Where do the English come into it?" I am trying to use the debate to move the argument forward in a more structured and positive way, broadening it out so that we can address the wider constitutional and financial contexts.

It would appear from what has been said today that that is more possible than ever it seemed in the past. That is why I feel more positive than I did just an hour or two ago. Obviously, I will support the amendments in the name of my right hon. Friend the Member for Devizes (Mr. Ancram) and I hope that we will move the debate forward in that context. I hope that, having listened to the positive speeches that have been made, the Minister will respond in like terms and see whether he and the Government can find ways forward that will allow us to stay together on the issue and make progress without the dissent that otherwise might arise.

Mrs. Laing

I do not understand how any hon. Member on either side of the Committee can object to the insertion into clause 61 of the words: having first taken into account the needs of Scotland in relation to the needs of the United Kingdom as a whole". It must be one of the most benign amendments ever proposed.

Throughout the debate on the Bill and previous debates on devolution during the past several months, the Government have assured us that devolution, the effect of the Bill and the formation of the new Scottish Parliament will benefit the entire United Kingdom. They have said that repeatedly, so why are they resisting the amendment, which clearly and simply states what they have suggested is already inherent in the proposed system of devolution—to take into consideration the needs of the United Kingdom as a whole?

Either the Bill and its consequences are good for the United Kingdom as a whole, in which case the amendment must be acceptable, or they are not, in which case the Government have been misleading those of us who represent parts of the United Kingdom other than Scotland.

I was not in favour of the Bill in the first place. Nor was I in favour of devolution. I was not in favour of a Scottish Parliament being founded in Edinburgh, but, as the Scottish people have spoken through last summer's referendum, I accept—as we all do—that what happens in the House must reflect the will of the people. I want the new Parliament to work. Perhaps it is special pleading—I do not want my constituents in Essex set apart from my friends and family in Scotland. I do not want the House to pass legislation that creates inherent conflicts between different parts of our United Kingdom.

However, the fact is that the proposed system of devolution will not work unless the inherent conflicts are at least reduced—if they cannot be obliterated. I do not believe that that is possible, but at least we can work in a sensible way to try to reduce the conflicts.

I agreed with the hon. Member for Dundee, West (Mr. Ross) when he described the conflict—

Mr. McAllion

It is Dundee, East.

Mrs. Laing

I am sorry. I am quite certain that I have never agreed with the hon. Member for Dundee, West and I am sure that he is delighted about that. However, today I agreed with the hon. Member for Dundee, East (Mr. McAllion) and I am sorry to insult him by saying that. What he said about the conflicts inherent in the system was absolutely correct.

Mr. McAllion

Just for the sake of my own record, the hon. Lady has obviously misunderstood me, as I certainly do not agree with what she has just said. I was arguing that the Barnett formula would prevent the conflict from taking place. It is the hon. Lady who is arguing that it should be removed.

Mrs. Laing

I appreciate that the hon. Gentleman wants to protect his reputation from my agreeing with him, but I was not saying that. I was saying that if the Committee is acting in the best interests of the entire United Kingdom, no one can possibly object to the amendment.

The hon. Member for Linlithgow (Mr. Dalyell) will be less concerned by the fact that I agree with him. He said quite clearly that when the two Parliaments are up and running and try to decide the annual allocation of taxpayers' money, there will be no chance of their reaching an amiable solution. Of course that must be correct. We know already that Government Departments do not reach amiable solutions, even though they are headed by Secretaries of State who are all colleagues in the Cabinet. They do not reach amiable solutions; they spend weeks arguing about which Department should have the greater part of the available public spending. As that is already inherent in the system, how much more will it be the case between the Parliament here in Westminster and the Parliament in Edinburgh?

We have already referred to the report issued by the Treasury Select Committee after it discussed the Barnett formula. It stated: There may be good reasons why this formula should continue to be used in the future as it has for the last 20 years, but it is an argument that cannot finally be settled until it is clear that total expenditure, not just the increase, is still being allocated according to relative need. It is important that there should be maximum possible agreement on this in all parts of the UK. As almost everyone agrees with that, why are the Government resisting an amendment which would simply require the needs of Scotland to be considered in relation to the needs of the United Kingdom as a whole?

As a Member of Parliament, I consider myself a representative of the United Kingdom as a whole. Whatever our allegiances to Scotland, to Essex or to anywhere else, we should all act in the best interests of the United Kingdom as a whole. The dangers of not doing so are considerable.

The Government have said time and again that devolution will safeguard and strengthen the Union. They have used that argument against the Scottish National party Members, who do not want the United Kingdom as a whole to be strengthened. That is fair enough; it is the position on which they were elected. However, the rest of us were elected to safeguard the United Kingdom.

As the Government say that devolution will strengthen and safeguard the Union, they must believe that an amendment that would require the Secretary of State to consider the needs of the whole of the United Kingdom can only be right. By rejecting the amendment, they risk creating the conflicts that the hon. Members for Linlithgow and for Dundee, East so eloquently outlined. As the Government are taking no action today to iron out some of those conflicts, the danger is that the proposed system of devolution will not work and the conflicts that are inherent from the start will increase.

If the system does not work, we shall slide further down the slippery slope to self-government for Scotland. Neither I nor other Conservative Members want that to happen. If the Government do not want it to happen, they can have no reason for rejecting an amendment which would be in the best interests of the United Kingdom as a whole. If they want to protect the Union, they cannot argue against the amendment.

Mr. Desmond Swayne (New Forest, West)

I shall reflect briefly on what I regard as the inadequacy of the debate. I wanted to explore some of the ideas of the hon. Members for Falkirk, West (Mr. Canavan) and for North Tayside (Mr. Swinney), but we are precluded from doing so by the limitations imposed by the pre-legislative referendum that both hon. Members supported. The Scottish people were told that financial autonomy was not on offer, so it would be improper to introduce it—although amendments Nos. 77 and 78 represent a manful attempt to do so.

I refer briefly to amendments Nos. 304, 291, 309 and 293. I support the view of my hon. Friend the Member for Epping Forest (Mrs. Laing) that these are elementary questions, although I intend to take rather less time in saying so. I disagree with her in one small respect—her belief that, as Members of Parliament, we should be ambassadors. Our role is not as ambassadors. If she were to refer to Edmund Burke, she would realise that the House of Commons is a deliberative assembly, and not a mere congress of ambassadors.

It is outrageous to be told by the hon. Member for Falkirk, West that the question of financial autonomy was settled by the Scottish Constitutional Convention. That is an insult to my constituents, who were not involved in that process at all.

The clause states: The Secretary of State shall from time to time make payments of such amounts as he may determine. That is ridiculous. Given that we are creating a democratically elected institution which will be responsible for disbursing funds, it is vital that we accept amendments Nos. 292 and 295, which would ensure that such payments were made at least once a year and that the Secretary of State could not unilaterally, without reference to the Scottish Parliament, change the amounts to be paid.

6.15 pm

Mr. Robert Syms (Poole)

In a unitary state—as the United Kingdom has been until now—it is inevitable that some areas will be winners and some will be losers in the distribution of resources. Most hon. Members will accept that. They can look across the Chamber and see other hon. Members whose constituencies perhaps receive a different deal, but who have been elected to the House on an equal basis.

The Bill will change the relationships within the United Kingdom; it would have little point if it did not. However, it is silent on the question of money. It presumes that the Barnett formula will continue to apply in some fossilised form. As my right hon. Friend the Member for Devizes (Mr. Ancram) said, we cannot debate devolution without debating resources. Money will be an issue in Scotland and, as time goes by, in England.

From what I have heard in the Committee's consideration of this Bill and of the Government of Wales Bill, I believe that expectations of what the new constitutional arrangements will bring are unrealistically high. All hon. Members have their favourite cause, believe that there is a pot of gold or have a shopping list but, as the Bill stands, they will be let down.

Money is a critical question. In the years to come, it will be a major subject of debate, and perhaps disagreement, between parts of the United Kingdom. It is not unreasonable to require, as amendment No. 304 would, the Government to use a needs-based formula. No one is presuming an outcome from such a formula.

I am sure that it will be recognised that, as the hon. and learned Member for Orkney and Shetland (Mr. Wallace) said, many of the communities north of the border, especially in the far north and in the central belt, have real needs. We must deal with the matter of money. The Bill is silent about it, but I believe that we shall have to debate it for many years to come.

Another critical point will be the relationship between Westminster and the Scottish Parliament. We have heard much about concordats but, as my right hon. Friend the Member for Devizes said, we do not know whether they will be between Westminster and the Scottish Parliament or between the Government and the Scottish Executive, whether they will be public or private, or whether the House of Commons will debate them. To make any constitutional arrangement work—we do not want disagreement—the worst case scenario has to be tested, but I do not believe that the Bill does that in terms of the relationships within the United Kingdom.

Money will be critical. There are high expectations north of the border. As we shall debate later, the Parliament will be limited to raising income tax by 3p in the pound, which may raise £400 million or £450 million. Local government will be affected, as it is a major area of expenditure, and there may be a great temptation to top-slice. Under the Bill, the levying of business rates will be wholly within the competence of the Scottish Parliament.

I do not believe that the arrangements under the Bill would provide a sound basis for the future. There will be great disagreement north of the border, particularly as local government is squeezed, and there will be debates in this Chamber between England, Scotland, Wales and Northern Ireland over the way in which resources are farmed out. It is critical to debate these matters and I wish that the Government would tackle them now. If they are not dealt with now, they will come back throughout this and future Parliaments.

In the past, it would often have been best if we had reformed local government—I know that we are talking of a different animal today—and local government finance at the same time. All previous Governments have tried to avoid doing so, which has caused great difficulties. The Bill sets up a new constitution and, if we do not tackle the questions of money, needs and grants, they will be a running sore for many years to come.

Mr. Dominic Grieve (Beaconsfield)

It is abundantly clear from the range of amendments tabled that, irrespective of which positions parties or hon. Members have adopted, there is anxiety over the way in which the Bill will operate in practice. Clearly, the matter can be approached in a number of different ways. For once, the way proposed by the Scottish National party has a certain logic, albeit that if it were introduced, it would effectively mean financial separation and it would cause a ratchet of further problems.

As a Unionist, I believe that we stand and fall together financially. I have always supported the notion that those parts of the United Kingdom that need more financial support should receive it. It really does not matter a bean whether that is the north of Scotland or Wales. As I see myself as a citizen of the United Kingdom, it is right and proper that that should be done.

The difficulty with the Government's approach is that they are burying their head in the sand in terms of the changes that will come about when the Scottish Parliament is set up and in terms of the aging of the Barnett formula in any event. Irrespective of whether a Scottish Parliament is set up, in years to come, that formula is bound to come in for further scrutiny in view of the way in which the United Kingdom is developing.

The amendment simply asserts the principle that all funding should take place on the basis of considering need throughout the United Kingdom. If the relationship between the Scottish Parliament and the Parliament here is to work—it has been my intention to further that relationship during this debate, whatever my anxieties about whether it can be made to work—it will have to set out on the basic premise that on each occasion in the coming funding year, the needs of the United Kingdom as a whole will have to be considered. The idea that that is a device by which Scotland is to be hammered over its financial settlement seems wrong.

Mr. Dalyell

We come back to the question: looked at by whom?

Mr. Grieve

That is a good question. The matter will have to be considered by the Secretary of State and the Government at Westminster in co-operation with Scottish Ministers. Co-operation is implied. As the hon. Gentleman has said on so many occasions, this Bill depends entirely on good will and co-operation. Our anxiety about the legislation, which I know he shares, is that although co-operation and good will are delightful abstracts, in practice, they are often absent. The success of our constitution hitherto has been that it has never catered too much to good will, but it has catered to the realities of power in its distribution.

Mr. Alex Salmond (Banff and Buchan)

I see the logic of the hon. Gentleman's position, but if we want to avoid that conflict either we should all accept the Barnett formula, as the two Front-Bench spokesmen have done, or we should accept the argument for fiscal autonomy put forward by the Scottish National party. The hon. Gentleman's argument will not resolve tensions. As soon as the issue is decided—whoever decides it—it will cause argument.

Mr. Grieve

Perhaps I expressed myself badly. If the Barnett formula is providing adequately for needs, let it continue. However, every time we discuss how much money should go to the block grant to Scotland, we should take into account the needs of Scotland in relation to those of the United Kingdom as a whole. We cannot get away from the principle, so it would be wise to restate it in the Bill. It might not help, but it would at least be a step in the right direction to set out what should be considered as the years go by.

The idea that there will not be discussion between Scottish Ministers and Westminster about funding seems unrealistic. Clearly, it is desirable that that should happen, as I am sure the hon. Member for Banff and Buchan (Mr. Salmond) would agree, even if he would prefer a system of fiscal autonomy.

If we are not to have fiscal autonomy, I endorse the amendment. At least it goes some way to spelling out the principles on which people should approach the problem as they will come across it year in and year out.

Mr. McLeish

We have heard some thoughtful and good contributions from both sides of the Committee but, in characteristically robust fashion, the right hon. Member for Bromley and Chislehurst (Mr. Forth) interjected the question of the English backlash. That may be some people's perception, but it is no context for a mature Parliament to discuss a major constitutional change. If we end up with a Scotland-England debate, we shall all lose out. For the benefit of the Committee, we should approach all these issues as most hon. Members have done. Let us not recreate a situation in which, perceived or real, an anti-English or anti-Scottish backlash is being fomented in the Committee. That simply is not useful.

Mr. Wallace

Does the Minister agree that as 15 English Members at most have been present out of 530 or so, that does not suggest that there is much of a backlash?

Mr. McLeish

Hon. Members on both sides who have attended have contributed and that is important.

The amendments focus on the funding arrangements for the Scottish Parliament. They break down into five groups, which I will consider in turn. The first group comprises amendments Nos. 309, 293, 295 and 86 and is concerned with relating the size of grant that Scotland gets from the UK Government to the country's needs.

The argument of the right hon. Member for Devizes (Mr. Ancram) seems to be that only by linking the grant to need will some kind of protection be offered which will prevent the future erosion of Scotland's level of funding. Amendments Nos. 309 and 86 would make it a statutory obligation for the amount of grant paid over by the UK Government to the Scottish Consolidated Fund to be based on Scotland's needs relative to the rest of the UK. I have no argument with that principle. However, the amendments are unnecessary because in practice, under the long-standing system of public expenditure distribution that operates throughout the UK, resources are already allocated on the basis of relative need. That principle applies not only to money allocated to Scotland, Wales and Northern Ireland, but across the whole spectrum of public spending. We have no plans to depart from that fundamental public expenditure principle.

It follows that amendment No. 293, which would place an obligation on the Secretary of State to report to the House that the grant that he was proposing to make was based on relative need, is also unnecessary. Furthermore, the House will already have had the opportunity to consider the level of any proposed grant in the context of its scrutiny of the annual estimates.

Amendment No. 295, which would impose on the Secretary of State an obligation to consult the Scottish Parliament and various bodies before deciding the amount of grant, is also unnecessary and inappropriate. The grant figure will be derived from the assigned budget, which will in turn be calculated in accordance with the block and formula rules. Those will have been published and so the process will be both public and essentially mechanistic. It is precisely to minimise the need for potentially controversial annual negotiations that we have decided to continue with the block and formula arrangements. A requirement to consult at this stage in the process would be at odds with that general approach, although I would fully expect the Scottish Parliament to consult widely about its proposals for allocating the resources available to it.

