§ 7.30 p. m
§ The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel) rose to move, That the draft order laid before the House on 4th February be approved [8th Report from the Joint Committee].
§ The noble Lord said: My Lords, this order is a significant step in the implementation of devolution for Scotland. The next financial year will be a particularly special one. At the start of the year the allocation of spending to individual services will be within the control of this Parliament, but by the end of the year it will be a matter for the Scottish Parliament. We have to provide for transitional arrangements to ensure that this historical transformation takes place as smoothly as possible and with the minimum of disruption to public services in Scotland.
§ Of course this order does not itself deal with the allocation of funds to individual services. That is solely a matter for the other place. That other place approved last week a draft of another order with a long and indigestible title, which I shall refer to as the appropriation order.
§ The order deals with the framework for the spending, accounting and auditing of money from the Scottish Consolidated Fund. That fund is being established from the beginning of the financial year in order that the payments from it can be authorised for the full year. The order provides for the transfer of the spending authorisations granted under the appropriation order from the Secretary of State to the Scottish Ministers.
§ Under Sections 65 and 70 of the Scotland Act 1998, the Scottish Parliament will have to legislate to put in place the detailed arrangements for the approval and spending of public money, including the accounting and auditing arrangements.533
§ A great deal of work has already been done to prepare the ground. In particular, the cross-party Consultative Steering Group has agreed a report from the Financial Issues Advisory Group which makes detailed proposals for all the necessary budgeting, monitoring, accounting and audit arrangements. That group, incidentally, included in its members Professor David Heald, a former colleague of mine at the University of Aberdeen, as was Dr. Michael Dyer, known to the noble Lord opposite. Professor Heald is a specialist adviser to Select Committees in the other place, and an acknowledged expert on public expenditure matters. He, like the other members of the group, gave freely of his time and knowledge. I would like, with your Lordships' permission, to place on the record our thanks for all the work they did. They rendered a considerable service to the public of our country.
§ The order before us deals with the financial year 1999–2000. It takes us, during the course of that year, from a Westminster public expenditure regime to one that is determined by and the responsibility of the Holyrood Parliament. It does so in the context of a financial year when spending responsibility will fall to the Secretary of State for Scotland in the first part of the year and from 1st July to the Scottish Executive.
§ In essence, the order puts in place, for the transitional year, arrangements governing the spending of and accounting for money paid out of the Scottish Consolidated Fund that are similar to provisions in a host of Acts of this Parliament, ranging from the Exchequer and Audit Departments Act 1866 to the National Audit Act 1983.
§ The order sets down the conditions under which sums may be paid out of the Scottish Consolidated Fund during the transitional year. It puts in place arrangements to ensure that any payments from the fund relate to functions that are or will be devolved and that they have the necessary legislative authority.
§ The next main provision transfers spending authority for those unspent balances at the date of devolution from the Secretary of State to the Scottish Ministers (and in certain cases to the Parliamentary Corporation). That is especially important, because it enables funding for public services to be approved for the entire transitional year and for allocations to move seamlessly from the Secretary of State to the control of Scottish Ministers without further approval.
§ While these provisions of the order concentrate on the spending of public money, others make sure that funds are properly accounted for. The order specifies accounting arrangements for the transitional year in some detail. In essence, it requires the Secretary of State to prepare accounts for transactions that take place prior to devolution and places an identical obligation on Scottish Ministers for the period after devolution. Both sets of accounts are to be audited by the Comptroller and Auditor General. They will be laid before this Parliament and the Scottish Parliament respectively. The Comptroller and Auditor General will also retain responsibility for examinations of economy, efficiency and effectiveness throughout the transitional year. The 534 order enables him, if necessary, to complete those studies he has started but not finished during the transitional year.
§ The question of accountability clearly does not end with the specification of suitable financial accounting and value for money arrangements. We also need to make more general provisions, to ensure that Ministers and officials remain accountable until the Scottish Parliament has put its own arrangements in place. Therefore, the order requires the appointment of accounting officers in both the pre- and post-devolution periods.
