 Welcome, committee members, to the eighth meeting of the committee in 2016. Can I remind all members who are in attendance to switch off their phones or at least put them into a mode that we cannot hear? Agenda item 1 involves taking evidence on the Scotland bill from our witnesses and we have the right honourable David Mandela MP, the Secretary of State for Scotland. We have to say, David, that it is slightly unusual seeing you sitting down there in the corner of our room on the television, but it is good to have you here. I thank you first of all in the Scotland of us for agreeing to give evidence to the committee this evening. I am aware that you may have to leave us if there is a requirement for you to vote in the House of Commons during the evidence session. That means that you will not be able to return probably for a sustained period, Secretary of State, as you go through the lobbies, etc. That event, given that the committee has now made significant efforts to accommodate this, particularly in regard to the video evidence, I propose at that stage just for the simplicity to end that session at that point and we will seek to rearrange another evidence session with you as soon as possible. That is probably the best way to deal with that. I believe that you want to make an opening statement, which we are more than grateful of the safety to do, but at the same time, because we don't know, could you just introduce us to who the officials are at the same time, if you don't mind, Secretary of State? Thank you, Mr Crawford. I did notice that you put me on the floor, but we will try to look up as we give our evidence. I am extremely grateful to the committee for facilitating my appearance by this video link, because I have been required in Westminster today for parliamentary business, as you have mentioned. I am accompanied by James Dowler, who has appeared before the committee, before the Deputy Director for Constitutional Policy at the Scotland Office, and by Lindsay White, who is the Deputy Director of Devolution at Her Majesty's Treasury. I have said before how valuable I regard the work of your committee in scrutinising the Scotland Bill, and I reiterate that. I am pleased to be able to give evidence today as the lead minister for the Bill. I am delighted to be able to give that evidence to you this evening with agreement having been reached between Scotland's two Governments on a new fiscal framework for Scotland. I made clear in the House of Commons a short time ago that I will make a statement to the House of Commons tomorrow in relation to the fiscal framework in order that members of this Parliament can have the same opportunity as you have had to hear about the fiscal framework. You will be aware that the Chief Secretary to the Treasury has led on the fiscal framework negotiations for the UK Government, and he has committed to give evidence to the Scottish Parliament once an agreement is reached, which is now, and he will be able to provide, I think, the Finance Committee more detailed technical information on the agreement. The Scotland Bill completed its committee stage in the House of Lords yesterday and begins report stage tomorrow. We now approach the concluding stages of the legislation and are mindful of the further opportunities for scrutiny from both Parliaments that the coming weeks do allow and indeed the need for the Scottish Parliament to debate and pass a legislative consent motion. Mr Crocker, I think will agree that the new Scottish Parliament elected in May will be very different from its predecessor. The new powers contained in the Scotland Bill will make it one of the most powerful devolved Parliaments in the world. It will in effect be a new Scottish Parliament. Lord Smith has confirmed that the Bill delivers the legislation required to honour the cross-party Smith agreement. I am confident that now we have agreed the fiscal framework that is fair and built to last. We can deliver a Scotland act that delivers a strong Scottish Parliament within the strong United Kingdom, which the people of Scotland voted for. Thank you for that opening statement. Of course, it now turns to the committee to examine and scrutinise the agreement that has been arrived at by the two Governments and come to our own conclusion about whether or not the agreement represents a good deal for Scotland before we make our recommendations to the Scottish Parliament. Just to help us to understand the background to that, can you confirm, as it was suggested this afternoon in the Scottish Parliament, that, at the beginning of the negotiation process, that Scotland's budget would have been down by a level of potential detriment of £7 billion and that the number of agreements that it holds at zero? You will be surprised to learn that I don't see it in those terms. This has been a negotiation, and negotiation is concluded with an agreement. Obviously, there's been various comment made during the negotiation process, but what's important in a negotiation is the agreement that's reached. As you've indicated, your committee and the Parliament as a whole, indeed this Parliament, will look at the agreement that's been reached and it will determine whether that agreement is fair to Scotland and fair to the rest of the United Kingdom. I believe that it is. Obviously, there's been significant public comment, and we've got to make a decision by the time that we get to make a recommendation to the Parliament, so I can ask you again to confirm that, at the beginning of the negotiation process, the detriment to Scotland's budget would have been potentially £7 billion and, this afternoon, following the agreement, it's