Pete Wishart criticises UK Government over attention paid to Scottish Affairs Committee fiscal framework call

Scottish Affairs Committee chair Pete Wishart has criticised the UK Government after it "appears to have dismissed” MPs' recommendations inside 24 hours in negotiations over the fiscal framework.

Talks between the Scottish and UK governments over how to reduce the block grant following the transfer of powers under the Scotland Bill remain deadlocked amid a disagreement over their interpretation of the “no detriment” principle laid out by the Smith Commission.

The two sides tabled fresh proposals last week as the Scottish Affairs Committee came out in support of the Scottish Government’s preferred block grant reduction plan, known as the ‘per capita’ method of indexation.

However, MPs on the House of Commons committee - who heard evidence from both governments and economic experts during an inquiry on the funding settlement - suggested an additional adjustment could be built in to ensure Scotland’s funding per capita does not increase beyond a certain point relative to the rest of the UK.

Committee chair Pete Wishart has now written to UK Treasury minister Greg Hands to claim that the UK Government has failed to give its call proper consideration. 

The SNP MP writes: “The evidence we received suggested that the ‘per capita’ indexed deduction approach of adjusting the block grant satisfies the first Smith principle of ‘no detriment as a result of the decision to devolve’, and that an additional adjustment could be applied to secure the second principle of taxpayer fairness for Scotland and the rest of the United Kingdom.

“In light of that evidence, we recommended that both governments explore this option to determine whether it provides a suitable compromise between their respective positions. It is disappointing that the UK Government appears to have dismissed this possibility only a day after our report was published.”

Wishart remains “concerned that there seems to remain a fundamental disagreement between the UK and Scottish governments over how the no detriment principles of the Smith Agreement should be interpreted”, his letter states.

The Treasury has argued in favour of indexing the adjustment to the block grant to an amount equivalent to a population share of the change in rest of UK revenues – known as the ‘levels deduction’ method.

However, the Commons committee claimed this would breach the principle of ‘no detriment’ outlined in the Smith Agreement, which stipulates that any deal must not leave Scotland worse off than if further powers had not been transferred.  

Instead, its report backed the ‘per capita’ method of indexation - advocated by Finance Secretary John Swinney - albeit with an additional adjustment built in.

In an initial response to the committee’s report on the fiscal framework the day following its publication, Hands suggested that the proposal put forward by MPs “would run counter to the aim of devolving tax powers”.

“We also believe that a simple, mechanical approach is preferable to a more complicated system of IDPC [Indexed Per Capita] plus an extra adjustment formula for taxpayer fairness,” he added.

Holyrood’s Devolution (Further Powers) Committee has set a revised deadline of 23 February for the two governments to broker a deal in order to allow for parliamentary scrutiny.