Welcome. Welcome to any members of the public who are in the gallery. Welcome to the 19th meeting of the devolution further powers committee. Make sure that all our mobile phones are switched off, please. Agenda item 1 Scotland Bill on proposals for further devolution panel 1 is the Scottish Government. We have with us today John Swinney, MSP and the Deputy First Minister, Cabinet Secretary for finance, John Neil, Ffiscal Responsibility Division, and Stephen Saddlar, from the Elections Constitution Division. I welcome the opportunity to be with the committee this morning to provide evidence on the Scotland Bill and the aspiration for further devolution. The Scottish Government is clear that the Scotland Bill, as published on 28 May, falls short on a number of key areas in implementing the conclusions of the Smith commission. Other than modest changes to social security provisions, the measures reflected in the bill are pretty much identical to those published in January. It is particularly disappointing that the bill has introduced does not make significant improvements to the draft clauses published in January, despite what I would consider to be has been active engagement and suggestions from both the committee and the Scottish Government. I spoke to the Secretary of State for Scotland last week and I am meeting him later today to discuss ways in which we can collectively move ahead on the current provisions in the Scotland Bill and to deliver a fully coherent package of measures, which is the aspiration of delivering improved policy outcomes for the people of Scotland. I should also reflect that the Scottish Government has been active as has been the committee in engaging with stakeholders. I was again struck by the discussion in which key voices were telling me that the current bill is inadequate across a range of areas, in particular in relation to social security and employment support. There is a real risk that the service people receive will be less effective as a result of not having a coherent package of measures and interventions available to us. It will not have escaped the committee's notice that the UK Government has so far not taken forward any Opposition amendments at the committee stage of the Bill in the House of Commons. Those include arrangements based on the Scottish Government's proposals that reflect issues and concerns raised by the committee in their interim report. Finally, I record my thanks to the committee for its work on the Bill and look forward to our discussions this morning. Thank you for your response and thank you for the material that your Government has been sending to us over the past couple of weeks. You have outlined where things have fallen short in the Government's view, but it would be helpful to hear from you what progress you consider has been made in terms of amending the Bill to bring it into line with our committee's unanimous views as outlined in our interim report. Across all five parties, as a minimum, we thought that the Bill should reflect the spirit and substance of the Smith agreement. If you can let us know what you think progress has been made and what actions the Government has taken since the publication of the Bill, I think that that would be helpful. Since the publication of the draft clauses in January, the Government has made a range of suggestions of areas in which we believed that the draft clauses needed to be revised to deliver the substance and the spirit of the Smith commission. When the publication of the Bill, we have continued that effort and set out a range of areas in which we believe that that should be the case. Our thinking on that is very much in alignment with the conclusions of the report of the committee, which I thought has been widely commended as a constructive and dispassionate analysis of the areas in which changes were required in the Scotland Bill to bring it into line with the spirit and the substance of the Smith commission report. There have been a number of changes made to the draft clauses that were published in January in the final element of the Bill, but I would have to say, with one exception, that they are mainly drafting changes to sharpen text and assist with definitions. The only area in which there has been any meaningful change in the substance of the draft clauses is in welfare, with the addition of a power to create benefits to top up reserved benefits. Although, on my reading of the Bill, it is not in respect of mitigation of sanctions that would be undertaken as a consequence of the wider UK approach on welfare reform, that is the only area in which there has been any meaningful change from the propositions that were outlined in January. In terms of the Scottish Government, we have been in regular discussion with the United Kingdom Government on these questions, both at official and at ministerial level. The committee will probably be aware that I speak on a weekly basis to the Secretary of State for Scotland. I met him on 8 June and, as I said, I will see him later on today. At all of these discussions, I make the case for the UK Government to recognise that there are significant deficiencies in the Bill in relation to the delivery of the Smith commission report. I simply leave it with the Secretary of State to make the necessary changes that I think are required to bring the Bill into the place where it can actually implement properly and fully the outcome of the Smith commission deliberations. No Tavish Scott was interested in amendments, in particular Tavish. If I make a video just to follow on your line of questioning, we just understand that engagement that the Deputy First Minister has been describing, because we have been, as a committee, very interested in inter-governmental relations and how they are going to work in the future. This is a bit of a model for them. Presumably, the Deputy First Minister would accept that the BBC agreement on the memorandum of understanding is progress, because that was agreed between the respective Secretary of State and one of your Cabinet colleagues. That is presumably some progress. Could you describe for the committee, Mr Swinney, the number of meetings that have taken place—if not today and maybe in writing—between opposite numbers in London to Edinburgh in terms of sorting out, for example, the social security points that you have raised and other issues? Could you also detail for us again, maybe not today