§ While much of this order rightly concentrates on matters associated with the use and management of the Scottish Consolidated Fund, it also makes arrangements to continue the payment of certain designated receipts into the UK Consolidated Fund. Those receipts mostly relate to fines and to interest payments and are presently paid into the UK Consolidated Fund. They do not form part of the Scottish Office budget. The order ensures that these arrangements continue.
§ The majority of receipts are not subject to these special considerations and the order provides for these, so far as they relate to functions that are or will be devolved, to be paid into the Scottish Consolidated Fund or, more usually, appropriated in aid.
§ The final main provisions of the order are of a relatively technical nature. They allow the continuation of the Registers of Scotland Trading Fund for the remainder of the transitional year. Thereafter, it will be for the Parliament to decide on the financial and control arrangements for this body. It also allows the payment of a salary to the Auditor General for Scotland, thus allowing the Parliament to fill the post quickly, so that the incumbent can get on with the necessary planning work and be in a position to take up his full duties on 1st April 2000.
§ The order also caters for the possibility that it may be necessary to make contingency payments from the fund during the transitional year. Here too, the order builds on existing procedures. The effect is broadly similar to that of the Contingencies Fund Act 1947. As a result. there will be clear limits to the payments that may be made by Scottish Ministers.
§ The order, together with other provisions, particularly the appropriation order, sets out financial provisions for the transitional year. That procedure has allowed local authorities and the like to draw up their budgets for the year 1999–2000; it allows the Scottish Parliament to revisit the proposed allocations later in the year, but, above all, it provides a springboard for full and effective financial devolution for the future.
§ The order is an integral and critical part of the transition to the devolved Scottish parliament. I beg to move.
§ Moved, That the draft order laid before the House on 4th February be approved [8th Report from the Joint Committee].— (Lord Sewel.)
§ Lord Mackay of Ardbrecknish
My Lords, first, I should like to thank the Minister for his explanation of the order which deals clearly with the transitional year.
535 I was intrigued by the noble Lord's description of the accounting procedures given that we spent many happy hours in Committee and on Report discussing exactly that. I was interested to note that, at least in the transitional year, the Treasury may "direct". Indeed, Article 17 (1) states,the Treasury may direct and in such form and manner as the Treasury may direct".I recall trying to persuade the Government that after the transitional year the Treasury should still have an interest in how such matters are dealt with, but I failed. However, when the Treasury gets a feel of this in the next financial year, I am sure that it will want to keep in contact for the following year.
We also spent many happy hours discussing the Comptroller and Auditor General and whether he would have an impact after the transitional year. I am pleased that progress has been made with regard to how the Scottish Parliament should account to, and be held to account by, its equivalent of the Comptroller and Auditor General. I welcome that. Assurances on that were given to me by the noble Lord, Lord Sewel, and I am always glad to be able to tick off assurances given and delivered as the days pass before the parliament begins its work.
With regard to Article 3 (1), am I right in thinking that "the principal appointed day" is 1st July, or is there another such principal appointed day? I hope that the Minister will be able to confirm that it is, indeed, 1st July.
As this is the first of a large number of such orders, can the Minister say how we are proceeding with consideration of them? Are the Government satisfied that all the necessary orders will be in place? I know from a letter which the noble Lord was kind enough to send to my noble and learned friend Lord Mackay of Drumadoon that a significant pile of pieces of secondary legislation awaits our consideration. As this is the first to be considered in your Lordships' House, I wonder whether we are on track and whether all the secondary legislation will be in place by, I presume, 1st July.
Article 4 (1) refers to the Lord Advocate. I should have thought that the Lord Advocate and the Solicitor General for Scotland would be in place before 1st July because they will be part of the Scottish Executive. I am not sure why we need that belt and braces, but I shall not go much further into that matter because it strays into legal fields and, as the Minister will recall, by and large I left such matters to my noble and learned friend Lord Mackay of Drumadoon when we considered the Bill.
