Nicola Sturgeon tells Cameron to stop Treasury sabotaging Scottish deal

Nicola Sturgeon taking calls

Nicola Sturgeon has urged David Cameron to overrule the Treasury after talks to agree a new financial deal for Scotland became deadlocked. In a letter to the prime minister, Scotland’s first minister accused the Treasury of sabotaging the deal by refusing to agree that a key principle was that the Scottish parliament would not suffer financially for taking on new tax and welfare powers worth about £15bn a year.

As she released her letter, she disclosed that her finance secretary, John Swinney, had been granted extra time for the negotiations by the Scottish parliament’s devolution committee. The committee had set a deadline of 12 February, the day Holyrood starts a week-long recess, to ensure that MSPs had time to study and accept the terms of the deal before Holyrood is dissolved in advance of May’s devolved elections. 

Sturgeon said the UK government’s proposed formula, set out by Greg Hands, the chief secretary to the Treasury, would see Holyrood lose about £2.7bn over the next decade because it failed to take account of Scotland’s lower population growth. Spread over 10 years, that funding shortfall is equivalent to about 0.8% of Holyrood’s likely annual budget – a figure thought to be the sum described as a “molehill” by the Scotland secretary, David Mundell, last week.

This was unacceptable, she told Cameron, and undermined the central principle of the all-party Smith agreement, which led to the new income tax and welfare powers for Holyrood being agreed in exchange for continuing, but lower, funding from the Treasury.

Speaking at her monthly press conference, Sturgeon said: “Thinking about all the people, even the Conservatives, who sat around the Smith commission table, did anybody really think that they were signing up to the systematic or automatic reduction in Scotland’s budget? But that is what the Treasury proposal on table right now would deliver. So if we’re going to get a deal, it has to be on the principle of no detriment, as was set out.”

The so-called “no detriment” principle is based on a clause in the Smith agreement designed to ensure that neither Scottish nor rest-of-UK taxpayers lose out as a direct result of the changed funding for Holyrood, by over- or underpaying through a revised version of the Barnett formula. which sets the annual Treasury grant to Edinburgh.

However, Sturgeon tacitly accepted that Scottish ministers could have made earlier moves to satisfy the Treasury’s concerns about Holyrood benefiting unfairly from the formula preferred by her government. She said Swinney would make a fresh concession to the Treasury to guarantee that Scotland would not financially benefit from any tax increases in England designed to benefit England-only services such as the NHS. Sturgeon indicated that Scottish ministers agreed that it was unfair for Holyrood to get an extra share of any extra tax increases for England-only spending.

Sturgeon told Cameron it was essential that the prime minister give her his assurance that both sides had the same understanding of what “no detriment” meant in practice. “I must make clear that the approach taken by the Treasury so far – which seems to focus not on delivering ‘no detriment’, but instead on seeking agreement on the amount of detriment that Scotland should bear – is simply not acceptable to the Scottish government,” she wrote.

A Treasury spokesman denied that the UK government’s position was in breach of the Smith agreement. “The UK government is absolutely committed to implementing the Smith agreement in full and in line with the no detriment principle. The offer we have placed on the table would have delivered more funding for the Scottish government than the existing Barnett formula since devolution in 1999,” he said. “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.”

Bruce Crawford, the devolution committee’s chairman, said it hoped a deal could be reached in the last week of February, around the time it has an evidence session with Swinney and Hands on 23 February.

Powered by article was written by Severin Carrell Scotland editor, for on Tuesday 9th February 2016 21.55 Europe/ © Guardian News and Media Limited 2010