but in writing the number of actual meetings that have taken place at official level as well as obviously at ministerial level 2? I do not have all of that detail in front of me, but I am very happy to prepare that for the committee and to share it. I would say that, in terms of ministerial interaction, there have been clearly discussions between the First Minister and the Prime Minister, discussions between myself and the Secretary of State for Scotland, discussions between the Culture Secretary and the Secretary of State for Culture at the UK level. We have had discussions and correspondence with DWP ministers on social security issues. There is a further scheduled session of the welfare subgroup, which involves DWP ministers, the Secretary of State and Alex Neil, Roseanna Cunningham and myself. At official level, I would say that we are discussing and in contact with UK officials several times a week and have been consistently since the publication of the Scotland Bill and prior to that. Not all of those discussions will be meetings, there will be a lot of telephone conversations and teleconferences but there has been a very regular amount of dialogue to take that forward. In the context of parliamentary oversight, it would be important to recognise how much is going on and, in fact, we are possible to be detailed to the committee, I think, would be helpful. Linda Faviani, I want to take you on a quick supplementary question. I thank you, convener, to one of the issues that you raised there, Deputy First Minister, about creation of benefits and welfare. The Smith agreement was quite clear about the ability to create benefits and areas of devolved responsibility. It would seem to me in reading the draft legislation that it talks about benefits that are devolved under that legislation. I see that you have proposed a clause 23A. Is that in recognition of that and what difference do you think clause 23A would bring? Would it better meet the spirit and substance of the Smith agreement? I do not have that in front of me. I do not read the whole thing out. It is about the Scottish Government proposing a clause giving the Scottish Parliament powers to create new benefits and areas of devolved responsibility. Is that looking back to the Smith agreement as opposed to the draft legislation, which would suggest that you can only do that in areas that are devolved under the Scotland bill? That is the purpose of the clause 23A that the Scottish Government has advanced. It was clear to me in the Smith commission that there was a design—indeed, I would say, it was a much celebrated element of the Smith commission report—that the Scottish Parliament would have the ability to create new benefits that did not currently exist and that it certainly did not—and the fine point of whether that was in devolved areas, for example health, housing, education or across the board was a point that, certainly from my understanding of the Smith commission report, was accepted as being the approach that should be taken forward in the legislation. We have put forward clause 23A on the basis that we believe it is necessary for the legislation to clarify that point absolutely, because once that passes into legislation, and if the Scottish Government or the Scottish Parliament was to advance a proposition to establish such a benefit, we would have to be absolutely confident that we had the legislative authority to take forward that proposition. If I look at some of my past experience on areas such as finding an alternative to council tax benefit when council tax benefit was reduced by the United Kingdom Government, we had to be very mindful as we went about that process to act within our existing competence, which was in relation to the management of local taxation and legislation for local taxation, rather than putting in place a benefit provision because we did not believe that we had the existing legislative competence to enable us to so act. Clause 23A is vital in providing that legislative clarity that the Scottish Parliament would be able to legislate within competence on those particular questions. I need to bring that alive from my own seat here, so I understand this, Deputy First Minister. It says quite clearly paragraph 54 in the Smith commission proposals. The Scottish Parliament have new powers to create new benefits in areas of devolved responsibility. The current bill as it stands, as I understand it, gives powers as in the bill in the Scotland bill, which would mean, in my understanding of it, for instance, if we want, because there is no element in the current bill about housing, if we want to introduce a new benefit in the area of housing, even though it is devolved, currently, as it stands, we will not be able to do that. That would be my reading of that point, yes. Do you want to follow any other welfare issues up, or can we move on to another area? No, I am happy just now, but I will listen further. Perhaps, Deputy First Minister, you could give us some description of where we are getting to then on the issue of the fiscal framework, and then I will ask Alex Johnson to come in. On the fiscal framework, I met with the chancellor in March, first of all, to discuss the design of the fiscal framework. I cannot recall if I have rehearsed this with this committee or certainly with the finance committee. We agreed at that stage that exploratory work would be undertaken by our respective officials, recognising the fact that the United Kingdom Government was about to go into an election campaign, and ministers would be finding it difficult, if not impossible, to interact. That would be about 10 days or so before the UK budget in advance of the election. Officials were instructed by both Governments to undertake the preparatory work to establish the fiscal framework. That work has been undertaken whilst the UK election has been taking place and, subsequently, I met with the chancellor on 8 June and the chief secretary to the Treasury to discuss the next steps in this process. I have a discussion scheduled for the week after next with the chief secretary to the Treasury, which will be the first of the substantive discussions to take forward the contents of the fiscal framework. A great deal of work has been undertaken to explore the scope and the issues that have to be covered in the fiscal framework. Ministers will now begin to discuss to consider how best we can take that forward. Alex