zero. The process was to reach an agreement, and agreement has been reached. It is the agreement, not the negotiation process, as I understand it, that's open for scrutiny. I don't have to leave for that bell, you will be pleased to know. As far as I'm aware, I don't have to leave for that bell. I can't hear anything now. Thank you, Secretary of State. I'll just complete that bit. Do you have to go for that one? No. The record will wait, Secretary of State, till the bell stops and then we'll start again. We'll try to proceed. Let's see how we get on. I'm just so glad for electronic voting in the Scottish Parliament. Let me avoid going back over that same question, but I'll ask it a slightly different way. Can we confirm that today, the impact on the Scottish budget following the agreement would be no detriment? Yes. The Scottish budget will not be reduced on the basis of the agreement that's been reached today. I'll pass it to Stuart Maxwell. Thank you very much, convener. Good evening, Secretary of State. Can you just confirm that there will be no detriment during the transitional period, this five or six years period that was spoken about by the First Minister in her statement to Parliament this afternoon? Can you just confirm that at the end of that period it will be necessary for both Governments to agree what will happen after that? In other words, a joint agreement and no one Government can enforce any future model on the other at that stage. It's an agreement by both Governments. Yes. The two Governments have agreed that these arrangements will be reviewed following the UK and Scottish Parliament elections in 2020 and 2021 respectively, allowing an assessment at that time and in light of a Parliament's worth of experience of the best way of achieving a fair, transparent and effective outcome in line with all of the Smith principles. The review will be informed by an independent report with recommendations presented to both Governments by the end of 2021. The fiscal framework does not include or assume the method for adjusting the block grant beyond the transitional period. The two Governments will jointly agree that method as part of the review. The method adopted will deliver results consistent with the Smith commission's recommendations, including the principles of no detriment, taxpayer fairness and economic responsibility. Thank you for that. I will follow that up with another question. If, at the point that you have the transitional period, you have the review and the negotiation between the two Governments, if they cannot come to an agreement at that point, does the transitional position carry on until such time as agreement is reached, or is there an end date of which something else happens? It is envisaged that both Governments would receive the report by the end of 2021, and the transitional period is due to end in 2022. I think that on the basis of the experience that we have had in reaching this agreement, the good faith demonstrated that, and with the independent element to the analysis that it will be possible for the Governments to reach agreement by the time the transitional period ends in 2022. I am sure that we are all welcome to that being the case, but I am asking you, if there is not an agreement at that point, would the no detriment principle carry on beyond that date, or what would happen? What is not going to happen is a suggestion that any methodology would be enforced. If the Governments clearly could not reach agreement on the outcome of the review, they would have to reach agreement as to what happened in the short term until they were able to reach an agreement. Good evening, Secretary of State. I want to ask a couple of follow-on questions to Stuart Maxwell. In overall terms, when will the committee see the overall agreement that has been reached? We were told this morning that it would be by the end of this week. Is that your understanding? That is my understanding. To be fair to our colleagues in the Scottish Government, as I understand it, is the third reading of the Scottish budget bill tomorrow. Clearly, there is immediate pressure, so officials are working as diligently as possible to have the full agreement produced, but it would be unrealistic to say that it would be available tomorrow. We are working towards the end of the week, and I give the undertaking that everything possible will be done to get it to you as expeditiously as possible. That is absolutely fine. On the review that you were discussing with Mr Maxwell, who will be the independent body? That will be agreed by the Governments. Is it yet to be decided, or is this being made up as we go along? It is not being made up as we are going along. We accept the need for the body to be for the review to have an independent element. I am sure that there will be many within the Scottish Parliament who will have views on how that independent aspect of the review will be best achieved. I take a point. It is not yet decided. That will not be a detail that is present in the formal papers that we will receive by the end of this week, I am assuming. The formal papers will confirm the independent element of it, but I am sure that, Mr Scott, you appreciate that there will require to be some agreement as to who and what is independent. There are a number of people who hold themselves out as independent within Scotland, but it may not necessarily be so. Well, there we are. That could take six years to negotiate, too. Could I just ask one final question, if I may convene it? You said to Mr Maxwell that the transition ends in 2022, and the negotiations between the Governments would only begin after the elections of 2020 and 