The second group, amendments Nos. 77 and 78, would change the funding arrangement for the Scottish Parliament and Scottish Administration from one based on current arrangements and involving payment of grant by the UK Government into the Scottish Consolidated Fund to one based on assigned revenues. These amendments propose that Scottish Ministers should be responsible for making payments from the assigned revenues to central Government for provision of services in Scotland relating to reserved matters. A system based on these amendments would involve a significant move away from one of the main principles underlying public finance in the United Kingdom—that Government expenditure should be based not on where taxes are raised, but on where the demand for services is.

Another reason for opposing amendments Nos. 77 and 78 is that, based on the figures for 1995–96—the latest year for which data are available—they would result in Scotland receiving substantially less than under the existing system. Such a settlement would be unfair, because it would not properly reflect Scotland's relative needs. Given the scale of the discrepancy, I do not foresee the situation changing significantly. To ensure the level of funding needed for the provision of services in Scotland, a system would be required to top up Exchequer revenues with a grant from the Westminster Parliament. That would be a retrograde step in comparison with the arrangements proposed in the Bill, introducing complication and uncertainty, and moving away from a tried and tested system. It would be the worst of all worlds.

6.30 pm

The third group of amendments in this selection is amendments Nos. 111 and 112—with amendment (a)—and new clause 12. They would give statutory effect to the Barnett formula and make provision for its review. I fully appreciate the sentiment that lies behind the amendments, so I shall not point out their weaknesses. However, they are misdirected in principle. I hope that I can persuade those who have tabled them not to press them. The aim is to reinforce the Government's commitment to continuing with essentially the same funding arrangements for the Scottish Parliament and Administration as currently apply to the funding of the functions of the Secretary of State for Scotland.

The funding arrangements proposed in the White Paper are intended as a continuation of the existing administrative arrangements, which have served successive Governments well for almost 20 years. As I have said, we are committed to publishing the detailed rules that will continue to govern the allocation of resources to the Scottish Consolidated Fund. We have already published the principles underlying those rules. Any Government wanting to change the rules will have to do so openly and justify their position. We shall publish the rules.

Mr. Wallace

As I said in my speech, I do not question the good faith of this Government. Does the Minister accept that a key test is how such provisions might be exercised by a Government less well disposed to the success of a Scottish Parliament? He says that they would have to publish details of any changes and take the political flak. Amendment No. 112 would involve the Scottish Parliament before any change was made. Why does he not insert some parameters that would prevent a Government with less commitment to a Scottish Parliament from having a blank cheque?

Mr. McLeish

We have seen different Governments over the past 20 years with different views about the allocation of the block and the formula. We feel that the current arrangement will endure. We hope that it is in the best interests of the Scottish Executive and the Westminster Government to come to sensible agreements. It is an enduring and successful arrangement that has worked for 20 years. It offers the best prospects for moving forward.

Mr. Dalyell

Before my hon. Friend leaves the issue of sensible arrangements, may I return to a question that I have asked previously? I find it hard to understand how continued membership of the home civil service would work. Will the head of the United Kingdom civil service, Sir Richard Wilson, have the right of recommendation, or any other say, in senior appointments? Is there still to be a right of approach to him? Are the terms and conditions of service still to be Whitehall-controlled? I know that those questions relate partly to clause 47, but in Treasury negotiations, they are of central importance.

Mr. McLeish

My hon. Friend may recall that when the issue was raised previously, I said that I would write to him. The central issue is that there will be a unified civil service. The current situation will endure into the new settlement.

An administrative arrangement offers significant advantages over statutory provision, particularly in flexibility and adaptability. Those advantages significantly outweigh any theoretical protection that might be provided by giving statutory backing to the Barnett formula or any other aspects of the Scottish Parliament's funding arrangements.

I offer my hon. Friends the Members for Dundee, East (Mr. McAllion) and for Falkirk, West (Mr. Canavan), who tabled amendment (a) to amendment No. 112, the assurance that, as we said in the White Paper, any review of the funding arrangements would need the full involvement of the Scottish Executive and the United Kingdom Government. We are committed to a fair, acceptable, efficient and effective system for funding the Scottish Parliament. We have made it clear that the Barnett formula is to continue, subject to annual updates to reflect shifts in relative populations—an appropriate arrangement given that the Barnett formula is population based. Population estimates are produced annually.

On a more technical level, amendment No. 292—which constitutes the fourth group of amendments—appears to be aimed at imposing a timetable on the payment of grant by the Secretary of State. It seems reasonable, but it is unnecessary. The detailed arrangements on the timing of payments into the fund by the Secretary of State out of money provided by Parliament will be for agreement between the Secretary of State and Scottish Ministers. There is no need for prescription in the Bill. I hope that the right hon. Member for Devizes will not press the amendment.

Mr. Ancram

I am grateful to the Minister for giving way. I know that he is rushing through his speech to finish in time. He is talking about agreement. I asked him several questions about concordats and agreements. Will the agreement that he is talking about be subject to concordat? Will he answer some of my questions about concordats? This is an important issue.

Mr. McLeish

The grant will not be covered by any concordat. We believe that the principles and the rules surrounding Barnett will be sufficient. We want to ensure that any concordats—I am going wide of the issue—are non-statutory and as public as possible. Such arrangements will be between the Scottish Executive and the UK Government, when the Scottish Executive is established.

The final amendment—No. 294—is difficult to fathom. It would strike out subsection (6), which requires Scottish Ministers to make payments to the Secretary of State in respect of certain receipts. It should be resisted.

I suggest that the lead amendment should be withdrawn and that the others should not be pressed. If not, I ask the Committee to vote them down.

Mr. Ancram

We have had an important and far-reaching debate on an important and far-reaching subject. I welcome the fact that so many hon. Members have spoken. I found the Minister's answers disappointing. I said that amendment No. 294 was probing, tabled so that he could explain a provision that I did not understand. He said that he found the amendment difficult to understand. I hope that we can return to that, because it is important.

My right hon.Friend the Member for Bromley and Chislehurst (Mr. Forth) was right to try to set the issue in a broader context. One of the difficulties that we have on constitutional reform is that the Government are approaching it piecemeal. I agree with my right hon. Friend that we should have a more comprehensive approach.

I am also grateful to my hon. Friends the Members for Epping Forest (Mrs. Laing), for New Forest, West (Mr. Swayne), for Poole (Mr. Syms) and for Beaconsfield (Mr. Grieve). They strongly supported our amendment and reinforced my initial arguments. Our amendment is constructive. The principle was accepted by almost everyone who spoke except the Minister. I am disappointed that, once again, his reaction to a constructive amendment was resist, resist, resist because it looks weak to do otherwise. I had hoped that such a constructive amendment would be given greater consideration—if only a promise by the Minister to go away and look at it and perhaps come back with an alternative. I am sorry that he did not.

It is depressing that so few Scottish Labour Members felt that the issue was of sufficient importance to attend the debate. One or two faithful Scottish Labour Members have been present, but the majority of them were nowhere to be seen. The issue will affect all their constituents.

Mr. Canavan

What about the Scottish Tory Members?

Mr. Ancram

If there were Scottish Tories, they would have contributed to the debate. They would know that their constituents' prosperity depended on the issue. We have learnt from the empty Labour Benches what Scottish Labour Members think about the future funding of their constituencies. Labour Members from the north-east were not even seen. I suspect that the Whips were working hard to keep them away in case they embarrassed the Minister.

The Minister's argument is difficult to accept. He says that the current administrative arrangements have worked well for the past 20 years, so we should keep them in place. It is not as if things were not changing. The Secretary of State tells us that the whole devolutionary project is historic, fundamental and exciting, yet the Minister says that we need not put anything into the Bill because nothing will have changed. A lot will have changed. The main thing will be that instead of a partnership within the United Kingdom, under one unitary Government whose members can get together and share problems and the resources to solve them, we shall have two separate Administrations who will not necessarily see eye to eye. That situation is totally different from the present one and the Minister has failed to address that.

The Minister said that we should not move away from a tried and tested system, but we are moving away from a tried and tested constitutional system in the Bill by setting up a Scottish Parliament. Nothing on the financial side recognises that fact. Listening to him, I found no comfort on the points that I raised.

The hon. and learned Member for Orkney and Shetland (Mr. Wallace) underlined my case when he said that Scotland has special needs. If it does, let us have a needs relationship built into the statute so that it can be tested year on year to ensure that funds and resources are fairly produced. My right hon. Friend the Member for South Norfolk (Mr. MacGregor), with his enormous experience, was right. We are looking for a fair, transparent system which will avoid constant friction between a Scottish Parliament and the Westminster Parliament. That is the key to what we are discussing.

I do not expect the Scottish National party to join us in the Lobby tonight. It will not support any amendment likely to make the Scottish Parliament work. The nationalists want it to fail because that is how they can achieve their ultimate goal of an independent Scotland. If the amendment is constructive, they will not be with us.

If we wanted proof of future confrontations, we had only to listen to the speech of the hon. Member for Dundee, East (Mr. McAllion). He gave us an example, if we needed one, of what matters will be like unless something more is written into the Bill. He abused English Members; he was rude about them and insulted them. He told us that we did not understand Scotland. We heard the authentic voice of the confrontation that is going to come unless some safeguard is built into the Bill. I have heard nothing to justify withdrawing the amendment. On that basis, I ask my hon. Friends to support it.

Question put, That the amendment be made:—

The Committee divided: Ayes 113, Noes 304.

Division No. 169]	[6.41 pm
AYES
Ainsworth, Peter (E Surrey)	Johnson Smith,
Amess, David	Rt Hon Sir Geoffrey
Ancram, Rt Hon Michael	Key, Robert
Arbuthnot, James	King, Rt Hon Tom (Bridgwater)
Atkinson, David (Bour'mth E)	Kirkbride, Miss Julie
Atkinson, Peter (Hexham)	Laing, Mrs Eleanor
Beresford, Sir Paul	Lait, Mrs Jacqui
Blunt, Crispin	Lansley, Andrew
Boswell, Tim	Leigh, Edward
Brady, Graham	Letwin, Oliver
Brazier, Julian	Lewis, Dr Julian (New Forest E)
Brooke, Rt Hon Peter	Lidington, David
Bruce, Ian (S Dorset)	Loughton, Tim
Butterfill, John	Luff, Peter
Chapman, Sir Sydney	Lyell, Rt Hon Sir Nicholas
(Chipping Barnet)	MacGregor, Rt Hon John
Chope, Christopher	McIntosh, Miss Anne
Clappison, James	MacKay, Andrew
Collins, Tim	Maclean, Rt Hon David
Cormack, Sir Patrick	McLoughlin, Patrick
Cran, James	Malins, Humfrey
Curry, Rt Hon David	Mawhinney, Rt Hon Sir Brian
Davis, Rt Hon David (Haltemprice)	May, Mrs Theresa
Day, Stephen	Moss, Malcolm
Dorrell, Rt Hon Stephen	Norman, Archie
Duncan, Alan	Ottaway, Richard
Duncan Smith, Iain	Page, Richard
Emery, Rt Hon Sir Peter	Paice, James
Evans, Nigel	Paterson, Owen
Faber, David	Prior, David
Fabricant, Michael	Randall, John
Fallon, Michael	Redwood, Rt Hon John
Flight, Howard	Robathan, Andrew
Forth, Rt Hon Eric	Robertson, Laurence (Tewk'b'ry)
Fox, Dr Liam	Ruffley, David
Fraser, Christopher	St Aubyn, Nick
Gale, Roger	Sayeed, Jonathan
Garnier, Edward	Shephard, Rt Hon Mrs Gillian
Gibb, Nick	Shepherd, Richard
Gill, Christopher	Simpson, Keith (Mid-Norfolk)
Gillan, Mrs Cheryl	Spelman, Mrs Caroline
Goodlad, Rt Hon Sir Alastair	Spring, Richard
Gorman, Mrs Teresa	Stanley, Rt Hon Sir John
Green, Damian	Swayne, Desmond
Greenway, John	Syms, Robert
Grieve, Dominic	Tapsell, Sir Peter
Hamilton, Rt Hon Sir Archie	Taylor, Ian (Esher & Walton)
Hammond, Philip	Townend, John
Hayes, John	Tredinnick, David
Heathcoat-Amory, Rt Hon David	Tyrie, Andrew
Horam, John	Waterson, Nigel
Howard, Rt Hon Michael	Wells, Bowen
Howarth, Gerald (Aldershot)	Whitney, Sir Raymond
Hunter, Andrew	Whittingdale, John
Jenkin, Bernard	Widdecombe, Rt Hon Miss Ann

Willetts, David	Young, Rt Hon Sir George
Wilshire, David	Tellers for the Ayes:
Winterton, Mrs Ann (Congleton)	Mr. Oliver Heald and Sir David Madel.
Yeo, Tim

NOES
Abbott, Ms Diane	Darling, Rt Hon Alistair
Ainsworth, Robert (Cov'try NE)	Darvill, Keith
Allen, Graham	Davey, Valerie (Bristol W)
Anderson, Donald (Swansea E)	Davidson, Ian
Anderson, Janet (Rossendale)	Davies, Geraint (Croydon C)
Armstrong, Ms Hilary	Davis, Terry (B'ham Hodge H)
Ashton, Joe	Dawson, Hilton
Atkins, Charlotte	Dean, Mrs Janet
Austin, John	Dewar, Rt Hon Donald
Barnes, Harry	Dismore, Andrew
Barron, Kevin	Donohoe, Brian H
Begg, Miss Anne	Doran, Frank
Benn, Rt Hon Tony	Dowd, Jim
Bennett, Andrew F	Drew, David
Benton, Joe	Drown, Ms Julia
Bermingham, Gerald	Dunwoody, Mrs Gwyneth
Berry, Roger	Eagle, Angela (Wallasey)
Best, Harold	Efford, Clive
Betts, Clive	Ennis, Jeff
Blizzard, Bob	Etherington, Bill
Blunkett, Rt Hon David	Ewing, Mrs Margaret
Boateng, Paul	Fearn, Ronnie
Bradshaw, Ben	Fitzpatrick, Jim
Brown, Rt Hon Nick (Newcastle E)	Fitzsimons, Lorna
Brown, Russell (Dumfries)	Follett, Barbara
Buck, Ms Karen	Foster, Rt Hon Derek
Burden, Richard	Foster, Don (Bath)
Burgon, Colin	Foster, Michael Jabez (Hastings)
Burstow, Paul	Foster, Michael J (Worcester)
Butler, Mrs Christine	Galloway, George
Byers, Stephen	Gapes, Mike
Caborn, Richard	Gardiner, Barry
Campbell, Alan (Tynemouth)	George, Andrew (St Ives)
Campbell, Mrs Anne (C'bridge)	Gerrard, Neil
Campbell, Menzies (NE Fife)	Gibson, Dr Ian
Campbell, Ronnie (Blyth V)	Godsiff, Roger
Canavan, Dennis	Goggins, Paul
Caplin, Ivor	Golding, Mrs Llin
Casale, Roger	Gordon, Mrs Eileen
Caton, Martin	Gorrie, Donald
Cawsey, Ian	Griffiths, Nigel (Edinburgh S)
Chapman, Ben (Wirral S)	Griffiths, Win (Bridgend)
Chaytor, David	Grogan, John
Chidgey, David	Hall, Mike (Weaver Vale)
Chisholm, Malcolm	Hall, Patrick (Bedford)
Clark, Rt Hon Dr David (S Shields)	Hamilton, Fabian (Leeds NE)
Clark, Dr Lynda	Hancock, Mike
(Edinburgh Pentlands)	Hanson, David
Clark, Paul (Gillingham)	Harris, Dr Evan
Clarke, Rt Hon Tom (Coatbridge)	Healey, John
Clelland, David	Heath, David (Somerton & Frome)
Coaker, Vernon	Henderson, Doug (Newcastle N)
Coffey, Ms Ann	Hepburn, Stephen
Coleman, Iain	Hesford, Stephen
Colman, Tony	Hill, Keith
Connarty, Michael	Hinchliffe, David
Cook, Frank (Stockton N)	Hoey, Kate
Cooper, Yvette	Hoon, Geoffrey
Corbett, Robin	Hope, Phil
Corbyn, Jeremy	Hopkins, Kelvin
Corston, Ms Jean	Howarth, Alan (Newport E)
Cotter, Brian	Howarth, George (Knowsley N)
Cryer, Mrs Ann (Keighley)	Hoyle, Lindsay
Cryer, John (Hornchurch)	Hughes, Ms Beverley (Stretford)
Cunningham, Rt Hon Dr John	Hughes, Simon (Southwark N)
(Copeland)	Hurst, Alan
Cunningham, Ms Roseanna	Hutton, John
(Perth)	Illsley, Eric
Dalyell, Tarm	Ingram, Adam