Johnson On that, do you have any indication of what the timescale might be, or is that open at the moment? On the fiscal framework? Yes. The chancellor and I agreed that we would aim to try to conclude that by the autumn to enable the later parliamentary consideration of the Scotland Bill to be informed by the contents of the fiscal framework. I have been clear to Parliament, to the committee and also to the United Kingdom Government that we could not propose a legislative consent motion to Parliament without an acceptable and agreed fiscal framework being in place, given the significance of the financial implications of what will be contained within the fiscal framework, which is not contained within the bill. There is a necessity for us to make as much progress as we can, and that work is now under way to try to conclude that by the autumn. I have enormous respect for the fact that a great deal can be achieved in work carried out at a ministerial level in discussions on the subject. However, the concern that some of us have is that the success at that level may have the effect of excluding the committee from analysing the process as it develops. Is there an opportunity within that timescale for this committee to know more about what is going on and to consider what is being proposed? I think that Mr Johnson raises an absolutely fair and substantial point on this question, and it is difficult territory to navigate because I am shooting. Mr Johnson will appreciate that on the one hand—I think that the chancellor and I discussed this issue when we met on 8 June—there is an aspiration on the part of both Governments to ensure that our respective parliaments are given as much opportunity as possible to shape the contents of the fiscal framework and for that discussion to be undertaken in a transparent fashion. However, I am sure that Mr Johnson would accept this space. There has to be space for a meaningful private negotiation to be undertaken to address some of the difficult issues that will be in the fiscal framework. What we discussed—and this is by no means a final position on this—was the desire for—I think that what we agreed between both Governments was that we could not provide a running commentary on the negotiations. I do not think that the committee would expect us to do so. However, where we have evidence, analysis and information that can be shared with the committee that is informing the discussions, I think that that is a fair and reasonable amount of material to share with the committee. Once we make a bit more progress on having a sense of what will be the range of topics and the subjects that will be contained within the fiscal framework, I then think that we are in a stronger position to perhaps share that with the committee, to give the committee a sense of what is the ground that is going to be covered within the fiscal framework. I do not want in any way my comments to be perceived as closing down in any way dialogue with the committee about this question. I am simply exploring some of the challenges that exist around the sharing of that information whilst a negotiation is under way. However, I want to try to be as helpful and as transparent with the committee as I possibly can be. On a specific issue in that process, can I ask you about where we are in discussion on borrowing powers and how that is likely to proceed during your discussions with the minister? It is a material and substantial part of the fiscal framework because it will relate to a number of key considerations around the necessity for appropriate resource borrowing to be available to the Scottish Government, given the fact that we will be responsible for a larger proportion of the raising of our disposal, and they will therefore clearly be volatility in those estimates in that performance, so resource borrowing will be a significant consideration in that. There will then be issues around the extent of our borrowing for capital investment purposes and the whole question of any limits that may exist around that or any parameters that may exist around that. Those are points of substance that I expect to come on to discuss with the United Kingdom Government, but we are at nothing like an advanced stage. We are not even at the early stage of those discussions. If we were to assume that the level of revenue borrowing that was necessary as an outturn would be to some extent conditional on the outturn of the Scotland Bill process and the implementation of new powers, as in, if you have additional powers, then the level of revenue borrowing will be necessary, and the level will be necessarily commensurate with that. That is a very material consideration, because in the contrast between the Kalman proposals—for example, if I can call them that in the Scotland Act 2012—the volume of income tax that would be under the control of the Scottish Government would be something of the order of about £4.5 billion, but under the proposals in the Smith commission—yes, about £4.3 billion on 2013-14 numbers—under the Smith commission would be £10.9 billion. That factor alone between the difference between the Kalman proposals and the Smith commission proposals makes entirely the point that Mr Johnson advances. I am pursuing similar questions, Deputy First Minister. There is nothing yet being said about the basis for the assignment of VAT. Is that part of those discussions, or is it something on which you can give us some indication today? Part of the wider fiscal framework discussion. Generally, there has been agreement around tax issues in between the Government's and the committee in broad terms. One of the features of the bill that is new is in clause 12, where there is provision that there shall not be different rates of income tax for different types of income. That is a provision in the Scotland bill, as it has now come forward. Is that something that you had discussions with the UK Government on in advance? Is that something that you are relaxed about? What is your Government's response to that? I think that our approach on that question and on all questions has been in this part of the discussion to ensure that the Scotland bill was translating the Smith commission's report in spirit and in substance. Broadly speaking, the provisions on tax pretty much do that. The Scottish Government has had little to add or to change about the UK Government's position as advanced in the Scotland