2021. Assuming that the elections are in May of 2021, that leaves the Governments of the day, or the Ministers of the day, the period would I be fair in assuming from May, June 2021 through to the end of the financial year 2022 to resolve this and put in place whatever is going to be put in place? Well, there is a requirement that has been built into the agreement that the review must be completed by the end of 2021. So the review will be completed by the end of 2021. Yes, there will be a relatively short period until the end of the transitional period, but I think that it will be in both Governments' interests to conclude an agreement within that timescale. As I've always been confident that we would be able to agree the fiscal framework, I'm confident that, with goodwill, such an agreement would be capable of being reached. Indeed. Would the work that's being done to inform that review, such as the independent analysis that you've described this evening, is envisaged that that would be done earlier than 2021, or at what point would that be carried out? It's envisaged that it would be concluded after the 2021 Scottish Parliament election, so that both parliaments had effectively, you know, the next Scottish Parliament has a full Parliament in which to see how these arrangements work in practice, and obviously not to come forward in the period immediately prior to elections, which, as we discover, sometimes makes agreement and discussion less easy to facilitate. I'm glad you've made that point. Thank you. Alison, did you want to come in on the review? I just wanted to seek clarity on that point that we wouldn't be in a similar process before the next election, so that I'm content with that, convener. Can I ask one further question about the membership of this or the process of establishing the independent group? Why might we not know who the members are, because it's some time away before we'd be required to know that? I think understanding what the mechanism would be for appointing these and how that would jointly be gone about would be something that this committee would want some assurance on before such time, as we signed off on the Scotland bill, whatever recommendation we would finally make. Can you give us some assurance that at least that mechanism can be as transparent as possible and we will be able to see what those are? I'm happy to do Mr Crawford to raise that directly with Mr Swinney, so that we can bring forward something for you, but, as I understand it, the exact detail of that mechanism is not part of the agreement. I think that I'm right in saying that the review is due to be completed by the end of 2021. The agreement should then take effect effectively from the financial year following, which is April. Are you saying that the whole thing will have to be agreed by the two Governments in effect of their 12-week period? I'm saying that the transition period ends at the end of the financial year in 2022. I don't see why the two Governments shouldn't be capable of reaching an agreement in a 12-week period. Sometimes, Mr Maxwell, what happens is that when you have a really short time to reach agreement, those provide the circumstances and the compelling reason to reach agreement, whereas a longer time doesn't necessarily read to agreement being reached expeditiously. I share your optimism about a 12-week period, but I go back to my original question from earlier. Given that it's a short period, you've said yourself it's a very short period, if at the point after 12 weeks that there is no agreement, which is perfectly possible—let's hope that it doesn't happen, but it's perfectly possible—can you confirm that it's your understanding that the no detriment will carry on after that 12-week period? What I can confirm is that no mechanism would be imposed at the end of that period without agreement. If we were not able to reach agreement on what was to happen in the longer term post 2022, we would have to agree what was to happen in the short term, but there would be no arrangement imposed on the Scottish Government. I want to come on to issues to do with borrowing. I can just give one brief supplementary on that point on the previous question first. Secretary of State, just regarding your comments on this review, is it not a possibility that the situation that we've just had could be replicated again because of the local authority elections that took place in Scotland in 2022? I think that there are always reasons not to agree. Obviously, there are, but I think that the fact that we've had a full Scottish Parliament is really the determining factor in setting the review date. There will have been a full term of the Scottish Parliament, and that is what shaped the date. Inevitably, in Scotland, there are always elections, it seems, in every year that could be said that we would have some degree of influence, but I think that the fact that we wouldn't be immediately before a UK general election or a Scottish Parliament election would be important. I don't diminish local government elections. They are very important, but I don't think that they would be a factor in influencing a failure to reach agreement. This morning, the Deputy First Minister, understandably, didn't want to go into any financial figures regarding borrowing, but there is a unit position now to tell the committee as to what the borrowing limit is going to be for Scotland. I am able to say that we've agreed that the Scottish Government will have substantial new borrowing powers. This will ensure that the Scottish Government can manage its budget effectively and invest up to £3 billion in vital infrastructure. As set out in the