Jackson, Ms Glenda (Hampstead)	O'Brien, Bill (Normanton)
Jackson, Helen (Hillsborough)	O'Brien, Mike (N Warks)
Jenkins, Brian	Olner, Bill
Johnson, Alan (Hull W& Hessle)	Öpik, Lembit
Johnson, Miss Melanie	Organ, Mrs Diana
(Perth)	Osborne, Ms Sandra
Jones, Barry (Alyn & Deeside)	Palmer, Dr Nick
Jones, Helen (Warrington N)	Pearson, Ian
Jones, Ms Jenny	Pendry, Tom
(Wolverh'ton SW)	Pickthall, Colin
Jones, Dr Lynne (Selly Oak)	Pike, Peter L
Jones, Martyn (Clwyd S)	Plaskitt, James
Kaufman, Rt Hon Gerald	Pollard, Kerry
Keeble, Ms Sally	Pond, Chris
Keen, Alan (Feltham & Heston)	Pope, Greg
Keen, Ann (Brentford & Isleworth)	Powell, Sir Raymond
Kelly, Ms Ruth	Prentice, Gordon (Pendle)
Kemp, Fraser	Prosser, Gwyn
Kennedy, Charles (Ross Skye)	Purchase, Ken
Khabra, Piara S	Quin, Ms Joyce
King, Andy (Rugby & Kenilworth)	Quinn, Lawrie
King, Ms Oona (Bethnal Green)	Rammell, Bill
Kingham, Ms Tess	Rapson, Syd
Kirkwood, Archy	Raynsford, Nick
Ladyman, Dr Stephen	Rendel, David
Laxton, Bob	Robinson, Geoffrey (Cov'try NW)
Lepper, David	Rooker, Jeff
Leslie, Christopher	Rooney, Terry
Levitt, Tom	Ross, Ernie (Dundee W)
Lewis, Ivan (Bury S)	Rowlands, Ted
Livingstone, Ken	Roy, Frank
Lock, David	Ruane, Chris
Love, Andrew	Ruddock, Ms Joan
McAllion, John	Russell, Bob (Colchester)
McAvoy, Thomas	Ryan, Ms Joan
McCabe, Steve	Salmond, Alex
McCafferty, Ms Chris	Salter, Martin
McCartney, Ian (Makerfield)	Savidge, Malcolm
McDonagh, Siobhain	Sawford, Phil
Macdonald, Calum	Sheerman, Barry
McFall, John	Sheldon, Rt Hon Robert
McGuire, Mrs Anne	Skinner, Dennis
McIsaac, Shona	Smith, Rt Hon Andrew (Oxford E)
McKenna, Mrs Rosemary	Smith, Angela (Basildon)
Mackinlay, Andrew	Smith, Rt Hon Chris (Islington S)
McLeish, Henry	Smith, Miss Geraldine
McNamara, Kevin	(Morecambe & Lunesdale)
McNulty, Tony	Smith, Jacqui (Redditch)
MacShane, Denis	Smith, Llew (Blaenau Gwent)
Mactaggart, Fiona	Smith, Sir Robert (W Ab'd'ns)
McWalter, Tony	Soley, Clive
Mallaber, Judy	Spellar, John
Marsden, Paul (Shrewsbury)	Squire, Ms Rachel
Marshall, David (Shettleston)	Starkey, Dr Phyllis
Marshall, Jim (Leicester S)	Stevenson, George
Marshall-Andrews, Robert	Stewart, David (Inverness E)
Meacher, Rt Hon Michael	Stinchcombe, Paul
Meale, Alan	Stott, Roger
Merron, Gillian	Strang, Rt Hon Dr Gavin
Michie, Bill (Shef'ld Heeley)	Stringer, Graham
Miller, Andrew	Stuart, Ms Gisela
Mitchell, Austin	Swinney, John
Moffatt, Laura	Taylor, Rt Hon Mrs Ann
Moore, Michael	(Dewsbury)
Moran, Ms Margaret	Taylor, David (NW Leics)
Morgan, Alasdair (Galloway)	Temple-Morris, Peter
Morgan, Ms Julie (Cardiff N)	Thomas, Gareth (Clwyd W)
Morgan, Rhodri (Cardiff W)	Thomas, Gareth R (Harrow W)
Morley, Elliot	Timms, Stephen
Morris, Ms Estelle (B'ham Yardley)	Tipping, Paddy
Morris, Rt Hon John (Aberavon)	Todd, Mark
Mountford, Kali	Tonge, Dr Jenny
Mudie, George	Touhig, Don
Mullin, Chris	Trickett, Jon
Naysmith, Dr Doug	Truswell, Paul
Norris, Dan	Turner, Dr George (NW Norfolk)

Vaz, Keith	Wills, Michael
Vis, Dr Rudi	Winnick, David
Wallace, James	Winterton, Ms Rosie (Doncaster C)
Walley, Ms Joan	Woolas, Phil
Wareing, Robert N	Worthington, Tony
Watts, David	Wray, James
	Wright, Anthony D (Gt Yarmouth)
Welsh, Andrew	Wright, Dr Tony (Cannock)
White, Brian	Wyatt, Derek
Whitehead, Dr Alan
Wicks, Malcolm	Tellers for the Noes:
Williams, Alan W (E Carmarthen)	Mr. David Jamieson and Ms Bridget Prentice.
Willis, Phil

Question accordingly negatived.

Amendment proposed: No. 77, in page 26, line 4, leave out from 'shall' to end of line 6 and insert `in respect of each financial year make payments into the Fund equalling the revenue raised by the Exchequer in Scotland and in the Scottish sector of the United Kingdom continental shelf.'.—[Mr. Swinney.]

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 276.

Division No. 170]	[6.53 pm
AYES
Cunningham, Ms Roseanna	Swinney, John
(Perth)	Tellers for the Ayes:
Ewing, Mrs Margaret	Mr. Andrew Welsh and Mr. Alasdair Morgan.
Salmond, Alex

NOES
Abbott, Ms Diane	Chisholm, Malcolm
Ainsworth, Robert (Cov'try NE)	Clark, Rt Hon Dr David (S Shields)
Allen, Graham	Clark, Dr Lynda
Anderson, Donald (Swansea E)	(Edinburgh Pentlands)
Anderson, Janet (Rossendale)	Clark, Paul (Gillingham)
Armstrong, Ms Hilary	Clarke, Eric (Midlothian)
Atkins, Charlotte	Clarke, Rt Hon Tom (Coatbridge)
Austin, John	Clelland, David
Barnes, Harry	Coaker, Vernon
Barron, Kevin	Coffey, Ms Ann
Begg, Miss Anne	Coleman, Iain
Benn, Rt Hon Tony	Colman, Tony
Benton, Joe	Connarty, Michael
Bermingham, Gerald	Cook, Frank (Stockton N)
Berry, Roger	Cooper, Yvette
Best, Harold	Corbett, Robin
Betts, Clive	Corbyn, Jeremy
Blizzard, Bob	Corston, Ms Jean
Blunkett, Rt Hon David	Cotter, Brian
Boateng, Paul	Cryer, John (Hornchurch)
Bradshaw, Ben	Dalyell, Tam
Brown, Rt Hon Nick (Newcastle E)	Darling, Rt Hon Alistair
Brown, Russell (Dumfries)	Darvill, Keith
Buck, Ms Karen	Davey, Valerie (Bristol W)
Burden, Richard	Davidson, Ian
Burstow, Paul	Davies, Geraint (Croydon C)
Butler, Mrs Christine	Davis, Terry (B'ham Hodge H)
Byers, Stephen	Dawson, Hilton
Campbell, Alan (Tynemouth)	Dean, Mrs Janet
Campbell, Mrs Anne (C'bridge)	Dewar, Rt Hon Donald
Campbell, Menzies (NE Fife)	Dismore, Andrew
Campbell, Ronnie (Blyth V)	Donohoe, Brian H
Canavan, Dennis	Doran, Frank
Caplin, Ivor	Dowd, Jim
Casale, Roger	Drew, David
Caton, Martin	Drown, Ms Julia
Cawsey, Ian	Dunwoody, Mrs Gwyneth
Chapman, Ben (Wirral S)	Eagle, Angela (Wallasey)
Chaytor, David	Efford, Clive
Chidgey, David	Ennis, Jeff

Etherington, Bill	Livingstone, Ken
Fearn, Ronnie	Lock, David
Fitzpatrick, Jim	Love, Andrew
Fitzsimons, Lorna	McAllion, John
Follett, Barbara	McAvoy, Thomas
Foster, Rt Hon Derek	McCabe, Steve
Foster, Don (Bath)	McCafferty, Ms Chris
Foster, Michael Jabez (Hastings)	McDonagh, Siobhain
Foster, Michael J (Worcester)	Macdonald, Calum
Galloway, George	McFall, John
Gapes, Mike	McGuire, Mrs Anne
Gardiner, Barry	McIsaac, Shona
George, Andrew (St Ives)	McKenna, Mrs Rosemary
Gerrard, Neil	Mackinlay, Andrew
Gibson, Dr Ian	McLeish, Henry
Godsiff, Roger	McNulty, Tony
Goggins, Paul	MacShane, Denis
Golding, Mrs Llin	Mactaggart, Fiona
Gordon, Mrs Eileen	McWalter, Tony
Gorrie, Donald	Mallaber, Judy
Griffiths, Nigel (Edinburgh S)	Marsden, Paul (Shrewsbury)
Griffiths, Win (Bridgend)	Marshall, David (Shettleston)
Grogan, John	Marshall, Jim (Leicester S)
Hall, Mike (Weaver Vale)	Marshall-Andrews, Robert
Hall, Patrick (Bedford)	Meacher, Rt Hon Michael
Hamilton, Fabian (Leeds NE)	Meale, Alan
Hancock, Mike	Merron, Gillian
Hanson, David	Michie, Bill (Shef'ld Heeley)
Harris, Dr Evan	Miller, Andrew
Healey, John	Mitchell, Austin
Heath, David (Somerton & Frome)	Moffatt, Laura
Henderson, Doug (Newcastle N)	Moore, Michael
Hepburn, Stephen	Moran, Ms Margaret
Hesford, Stephen	Morley, Elliot
Hill, Keith	Morris, Ms Estelle (B'ham Yardley)
Hoey, Kate	Morris, Rt Hon John (Aberavon)
Hoon, Geoffrey	Mullin, Chris
Hope, Phil	Naysmith, Dr Doug
Hopkins, Kelvin	Norris, Dan
Howarth, Alan (Newport E)	O'Brien, Bill (Normanton)
Howarth, George (Knowsley N)	O'Brien, Mike (N Warks)
Hoyle, Lindsay	Olner, Bill
Hughes, Ms Beverley (Stretford)	Öpik, Lembit
Hughes, Simon (Southwark N)	Organ, Mrs Diana
Hurst, Alan	Osborne, Ms Sandra
Hutton, John	Palmer, Dr Nick
Ingram, Adam	Pearson, Ian
Jackson, Ms Glenda (Hampstead)	Pendry, Tom
Jackson, Helen (Hillsborough)	Pickthall, Colin
Jenkins, Brian	Pike, Peter L
Johnson, Alan (Hull W & Hessle)	Plaskitt, James
Johnson, Miss Melanie	Pollard, Kerry
(Welwyn Hatfield)	Pond, Chris
Jones, Barry (Alyn & Deeside)	Pope, Greg
Jones, Helen (Warrington N)	Powell, Sir Raymond
Jones, Ms Jenny	Prentice, Gordon (Pendle)
(Wolverh'ton SW)	Prosser, Gwyn
Jones, Dr Lynne (Selly Oak)	Purchase, Ken
Jones, Martyn (Clwyd S)	Quin, Ms Joyce
Kaufman, Rt Hon Gerald	Rammell, Bill
Keeble, Ms Sally	Rapson, Syd
Keen, Alan (Feltham & Heston)	Raynsford, Nick
Keen, Ann (Brentford & Isleworth)	Rendel, David
Kelly, Ms Ruth	Robinson, Geoffrey (Cov'try NW)
Kemp, Fraser	Rooker, Jeff
Kennedy, Charles (Ross Skye)	Rooney, Terry
King, Andy (Rugby & Kenilworth)	Ross, Ernie (Dundee W)
King, Ms Oona (Bethnal Green)	Rowlands, Ted
Kingham, Ms Tess	Roy, Frank
Kirkwood, Archy	Ruddock, Ms Joan
Ladyman, Dr Stephen	Russell, Bob (Colchester)
Laxton, Bob	Ryan, Ms Joan
Lepper, David	Salter, Martin
Leslie, Christopher	Savidge, Malcolm
Levitt, Tom	Sawford, Phil
Lewis, Ivan (Bury S)	Sheerman, Barry

Sheldon, Rt Hon Robert	Todd, Mark
Skinner, Dennis	Tonge, Dr Jenny
Smith, Angela (Basildon)	Touhig, Don
Smith, Rt Hon Chris (Islington S)	Truswell, Paul
Smith, Miss Geraldine	Turner, Dr George (NW Norfolk)
(Morecambe & Lunesdale)	Vaz, Keith
Smith, Jacqui (Redditch)	Vis, Dr Rudi
Smith, Llew (Blaenau Gwent)	Wallace, James
Smith, Sir Robert (W Ab'd'ns)	Walley, Ms Joan
Soley, Clive	Wareing, Robert N
Spellar, John	Watts, David
Squire, Ms Rachel	White, Brian
	Whitehead, Dr Alan
Starkey, Dr Phyllis	Wicks, Malcolm
Stewart, David (Inverness E)	Williams, Alan W (E Carmarthen)
Stinchcombe, Paul	Willis Phil
Strang, Rt Hon Dr Gavin	Winnick, David
Stringer, Graham	Woolas, Phil
Stuart, Ms Gisela	Worthington, Tony
Taylor, Rt Hon Mrs Ann	Wray, James
(Dewsbury)	Wright, Anthony D (Gt Yarmouth)
Taylor, David (NW Leics)	Wright, Dr Tony (Cannock)
Temple-Morris, Peter	Wyatt, Derek
Thomas, Gareth (Clwyd W)
Thomas, Gareth R (Harrow W)	Tellers for the Noes:
Timms, Stephen	Ms Bridget Prentice and Mr. David Jamieson.
Tipping, Paddy

Question accordingly negatived.

