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Lord Sewel: My Lords, I appreciate that Amendment No. 147 is another attempt by the noble Lord, Lord Dixon-Smith, to introduce into the Bill a statutory formula based on relative need. However, as I explained in Committee, under current funding arrangements, relative need across the spectrum of government spending in Scotland is already built into public expenditure baselines. This ensures that relative need is properly captured.

As the noble Lord indicated, what the Barnett formula does is, on top of these needs-based baselines, to offer a means of determining, relatively painlessly, what the Scottish Office share of any changes to comparable

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public spending programmes should be. This part of the process is not needs-based. The Barnett formula is based purely on relative population numbers.

This arrangement is tried and tested; it is familiar to those who need to know about it; it has delivered fair settlements for Scotland for two decades; and it offers the prospect of continuity and stability for the new devolved administration at a time of enormous change.

Against that background, I am not at all persuaded that the noble Lord's amendment takes us forward at all. Indeed, I am bound to say that it is flawed in its conception. The fact is that a comparison of relative need in a local authority context and in a national context is a comparison of apples and oranges because national governments and local authorities do different things and have different functions. So what is an appropriate formula for one is almost definitionally not an appropriate formula for the other. It is likely that an assessment of relative needs for national governments will be carried out differently from the way we measure relative needs for local government. Local government has a completely different taxation system which is taken into account in the calculation of RSG. That will not be relevant to the relationship between the UK Government and the Scottish administration.

The noble Lord, Lord Dixon-Smith, raised two specific points, if I heard him correctly. First, he asked whether the whole payment into the Scottish Consolidated Fund would be invalid if there was no formula for determining it. That is not the case. The Bill empowers the Secretary of State to make payments into the fund of such amounts as he may determine. There is no requirement in the Bill to use a formula. We have indicated that we will stick with the Barnett formula, which has done the job in the past to the relative satisfaction of everybody concerned.

The other point that the noble Lord, Lord Dixon-Smith, made was whether the whole thing would come to a grinding halt if a Prime Minister of the day decided not to have a Secretary of State for Scotland. The convention is that when reference is made to a Secretary of State in an Act, the powers can be employed by any Secretary of State. It is not tied to a specific Secretary of State.

I admire the ingenuity of the noble Lord, Lord Dixon-Smith, in continuing to worry at this problem and coming up with alternative means of ensuring that the allocation of funds to the Scottish parliament will be on a needs basis. It is inappropriate to look at an RSG formula. You start off at the wrong place and finish up at the wrong destination. You start off at the wrong place simply because the services and functions of local authorities are very different from the services and functions of a national government such as the Scottish executive will be.

I will have to disappoint the noble Lord again. The Government cannot accept his amendments and I trust that he will withdraw them.

11.45 p.m.

Lord Dixon-Smith: My Lords, I thank the Minister for his explanation. His explanation sounds like

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something that I used to hear from my father on occasions: "My boy, we have always done things this way. That is the way we are going to do them. That is enough". That may be enough, but I am not sure it is appropriate. I will need to consider carefully what the Minister has said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 61 [Payments out of the Fund]:

Lord Sewel moved Amendment No. 147A:


Page 26, leave out line 36.

On Question, amendment agreed to.

Clause 62 [Borrowing by the Scottish Ministers etc.]:

Lord Sewel moved Amendment No. 147B:


Page 27, line 9, leave out ("an") and insert ("any other").

On Question, amendment agreed to.

Clause 64 [Borrowing by statutory bodies]:

Lord Sewel moved Amendment No. 147C:


Page 27, line 29, leave out subsection (3).

On Question, amendment agreed to.

Clause 65 [Auditor General for Scotland]:

Lord Mackay of Ardbrecknish had given notice of his intention to move Amendment No. 148:


Page 27, line 35, leave out from ("resolves") to end of line 37.

The noble Lord said: My Lords, I heard sufficient words from Ministers on Amendment No. 132 about qualified majorities. I shall not pursue this one and I will not move it.