However, perhaps I may consider just one legal matter. When we considered the Bill, I recall discussing at some length what is now Section 64. Unfortunately, such is the size of the pile of Hansards on that Bill that I have found it impossible to find the actual discussion. We discussed exactly which receipts would be returned to the Consolidated Fund. I now see that the order refers to fines, forfeitures and fixed penalties. I understand from press reports that they will amount to some £22 million. If the Scottish Parliament is to be 536 responsible for making the laws—indeed, it is—which will result in people being fined, and if I am right in thinking—no doubt the Minister will correct me if I am wrong—that the courts will be funded from the Scottish block—that is, by the Scottish Parliament—it seems a little unfair and unusual that such a sum should be returned to the grasp of the Treasury and cannot be used by the Scottish Parliament to offset some of its expenses in paying judges and sheriffs and running the courts.
That is my only substantive comment on this piece of secondary legislation. It certainly looks about right and deals with the issues that we know will arise during the transition. We can only hope that the Government have not omitted anything and that nothing now omitted will emerge later in, say, June or July. I would be amazed if in June or July we did not find arising something that we have not covered in a piece of legislation of this size and in a shift of power of the size that is envisaged in the devolution proposal.
§ 7.45 p.m.
§ Lord Steel of Aikwood
My Lords, I entered the Chamber in listening mode and from listening to the Minister I had hoped to discover two points. First, I wonder whether the Minister can explain—he did not do so in his opening speech—the difference between "transitory" and "transitional". Why do we have both words? That defeats me. It may well defeat the Minister also, but it seems an extraordinary piece of drafting.
The more substantive point was that just mentioned by the noble Lord, Lord Mackay of Ardbrecknish. I cannot understand why the fines, forfeitures and fixed penalties cannot be paid right away into the Scottish Consolidated Fund on day one of the Scottish Parliament coming into being. The Scottish Parliament will be responsible not only for the administration of the courts, but also for Scotland's entire prison and judicial service. The only explanation which the Minister could offer was that such matters are not at present part of the Scottish Office budget. Perhaps I may point out that plenty of things will be happening in the future which are not now part of the Scottish Office budget. It seems odd that the proceeds from Scottish crime should go to the Westminster Treasury rather than to the Scottish Administration. The Nationalists used to say, "It's Scotland's oil" so perhaps we can say, "It's Scotland's crime and we should have a share in the proceeds".
§ The Duke of Montrose
My Lords, perhaps I may intervene for a moment on a point beyond the transitional matters, but still very much relating to Scottish finance. I thank the Minister for some answers that he gave me earlier in writing in response to my questions about agriculture when he said that the Scottish Parliament will have full responsibility for agriculture.
The other day I came across something that sparked off a thought in my mind. We have been talking about fines, forfeitures and fixed penalties. The European Union has a way of imposing fines on other governments, and the United Kingdom has just been asked to pay back £34 million mainly due to inadequate controls in the sheepmeat sector. Once devolution takes 537 place, will such a fine then become a liability on the Scottish Administration? If so, from where will the funds to meet the proportion due from the Scottish finances come?
§ Baroness Carnegy of Lour
My Lords, perhaps I may ask the Minister a question. The sums going into the Scottish Consolidated Fund are explained in Article 8 of the order while the sums going out are explained in Article 9. They include the cost of preparing for the Parliament, the expenses of the Lord Advocate and of Ministers, and other expenses that arise in the public interest. Who controls the budget of the Consolidated Fund? The order explains that in the transitional year expenses must not exceed £50 million. Who sees to it that that is what is happening? Will that be the responsibility of the Secretary of State for Scotland throughout the transitional year or will it be, first, the Secretary of State for Scotland and then whoever is responsible for the budget of the Scots Parliament?