Mr. Dalyell

I beg to move amendment No. 81, in page 26, line 6, at end insert— '(2A) No such payment as is mentioned in subsection (2) shall be made in respect of any financial year unless prior to the commencement of that financial year—

1. (a) the Scottish Executive has submitted to the Secretary of State a report containing the Executive's detailed expenditure plans for the financial year in question, and—
2. (b) the Secretary of State has laid the report before the House of Commons at least ten sitting days before any motion is made in that House for the approval of a grant of Supply authorising the payment.'

The Chairman of Ways and Means (Sir Alan Haselhurst)

With this, it will be convenient to discuss the following: Amendment No. 83, in page 26, line 6, at end insert— '(2A) The Secretary of State shall not make a payment under subsection (2) if at any time when such a payment would otherwise fall due he is not satisfied that the Scottish Executive has established, or is maintaining, proper arrangements for financial scrutiny and auditing of accounts in accordance with sections (Financial control, account and audit), (Accounting officers) and (Arrangements for independent audit of accounts of Scottish Executive).'. Amendment No. 242, in page 26, line 6, at end insert— '(2A) No payment shall be made under subsection (2) unless the Secretary of State is satisfied that appropriate rules have been made under section 66(1) for each of the purposes described in that provision. (2B) No payment shall be made under subsection (2) unless—

1. (a) the Scottish Executive has submitted to the Secretary of State a report containing particulars of the expenditure proposals to which the payment relates, and
2. (b) the Secretary of State had laid the report before the House of Commons at least ten sitting days before any motion is made in that House for the approval of a grant of supply out of which the payment is to be made.'.

Amendment No. 296, in clause 62, page 26, leave out lines 33 and 34.

Amendment No. 297, in page 26, line 36, at end add— (4) The total sums which the Scottish Parliament proposes to pay out of the Fund in any financial year shall not exceed the sums expected to be paid into that fund for the same financial year.'. Amendment No. 257, in clause 66, page 28, leave out lines 13 and 14 and insert— '(3) Standing orders made under Paragraph 4 of Schedule 3 shall provide that a committee shall be appointed with the function of considering accounts and reports laid before the Parliament in pursuance of subsection (1)(e) and that—

1. (a) that committee may not delegate its functions to another committee or sub-committee,
2. (b)no member of the Scottish Executive may be a member of that committee, and
3. (c)the person chairing that committee may not be—
1. (1) a person representing a party of which any of the Scottish Ministers are members, or
2. (2)if each of the parties in the Parliament have one or more of the Scottish Ministers as a member, a person representing the party of which the First Minister is a member.'.

Amendment No. 244, in page 28, line 17, at end add— '(5) Rules made for the purposes of subsection (1) shall provide for—

1. (a) accounts prepared under paragraphs (a) and (b) of that subsection to comply with any directions from time to time given by the Treasury as to the form of the accounts, the information to be provided in them and the general practices and principles to be observed in their preparation, and
2. (b) the designation of accounting officers accountable to the Parliament for the expenditure to which the accounts relate and the specification of their responsibilities.

(6) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision that, if the Treasury so direct, those rules and the functions under subsection (2) shall, to such extent and with such modifications as the direction concerned may provide, apply to any body established by an enactment or subordinate legislation and specified in the direction in relation to which it is within the legislative competence of the Parliament to make such provision. (7) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision for the independent person referred to in subsection (1)(c)—

1. (a) to be appointed by Her Majesty on an address presented by the Parliament, and
2. (b) to be removed by Her Majesty before the end of the period for which he was appointed only on an address presented by the Parliament approved by a resolution passed by at least two thirds of the whole number of its members.

(8) The Act of the Scottish Parliament by or under which the rules referred to in subsection (1) are made shall make provision for the independent person referred to in subsection (1)(c) to prepare for each financial year estimates of the income and expenditure of his office and for those estimates to be considered by the Parliament or one of its committees or subcommittees.'. Clause 66 stand part.

New clause 3—Financial control, accounts and audit—

1. '(1) The Scottish Executive shall, for each financial year, prepare accounts in accordance with directions given to it by the Treasury.
2. (2) The directions which the Treasury may give under subsection (1) include directions to prepare accounts relating to the financial affairs and transactions of persons other than the Scottish Executive.
3. (3) The directions which the Treasury may give under subsection (1) include, in particular, directions as to—
612
1. (a) the financial affairs and transactions to which the accounts are to relate,
2. (b) the information to be contained in the accounts and the manner in which it is to be presented,
3. (c) the methods and principles in accordance with which the accounts are to be prepared, and
4. (d) the additional information (if any) that is to accompany the accounts.
4. (4) Any accounts which the Executive is directed under this section to prepare for any financial year shall be submitted by the Executive to the Comptroller and Auditor General no later than five months after the end of that financial year.
5. (5) The Comptroller and Auditor General shall—
1. (a) examine and certify any accounts submitted to him under this section, and
2. (b) no later than four months after the accounts are submitted to him, lay before both the Parliament and the House of Commons a copy of them as certified by him together with his report on them.
6. (6) In examining any accounts submitted to him under this section, the Comptroller and Auditor General shall, in particular, satisfy himself—
1. (a) that no expenditure to which the accounts relate has been incurred unlawfully or otherwise than in accordance with the authority which governs it, and
2. (b) that money received by the Executive for a particular purpose or particular purposes has not been expended otherwise than on that purpose or those purposes.
7. (7) Where—
1. (a) by virtue of any enactment other than this section the Executive is under an obligation to prepare accounts dealing with any matters, and
2. (b) it appears to the Treasury that those matters fall to be dealt with in accounts directed to be prepared under this section, the Treasury may relieve the Executive of that obligation for or in respect of such periods as they may direct.
3. (8) A reference in this section to the Comptroller and Auditor General may be construed as a reference to such person as he may appoint to exercise on his behalf the specific functions in relation to the accounts of the Scottish Executive which are set out in this section.'.

New clause 4—Arrangements for independent audit of accounts of Scottish Executive— '.—(1) The Standing Orders of the Parliament shall provide for the establishment of arrangements, supervised by an independent person, for—

1. (a) the scrutiny of the accounts of the Scottish Executive,
2. (b) the carrying out of examinations into the economy, efficiency and effectiveness with which the Scottish Ministers and the Lord Advocate have used their resources in discharging their functions, and
3. (c) the carrying out of examinations into the economy, efficiency and effectiveness with which other persons determined under rules approved by the Parliament to whom sums are paid out of the Fund or by the Scottish Ministers have used those sums in discharging their functions.

(2) Standing orders shall also provide for the consideration by the Parliament, including by any Committee appointed for that purpose, of accounts laid before it in pursuance of section (Financial control, accounts and audit) (3) For the purposes of this section, a person is independent if he is not subject to the direction control of any member of the Scottish Executive or of the Parliament in exercising that function.'.

New clause 5— Accounting officers— `.—(1) The Treasury shall designate a member of the staff of the Scottish Executive as the Executive's principal accounting officer.

1. (2) The Executive's principal accounting officer shall have in relation to the Executive's accounts and finances the responsibilities which are from time to time specified by the Treasury.
2. (3) The Treasury may designate other members of the Executive's staff as additional accounting officers.
3. (4) An additional accounting officer shall have in relation to the Executive's accounts and finances such responsibilities as may be specified in the instrument by which he is designated.
4. (5) The responsibilities that may be specified under this section in relation to the Executive's accounts and finances (or any of them) include in particular—
1. (a) responsibilities in relation to the signing of accounts,
2. (b) responsibilities for the propriety and regularity of the Executive's finances, and
3. (c)responsibilities for the economy, efficiency and effectiveness with which the Executive uses its resources.
5. (6) The responsibilities which may be specified under this section include responsibilities owed to—
1. (a) the Parliament or any committee appointed by it to scrutinise the accounts of the Executive, or
2. (b) the House of Commons or its Committee of Public Accounts, and in the case of an additional accounting officer include responsibilities owed to the Executive's principal accounting officer.'.

Amendment No. 80, in schedule 7, page 85, leave out lines 16 to 21.

Amendment No. 246, in page 85, leave out lines 17 to 21 and insert— '10. In section 6 of the National Audit Act 1983 (value for money studies)—

1. (a) after paragraph (c) of subsection (3) there is inserted—"(Ca) the Scottish Executive and any other persons to whom sums are paid out of the Scottish Consolidated Fund; and", and
2. (b) after subsection (4) there is inserted—

(4A) No examinations should be carried out under this section by the Comptroller and Auditor General pursuant to subsection (3)(ca) unless he has consulted the independent person referred to in section 66(1)(c) of the Scotland Act 1998 and he has taken into account any relevant work done or being done by that person".'.

Mr. Dalyell

Amendment Nos. 81 and 83, which I have also tabled, could be called the reduction of girning amendments, although I do not know whether that is a parliamentary term.

The reality is that in 1999, when my right hon. Friend the Secretary of State for Scotland goes off to Holyrood, accompanied by the hon. Member for Banff and Buchan (Mr. Salmond), they and the Ministers at Holyrood, indeed every Member of the Holyrood Parliament, will soon come to regard the main function of those of us, their former colleagues, who are left at Westminster, to be to pursue one purpose above all others. In their eyes, that purpose will inevitably be to get more lolly, more money, from the Treasury. In the eyes of all Holyrood Members of Parliament, any other function that those of us who are left here may have will be minuscule compared with that one basic task. That is the reality of the matter.

Mr. Salmond

I am sure that the hon. Gentleman will concede that I would have another task in mind that went beyond getting more lolly, as he put it, out of the Treasury. From his remarks, I assume that he does not intend to stand for the Holyrood Parliament. The Linlithgowshire Journal and Gazette asked me about his intentions just last week and I was unable to answer that question. Can he confirm that he will not be a candidate for the Scottish Parliament?

Mr. Dalyell

The Linlithgowshire Journal and Gazette has been told 15 times that there is no question of that. In the first place, no one is going to select me, so there is a certain finality about that.

The serious point about the amendments is that they represent an attempt—frankly, Sir Alan, I admit to you that it is a futile attempt—to limit the consequences of girning. In case there is any difficulty about that word, it means to complain, complain and complain. That will be our function. A difficult and potentially dangerous and divisive situation could be created when one has a block of people whose function above all others is to complain and ask for more and more and more—a begging bowl in excelsis.

I note that the hon. Member for Banff and Buchan, who is the leader of the Scottish National party, is smiling. He is in the position of the cat that swallowed the cream; I am in the position of the skunk that failed at the garden party.

The probing amendments have been tabled to ask what will be done about the unsatisfactory situation that could create a division, according to which those Scottish Members of Parliament who are left at Westminster will be expected to get money and play a reduced part at this Parliament. That will be a difficult situation. If they do not get that money, they will be blamed for everything that goes wrong. It is in the nature of politicians that we do not like to blame ourselves—rather we find someone else, a scapegoat. In this case, the scapegoat will certainly be the ineffective Westminster Members who fail to produce the money with which Holyrood Members of Parliament can build roads, repair schools, build houses and fund local authorities. In that, there is a difficult, divisive situation.

I promised that I would be succinct, and so I shall be. I shall leave it at that.

Dr. Liam Fox (Woodspring)

I shall speak to amendments Nos. 296 and 297. Amendment No. 296 is purely a probing amendment. By seeking to delete subsection (2)(b), we want to find out what expenditure would be covered by this provision that is not included in subsection (2)(a). Can the Minister give us specific examples?

The main purpose of the amendments is to deal with what the hon. Member for Linlithgow (Mr. Dalyell) described as the wedge clause. We have said time and again that expenditure would be the wedge that the nationalists would try to drive into the Scottish Parliament to divide Edinburgh from London. As soon as we started to debate the clause, the hon. Member for Banff and Buchan (Mr. Salmond) told us that that is exactly what they intended to do, and that they had a further objective—to divide the Scottish Parliament entirely from the United Kingdom. I know that hon. Members on the Government Benches do not want that, so I hope that the Minister will pay serious attention to the concept behind the amendment.

7.15 pm

Mr. Salmond

Surely the hon. Gentleman is not telling the Committee that that is a blinding revelation to him about the Scottish National party's aims and objectives. It is the first item on every SNP membership card. I cannot believe that the hon. Gentleman became aware of it only this evening.

Dr. Fox

No, I have always been perfectly aware of that, but during the referendum, when voters in Scotland saw the hon. Gentleman on the platform with the Secretary of State supporting his White Paper, which stood for devolution within the Union, a few of them might have thought that he was being, at best, a little disingenuous in campaigning for that, when he obviously had something utterly different in mind. Although he had made that explicit beforehand, I wonder how many voters were caught on the hop.

The concept of a balanced budget is important. It is a discipline that should be brought into a Scottish Parliament from the outset. We all understand the concept from our own lives, even if we do not always manage to achieve a balanced budget, as we realise when the credit card bills come in. The Government make great play of the attempt to get back to budget balance, and all western Governments are trying to achieve it, to make sure that debt is not piled up and passed on to subsequent generations. The Government are making great progress with that, thanks to the healthy revenues from taxation that they are receiving as a result of the successful economic policies that they inherited from the Conservatives.

As we have argued on many occasions, we want to minimise the potential points of friction when the Parliament is set up. The Secretary of State has said repeatedly in Committee that we must consider the worst case scenario. We must prepare ourselves in advance for the tactics that will be employed by those who will seek to break up the Union by using the expenditure wedge.

In the 1980s, we saw Militant Tendency members from the pre-Thatcher unreformed Labour party setting illegal budgets in Liverpool, Bristol and other places, which they knew that they could never finance, and expecting central Government to bail them out, as a way of creating friction between local and central Government. They left huge debts behind. There are councils in the United Kingdom that have bigger debts than some small third-world countries.

Can the Committee imagine how much more dangerous such friction would be with a nationalist complexion? London would be blamed for the financial shortcomings of an Edinburgh Parliament. Some of those who stand for the Parliament will make promises that they know cannot be fulfilled within the expenditure limits that the Government have set themselves, and which they will surely therefore set a Scottish Parliament. When those objectives cannot be realised and disillusionment sets in, the politicians in the Edinburgh Parliament will not get the blame. As the hon. Member for Linlithgow said, politicians seldom blame themselves—in the six years that I have been in the House, I do not remember once hearing a politician blaming himself for anything.

People in Scotland will not blame the actions of the Edinburgh Parliament. They will blame this House. It will be London's fault. The tight purse-strings being held by this place will be blamed for the problems that fall on the Scottish Parliament. That is the wedge that will be used to destroy the United Kingdom. We cannot rule out that situation entirely, but we can build into the Bill the concept of budget balance, as amendment No. 297 sets out.

