Peers call for Scotland Bill halt amid funding package concerns

A House of Lords committee has called for a halt to the Scotland Bill until key issues are addressed, including details of the funding package which will accompany it.

The Economic Affairs Committee has set out its concerns in a report on the legislation which hands a raft of new powers to Holyrood.

It identifies seven problems with the Bill, stating the future of the UK "could well be at risk" if they are not solved.

The legislation, which was passed by the House of Commons earlier this month, is due for second reading in the House of Lords on November 24.

The committee has said the Bill should not proceed to the committee stage - the first stage where amendments can be made - until the devolution fiscal framework is published.

This would include agreement on the funding of the Scottish budget and how it is adjusted once powers are devolved, the scrutiny of public revenues and spending, borrowing powers, fiscal rules and fiscal institutions.

A deal on funding is still being thrashed out between the UK and Scottish governments, with the latter threatening to block the Bill's legislative consent at Holyrood unless a satisfactory agreement is reached.

Committee chairman Lord Hollick said: "The Scotland Bill has the potential to fundamentally change the UK and impact on us all both politically and economically.

"It is crucial that what is proposed is stable and sustainable. Parliament is being asked to pass the Bill before we are told full details about the fiscal arrangements that will underpin this new era of devolution. That cannot be right.

"We are calling on the progress of the Bill to be halted until the details are agreed and published. That would at least allow peers the opportunity that MPs were denied of scrutinising and amending this important legislation as informed participants."

The committee called for the Barnett Formula - the funding mechanism that determines how much cash Scotland receives from the Treasury - to be scrapped and replaced with "a needs-based funding formula for distributing funds to devolved administrations".

It looked at how the Scottish block grant could be adjusted to account for Scotland's new income tax powers but found it was impossible to recommend a preferred option due to the absence of the details of the fiscal framework.

It also warned that giving almost full control of income-tax powers could risk weakening the connection between the Scottish electorate and UK Government.

Further concerns were raised over the "no detriment" principle, which states there should be no detrimental impact as a result of UK Government or Scottish Government policy decisions post-devolution.

Such a principle is unworkable in practice and a recipe for continuing conflict, the committee said.

Elsewhere, additional borrowing powers should be agreed with a clear limit on Scottish Government debt and the UK Government watchdog the Office of Budget Responsibility should scrutinise the funding of devolved governments alongside the Scottish Fiscal Commission in Scotland.

Scotland's Deputy First Minister John Swinney said: "While we don't agree with many of the Lords' conclusions, we do agree that the fiscal framework is essential to delivering the Smith Commission proposals in both letter and spirit.

"In particular, their proposal to remove the Barnett formula - which was a key component of the vow and the Smith Commission - is unacceptable.

"We have already committed to giving MSPs the opportunity to scrutinise the detail of the fiscal framework.

"Of course, the key vote that matters will not be in the unelected House of Lords - it will be in the Scottish Parliament."

A UK Government spokesman said: "Fiscal framework discussions have been constructive and focused on securing a fair and workable fiscal framework which delivers the cross-party Smith agreement.

"Both governments have agreed not to comment until an agreement is reached."

Holyrood's Devolution Committee has previously said the Bill cannot be given the go-ahead until the funding package is fully known.

Convener Bruce Crawford said: "The fiscal framework is vital and of equal importance to the Bill itself.

"It is critical that Holyrood's Devolution Committee receives the final draft agreed between the two governments in sufficient time to enable proper scrutiny.

"Only then should the question of legislative consent to the Bill be put to the Scottish Parliament next year."

Scottish Labour MSP Iain Gray said: "The SNP government say they want the best deal for Scotland and so do we. Their task is to negotiate a framework which meets the Smith requirements. That is eminently achievable.

"It is the job of the First Minister and her deputy to get that deal for Scotland, and we have to assume that they are up to that job. They should stop wasting time with threats to walk away and refuse to accept the powers Scotland wants and is now entitled to."