I am trying to imagine what would happen if a different party were in power in the Scots Parliament from that in power at Westminster—that is, a different party from that to which the Secretary of State belongs? How would that control be exercised? What will happen if the Comptroller and Auditor General does not like what is being clone with the Scottish Consolidated Fund? How can he intervene? One is trying to picture whether this will work smoothly. As the Minister said, it is really important that the transitional year goes smoothly and the parliament gets off the ground to the satisfaction of the Scottish people who will be watching very closely how it works.
§ Lord Sewel
My Lords, I believe that a number of matters of important detail have been raised in this short debate. Perhaps I may confirm, first, that the principal appointed day is indeed 1st July. That deals with the point raised by the noble Lord, Lord Mackay of Ardbrecknish. As regards a point raised by the noble Lord, Lord Steel of Aikwood, I can tell him in response that I could offer a definition of "transitory" and "transitional" in that we as politicians are transitory but this House is transitional. However, I do not think that that is the nature of the definition which rests in this legislation. I cannot think of anything better at this time of night, so perhaps the noble Lord will leave the matter with me.
I move on now to the point about the way our European colleagues impose what are effectively fines on governments for various shortcomings. The answer to that is quite simple. If the shortcoming in the opinion of the European Commission is the result of action or inaction on the part of Scottish Ministers or the Scottish Parliament, the "fine" would have to be paid by the Scottish executive. The money is available to the latter. As is the case now in agricultural matters, it is the agricultural budget of the Scottish Office which has to stump up the cash if there is an error in payments made to farmers in Scotland. One good way to avoid it is to keep better stock records. I have to make that point time and time again to a number of farmers. Indeed, that is one of the big improvements that we can make.
538 The noble Baroness, Lady Carnegy of Lour. asked who controls the budget. Up to 1st July it is the Secretary of State and, thereafter, it will be Scottish Ministers. However, the Comptroller and Auditor General has to agree issues as they come through. The interesting point about the role of the auditor general for Scotland is that the legislation makes it clear that, basically, he has to be appointed and the Scottish legislation has to give him certain duties to allow him to grant credits so that money can come out of the consolidated fund. Therefore, there is no way that the Scottish Parliament could be tempted not to appoint an auditor general for Scotland and somehow avoid the appropriate scrutiny and control. Indeed, if it were to try to do so, it would simply not be able to get the credits to spend the money. Everything must be properly in place.
I turn now to the business of fines. I notice that the noble Lords, Lord Mackay and Lord Steel seem not so much to be running after their colleagues in the other place but rather colleagues of the party which is not represented in this House. I refer of course to the Scottish National Party. I am interested by the argument that I believe the noble Lord, Lord Steel, came close to advocating, that somehow fines should fund the judicial service. The noble Lord does not seem to agree. I am glad to see that he is moving away from that. However, from the way he explained it, he seemed to be saying that we could use the money collected from fines to fund the judicial service. That would be an interesting proposition. Whether we increase fines in order: to pay for better pensions for judges—a matter which is close to my heart and close to the hearts of many Members of your Lordships' House—I do not know. I believe that there are probably better ways of doing so.
The income from fines has never gone into the Scottish Office block; it has always gone into the UK Consolidated Fund. This new arrangement does not alter the position. It is not money which was previously available to the Scottish Office and which is now being taken away. Indeed, it never was available to the Scottish Office. As I said, it went into the Consolidated Fund. I suggest that it would be inappropriate for fine income to work its way into the Scottish Office block because, in a way, that would give the criminal justice system an incentive to maximise fine income and make inappropriate disposals of cases. For example, in some cases the most appropriate method of disposal would be a community service order. However, if you are running a bit short of income, people may slap in a fine rather than imposing a community service order. I do not believe that that is the appropriate way to proceed.
As I said, there is nothing new in the procedures. We are trying to hand over to the Scottish Parliament and the Scottish executive arrangements which presently obtain within the relationship of Scotland and the United Kingdom on the financial side. The position on fines reflects that fact. With that explanation, I hope that noble Lords will feel able to support the order.. I commend the order to the House.
§ On Question, Motion agreed to.