Budget balance is a good discipline, which the Government try to apply to themselves. It will be easier to achieve, because some of the functions that tend to run away with public expenditure will not be the responsibility of the Scottish Parliament. It will mean that debt is not passed on to future Parliaments and future generations.

I urge the Minister to take seriously the threat that is posed. He heard the leader of the Scottish nationalists say that they have a further objective. I urge the Minister not to give them that opportunity.

Mr. Welsh

The hon. Gentleman is advancing a strange argument. He is arguing for local government prudence and balancing budgets. May I point out that Scottish National party-controlled councils have the best record of financial prudence anywhere in Scotland? I recommend him to examine SNP-controlled Angus. The hon. Gentleman speaks of balanced budgets, but his own Conservative party doubled the UK state debt when it was in power.

Dr. Fox

Of all the Members in the House, the hon. Gentleman has the most attractive way of presenting a red herring. The councils are not trying to break away from the rest of local government in Scotland, but the nationalists do intend to break the Scottish Parliament away from the rest of the United Kingdom. That is the essential difference. They will use every means at their disposal, and I urge the Minister not to give them the one weapon that they seek above all else: to raise expectations that cannot be funded. The Secretary of State has said several times that we must prepare for the worst case scenario. I urge him to accept the amendment to prevent that occurrence.

Mr. David Davis (Haltemprice and Howden)

One of the great treasures of the House is the Members who pursue a course of courageous individualism. I have crossed swords with the hon. Member for Linlithgow (Mr. Dalyell) on open government, science, foreign policy and public services, but as he follows that course of courageous individualism, it is a great pleasure to support him today and to support his arguments, which apply equally to the amendments tabled by me. I disagree with nothing that he said.

The amendments in my name cover two important areas: the responsibilities of the United Kingdom Parliament, and the application of the proper principles of scrutiny in the Scottish Parliament. The amendments are largely self-explanatory, particularly as they are so long, so I shall concentrate on outlining the general principles involved in them.

I begin with the responsibilities of the UK Parliament. May I say at the outset that I want the Scottish Parliament to work. That is now necessary to the continued integrity of the United Kingdom. In the words of the Secretary of State, who is no longer with us, I want as far as possible a friction-free relationship between the House of Commons and the Scottish Parliament. A friction-free relationship, however, will not be advanced by withholding information from the United Kingdom Parliament. It will not be advanced by expecting Westminster to rubber-stamp the allocation of a large sum of money, with neither knowledge of its use nor confidence in its handling.

As I outlined in my Second Reading speech, this House is accountable to UK taxpayers for the money raised by taxes in the United Kingdom. That argument would not apply if the Government took the route of financial autonomy raised by the hon. Member for North Tayside (Mr. Swinney)—I told him that I would compliment him, and I hope that I have not done him too much damage—the hon. Member for Falkirk, West (Mr. Canavan), who is not with us, and my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth). Each of them argued that if there was a Scottish tax base that the Scottish Parliament used, some of the problems that we are debating would not arise. I shall not alarm my colleagues on the Front Bench any more by going further down that line.

Dr. Fox

Hear, hear.

Mr. Davis

I might continue if my hon. Friend provokes me.

Because of the way in which the Government have chosen to finance the Scottish Executive, by a block grant from United Kingdom taxes, we are accountable for it. We should be clear about one thing. It is possible to delegate power, and we are doing that. It is also possible, with proper oversight, to delegate responsibility to a point. However, it is not possible to delegate final accountability. After all, accountability is a duty, not a right. Final accountability for the disposal of taxes lies inevitably with those who raise the taxes. Attempting to avoid that is not delegation, but abdication.

Clause 61 creates the Scottish Consolidated Fund and provides for the Secretary of State to pay the grant from the House into it. My proposed amendment requires the Secretary of State to be satisfied about the Scottish Parliament's accounting and auditing arrangements before he pays the grant. The Bill currently fails to make the Secretary of State accountable, in any meaningful sense, for the annual grant of more than £14 billion that he will pass to the Scottish Parliament.

Amendment No. 242 inserts subsection (2A), which restates a level of accountability that is consistent with devolution. It simply requires that the Secretary of State should satisfy himself that the Parliament has established adequate accounting and auditing rules as required by clause 66 of the Scotland Bill. If he is not satisfied, he must not pay the grant. That straightforward measure will ensure that the Scottish Parliament complies with the Bill's requirements on financial control, and it will hold the Secretary of State accountable to the House for that. It provides a minimum level of accountability for the £14 billion of United Kingdom taxpayers' money that is voted annually to the Scottish Parliament.

Mr. Dalyell

As a former member of the Public Accounts Committee—albeit a long time ago—I must ask whether that is also the opinion of the Comptroller and Auditor General.

Mr. Davis

Indeed it is. I made my speech on Second Reading after the Comptroller and Auditor General raised with me his concerns about several issues, which I then pursued. Although the arguments that I put on Second Reading and those that I deploy today are my responsibility, the Committee may assume that the Comptroller and Auditor General agrees with all the amendments standing in my name.

The proposed amendment moves some way towards, but is more indirect than, arrangements at Westminster and plans for the Welsh assembly. The second proposed amendment to clause 61 deals with the lack of information provided under the Bill to enable the House to reach a proper decision about the approval of the grant. Under the Bill as it is currently drafted, the House can be asked to vote blind on the annual grant to the Scottish Parliament, contrary to the practice for other expenditure. The House voted funds to the Scottish Office for 1997–98 on the basis of detailed Supply estimates comprising 10 votes and 73 line items. The Bill could reduce that detail to a single undifferentiated figure.

Amendment No. 242 would insert subsection (2B), which would remedy that by requiring the Scottish Executive to supply details of their expenditure proposals to the Secretary of State, who in turn would have to lay that information before the House. The Secretary of State could not pay the grant until that had happened.

I should point out clearly that the Bill does not allow the United Kingdom Parliament to control or direct the expenditure: it simply allows the House to know about it. The amendment is a minimum provision that would give the House some idea of how the Scottish Parliament proposes to use £14 billion of United Kingdom taxpayers' money, which it expects the House to vote to it. It mirrors, to a limited extent, existing arrangements in Westminster and the proposals for the Welsh assembly.

I reiterate: it will not help the relationship between Westminster and Edinburgh if the House cannot have confidence that the money it has allocated—for which it is responsible to the United Kingdom taxpayer—is being well spent. Without adequate powers of oversight, the United Kingdom Parliament will be spending its money blindfolded. That will create friction, not avoid it.

I refer now to the application of proper principles of scrutiny within the Scottish Parliament. Clause 66 specifies the limited framework of accountability and scrutiny that the Scottish Parliament must adopt.

Mr. Welsh

Is the right hon. Gentleman saying that Westminster will scrutinise Scottish taxpayers' money that is allocated by Scottish Members in a democratically elected Scottish Parliament? By demanding that accounts be sent to Westminster—I wonder how long that would take—and approved before the money could be spent, he would impose on a Scottish Parliament the same system that the Fees Office imposes on Members of Parliament in this place. That is a ridiculous way to treat any self-respecting Parliament.

Mr. Davis

I am sorry that the hon. Gentleman has a problem with the Fees Office, but he has not listened to what I have said. I made it clear at the outset that if taxes were raised directly in Scotland—including hypothecated taxes—these issues would not apply. However, that is not the case: this is United Kingdom taxpayers' money. The hon. Member for North Tayside spoke earlier about the expenditure balance between England and Scotland. Most hon. Members understand only too well that the balance tips towards Scotland.

However, that is not the problem. The problem is that the House is being asked to allocate blind £14 billion—it may be rather more than that—in one block grant. That cannot be good for democracy or for the relationship between this place and the Edinburgh Parliament. I will give the hon. Gentleman one more chance.

Mr. Welsh

The previous Government admitted that the subsidy from Scotland to the United Kingdom was about £31 billion over 18 years. The right hon. Gentleman espouses the creation of a pocket-money Parliament. If all of Scotland's resources were available, it would make a big difference. The right hon. Gentleman wishes to impose a pocket-money Parliament and then demands that the House should retain control over that pocket money. That really is unacceptable.

Mr. Davis

The hon. Gentleman is pulling numbers out of the air from 20 years ago, when the oil revenues were much larger than they are now. As I have said before, the best estimate is between £2 billion and £6 billion—and I think that it is at the lower end of the scale. That does not matter. The hon. Gentleman is missing the point: we are talking about United Kingdom taxpayers' money. It would be a very different exercise if we were dealing with money raised from a Scottish tax base that went straight to the Scottish Parliament—as happens in federal authorities elsewhere, such as in the United States. That may be what the hon. Gentleman wants, but it is not what the Government have provided and it is not what we are dealing with tonight. The Committee must deal with the Bill as it is written.

Mr. Swayne

Does my right hon. Friend agree that it would have been useful to explore the issues of hypothecated taxes and Scottish taxpayers' money, but unfortunately that has been ruled out by the pre-legislative referendum, which the Scottish National party supported?

Mr. Davis

My hon. Friend is absolutely right. The last time he said that, SNP Members went pale—which rather makes his point.

Mr. Dalyell

I understand perfectly well—I have tumbled to it—why the hon. Member for Angus (Mr. Welsh) is so irritated. I would be equally irritated if I were in his position. Does not that bring us to the central conundrum of the entire Bill: the fact that the hon. Gentleman can use the phrase "a pocket-money Parliament" reveals volumes about the difficulty of having a subordinate Parliament in part, although only part, of a unitary state?

Mr. Davis

The hon. Gentleman is absolutely right, and this unique institution is flawed for precisely that reason. I am attempting to make a difficult entity work because, at the end of the day, I am committed to the United Kingdom, to open government, freedom of information and democracy—all of which are tied up in this equation.

Clause 66 specifies the limited framework of accountability and scrutiny that the Scottish Parliament must adopt. The Government's intention is that the Scottish Parliament will be largely free to devise its own audit and scrutiny arrangements. Clause 66 does little more than suggest the types of arrangement that the Parliament will be expected to devise. Amendment Nos. 257 and 244, again in my name, insert certain fundamental requirements that are currently missing.

7.30 pm

First, amendment No. 257 requires that the arrangements which the Scottish Parliament devises for the scrutiny of reports laid before it by the independent auditor should include the establishment of a committee that is not dominated by the Executive.

Secondly, amendment No. 244 requires that the accounting arrangements of the Scottish Administration should accord with best practice in accounting for and the control of UK Government expenditure.

Thirdly, the rules applying to preparation, audit and scrutiny, for the Scottish Parliament's Administration, should apply also to bodies funded by grants from the Scottish Executive.

Fourthly, the decisions on the appointment and dismissal of the auditor of the Scottish Parliament should be independent of the Scottish Executive. That is one of the most critical provisions in amendment No. 244.

Finally, the funding of the auditor of the Scottish Parliament should not be controlled by the Scottish Executive.

Those are not theoretical issues, nor are they problems confined to the governance of ramshackle regimes or dubious Governments. For example, to take the last issue of the control of the funding of auditors, in the 1980s the Danish Government cut the funding of their parliamentary auditor, leading to a constitutional uproar in Denmark, which eventually led its Parliament to put into effect a parliamentary audit Act almost identical to our own. That is the sort of problem that can arise as a result of the woolly definition of independence in the Bill.

The conditions that I have just outlined are the minimum for not just Westminster but the Scottish people to have absolute confidence in the financial probity of the Scottish Executive and Parliament. It is, for example, inconceivable that proper scrutiny arrangements would allow a scrutiny committee that was dominated by the Executive, or that the Scottish Executive should be allowed to control the Scottish Parliament's auditor by controlling his appointment, dismissal and funding.

The Government say that those are matters for the Scottish Parliament to decide. For the moment, let us put aside the fact that this is UK money that we are talking about. The Government should be clear. Either they are saying that the Scottish Parliament will put in place those minimum requirements, in which case the apparent freedom that it is exercising is illusory and we should properly deal with them here, or they are saying that they are willing to take the risk that it will not put in place such arrangements, with all the dangers that that involves.

We should remember that we are not simply legislating for the next few years, for the duration of some concordat, or for some other short period. The Scottish Parliament's institutional arrangements are supposed to be permanent. The Government may well in good faith expect the Scottish Parliament to implement similar scrutiny arrangements to those that operate in the House, but no one can predict how a future Scottish Executive, if so determined, might change the rules to hinder scrutiny of their actions.

One must also understand—this goes to the pocket-money Parliament argument, picked up so acutely by the hon. Member for Linlithgow—the unique pressure that could face a Scottish Public Accounts Committee. The Scottish Parliament will not raise its own taxes; it will be dependent on another institution for its funding—therefore, the action of exposing waste or corruption could place it in the peculiar position of saying, "We wasted this amount of money last year, but can we have some more this year, please?" That would be an invidious position.

Therefore, it is vital that those minimum safeguards are guaranteed, in the interests of the Scottish voter as well as of the United Kingdom taxpayer in general.

Even then, no legislation can ever be drafted to prevent the Scottish Parliament or Executive, if so determined, from hindering or constraining the proper audit and scrutiny of their affairs. The House still needs the protection of its own auditor, the Comptroller and Auditor General, having sufficient—I use that word carefully—access to be able to report independently to Westminster, should the need arise.

Mr. Dalyell

Does the right hon. Gentleman agree that in 1977, 1978 and 1979, if it had been possible to find legislation to cover this, those clever men, Bruce Millan and John Smith, would have found it, and those equally clever men, Sir John Garlick, Sir Michael Quinlan and their advisers, would certainly have found it? It eluded them all.

Mr. Davis

The hon. Gentleman again points up the problem of the structure. He is right in his allusion. I am trying to do what I can as a Member of the House and as Chairman of the Public Accounts Committee to influence the Government to go down a route that will make the legislation work as well as it can and ensure, in the Secretary of State's words, the most friction-free arrangement possible, in the interests of the United Kingdom and the people of Scotland.

Under the Bill, the Comptroller and Auditor General is denied access to the accounts, and he cannot work with the local auditor. Amendment No. 246 seeks to put that right. The aim is not to duplicate audit, nor to curb the actions of the Scottish Parliament's own auditor, his power, independence or range. The amendment is carefully crafted so that the objective can be achieved with a light touch, in co-operation with the Scottish auditor, and in such a way as to give great confidence to Members of this House of Commons and the Scottish Parliament in the disposal of the taxes that they have raised and for which they are accountable.

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale)

First, I declare an interest. As we are concentrating on the scrutiny and monitoring of financial arrangements within the new Scottish Parliament, I have to admit, more than anything else, that I am a Scottish chartered accountant. I am a member of the Institute of the Chartered Accountants in Scotland, the oldest accountancy body in the world, which establishes beyond reasonable doubt that the Scots are well able to account for their money and have an honourable and long tradition of so doing.

The Liberal Democrats broadly agree with the drift of the amendments as far as they go in establishing the principle that we should have adequate scrutiny. But we want to distinguish between proper scrutiny and imposing a financial straitjacket. In amendment No. 81 in the name of the hon. Member for Linlithgow (Mr. Dalyell) and amendment No. 242 in the name of the right hon. Member for Haltemprice and Howden (Mr. Davis) we see a straitjacket being imposed upon the new Scottish Parliament, essentially requiring some sort of pre-budgetary detailed explanation of where funds must go. People are entitled to say that that surely busts the principle of devolution. The Members of the Scottish Parliament should decide exactly that. Decisions on the financial amounts being passed to the Scottish Parliament should be for it, not this House of Commons.

