After almost a year of protracted negotiations, and a week of apparent impasse, an agreement has been reached between the Scottish and UK governments on the future funding of Holyrood following the further devolution of tax and welfare powers.
In an emergency statement to Holyrood late on Tuesday afternoon, Nicola Sturgeon, the Scottish first minister, confirmed an agreement had been reached in principle after the Treasury tabled a fresh offer at lunchtime aimed at breaking the deadlock.
Sturgeon announced to MSPs that, following a telephone conversation with George Osborne, detail of the agreement would be published by the end of the week, allowing time for scrutiny by MSPs before the Scottish parliament is dissolved on 24 March for elections in May.
Earlier in the afternoon, Sturgeon had called on David Cameron to meet her for eleventh-hour talks to rescue the negotiations, which had foundered on the key issue of how the block grant to Scotland should be adjusted to take into account the new powers promised by the Smith Commission, while adhering to the commission’s principle of no detriment – that neither the UK nor Scottish governments should suffer financially from policy decisions made by the other once the powers come into force.
Sturgeon told the chamber: “The agreement we have reached on the block grant adjustment ensures that there is no detriment for the next six years and that there can be no default by the UK government after that to a funding model that would deliver detriment in the future.”
She said that, under the agreement, the UK government would guarantee the outcome of the Scottish government’s preferred funding model – per capita indexed deduction – during a transition period of six years to March 2022.
The dispute over block grant adjustment had revolved around the fact that Scotland’s population is projected to grow more slowly than that of the rest of the UK, and how to balance this financial burden. Sturgeon said the deal would ensure, at the end of the transition period, “a fair review mechanism that did not prejudge the outcome and that would not default to a funding proposal that delivered population-driven detriment to the Scottish budget”.
A day of frenetic activity around the fiscal framework settlement began when the deputy first minister, John Swinney, appeared before Holyrood’s devolution committee before 9am and told MSPs that, while he remained fully committed to reaching a deal and that significant progress had been made on other issues, a “fundamental disagreement” remained over the adjustment of the block grant.
He told members of the cross-party committee that he estimated the Scottish budget would be reduced by more than £2bn over 10 years as a direct result of devolution of powers under the present offer from Westminster.
Sturgeon herself first appeared before the Scottish parliament in the early afternoon, insisting that Westminster’s offer “would not live up to Smith”. She added that, although the Treasury had most recently offered to deliver – on a transitional basis – a no-detriment outcome for the period up to 2021-22, the question remained of what would happen after that.
She said: “I will not sign up to a systematic cut in Scotland’s budget, whether that cut is being applied today or by a prejudged review in five years’ time.” Within a matter of hours, Osborne had convinced her otherwise.
The deal was immediately welcomed by the Scottish Labour leader, Kezia Dugdale, who had backed the Scottish government’s position in the negotiations, and described it as “a historic moment for Scotland”.
The Scottish secretary, David Mundell, said he had “always been confident” an agreement would be reached, adding: “The debate is now truly about how the new powers will be used to improve the lives of people in Scotland.”
This article was written by Libby Brooks Scotland correspondent, for theguardian.com on Tuesday 23rd February 2016 19.31 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010