MSPs issue powers warning in Scotland funding deal report
The new funding deal for Scotland must not leave the country with risks it does not have the powers to mitigate for, the Scottish Affairs Committee has warned.
The new funding deal for Scotland must not leave the country with risks it does not have the powers to mitigate for, the Scottish Affairs Committee has warned.
Its report on the fiscal framework for the Scotland Bill, which sets out how the block grant will be altered when MSPs get new tax-raising powers, found greater financial responsibility must be matched by enhanced borrowing powers and the principles of no detriment'' and taxpayer fairness must be met.
The committee called on the Scottish and UK governments to explore an adjusted version of the method favoured by Scottish ministers and recommended the operation of the new fiscal framework be reviewed after four years.
The two administrations have been locked in negotiations over the framework for months, with Scottish ministers warning they will walk away if a fair deal for Scotland cannot be agreed.
They claim a bad deal could cost Scotland billions of pounds in the long-term.
First Minister Nicola Sturgeon said the Treasury seems to want to achieve an outcome that would systematically reduce the Scottish budget as a result of our differential growth in population, even though the Scotland Bill gives us no additional powers to grow our population''.
The Scottish Government believes a method known as per capita indexed deduction, which would take into account the fact that Scotland's population is growing more slowly than the rest of the UK, is the best way of meeting the no detriment principle - the idea that the actions of one government should not harm another.
The UK Government says a deal must be fair to all taxpayers and no detriment'' does not meanno risk''.
Committee chair Pete Wishart said: For the fiscal framework to work, it must have fairness and transparency as its central pillars.
Most importantly, it must meet the central principles of no detriment and taxpayer fairness as enshrined in the Smith Agreement.
There must be clear mechanisms that protect Scotland from undue risk and ensure that future adjustments to the block grant are fair to Scotland and the rest of the United Kingdom.''
He added: The Scottish Affairs Committee suggests that the per capita indexed deduction approach of adjusting the block grant satisfies the Smith principle of 'no detriment as a result of the decision to devolve'.
In conjunction with this approach, the committee heard that an additional adjustment could be applied to secure the principle of taxpayer fairness for Scotland and the rest of the United Kingdom.
If applied, this must ensure that Scotland's funding per capita is no better or worse relative to the rest of the UK than if the existing arrangements remained in place. We invite the two governments to explore this solution.''
The committee also recommended an enhanced Scottish Fiscal Commission should be made responsible for forecasting in Scotland because there was clear consensus that this should be done by a body independent of government''.
Holyrood's Finance Committee has voted against amendments which would have tasked the commission with producing official forecasts on devolved taxes and scrutinising government finances.
A UK Government spokeswoman said: The government agrees with the central finding of the UK Parliament's Scottish Affairs Committee that the fiscal framework must meet the principles set out in the Smith Agreement, which we have consistently said we are committed to implementing in full.
The Smith Agreement clearly sets out that no detriment means funding for Scotland and the rest of the UK should be unaffected when powers are devolved, and thereafter Scottish taxpayers should benefit from all growth in devolved Scottish taxes and taxpayers in the rest of the UK should benefit from all growth in their equivalent taxes.
The offer we have placed on the negotiating table is not only in line with the no detriment principle but would have delivered more funding for the Scottish Government than the existing Barnett formula since devolution in 1999.
From the outset our position on the fiscal framework has been clear - we stand ready to do a deal that is fair for Scotland and fair for the rest of the UK.''