Mr. Dalyell

I recollect a pleasant occasion at the Tait hall in Kelso during the referendum when that question was raised in a slightly different form. It is a genuine problem. How are people whose constituents are involved expected to vote extra moneys, perhaps—as under something like Barnett, although they may be reduced—to people over whom they have no financial scrutiny rights whatever, to the disadvantage of their constituents? That is testing human nature a bit far.

Mr. Moore

I remember the debate with the hon. Gentleman with some fondness. It was a busy hall in Kelso that night. Many Conservatives who probably were not out during the election campaign were certainly in evidence in the town hall on that occasion.

The House of Commons has, for a long time, predating my membership, debated the principles on which the new Parliament is to be established. Members of this House can have no difficulty in knowing that Scottish Members of Parliament will look after the money passed to them with some care and accuracy. We do not dispute the idea that information should be flowing back to this House; it is the manner and style in which it is done that we question. The idea that we should have a straitjacket and that the dead hand of the Treasury should still control what is going on in Scotland to the last tuppence ha'penny is not acceptable.

Dr. Fox

The whole point is that this is a devolved Parliament. The funding for it comes from all UK taxpayers through this House, and accountability for that expenditure must ultimately lie here.

Mr. Moore

The hon. Gentleman seeks to deny us an important part of the principle of devolution. Most Scottish people contribute to the taxes that come to this place.

Dr. Fox

That is exactly right. Scottish people will contribute to that funding. Scottish Members of Parliament will still sit in this House because they will be responsible to their constituents, who are also taxpayers. Scotland will have a devolved Parliament, not a federal system.

Mr. Moore

This House is in the process of making a decision that will devolve powers to the Scottish Parliament. It goes to the heart of what we discussed in the devolution debates in the run-up to the referendum: we must have confidence in the people of Scotland adequately to scrutinise their affairs, particularly their financial affairs.

Mr. Grieve

Will the hon. Gentleman give way?

Mr. Moore

I have given way on a number of points.

Mr. Swayne

Give way some more.

Mr. Moore

I thank the hon. Member for New Forest, West (Mr. Swayne) for his kind advice, but I shall press on.

The issue at stake is that the Scottish Parliament should set up its own financial scrutiny of the sums devolved to it from the Westminster Parliament, but that there should not be a straitjacket that requires the Treasury to have a pre-Budget view of exactly what will happen in the Scottish Parliament.

Mr. David Davis

Will the hon. Gentleman read the Bill again and look at clause 90, which gives precisely those powers to the Treasury, but not to this House?

Mr. Moore

The right hon. Gentleman makes an extremely good point. I was going to come to that point but I am happy to deal with it now. Clause 90 causes us a great deal of difficulty because it allows the Treasury to get almost any amount of information directly from the Scottish Parliament rather than through this House. We would be much happier about the arrangement if the House rather than the Treasury received the information.

Mr. Salmond

We have already covered this matter in a previous clause. Perhaps the right hon. Member for Haltemprice and Howden (Mr. Davis) was not here then, but we identified the fact that Committees of this House will be able to summon witnesses and documents from the Scottish Parliament. If hon. Members cannot catch up with the debates that we have had, it will prolong the debates that we are now having.

Mr. Moore

The hon. Gentleman is most kind—

Mr. Jenkin

The hon. Gentleman should have said "my hon. Friend". The hon. Member for Banff and Buchan (Mr. Salmond) is a nationalist friend.

Mr. Moore

The gist of the hon. Gentleman's sedentary comments is completely inaccurate.

We support the amendments in the name of the right hon. Member for Haltemprice and Howden. Amendment No. 257 seeks to establish the principle of a suitably independent parliamentary Committee within the Scottish Parliament. It is an important principle of this House that an independent parliamentary Committee should be established and we are glad to support that in this context. We support amendment No. 244, which seeks to strengthen the position of the independent person who is responsible for preparing the accounts and carrying out the audit function, but we must be careful about how far we take the Treasury's influence. As I said, we are particularly concerned about clause 90.

Mr. Dalyell

Is not Pandora's box well and truly wide open? The hon. Gentleman referred earlier to the dead hand of the Treasury; he now makes another comment about the Treasury. The implication is that the English will be subject to Treasury rules and that, somehow or other, the Treasury rules will not apply north of the Scottish border. Such a position is untenable in a United Kingdom. We are discussing extremely important matters.

7.45 pm

Mr. Moore

I accept that we are discussing important matters but not that we should necessarily accept all the proceedings that go on now, or the gist of them, which is that the Treasury should have so much power and influence. The hon. Gentleman bypasses the fact that the Treasury can go straight to the Scottish Parliament without reference to the Westminster Parliament.

The essence of what is required for the new Scottish Parliament is that we should devolve responsibility to look after the funds allocated to it, and that those funds should be adequately scrutinised. We should have complete confidence in the Scottish Parliament's ability to do that through the proposed independent Committee. We support those aspects of the amendments.

Mr. Salmond

I find myself trying to come to the rescue of the Unionist forces in this House in terms of their logic and reasoning. Various arguments have been put forward. The right hon. Member for Haltemprice and Howden (Mr. Davis), and the hon. Members for Woodspring (Dr. Fox) and for Linlithgow (Mr. Dalyell) say that the Government's arrangements skate on thin ice and are extremely dangerous. They say that they will provoke a mentality of "Gie us mair" from a Scottish Parliament, and that that will be the wedge that will break up the United Kingdom. Apparently, that is due to my colleagues and I sitting like cats enjoying the cream. However, it hardly squares with the vote that took place a few minutes ago, when we put forward an alternative arrangement.

The right hon. Member for Haltemprice and Howden was kind enough to say that our proposal would have avoided those problems by setting up a line of accountability, but in the Division a few minutes ago he sat and abstained. He did not even vote one way or the other. He has a brave heart when he praises the SNP amendments, but a faint heart when he refuses to go into the Lobbies. We can hardly be accused of the faults which the Unionists see in the Government's arrangements when we put forward a separate line of accountability, which would have avoided those arrangements.

I think that there are grave deficiencies in the Government's proposals, but how do the Unionist forces propose to deal with them? The hon. Member for Linlithgow says that the Scottish Parliament should submit accounts before it gets any money, as though the submission of accounts would somehow remove the grievances. I should have thought that putting the Scottish Parliament in a subservient role and giving it a begging-bowl mentality would accentuate the grievances.

The underlying question put by the right hon. Member for Haltemprice and Howden seems to doubt the Scottish Parliament's ability properly to scrutinise its expenditure. I have just seen a parliamentary answer, which estimates the cost of the new accommodation for Members of Parliament in this place at £250 million.

Mr. Swayne

Shameful.

Mr. Salmond

The hon. Gentleman is blameless because he was not in this place when the previous Government authorised such expenditure. None the less, it comes amiss from Tory Front-Bench Members to complain about the cost of setting up a national legislature for Scotland when they were prepared to spend 2.5 times as much, and perhaps more, in providing extra rooms for Members of Parliament at Westminster.

Mr. Swayne

I just wanted to draw—

The Chairman

Order. Before the hon. Gentleman intervenes, may I express the hope that he will not pursue the matter of the new parliamentary building?

Mr. Swayne

I shall not rise, then.

Mr. Salmond

The hon. Gentleman has been cut off in his prime. As he develops experience in this House, as he did at St. Andrews university students representative council, he will find a way to change his interventions after helpful guidance from the Chair.

The proposal for the funding of the Scottish Parliament which has been criticised is not an SNP proposal. The SNP proposal was distinct and clear. It would have set up the clear line of accountability that hon. Members want.

It is fascinating that we should be attacked for arrangements that are not of our making. The hon. Member for Woodspring claimed that, in the referendum, the question of the SNP being an independence party was not raised—[Laughter.] I see the Minister of State laughing. It was an ever present question in every television debate. The Secretary of State and I resolved it by pointing out that it was a matter of choice for the people of Scotland. The people of Scotland were rather happy with the argument that it would be a matter of democratic choice for them.

I do not know how many interventions the hon. Member for Woodspring made during the referendum campaign. I did not see him as often as I saw the right hon. Member for Devizes (Mr. Ancram). If we had seen him more often, perhaps the Conservatives would have done better in the referendum. That argument was well ventilated during the campaign.

The proposal outlined by my hon. Friend the Member for North Tayside (Mr. Swinney) would have provided better scrutiny. There would be greater financial accountability if the Scottish Parliament raised its revenue. I am sorry that the right hon. Member for Haltemprice and Howden disputes that point. The questions dealt with by the Treasury last year on the Scottish financial surplus are conclusive, at least for the years to 1994–95.

Scottish Members will know Mr. Jim Stevens, who is an economist and a member of the Scottish Labour executive. I think he has been called the "Hammer of the Nats", as his views on devolution are sometimes closer to those of the hon. Member for Linlithgow than they are to those of Members on the Labour Front Bench. I have disagreed with Mr. Jim Stevens on just about everything to do with politics and economics in Scotland in the past decade. To his credit, he had the generosity to say that we were right. In The Scotsman on 29 March 1997, he referred to the substantial fiscal surplus in Scotland over the years to 1994–95. He said: I am saying that the SNP are right. The evidence produced from the Scottish Office and the Treasury suggests that they are right. That may be the first and last time I cite Mr. Jim Stevens in support of my arguments. None the less, as an economist, his pursuit of the truth overrode his political instincts, and he made that concession during the general election campaign.

I regret that hon. Members who now argue for amendments that contain an artificial proposal for more accountability and for more strings to be attached to the Scottish Parliament did not support the previous set of amendments, which would have established such accountability in a real sense. These amendments do not provide a solution. It is unsatisfactory for a Parliament to have the ability to raise only 3 per cent. of its revenue, but the solution is not to impose checks and balances, and to require accounts and expense claims to be submitted to the Treasury or to this Parliament. That is insulting in the extreme. The solution is to move towards a more financially accountable Parliament.

The hon. Member for Woodspring says that the Tory amendments would ensure that the Parliament pursues a balanced budget. The Tories doubled the United Kingdom national debt in the space of seven years, yet the hon. Gentleman feels that he is quite entitled to argue at the Dispatch Box that their amendments will impose greater financial accountability on the Scottish Parliament. Does he not realise that people may be insulted to hear that argument from a party that played fast and loose with Scottish resources and with United Kingdom finances?

Dr. Fox

The hon. Gentleman is allowed to enjoy his fantasy, but he may remember that in the 1980s we paid a substantial proportion of the national debt left to us by the Labour Government. However, we shall not go into that.

Given that funding for the Scottish Parliament will come through this Parliament, which contains Scottish Members, what appropriate means of scrutiny does the hon. Gentleman think this Parliament should have over the money that is transferred out of the United Kingdom to the Scottish Parliament?

Mr. Salmond

It is fact, not fantasy, that the Conservative Government under the previous Prime Minister, the right hon. Member for Huntingdon (Mr. Major), increased the national debt by £200,000 million to its highest level in history. For the hon. Gentleman to table a balanced budget amendment to try to restrict the Scottish Parliament is blatant hypocrisy.

Mr. Jenkin

Answer the question.

Mr. Salmond

The hon. Gentleman should restrain himself. I shall answer in my own way, in my own time. The previous range of amendments would have provided financial accountability. Tory Front-Bench Members chose to abstain, so they cannot now argue that accountability should overlie this parliamentary arrangement. If I were a devolutionist, I would say that devolution is power retained, so that the ultimate power and responsibility is retained by this place. I am sure that the Minister will say something of that sort. The problem for some hon. Members is that they have suddenly realised that that will create tension between the Scottish Parliament and the Westminster Government. That tension is implicit in the proposals. However, I depart from Conservative Members and from the hon. Member for Linlithgow in that I believe that the move to independence will take place not because of the tensions, but because of the growing confidence of the Scottish people as they see the Parliament in operation. It will legislate on subjects in a way that is far superior to the way in which the House has legislated in the past 20 years or more.

Mr. Grieve

If the hon. Gentleman is right that the Scottish Parliament should scrutinise its own accounts, doubtless it will soon become apparent that we need not worry about that. I should be grateful if he would pick up the question put by my hon. Friend the Member for Woodspring (Dr. Fox). Given the way in which the Bill is constructed, does the hon. Gentleman have any suggestions about how scrutiny may be exercised by this Parliament over the funds that will be transferred to Scotland?

Mr. Salmond

The hon. Gentleman and his hon. Friends sat on their hands when we argued for financial accountability in our amendment. It comes amiss from him, some three quarters of an hour later, to raise that point again.

Mr. Jenkin

It was a bad amendment.

Mr. Salmond

If it was a bad amendment, where were the Conservative amendments to achieve that accountability in a better way? The hon. Gentleman cannot have his cake and eat it. The problem for the Conservatives is that in debate after debate on the Bill they have taken a fundamentally hostile attitude towards the Scottish Parliament. They claim that they have now accepted the democratic decision and will of the Scottish people, but they have taken a grudging, pernickety, restraining attitude towards the Scottish Parliament, which is why they are on 9 per cent. in the Scottish polls.

Mr. Swayne

rose—

Mr. Salmond

Two weeks ago, we discussed the fact that a parliamentary Committee in the House has the ability to summon Scottish Ministers and examine accounts. Conservative Members were quite happy to accept that the Scottish Parliament will not have a corresponding power to summon Ministers and examine documents from the Westminster Parliament.

Mr. Swayne

rose—

Mr. Salmond

The Government are introducing many checks on the autonomy of the Scottish Parliament, but the Conservatives want to introduce more checks and restraints. They are hostile to the Scottish Parliament having any freedom and autonomy.

Dr. Fox

This is a wonderful debate, because this is the crux of the matter. The Scottish Parliament is not fiscally autonomous. Its funding comes through the United Kingdom Parliament, so accountability rests with this Parliament. The hon. Gentleman wanted an autonomous Scottish Parliament, so he has difficulty with the Government's proposal for a devolved Parliament.

Mr. Salmond

The hon. Gentleman must allow me to argue for my own proposal. I am not here to argue for the Government's proposal.

Mr. Jenkin

The hon. Gentleman argued for it in the referendum campaign.

Mr. Salmond

I do not remember the hon. Gentleman intervening much in the referendum campaign. As I said, if the hon. Member for Woodspring had intervened more, perhaps the Tories would have achieved a better result. If the hon. Member for North Essex (Mr. Jenkin) had intervened in that campaign, I am sure that they would have had an even worse result.

Mr. Swayne

I presume, Sir Alan, that I will be in order if I tell the hon. Gentleman why I sat on my hands at the end of the previous debate. The hon. Gentleman's amendments were illegitimate because of the constraints of the pre-legislative referendum, which his party supported. The White Paper ruled out the financial accountability that he desires.

Mr. Salmond

When the hon. Gentleman has had some experience in the House, he will know that, had my amendments been illegitimate, the Chair would not have selected them for debate and vote. I have known the hon. Gentleman for a long time, and he has not changed many of his habits.