Smith agreement, we will provide the Scottish Government with £200 million to set up and administer the new powers that it will control. Is that the level that the Scottish Government is looking for? We have reached an agreement, but I think that, as we have managed to generalise it, it is not appropriate to have a commentary on offer and counter offer. What has been agreed is what has been agreed, and I think it is that agreement which is to be scrutinised and determined if it is going to be fair and appropriate for the Scottish Government's needs as identified in the Smith commission. Mark McDonald had one last question on the fiscal stuff, and I want to move on then, Secretary of State, to areas of the Scotland bill itself, just to conclude the evidence deconcession. Mark McDonald, I am sorry, but Alex Johnson wants to come in after. It goes slightly wider, and it goes back to the beginning, Secretary of State, you spoke about the powers coming to effect in the next Parliament. I just wanted to ask you on the timescale once the bill has concluded its passage. There was discussion at the beginning of the process about how some powers would be easier to devolve at an early stage compared to others. If you look at, for example, SRIT, which was included in the 2012 Scotland Act, is now only just recently come into effect, I appreciate that much of the groundwork that has been laid through that will make it easier for future devolution. Is it likely that all powers will transfer as a package, or is there likely to be some that will transfer earlier than others? Are you able to give any indication on timescales? It is the intention that the tax powers would be transferred in time for April 2017, and that, effectively, the next budget of the new Scottish Parliament would take place in the context of the new powers. Obviously, that continues to have to be agreed with the Scottish Government, but I think that the point that you make is a very good one, is that, although SRT is often not particularly heralded, the fact is that it has laid the groundwork for a lot of the arrangements with the new tax powers so that the income tax powers can come into place in April 2017 because of that groundwork, such as, as from this April, the new coding arrangements will be in place. They do not need to be tested out. My understanding is that it is the shared view of both Governments that the transfer of the welfare powers should be on the basis of agreement through our joint ministerial group on welfare. There are different levels of arrangement. The two Governments are working extremely well in relation to taking those powers forward. Just for the record, to the convener who is off-screen, I commend both Alec Neill and Rosanna Cunningham, who have worked particularly constructively with my colleagues Ian Duncan-Smith and Priti Patel, and the way in which officials between the Scottish Government and UK Government have worked in order to smooth the transition of those welfare powers. They will come on stream on a basis that is agreed by both Governments. The reason why I am asking is that, obviously, if we are looking at a six-year transitional period with a review at the end of it, it is important to understand for how much of that transitional period the Parliament will have control of certain areas. Obviously, that would influence the effectiveness of any review, so I appreciate that you maybe cannot give definitive timescales but an indication of where the thinking is from the UK Government's perspective about how long it will take for some of those powers to be devolved. You have spoken about April 2017 for the taxes and that is very welcome, but in terms of some of the other policy areas, it would be good to get an understanding of the likely timescale or at least the envisaged timescale from the UK Government's perspective. My envisaged timetable is that a subject, obviously, to the Parliament bringing forward its legislative consent motion and the bill proceeding to royal assent ahead of the Scottish Parliament elections, a number of the powers will be in place almost immediately after the Scottish Parliament elections. There are a number of one of the other tax powers, for example, air passenger duty can be transferred at the point that the Scottish Government has its model ready for that transfer. If the arrangements are available shortly after the Scottish Parliament election, we would be able to transfer them. In relation to the wider powers and the wider tax, we place no impediment in relation to the transfer of those powers. The welfare powers, I think, from both our perspectives, and we've agreed this in the joint ministerial committee, just are slightly different in the sense that everybody has to be very confident that the new arrangements are in place and working so that when, for example, your personal independence payments were switched off from a UK basis, the new arrangement is in place because we cannot leave vulnerable people in a vacuum, so we are working very closely to ensure that when the switch-over takes place of the welfare powers that everything is in place to allow that to happen. I am confident on the basis of the good working relations that we have that that will indeed be the case. I think that it would be quite useful if we could ask you to set some of this out in a letter to us so that we can have that in front of us, so that we can have a bit more of the detail and explanation. If we don't know exactly when some of the powers are being placed, what the mechanism is to enable that, I think that it would be very useful to us. I would be very happy to do that. I think that it would be also