bill, because we believe that it translates appropriately the Smith commission report into legislation. The clause 12, as it stands, is broadly in line with your expectation. That is helpful. One other area of where the Scottish Government is seeking amendment to allow it to draw revenue is in relation to onshore oil and gas extraction to fracking. I guess that many people might be surprised that you have made a bid for the Scottish Government to be able to access land rental charges from fracking. Is that something that you would want to comment on today in the wider context? It is purely for policy completeness, convener. If the power is devolved, then it should be done properly. Clearly, the way in which the legislation has been drafted only excludes that element of land rental of royalties, if you like. Given the provision that exists, for example, of shore oil and gas revenues for royalties there and so on, do you consider that adding this, as you say, for completeness is a strong indication of a policy preference to see fracking going forward in Scotland in the future? I think that the Government's position on fracking is quite clear that there is a moratorium in place. We are undertaking evidence-based research on this question to ensure that the public debate and any consideration of this issue is well informed by the evidence. As Mr McDonnell will know, the policy function is being devolved to the Scottish Parliament, so we believe that if the policy function is being devolved, it should be devolved completely, not in a half-hearted fashion. Do you accept that this is a taxation element relating to the regime as opposed to a licensing element? It is for policy completeness that my objective is to make sure that where a policy area is being devolved, it is being devolved in a complete fashion to enable the Scottish Parliament to exercise responsibility fully within the scope of the power being devolved. Thank you, convener. I wonder, Deputy First Minister, in relation to the fiscal framework, what discussions you have had in relation to the no detriment principle or principles. Obviously, there is a general view that the first no detriment principle that, when a power is devolved, it should have no adverse impact on either UK or Scottish Governments is fairly well established and well accepted. There has been a degree of debate around the second no detriment principle and how it can work in practice. Has that formed part of your discussions at home? The discussions on the fiscal framework are at a very early stage, and the pace of those discussions will increase really quite significantly over the summer. There will be initial, official substantive discussions next week, and, as I said in one of my earlier answers, I will see the chief secretary the week after next to discuss the substance of some of those questions. Mr MacDonald is absolutely correct that there are essentially two elements to the no detriment provisions. One is about the primary aspects of no detriment, whereby a power is transferred to the implications at the point of transfer of the power. I think that there is a very clear understanding of the principle behind that, that that should be on a no better, no worse off principle. On the secondary no detriment principle, I think that there is an awful lot more scope for discussion and debate about what are the implications and what different elements have come together to substantiate a potential secondary impact. That is a much more difficult process to determine. There is also a whole range of different scenarios. As to trying to trace back what factors may have led to a particular economic or fiscal outcome. That will require a great deal of discussion and dialogue to determine the basis upon which that can be undertaken. It is also important in the discussions about the secondary elements of no detriment, not to lose sight of the fact that implicit within the provisions of the Scotland Bill is an acceptance that there is a transfer of responsibility to exercise a function and with transfer of responsibility comes a transfer of risk. It might be a risk that is positive or that might be a risk that is negative. In that context, the purpose of many of those changes must be to enable the Scottish Parliament and the Scottish Government to be able to retain the fruits of the achievements that are made in policy terms and the beneficial impact on revenue. However, I would also have to accept that there would also have to be the acceptance of the risk of that not being the case, of there not being a gain and the Scottish Parliament being as responsible for that as it would want to be for the gathering of the risk. Some of those issues apply very clearly to the Outer Kingdom Government as well. One of the concerns that is being raised regarding the secondary detriment principle is that if applied too rigidly, it could be seen as a constraining factor on the flexibility of the Scottish Government to pursue particular policy avenues. The same would apply in terms of the fiscal framework and how that is developed to enable the Scottish Government and the Scottish Parliament to have some flexibility about the direction of travel. For example, if the fiscal framework were drawn too tightly, the Scottish Parliament and Scottish Government had to align to the direction of travel at a UK level in terms of financial policy rigidly, that would be seen as perhaps questioning why transfer the powers if they were not going to be able to be used in a flexible fashion. Are those going to form some of the discussions that you take forward? That strikes me as being the central point about the consideration of the secondary no detriment principle, which is that if we are transferring those powers, if we are going through this process, then there has to be some form of implication. There has to be some form of flexibility being exercised so that a Scottish Government and a Scottish Parliament is able to take different decisions to acquire the benefits of that and deal with the consequences if they are not positive consequences. If that is not accepted, other than transferring power for the sake of transferring power, I am not quite sure that I understand what the point of it all has been. There has to be an ability for the Scottish Government to genuinely be able to exercise flexibility and to be able to bear the fruits of that. Following on Mark McDonald's