I have been generous, because I have given way to Conservative Members some seven times. I shall expect reciprocation in future debates.

Let me summarise my argument. If hon. Members want financial accountability—if they want the democratic accountability that goes with a Parliament's ability to raise its own revenue and decide how to spend it—they should have followed that logic into the Lobby. There is no way of reproducing such accountability by imposing a straitjacket in the form of amendments that will be seen as insulting—almost authoritarian—in terms of the Westminster Parliament's relationship with the Scottish Parliament. Either we have an accountable Parliament or we do not, and those who are not prepared to vote for an accountable Parliament are in a very poor position to attack the arrangement that has been made.

8 pm

The logic of why the Scottish Parliament is not accountable in terms of financial arrangements comes from the fact that it can raise only 3 per cent. of its revenue through its autonomous tax-raising power. That is the point: if the line of accountability is to be changed, the percentage must be changed, either in the way that we suggested a few moments ago or through some other device—some other amendment. The idea that setting up an accounting Committee or supra-Committee, or giving the House a role in overseeing the Parliament, will resolve the difficulties foreseen by Conservative Members and the hon. Member for Linlithgow is fantasy. If anything, such action will exacerbate those difficulties—will exacerbate the grievance. Those who, like me, believe that the route to independence is the Scottish people gaining confidence in an institution that develops in a positive manner do not approve of the grievance politics being peddled by the Conservative party.

Mr. MacGregor

I shall make two comments about the speech of the hon. Member for Banff and Buchan (Mr. Salmond). First, halfway through his speech he referred to the tensions and frictions that would be created by what is being proposed. I think it fair for the hon. Gentleman to argue—as we have argued—that tensions and frictions would be involved in the whole arrangement that we discussed in our last big debate, when we voted on the issue. We pointed out then that tensions and frictions were inherent in what we were discussing. But I do not see how the hon. Gentleman can say that the same tensions and frictions will arise from what is actually a technical and parliamentary matter, rather than a matter of fundamental disagreement about levels of public expenditure and the like. I think that the hon. Gentleman grossly exaggerated the impact of the amendment, and approached it from the wrong standpoint.

Mr. Jenkin

The amendments imply no more powers than the House has implicitly. The inability of the hon. Member for Banff and Buchan (Mr. Salmond) to accept those implicit powers shows that his support for the Government during the referendum campaign was designed simply to mislead the Scottish people about his real intentions.

Mr. MacGregor

I was going to come on to what the amendments amount to, but my hon. Friend has made a fair point.

Mr. Salmond

Surely the right hon. Gentleman will not seriously argue that anyone in Scotland, or in the Committee, is under any misapprehension about my support for independence throughout my political career. How on earth can the right hon. Gentleman, given his experience, agree with that juvenile on the Opposition Front Bench who claims that I have been misleading people?

Mr. MacGregor

That is not what I was saying. The hon. Gentleman is extremely good at standing up and making a point that is entirely irrelevant to what has gone before.

Let me make my second point. The hon. Gentleman argued that, if we were concerned about accountability, we would have voted for his amendment—on which he divided the Committee—in the last debate. That amendment, however, sprang from a completely different view of what the Scottish Parliament ought to be, and we naturally were not going to follow its line. The amendment that we are discussing now is concerned entirely with the Scottish Parliament as it is being established by the Bill, and is a much better way of achieving the desired objective. It would be foolish of us to vote in favour of an amendment with whose basic principle we do not agree, rather than an amendment that addresses the Bill as it stands.

I was unfortunately unable to be present for the Second Reading debate, but I read the report of it thoroughly, and was struck by what had been said by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). I noted that the Minister had listened to my right hon. Friend attentively, and had responded sympathetically, saying that there were real issues that needed to be addressed. That is very much my standpoint, and that is why I was keen to participate tonight and to support my right hon. Friend.

The issue, in fact, is simply about the House's responsibilities in terms of financial probity and value for money—but especially financial probity, which is the whole point of the Public Accounts Committee and the Comptroller and Auditor General and his staff. Let me say this to the hon. Member for Banff and Buchan: we are surely discussing an issue of principle, relating to the way in which expenditure authorised by the House is scrutinised to ensure that the money is spent in the way that the House originally intended. The issue is about that, and nothing beyond that. I think that the principle will be breached in a major way if the Comptroller and Auditor General cannot report to the Public Accounts Committee, and the Public Accounts Committee cannot then scrutinise and take evidence on what he has said—if that is entirely delegated to the Scottish Parliament. As several of my hon. Friends have said, it is the House of Commons that decides on the amount that goes to the Scottish Parliament—

Mr. Salmond

Will the right hon. Gentleman give way?

Mr. MacGregor

Let me just finish the sentence, because I am sure that I am about to hear another irrelevant interruption.

It is the House of Commons that decides on the amount, and it is therefore from United Kingdom taxpayers that the money will come. It is a basic principle that that is one of the purposes of the House, and one of the purposes of the PAC and the Comptroller and Auditor General.

Mr. Salmond

The House of Commons is free to investigate the amount that is sent to the Scottish Parliament. The amendments are about investigating the way in which the money is then spent. Even now, in the Scottish Office, it is for the Secretary of State for Scotland to decide how to shift and allocate money between budgets. The right of the House to investigate the amount that is being sent to Scotland will be unaffected by the legislation.

Mr. MacGregor

The hon. Gentleman's position strikes me as even more curious. He says that in some ways the House has the ability to scrutinise, but, in the way that matters most to the House, it has no such ability. The general point is that the House can scrutinise the probity of expenditure through the PAC and the Comptroller and Auditor General, but apparently that is the one area from which it excludes itself through the Bill.

The hon. Gentleman made the fair point that parliamentary Select Committees would be able to call Scottish Ministers and civil servants—I presume—to appear before them. That is part of the normal process of Select Committees, but the PAC has a different function, and that is the function that is being excluded under the Bill as it stands.

Let me make two more points. First, there is an important issue that the Minister must meet head on if he is to reject my approach. Clause 90 has already been mentioned, but I must say that it strikes me as an affront to the House to allow Treasury civil servants to demand information that the House cannot demand, and scrutinise it, while the Comptroller and Auditor General apparently cannot do that.

My other point relates to local government expenditure. The Audit Commission normally scrutinises that—just as, presumably, the equivalent of the Comptroller and Auditor General will in the Scottish Parliament. I understand that the Comptroller and Auditor General has the right of access to the Audit Commission and to all Audit Commission papers, and that it would be possible for the Comptroller and Auditor General to recommend to the PAC that an issue needed to be scrutinised in terms of financial probity. That, however, seems to be impossible in relation to a huge chunk of United Kingdom taxpayers' money—£14 billion plus.

Perhaps the Minister will be able to convince me otherwise, but I think that we are setting a dangerous precedent, and creating a loophole in the way in which moneys voted for by the House can be scrutinised not just by Members of Parliament, but with the back-up of staff who do much of the detailed work to unearth whether there is a case to answer. That is why I think that my right hon. Friend—who is already doing a splendid job as Chairman of the PAC—is fulfilling his role in bringing the issue before the Committee and urging it to accept the amendments. I hope that, if we do not receive a satisfactory and convincing answer tonight on a matter that should concern all hon. Members, the matter will be scrutinised further in another place.

Mr. Swayne

When I used the term "illegitimate" to describe the amendments of the hon. Member for Banff and Buchan (Mr. Salmond), I was being charitable. I might have been tempted to use unparliamentary terms. I described them as illegitimate because the hon. Gentleman is attempting to lead us down a path that it would be interesting to follow, to discuss and to debate—perhaps coming up with a different Bill—but the time for that has passed.

The people of Scotland were offered a done deal in the White Paper and it is illegitimate to table a series of amendments that take us away from the White Paper. That is precisely why I took the attitude that I did.

Mr. Salmond

In terms of financing and funding, the White Paper argued for the Barnett formula. The hon. Gentleman will have noted that some of his colleagues have questioned the Barnett formula. Does he regard their actions as illegitimate?

Mr. Swayne

The hon. Gentleman has misunderstood the attitude of Conservative Members. We have not questioned the Barnett formula. It has been questioned largely by Labour Members, particularly northern Labour Members. This Pandora's box has been opened elsewhere.

Mr. Salmond

Just before Christmas, the Treasury Committee published a report. With the exception of the hon. Member for Gordon (Mr. Bruce), every other member of that Committee—Labour and Tory—questioned the Barnett formula.

Mr. Swayne

That was the attitude of a Select Committee of the whole House rather than of the Conservative party.

I wish to remain in order, to be brief and to concentrate on amendment No. 297, which adds the proviso that the total sums that the Scottish Parliament pays out of the fund in any year shall not exceed the amounts that are paid in. That is an essential requirement to ensure that the Parliament's expenditure programme is consistent with the principles of a balanced budget. It is a guarantee against the budget exceeding the Parliament's income in any year. I suspect that it will prevent any posturing in relation to the setting of illegal budgets that are more political than financial.

Let us consider the pressures under which the parliamentarians may find themselves. Let us suppose that the UK Parliament and the governing party find that they have to take tough decisions, perhaps having voluntarily taken on the spending constraints of a previous Administration. They find that they are able to live within those constraints. However, the Parliament in Scotland, experiencing different social problems, perhaps with unemployment rising in Scotland—although not in the rest of the kingdom—finds that it is unable to live within those constraints. There will be huge pressure on those parliamentarians at least to posture—if they cannot find real money—in setting a budget that is well in excess of that which the fund would allow. The amendments are a preventive measure.

Mr. John Hayes (South Holland and The Deepings)

I had not intended to speak in the Committee until I was galvanised by listening to the hon. Member for Banff and Buchan (Mr. Salmond) on the monitor. He spoke for a long time, so I listened for a long time, but he did give way often, as he has already said. The key issue in this debate is the financial probity of the House and its responsibility to ensure that money is spent properly and appropriately.

The problem with the nationalist argument is that it assumes that the sovereignty that will be transferred from the House to the Scottish Parliament is a transfer of absolute sovereignty and supreme responsibility. That is palpably not true. The assembly has democratic legitimacy and a place within a United Kingdom, but it does not have the supreme authority that sovereignty demands. That is retained by this Parliament. Therefore, the duty to ensure financial probity and proper control of expenditure must ultimately still rest with this Parliament. That is the point that the hon. Gentleman ceased to take on board during his contribution.

8.15 pm

As my right hon. Friend the Member for South Norfolk (Mr. MacGregor) said, the debate about the responsibility for controlling expenditure is not in itself contentious because the House's powers in that respect are implicit in its role and in its status. The nationalists may not be able to buy that. Although I do not doubt the intentions, integrity or beliefs of the hon. Member for Banff and Buchan, as the official Opposition spokesman, my hon. Friend the Member for North Essex (Mr. Jenkin) said, the truth is that the way in which they were presented to the electorate in Scotland during the referendum was fundamentally dishonest. That is not to say that the hon. Member for Banff and Buchan is dishonest or that he does not genuinely believe in independence for Scotland, but the way in which he dressed up and marketed those beliefs to attract the maximum number of votes—for a cocktail of measures with which even he did not agree and which were put together by the Labour party and his own—was a fraud and a deception.

Mr. Dalyell

Does the hon. Gentleman agree that he came rather late to this debate and that, rather than hearing him provoke the hon. Member for Banff and Buchan (Mr. Salmond), some of us who have raised serious issues would like to hear the Minister's response?

Mr. Hayes

With respect to the hon. Gentleman, to whose wisdom, understanding and diligence in these matters I warmly pay tribute, the point that I am making—and it is a serious point—is that the Scottish nationalists are fundamentally at odds not only with Conservative Members, but with Labour Members. The Scottish nationalists' perception of the role and status of the Scottish Parliament is at odds with the White Paper, the Bill and the view that the House has supreme ultimate authority to ensure that money is spent properly and wisely and that the mechanisms must remain in place to guarantee that authority.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

Nothing that the hon. Gentleman says about the divergence of views between ourselves and the Labour, Conservative or Liberal Democrat parties in Scotland will come as a surprise to anyone living in Scotland. What he says about the potential problems involving the probity of a Scottish Parliament is an insult to everyone living in Scotland. If repeated, that sort of remark will ensure that the number of Conservative Members representing Scotland will remain at its present level: zero.

Mr. Hayes

That is, of course, absolute nonsense because there are many—

Mr. Dalyell

On a point of order, Sir Alan. Has not Madam Speaker ruled that hon. Members who are not present to hear opening speeches should not make speeches? Is it not an abuse to come into the Chamber and make a blathering speech, when important speeches have been made by hon. Members on both sides of the Committee, to which we need an answer?

The Chairman

Madam Speaker's remarks were directed towards statements in the House. However, the hon. Gentleman is right that it is a convention and a courtesy that hon. Members do not seek to participate in debates in which they have not heard the main arguments. The hon. Member for South Holland and The Deepings (Mr. Hayes) rose and, in the circumstances, the Chair had to call him.

Mr. Hayes

I can assure you, Sir Alan—I did mention this earlier—that I had been observing the—

The Chairman

Order. The hon. Gentleman is a new Member, but I must tell him that it is no excuse to come into the Committee and plead that he has been watching the debate elsewhere. The understanding is that to take part in a debate in this House, an hon. Member must be present in this Chamber.

Mr. Hayes

I obviously bow to that instruction, Sir Alan. I will be brief. Let me make this point—

Mr. Salmond

In conclusion, I hope.

Mr. Hayes

It is a repetition, but clearly the hon. Gentleman does not understand it. His view is a divergence—not because of any fundamental debate about the role of Scotland and the role of England-but because he does not recognise the ultimate authority of this Parliament to guarantee probity in expenditure in respect of this Parliament and the new devolved Parliament. That is a fundamental difference, with which the amendments seek to deal.

Mr. McLeish

I want to reflect seriously on the points raised in the debate, in which many hon. Members have made good contributions to a serious subject. It is imperative that the new Parliament takes seriously effective accounting, auditing and value for money. It will enhance the credibility of the Parliament from day one if it has the appropriate procedures, and if it makes clear—as I will tonight—that every activity of expenditure and monitoring will be taken with the utmost seriousness.

I have had some discussions with the Chairman of the Public Accounts Committee, the right hon. Member for Haltemprice and Howden (Mr. Davis), which I hope to reflect in my comments tonight. I also wish to refer to the concerns of the right hon. Member for South Norfolk (Mr. MacGregor), who has long experience in the House. With longevity in this place comes an understanding of the importance of the Comptroller and Auditor General and the PAC. Like many hon. Members, I was a member of the PAC in my first year in the House. It was an experience which has served me well. I should like to reflect the sentiments of that period and the comments of my hon. Friend the Member for Linlithgow (Mr. Dalyell).

We are covering important ground. From the outset, it is important to realise the nature of the Parliament we are establishing. My hon. Friend the Member for Linlithgow has a long-standing and principled record of opposing devolution, but he has commented on the procedures to be established in this House and the Scottish Parliament. The Conservatives have made points—sometimes not-so-veiled points—in relation to their concerns about the Parliament, but have focused on particular issues.

The Parliament will be a legislative body with law-making powers. Crucially in this context, it will have a clearly defined and separate Executive. That is important. People may be cynical and have lingering doubts about the Bill, but it is important to make that point. In these circumstances, it is the right—indeed the duty—of the Scottish Parliament to hold the Executive to account.