helpful for the committee without being over much suggesting that the Scottish Government sets out how it envisages dovetailing with that process, because it is a dovetailing process. I want to transfer air-pass under duty as soon as I can, but I require the Scottish Government to tell me when it wants that to happen and what transitional methodology it wants us to put in place. Of course, we would be asking the Scottish Government to do the same, but we will decide that. I am very encouraged to hear that inter-governmental relations have been developing so constructively during this process, but the question that I would like to ask the Secretary of State is if he envisages the Scottish Fiscal Commission having a role within the fiscal framework. We do envisage the Scottish Fiscal Commission having an important role, and we have set out, as will become a part of the fiscal framework, that that commission does require to be independent in its operation, and the Scottish Government have agreed to that. In the arrangement, there is a modification to the proposals, which they had previously put forward to ensure that degree of independence, which I think certainly your colleagues in the Scottish Parliament have argued for. Would the usefulness of the Scottish Fiscal Commission within this process be entirely dependent on ensuring that it was strengthened and in a position to wield that power and decisions effectively? It has been agreed, as part of the Fiscal Framework Agreement, that that is what will happen. The detail of that will emerge in the documentation, which you will see before the end of the week. The Scottish Government has agreed that those strengthening arrangements should be put in place to ensure that independence that you refer to. Again, for the record, Mr Croft, I do want to commend again, because Mr Johnson referred in to governmental relations. Although we have not always seen eye to eye, I do assure the committee that these arrangements have been conducted with the utmost cordiality. Throughout that process, Mr Swinney and I have always been able to have robust discussion but engage cordially throughout the process. I think that that does stand us in very good stead for the further development of inter-governmental relationships in the way that we would all want to see. Probably an appropriate place to go on that would be in the Scotland Bill in the Crown of State, because there is a fair bit to go on that yet. I think that Rob Gibson would like to ask a couple of questions in that regard. Good evening, Secretary of State. Our committee wrote recently to the Treasury Express in a number of areas of concern that the committee has where we consider that the draft memorandum of understanding and the statutory transfer scheme appear to be too restrictive and lack clarity for the Crown of State. What is your view on the concerns of the committee that we have expressed? My understanding from Treasury colleagues is that they are going to respond fully to the points that you have made. We are still engaged in some discussion directly with the Scottish Government in relation to the arrangements for the Crown of State. The committee's views will be taken cognisance of, but the methodology by which we approach the Crown of State is something that has been agreed. Is that report back from the Treasury to us going to take place in time for us to scrutinise this before the legislative consent motion? Yes, I will undertake to ensure that, along with the other documentation, you have that response by the end of this week. So, if there is a need for full consultation about the process, it would probably be during the next session of this Parliament. Therefore, in session 5, would it be possible for the draft transfer scheme to be consulted at that time so that the new Parliament can come to a considered view with regard to what is an offer? It would obviously be them who would have the job of implementing it. I am not unsympathetic to the point that you are making, but I would have to double check in terms of process, because I am not fully conversant with the crossover processes between Parliament and those arrangements. However, I will write to you on that point, and again by the end of this week. Alison Johnstone, I think that Secretary of State wants to ask a question on post-study work visas. Thank you, convener. We took some evidence on this issue a couple of weeks ago, and I think that it was very striking. We had a couple of witnesses who benefited from being part of the fresh talent initiative. I am not sure whether you have had a chance to look at any of that evidence yet, but I just wonder if you agree with Scotland's business directors such as the Institute of Directors, other organisations such as University Scotland and the STUC that a post-study work visa scheme should be reintroduced in Scotland. My position as I have set out when I appeared before the Scottish Affairs Select Committee recently on this very issue is that I am looking at their report and will consider if they are able to set out, if the report sets out ways in which the existing arrangements can be improved, that we will consider doing that. The report was produced last week, and I will be responding to it shortly. I am aware, as I should say, of your own evidence, so I am very alive to the issue, and we are looking at the information that has been provided to us. Another question from Linda Fabiani this time on work programme issues, Secretary of State. I think that there will be one question after that. Hello, Secretary of State. I would like to talk about the work programme and where we are at with that. We started