thoughtful questioning, does that mean that the logic of that answer, Deputy First Minister, would be that the fiscal framework would need to apply over a period of time? It could not be one budgetary cycle, in other words, one year. It would have to be over a Parliament, would it not, because the very flexibility that Mark McDonald's rightly argued for could only be judged, could it not, over a Parliament or an extended period of time? I think that the question becomes to what extent are those questions able to be judged? If I go back to one of the discussions that I had around the block grant adjustment on land and buildings transaction tax, one of the proposals that was put to me was that, in applying the no detriment principle, a calculation had to be made of what was the likely pattern of this tax change over a period to 2029-30. Once that had been modelled, a block grant adjustment would be indexed to essentially neutralise any positive effect of that. What that means is that the Scottish Parliament, at the moment of devolution of the responsibility, was no better and no worse off. Equally, over a period extended to 2029-30, the Scottish Parliament was no better and no worse off by our exercise of that policy. I resisted that, because that would take me back to the point that Mr McDonald raised, allowing us to legislate for a different form of land and buildings transaction tax. What precisely was the point of that? That proposal went off the table, but I remind the committee that the block grant adjustment that was made for land and buildings transaction tax was a one-year block grant adjustment for 2015-16, because we were unable to agree some form of mechanism, an indexation mechanism that moved forward. Despite the fact that I offer a number of different alternatives, what I was not prepared to accept was that model, which was described to me as a constraining model. The title said it all, because it rendered utterly null and void any possible gain, or any possible loss that we might have had to deal with as a consequence of exercising that responsibility. That brings us to a fundamental point about what is the purpose of devolving the power if it is not to devolve the responsibility and the potential benefit or the potential liability that is a consequence of our actions. I was just trying to understand, I agree, in the fiscal framework. In a conventional political sense, it would last a Parliament, because by definition, Governments can change after that Parliament has come to an end, whether in London or here in Edinburgh. I know that you will argue that your Government will go on forever, but just for the sake of political convention, Governments can and do change. Is not the judge of a fiscal framework therefore logically for a Parliament and therefore the questions that are being asked about and no detriment would need to be considered over that period of time in that wider sense? No, I think that we are looking here at a fiscal framework that I know sometimes Governments change hands. I know that it is inconceivable in a Scottish context nowadays, but I really do not think that we are talking about a fiscal framework that is for one parliamentary term. I think that we are talking about a fiscal framework that regulates the fiscal relationship between the Scottish Parliament and the United Kingdom Parliament for the foreseeable future. The clear that there has to be a necessity to adapt, but I do not think that it is something that we would consider as being relevant just for one parliamentary term. I think that we have done enough on the tax area and the fiscal area and now that we have moved into a new area. Stuart Maxwell wanted to ask some questions. Thank you very much, convener. I wanted to ask the Deputy First Minister about the issue of vetoes. Where we are on this question or this disagreement between the Scottish Government and the UK Government, could you tell the committee how many areas that the Scottish Government thinks that the UK Government has a veto in terms of the Scotland Bill that was published, and if possible, could you list those areas for us? As I calculate them, convener, I think that there are eight vetoes within the Scotland Bill. There are two in relation to universal credit and there are a range of others around fuel poverty support schemes, obligations on suppliers to reduce carbon emissions, on home heating costs and some other issues. My supplementary question is, given the range of areas that the Scottish Government believes that there are still vetoes in that the UK Government holds over those areas, what negotiations have been undertaken to try to resolve those disagreements over those eight vetoes as the Scottish Government sees them? We have made our position very clear. We have made it clear in correspondence, in alternative clauses and in other submissions that we have made. One of our problems is that the UK Government does not consider the terms that those are expressed in as a veto. I hear a sedentary comment from Mr Johnson, who specialises in sedentary comments. Anathema, to me, Mr McNeill. If we explore the terms in which, for example, the veto is considered to be in the clause on universal credit, I observed this debate in the House of Commons when I was there a couple of weeks ago, in the second reading debate, where a lot was being made of the fact that the clause said that consent could not be reasonably withheld. One of the Conservative members of Parliament, Bernard Jenkins, made the point that the fact that there was terminology in the bill such as consent could not be reasonably withheld was a justiciable term. He is probably right about that, but I do not think that that is a good explanation. I think that that is a very bad explanation. It suggests that if we are so concerned about the stance that has been taken on operational matters by United Kingdom ministers when we want to pursue a particular thing, we have got to go to the courts.  