This House must ensure that the Parliament is in a position to hold the Executive to account, but not prescribe every detail of how it is to do that. It is important that the Parliament takes ownership for its own procedures, rather than have these foisted on it. In that way, they are likely to be more successful.

For those reasons, we said in the White Paper that the detailed arrangements that the Scottish Parliament makes to control and scrutinise the spending of the Scottish Executive will be a matter for the Scottish Parliament and its Committees, but that the Scotland Bill will lay a general obligation on the Parliament to establish effective scrutiny and audit arrangements. The Bill does that. It sets out a framework for the Parliament to legislate for the rules regarding the allocation and approval of expenditure, the accounting and auditing of that expenditure, carrying out value-for-money studies and reporting the results of those to the Parliament.

It is only a framework. For the reasons I have given, the Parliament must be responsible for the detail. In framing that detail, it can incorporate—if it so wishes—the suggestions featured in these amendments, such as the establishment of a Committee similar to the Public Accounts Committee. I have no hesitation in saying that I hope that the Parliament will do that. My experience as a member of the Committee was excellent, and it does invaluable work. However, the Parliament should be able to decide on the best way forward, even though my preference would be to go for a Public Accounts Committee.

Mr. Salmond

From the initial discussions that have been held in the consultative committee that the Minister is chairing, does there not seem to be common ground across the political parties to have a Committee structure in the new Parliament which is more powerful and effective than the Committee structure in this House?

Mr. McLeish

I note the hon. Gentleman's sentiment; we should like that to happen. No one can argue that the traditions of this House have not been well served by its auditing, accounting, controlling and monitoring procedures. In some respects, we have an opportunity in the Parliament in Edinburgh to build on this House's success. I shall return to matters such as the designation of accounting officers and the security of tenure of the chief auditor.

Let me be absolutely clear that there is no difference between the Chairman of the PAC and the Government on the principle of accountability to the Parliament. However, we do differ significantly on how the principles should be put into practice. It is vital that the Parliament holds the Executive to account. But that is its role—and not one which this House should attempt to usurp.

Earlier, we had a discussion about expenditure. The Government believe that the control and scrutiny of the expenditure of the Scottish Parliament should be a matter for the Parliament in Edinburgh. Control and scrutiny of the resources given to the Parliament will still be vested in this Parliament. The Parliament in Edinburgh will be in charge and will be responsible for what it spends money on, but we must make sure that the grant is properly accounted for and monitored after we have the assigned budget and after the money is given to the Scottish Consolidated Fund. The Bill provides for that.

The House should not attempt to set out in every detail how the Parliament should go about this task. It will be able to take the best of what we have to offer, but it must be free to adapt the details to its own circumstances.

We shall ensure that the Parliament and Executive are given the best possible advice in these matters. As I have discussed with the Chairman of the PAC, we have established a consultative steering group and we are setting up an expert panel, which will include the National Audit Office. It will, of course, be up to the Parliament to decide for itself on the basis of the advice it has on the final shape of the arrangements. However, it is a sign of intent and a way of going forward.

Dr. Fox

It is not a matter of "usurping" the Parliament's power—the Minister used that word. However, I find it strange that clause 90 gives the Treasury the ability to require Scottish Ministers to provide any information that the Treasury wants, but not any information that this House wants. The Treasury is to have that power. What mechanism will this House have to scrutinise how money is spent?

Mr. McLeish

Clause 90 suggests that, from time to time, information will be required by the Treasury. It is dealing with macro-economic policy and there is no conflict in providing such information. However, there is a very important distinction between that process and democratic debate in the House on the Scottish Parliament's expenditure programmes. Clause 90 is a matter-of-fact clause which rightly allows the Treasury to be provided with information.

Amendment Nos. 81 and 242 suggest that the House should receive a report of the Executive's spending proposals, as approved by the Parliament, before it votes the Supply for the grant that the Secretary of State will make to the Scottish Consolidated Fund. That would amount to the House's being asked to approve the Scottish Parliament's spending proposals, which is fundamentally at odds with the very essence of devolution. The allocation of resources within the overall budget is quite clearly a matter for the Parliament. It will also be a matter for the Parliament whether to vary the amount of that budget—upwards or downwards—if it uses the tax-varying power.

8.30 pm

Mr. Dalyell

Is it not at odds with the principle that a Parliament should be able to monitor the money that it has to raise? It has the obligation of raising the money, and there is a certain principle that those who raise money have a right to monitor it. There are two conflicting imperatives.

Mr. McLeish

I do not see the conflict between the imperatives. Supplying resources from Westminster is one issue; the Scottish Parliament spending those resources is another issue. There are systems—in an assigned budget, which is processed in the House, in Supply estimates and in an annual appropriation—whereby the Comptroller and Auditor General will have access, thereby dealing with the central point of the resources that are passed, through grant, to the Scottish Consolidated Fund. The systems would separate Supply from spending proposals, and we believe quite firmly that spending resources in the Scottish Parliament should be a matter for the Scottish Parliament.

Mr. Grieve

I appreciate the hon. Gentleman's point, but there is a problem. I accept that, once the principle of devolution is realised, decisions on how to spend money in the devolved spheres in Scotland will be taken by the Parliament. However, suppose that there are instances in which it is observed not that the principle of expenditure is wrong—as that cannot be questioned—but that the manner of expenditure is wholly inefficient, and that our constituents' money is being channelled in that way. Is that not the nub of the issue? Is there not a need for some mechanism to allow scrutiny in the House?

Mr. McLeish

That is not the nub of it. If we are involved in serious devolution, the central issue, which some hon. Members find more difficult to grasp than others, is that—although we are talking about resources raised by taxation and dealt with by this Parliament in a grant to the Scottish Consolidated Fund—a new set of accounting and auditing procedures will be required which will be the responsibility of the Scottish Parliament. I very constructively make the point that there will be no great desire on behalf of anyone in the Scottish Parliament to do anything less than is done at Westminster. Indeed, in the context of United Kingdom politics and Scottish politics, a special premium will be placed on making significant improvements.

Direction of accounts is dealt with by amendment No. 244 and new clause 3, which suggest the form of accounts, and how they should be constructed and directed by the Treasury. If the Parliament is to hold the Executive to account, it follows that it, and not some external source, should decide on the details of accounting. As I said, we will make available to the Parliament the best advice on those matters.

The right hon. Member for Haltemprice and Howden raised the important matter of the designation of accounting officers, which is proposed in amendment No. 244 and new clause 5. We accept the principles that lie behind suggestions that the Parliament should be able to examine officials who may be responsible for misspending and waste, and that officials should be given a clearly separate role as part of the checks and balances necessary for the proper operation of the Executive. Those principles work well in scrutinising expenditure in the House.

The Scottish Parliament will, of course, have adequate power to legislate on those matters, and it can provide for the appointment of accounting officers if it so wishes. However, given the concerns of the right hon. Member for Haltemprice and Howden, I am willing to give the matter further consideration.

The second important point is security of tenure of the auditor. We have no quarrel with the principle of security of tenure suggested in amendment No. 244 for the person appointed to carry out, or supervise, the audit of the accounts. Clearly, that person must be free from control or pressure from either the Parliament or the Executive; and we have already included provision in the Bill for him or her to be independent of both. However, given the concerns that have been expressed, I will undertake to consider whether there needs to be further provision in the Bill to secure his or her independence. I hope that the right hon. Member for Haltemprice and Howden will accept that in the spirit in which it is intended.

We think that the proposal in amendment No. 244, on the independent auditor's estimates of income, expenditure and remuneration, is unnecessary. The Parliament itself can make the necessary provision for the submission of estimates and provisions for payment of expenses and salary. The Bill has been drafted to allow the Parliament to vote money directly to the auditors, rather than to have them rely on the Executive.

The establishment of Committees is dealt with in amendment No. 257. The suggestion that the Parliament must have a Committee similar to the House's PAC seems to be at odds with the principle of devolution. There is no doubt that the Parliament will want to have a Committee that embraces the functions performed in the House by the PAC, although it may not be called a Select Committee on Public Accounts; other terminology may be used. However, we accept the spirit of the suggestions that have been made on the matter. Personally, I will have no trouble in establishing a central focus for our activities in the new Parliament.

The Parliament must consider both the accounts and the auditor's reports. The Bill already provides for that. However, how it does so and its Committee structure will be up to it. There is nothing to stop it having the equivalent of a PAC. Imposing one on it will carry with it unnecessary inflexibility. Clearly, the precise arrangements should be for the Parliament to decide.

New clause 4 proposes that the Parliament's Standing Orders should make provision for arrangements for scrutinising the accounts of the Executive and for carrying out value-for-money studies. We think that that is unnecessary. Clause 66 already makes adequate provision on both those matters. The Parliament must make provision by or under an Act, setting out the detailed arrangements in those matters. Although it may be possible to encompass some of the arrangements in Standing Orders—such as consideration of accounts and reports by the Parliament—those are unlikely to be sufficient by themselves. Legislation would be a better vehicle to deliver all that would be required.

Most of the points so far deal with suggestions designed to ensure that the Parliament has adequate machinery for calling the Executive to account. We appreciate those suggestions, and I shall ensure that my officials take them into account in preparing advice to be put, in due course, to the new Executive and the new Parliament. Generally, however, we do not believe that the proposed level of prescription is necessary or desirable, or consistent with the thrust of our devolution proposals.

Amendment Nos. 80 and 246 and new clause 3 deal with the locus of the Comptroller and Auditor General, by providing that he should audit the accounts and retain his powers to undertake value-for-money studies and to report results of those activities to the House, and by having the PAC examine relevant officials. Clearly, that would conflict with the principles that I have stated—that it is for the Parliament to hold the Executive to account. To have the House attempt to do so at the same time would only fudge accountability; it would not clarify it.

Moreover, any circumstances whereby the House and its Officers undertake investigations into the Scottish Executive, or any other body that is accountable to the Parliament, could only be a potential cause of conflict between the two Parliaments. We did not seek to impose dual auditing when we established the devolved administration in Northern Ireland; nor does the Comptroller and Auditor General audit the accounts or conduct value-for-money studies in local authorities.

I understand the argument that public money—money provided by the House—is at stake. However, the accounts of the Supply grant for the payments to the Scottish Consolidated Fund will be audited under existing legislation by the Comptroller and Auditor General, laid before the House and open to examination by the PAC. The Bill provides for the Secretary of State to account for other transactions that he may undertake in short-term lending to the Executive and in handling repayment of outstanding loans obtained from the National Loans Fund. Similarly, the Comptroller and Auditor General will audit those accounts and lay them before the House.

Amendment Nos. 83 and 242 are designed to ensure that the Secretary of State is satisfied that adequate arrangements are in place before he makes any payments to the Consolidated Fund. It will be important for the Parliament to put in place the necessary rules required—not only under clause 66 but under clause 62—before it takes on full responsibility for accounting and audit. Moreover, it will be important to ensure a smooth transfer of the audit function, particularly if the transfer of executive responsibility occurs during financial year. We will want to present to the House as soon as possible our proposals on transitional arrangements, which will deal with those very important points. We strongly believe that we must have proper procedures in place in Edinburgh before we ask the House to transfer those accounting and auditing responsibilities. I think that that is right, and we will certainly ensure that it will be done, by means of an order.

Mr. David Davis

I thank the Minister for giving way. He knows that I am disappointed by his response. There is no doubt that we differ on matters of principle. Nevertheless, may I take the opportunity to thank him for his courtesy and his time in listening to our case and for some of the amendments that he hopes to implement, particularly in respect of the interim arrangements?

I do not propose to press my amendments, although the Minister may expect to hear more from me on the issue for as long as the Bill makes progress through the House and another place. I shall be surprised if the issues, which are of serious constitutional significance, do not arise again in another place.

Mr. McLeish

I thank the right hon. Gentleman for his intervention. He knows that we will discuss the issues many times before the Scottish Parliament is established.

Let me briefly complete my remarks about the amendments under discussion. The practical effect of amendment No. 296 would be that the Parliament was unable to provide for the salaries and allowances of Members of the Scottish Parliament unless it made them a statutory charge on the Scottish Consolidated Fund or provided for them to be paid by the Scottish Ministers. Also, it would not be possible for the expenses of the parliamentary corporate body to be paid. It would also mean that the Parliament was unable to vote money directly to the independent auditor and could only arrange for him to be paid by the Administration or for his expenses to be a charge on the fund.

While amendment No. 297 seems attractive, it is both unnecessary and undesirable for the following reasons. The Scottish Parliament could not effectively budget to live outwith its means, as the Scottish Executive will have no borrowing power on their own account other than the short-term borrowing provided for at clause 63. Moreover, even the short-term borrowing is repayable under such terms as the Treasury may determine—including the time scale for repayment.

Briefly, clause 66 provides for robust financial arrangements where necessary, while leaving the Scottish Parliament the maximum freedom to determine its own procedures. I hope that I have taken seriously the matters raised by hon. Members. I have benefited from the discussions with the right hon. Member for Haltemprice and Howden. Obviously, we shall have further discussions and when we have reflected further on particular points, we shall bring them back before the House. With that contribution, I hope that the amendment will be withdrawn.

Mr. Dalyell

I shall resist the temptation to enter into arguments that clearly began more than a quarter of a century ago in St. Andrews university. We shall leave that aside.

Perhaps in one sense there are two categories of hon. Member: those who have been fortunate enough—as the Minister and I have—to serve on the Public Accounts Committee and those who have not. I served under three Chairmen: Harold Wilson, John Boyd-Carpenter and Douglas Houghton and I learnt a great deal from them. My hon. Friend has obviously learnt a great deal from his time on the PAC and I accept that he accepts the spirit of what has been said.

I suppose that my hon. Friend will have further discussions with the audit department. He and I know the importance of transparency, as does anyone who has served on the European Parliament. I served on the Budget Committee and the budget sub-committee under two German chairmen and I learnt a great deal about the importance of transparency. It will have to be worked out. Do I understand that much of the work will be referred to the consultative steering group?

Mr. McLeish

indicated assent.

Mr. Dalyell

My hon. Friend indicates assent. Let me make it clear that I have never ever said—during the referendum or on any other occasion—that the calibre of Members of the Scottish Parliament would be any less than that of right hon. and hon. Members. I have never said that. I am sure that they will be as capable as we are of performing tasks of scrutiny. That is not the issue. The issue is that they will be under tremendous political pressures to satisfy expectations that have been raised, and that means money. I return to the real problem that those who raise money expect to do some monitoring, in one form or another, of the way in which the money is spent.

Mr. Wallace

Does the hon. Gentleman agree that if, as he suggests, the money might well be tight, there might be a great premium on those serving in the Scottish Parliament to make sure that the money was spent effectively and efficiently, and that might mean all power to a PAC-type body that would be monitoring the expenditure?

Mr. Dalyell

I agree with that, with the rider that people will always want more. Time is running out, so, with the great satisfaction of the spirit of my hon. Friend's reply and his obvious interest in the matter, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

It being a quarter to Nine o'clock, THE CHAIRMAN, pursuant to the Order [9 February] and the Resolution [10 February] put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

Clause 61 ordered to stand part of the Bill.

Clause 62 ordered to stand part of the Bill.