off in the Smith agreement talking about the devolution of the work programme. We then, when the draft clauses came along, reduced the level of devolved work programme. Since that point, we have had changes from the UK Government. We are now talking about merging of the work programme and work choice and new programme. Along with that, we have had not only massive budget cuts, which we have confirmed to us just recently from the UK Government, but also extensions of contracts for running the work programmes. Can you give me an idea of what we will see in the agreement that comes to us for scrutiny within the next week or so? It won't make specific reference to the work programme or work choice. There has been extensive discussion around these arrangements. I have participated in some of them myself. My understanding is that the Scottish Government took a view, having initially not been sympathetic to the extension of contracts, that it was necessary to have a period for them to take forward a mechanism to set up their own system of equivalence to the work programme and work choice. Obviously, the committee wrote to the Minister of State for Employment earlier this month, and she did respond on the 19th of February specifically on the financial issues, in which she made clear that there wasn't going to be the level of budget changes that had been suggested. However, I have had a series of discussions with the Deputy First Minister around employability. As you may know, we have something called the Employability Forum, which brings together the Scottish Government, UK Government and COSLA. I think that we do need to find ways of working more closely together, because I take on board the point that you make. The Smith Commission agreement in this area was in a moment in time. The number of things have changed, not least the number of people in employment, a record number, which I think we would all welcome. We need to continue to work together in the area of employability. You are saying, then, that there is still negotiation going on on that? I am saying that there is still discussion that the two Governments would want to have about improving employability arrangements within Scotland. That is not agreeing to some Smith Plus provision. That is not what we are seeking to do, but we are seeking to come to the most effective arrangements for employability within Scotland, bringing together all those who have a specific interest being the UK Government, Scottish Government and COSLA. I am sure that if you did want to talk about Smith Plus, you would be very happy to do so. I know you would. I know you would. I am trying to offer a reasonable way forward, because I accept Smith's agreement in relation to employment programmes. It is at a moment of time that things evolve and we have to work together as we go forward. I think that Ms Patel's letter of the 19th of February addresses the financial concerns, but, of course, we will continue a dialogue with the Scottish Government on employability more generally. I will leave the last question. I think that it will be to the Secretary of State to Mark McDonald. Gosh, what privilege. Secretary of State, the Scotland bill completed its committee stage in the House of Lords yesterday. Are you in a position as yet to advise whether it is the intention of the Government to make any further amendment to the Scotland bill at report stage or at third reading? If so, in what areas? Obviously, the committee has previously highlighted areas where it wishes to see amendment to the bill. Are you able to give us any further information at this stage? The amendments that will come forward at this stage are only technical amendments in terms of improving the language of the bill. Those are amendments that have been agreed with the Scottish Government. There are some amendments that will be lodged on Thursday, which are consequent of the fiscal framework in particular in terms of the adjustment to the borrowing powers, so that there will be a fiscal framework amendment. It is our intention to bring forward an amendment again, which we have agreed with the Scottish Government to support legislation in relation to parking on the pavement, which the Scottish Government wants to address. It is seen that the bill is an opportunity to do that expeditiously, but the Government does not intend to bring forward any other amendments. It is not minded to accept any amendments that have been suggested by the Opposition parties in the House of Lords. That is good to get the Government's thinking on that. We will perhaps probe it further as a committee as we scrutinise. Thank you very much for coming to give us an opportunity to understand the UK Government's position. Will you be able to make yourself available sometime next week, I think, to take further evidence once we have seen the colour of the ink on the agreement and potentially any other UK Treasury minister that we might decide to discuss at that time? It would be most helpful. I am absolutely happy to give that undertaking. I am pleased to be able to engage with the committee. It is very important that the fiscal framework and other aspects of the bill are properly scrutinised. I do not have any difficulty with doing that. Some have suggested that these arrangements have been conducted in secret. They have not been conducted in the way in which important negotiations have to be conducted, but what is important is the agreement that has been reached. I think that it is a significant agreement for Scotland, an agreement that is fair to Scotland and fair to the rest of the UK. I am very happy to participate in any further scrutiny of it.