That makes my point that it is a veto. With devolution, power is transferred. We are able to exercise that power and that responsibility according to our judgments, according to our accountability to the Parliament and our accountability to the electorate of Scotland. However, here we have a situation in which we have to secure the consent of the UK Government to do certain things. That consent might not be reasonably withheld, but I can think of numerous occasions where we have tried to make progress and we have had this argument, that argument, this issue of timing, that issue of timing put in place. Before you know it, significant time has elapsed and we have not been able to advance the policy intention that we wanted to take forward. I think that notwithstanding the fact that there might be muttering to my side here, I think that it is a veto because the UK Government can stop the Scottish Parliament exercising our responsibility if it chooses to do so. One final very small question. For clarity's sake, as things currently stand, who would decide on what is defined as unreasonably withheld? Who decides that? That would be because the consent would lie with the UK Secretary of State, that consent could only be given by the UK Secretary of State. The UK Secretary of State holds the power and it is their power to give over if they reasonably consent to it. That is why it is a veto. Person who is muttering wants to be heard aloud now. I was just going to say that, surely, however we define this process that has been described within the Scotland Bill in a form of words that you do not approve, whatever form of words that we build around that process, it is necessary to have a process by which responsibilities can be passed. However, there is no form of words that could not be construed in the same Machiavellian fashion as a veto. Surely, we are genuinely dancing on the head of a Machiavellian. Yes, indeed, Mr Jones. My goodness, we have reached a new low today. The way that I explained this to Mr Maxwell is the clearest way to try to think about this. The power to decide whether or not a change happens rests with the UK Secretary of State. That Secretary of State is under an obligation not to unreasonably withhold consent. In my experience—I have not been a minister for 20 minutes, I have been a minister for eight years—there are lots and lots of ways in which arguments can be put in place that can justify and could be presented as reasonably withheld. That constrains the ability of the Scottish Parliament to exercise responsibilities, which I believe in terms of the Smith commission proposals were powers that were to be devolved for the Scottish Parliament to exercise those responsibilities. We put forward, on 18 May, revised welfare clauses that were designed to address this particular issue. They, of course, have been published. I think that all roads go back to a concern of the committee, which was outlined in its report about the process and procedures. I think that the Scottish Government and the response recognised that there needed to be an overhaul, because it is not simply devolution. The challenge is much greater, is it not, in that we are devolving sharing powers, which need some sort of architecture to carry that. We are, as a committee, trying to provide scrutiny and meaningful scrutiny of this whole process. We are flying with one wing here, in that everything—we are not flying with it at all, then. We are continually referring to situations and meetings that have passed. We have no understanding of dispute mechanisms. When they are registered, we are failure to agree. We have no update about your declared position that the UK Government and the UK Government are in discussion and developing appropriate mechanisms to deal with those issues. We have no clear understanding from a committee's point of view of what we should expect in terms of information in the process and the whole issue of greater bilateral engagement, and the Government's engagement with Parliament to provide appropriate scrutiny. It diminishes the process when parliamentarians cannot scrutinise that. We get into an exchange there about what is a veto and what is shared responsibility. I think that we have a responsibility to do much better than the new politics of Scotland and the new environment that we are working on. I am trying to be helpful here, as much as I can. For example, the Scottish Government has, given the UK Government a paper outlining a possible alternative approach to the consent provisions in the draft clauses, based on a combination of joint ministerial committees, memorandums of understanding, concordats, regular official contact, a whole variety of different ways in which that could be undertaken. We have not had a response to that. I simply give you—that is where we are. Part of the issue, and I think that Mr McNeill raises a number of issues about the interaction between the two Governments about those issues. There is also another interaction, which is between UK ministers and the House of Commons currently on the passage of the Scotland Bill. In that context, UK ministers are putting on the record their views about how some of those issues need to be resolved. I am not party to that dialogue in the House of Commons, quite clearly. There is a Government-to-Government dialogue that I am involved in. I assure Mr McNeill that we are trying to find a way of ensuring that the powers are able to be devolved and that the arrangements are workable. I would be failing in my duty to the committee if I did not point out the fact that the clause that is currently constituted, I think, is an impediment to the Parliament exercising those responsibilities. One of the comments that Mr McNeill made was about dispute resolution. I have been involved on a particular issue about consequential Olympic funding, which did not start not long after we came to office. It started under our predecessors. We inherited it from our predecessors and we pursued it. It must have started in about 2005 or 2006 or something like that. We inherited it in 2007 and it was resolved by the coalition Government sometime between 2012 or something like that. It might be slightly earlier than that, but it had gone on for years. We could probably paper the walls of the committee room with the letters and it got resolved to our satisfaction. Basically, what we had faced for the best part of five years and our predecessors had faced was that there is no issue. An overhaul of the system, you make the point. If we multiply that 100 times and share responsibilities, then where are we going to end up if we do not resolve this issue about how we deal with one another? That is how I would illustrate the danger of the committee saying, well, it says in the legislation that consent cannot reasonably be withheld. Agreement was unreasonably withheld about