[Amendment No. 148 not moved.]

Lord Sewel moved Amendment No. 149:


Page 27, line 37, at end insert--
("( ) The validity of any act of the Auditor General for Scotland is not affected by any defect in his nomination by the Parliament.").

On Question, amendment agreed to.

Clause 66 [Financial control, accounts and audit]:

Lord Mackay of Ardbrecknish moved Amendment No. 150:


Page 28, line 44, at end insert--
("( ) In particular, Scottish legislation under subsection (1) shall provide for--
(a) accounts prepared under paragraphs (a) and (b) of that subsection to comply with any directions from time to time given by the Comptroller and Auditor General as to the form of the accounts, the information to be provided in them and the general practices and principles to be observed in their preparation, and
(b) the designation of accounting officers accountable to the Parliament for the expenditure to which the accounts relate and the specification of their responsibilities.
( ) The Scottish legislation referred to in subsection (1) shall make provision that, if the Comptroller and Auditor General so directs, the provisions referred to in subsection (1) and the functions under subsection (2) shall, to such extent and with such modifications as the direction concerned may provide, apply to any

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body established by an enactment and specified in the direction, in relation to which it is within the legislative competence of the Parliament to make such provision.").

The noble Lord said: My Lords, this amendment deals with the whole question of the supervision of the accounts of the Scottish parliament and the role of the Scottish parliament and the other place in dealing with the accounts. As your Lordships know, the other place has the Public Accounts Committee and there is also the Comptroller and Auditor General. The accounts prepared by government are scrutinised by the Comptroller and Auditor General, who reports to the Public Accounts Committee, which hears evidence and grills Ministers and is of very considerable importance in the other place.

It appears that in future the money sent by the other place to the Scottish parliament will not be subject to the scrutiny of the Comptroller and Auditor General and will not be subject to the scrutiny of the Public Accounts Committee. However, in the Bill it is perfectly clear that the Scottish parliament will appoint an auditor who will have most, if not all, of the powers of the Comptroller and Auditor General. Indeed, it allows for the possibility of this scrutiny by the Scottish parliament, or a committee thereof, of the accounts of the parliament.

In Committee on 30th July I proposed an amendment which required that the procedures of the Scottish parliament should be subject to directions given from time to time by the Treasury. The Government chided me for believing in the nanny state as far as concerns the Scottish parliament--I think that is a fair shorthand of what I was accused of doing--and said that it was wrong that the Treasury should have a role in this. I have decided to return to the issue. I accept that it may be wrong that the Treasury has a role, but I am still not entirely convinced that the other place should not have some role, not so much in the detail but in making sure that the auditor in the Scottish parliament and the arrangements in the Scottish parliament give the scrutiny to the financial affairs of the government that they ought to receive.

I am sure that the parliament will set up a perfectly proper system and that there will be no problem, but I think that there is a case to be argued that either the Public Accounts Committee of the other place or the Comptroller and Auditor General should be able to say to the Scottish parliament or to the auditor in Scotland, "That is not quite right. I would rather you did it in this way because, after all, the money you are checking is the money which, up to now, I have checked". That is certainly true. Money spent by the Scottish Office has been subject to the supervision of the Comptroller and Auditor General and investigation by the Public Accounts Committee. These powers are to be moved to the Scottish parliament--that is right and proper--but I do think that there is an argument for saying that either the Public Accounts Committee or, as in my amendment, the Comptroller and Auditor General ought to at least have a back-stop power to be able to give directions about the form of the accounts, the information provided in them and the general practice and principles if it is deemed necessary.

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I hope that this is not too much of a nanny, but I come back to the point that this money is being voted by the Members of the other place. They are responsible for raising the money in taxation. I think that there ought to be some back-stop provision for the accounting and control procedures in the other place to be satisfied that what the Scottish parliament is setting up is right. I have therefore put forward this amendment--it is very much changed from the amendment I put forward in Committee--as an effort to try to find a way out of what I believe is a dilemma in the responsibility for money raised by the other place. I beg to move.


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