the Olympic consequential funding for years. When it came to resolve it, it took about 20 minutes. Once people started saying, okay, let's fix it here. We have exhausted that area. Employment rights, Stuart McMillan. Thank you, convener. Good morning, Deputy First Minister. The Smith commission report was very clear in paragraph 57 where it starts. The Scottish Parliament will have all powers over support for unemployed people through the employment programmes contracted by the DWP. The clause section 26 of the Scotland Bill certainly does not appear to live up to what the Smith commission proposed. Obviously, the Scottish Government has put forward further proposals on employment support. How would either of the Scottish Government propose those results in improved co-ordination of employment policy? This is an important area because it affects the journey that individuals will make from economic connectivity into employment. The requirement for that journey to be as efficient and coherent as is possible for individuals is central to the achievement of many of our economic objectives. The Scottish Government takes the view that the existing provisions restrict the powers over employability support services to those claiming reserve benefits. Our proposed alternative clause amends the introduction of the words in clause 26 to make provision for power to legislate on arrangements rather than the process by which a person makes such arrangements. It is designed to give us a more comprehensive and clearer access to the controls that are necessary to streamline employment support arrangements and to ensure that the journey of individuals into employment is made more coherent. Some of the evidence that has been received in the past, particularly from the Scottish Women's Convention, also told the welfare reform committee that it seems somewhat at odds that on one hand, the Scottish Government can create a work programme that best suits the needs of Scottish people, yet on the other hand, the sanctions associated with that remain with Westminster. Those seeking work could be at a detriment as a result. Do you think that your comments tie in with what you have just suggested a moment ago in terms of the efficient and coherent proposals? There are two points here. The first is the point of coherence of the system whereby this point was made very well to me by a range of different organisations who are actively involved in employment support in the Scottish economy. Individuals would be potentially transferring from one Government to the support of another Government on a potentially fairly regular basis. That does not make for a coherent package of support, which is why we argue as we argue. The second is on the interaction between the sanctions of regime, which is part of the benefits system, which on one hand remains a reserve function and the access to employment programmes and the way in which that is supported. Clearly, I would prefer for all that to be under the stewardship of the Scottish Government. However, if there is an interaction with the benefits system, some of those issues become more complex to deploy, but I think that there is a lot of substance in the points that Mr McMillan raises. In terms of the different programmes, how does the Scottish Government's alternative clause distinguish between the contracted and the non-contracted programmes? That essentially relates to the fact that some parts of that journey will be under the control of the Scottish Government and some programmes that we support. Some parts of the journey will remain part of the reserved areas of responsibilities that the United Kingdom Government retains responsibility for. I will go to Lewis on some equality issues and then we will pick up on the Crown of State after that. I have a couple of quick questions. The Scottish First Minister proposes to replace references to legislation from the 70s and the Disability Discrimination Act 1995 with references to the equality legislation of the last decade, which substantially replaced them. Can you explain why the Scottish Government does not want to or does not support updating the reserved areas, the reference to reserved areas under equality legislation? There is further discussion of the purpose and effect of the drafting of the bill and will be required, but we remain concerned that the bill is included in a bill intended to deal only with additional devolution. Why is there an issue around that? Clearly, you would want—the Scotland Act effectively is the founding document of this place and of devolution in Scotland. Why would you resist an updating of the references to other legislation in such an important area? That is one of the areas where we are actively discussing with the UK Government the nature of the drafting to be absolutely clear that what has been put into the bill properly reflects what we consider to be the approach that is argued for in the Smith commission. That is one of the areas that we are actively involved in discussing with the UK Government on. That might be the same answer, but I again understand that you are resisting the reference to part 1 of the Equality Act 2010, with reference to a social economic duty on public authorities. Does that come into the same category? Is there a particular reason why you are resisting that reference? It is the same argument here. Good morning, Deputy First Minister. In evidence to the Rural Affairs, Climate Change and Environment Committee on 17 June, the Crown Estate explained that the Scotland Bill was drafted to allow the Scottish ministers not to be bound by the requirements of the Crown Estate Act of 1961. Why does the Scottish Government believe that this does not deliver on the Smith report and can you explain how the Scottish Government proposed amendments will actually make for a more robust system? The approach that we have taken in the amendments that we have suggested is to take essentially a much simpler approach to the devolution of the Crown Estate responsibility than is taken in the draft clauses put forward by the United Kingdom Government. Purpose and direction of our amendments has been to ensure that the focus of the legislation is on the devolution of the responsibility, not on the devolution of a scheme. The design of a scheme and the approach that is to be taken I consider to be matters for the Scottish Parliament to determine. The approach that we are taking is one that is essentially consistent with how we believe devolution provisions have been drafted since 1998 or 1997, I should say, in its early drafts, to devolve that function and then for the Scottish Parliament to be able to design the approach that we take in that respect. If that is so, we can see that the management of the Crown Estate and the revenues of the Crown Estate are both parts of what Smith envisaged that we should control. Are you clear that the amendments that have been made so far would both devolve management and revenue? Yes. The distribution of that revenue would you be able, within the powers given, to decide on other bodies to use or gather or keep that revenue? I am concerned by the reason why we have gone for the simpler approach, is to give the maximum flexibility to Parliament to be able to determine and to decide what further changes are deployed as a consequence. The danger of the current provisions is that there is a restrictiveness within the scheme, which I do not think is again consistent with the principle of devolving that responsibility. I think that we would be in a stronger place if that power was able to be exercised in a more comprehensive way by the Scottish Parliament. Are those the kind of things that would be included in the memorandum of understanding about this? Is this another argument about why the memorandum of understanding is actually very important to making sure that the system can work? There is an important question about whether a function is being devolved. Or whether a scheme is being devolved. If the function is being devolved, then it is up to us to design the scheme. If the scheme is being devolved, then the scheme will determine the basis on which some particular provisions are taken forward. I think that it is up to this Parliament to decide how we would intend to progress and advance those questions. Therefore, an open approach to that would be essential to give Parliament as much flexibility as it chooses to exercise. Obviously, in the past couple of days, there has been a lot of nonsense about the Crown of State and the keeper of the private purse. However, I want to clear up an issue that is relevant, because obviously that wasn't relevant. However, it is possible that the devolved Crown of State in Scotland could make shed loads of money more than the people who expect it to do so. Is there any prospect of being a detriment applied and any additional resources that come from the Crown of State being removed from the Scottish bloc? That is the point that has been missed among all the keeper of the private purse discussions. If the Crown of State is devolved and the revenues flow to the Scottish Government, then there will be a block grant adjustment that will be undertaken as a consequence of that. That is the starting point, convener. There will be a block grant adjustment, unless all my numbers have come up, but there will be a block grant adjustment at the point of devolution. There is then, convener, the question that you raise, which is similar to some of the points that I think Mr MacDonald was raising earlier on, in which Mr Scott was also raising, is what happens if there is then a financial benefit? Are we able to retain that, or does the no detriment principle somehow apply in some of those areas? It is a very material point in the block grant adjustment discussions. There is no clarity on that yet, though? No. So it would be a useful thing for us, as the Secretary of State, because otherwise, what is the point? The First Minister responded to Rob Gibson's question about the Crown of State by agreeing that the devolution of both management and revenue is what is intended under the Sweth agreement and by affirming that your own amendments to the Scotland Bill would deliver that. Would you agree that there is no reason why the scheme brought forward under the bill as it currently stands? There is no reason why that could not also deliver the devolution of management and revenue of the Crown of State in Scotland. I think that there is an important point that has been lost here. The debate, which is now very active and engaged with a number of commentators about the approach that has been taken to the Crown of State, gets to the number of whether or not there should be an approach taken that gives Parliament the flexibility to determine and to decide the approach that it intends to the exercising of the responsibilities over the Crown of State. I do not think that it is devolution for that to be undertaken through the design of a scheme, as opposed to devolving those responsibilities to the Parliament for the Parliament to formulate the approach that it intends to take. If the scheme devolves the management and revenue of the Crown of State in the terms that Mr Gibson has asked you about, does it not therefore become a debate about the best form of architecture rather than the delivery of the purpose of devolution? I think that there is a very important philosophical point here, which is the fact that that is the consequence of devolution being prescribed by the United Kingdom Government, because Mr MacDonald knows the legislative process well enough to know that if the provisions that are currently in the Scotland Bill are enacted, there will be restrictions consequent on that, which will be more restrictive than the devolution of the responsibility to the Parliament to formulate its own approach and its own design. In what area does the Deputy First Minister consider such restrictions to be of critical importance? It is not for me to work out how that can be undermined. I simply want to make sure that the devolution of the Crown of State responsibility, which is what the Smith Commission said should be the case, is enacted. I do not want to see devolved a set of arrangements that ffetter the ability of the Scottish Parliament to exercise its full devolved responsibility. Potentially it could ffetter, but not in any way that you can define at the stage. If that was the case, the whole logic of the devolution of responsibility since 1998 would not have taken the course that it has taken. Mr MacDonald would argue for a scheme of devolution of the health service, a scheme of devolution for education, a scheme of devolution for housing. What is being proposed in the Crown of State provisions is, in my view, at odds with the nature of the devolution process that has been undertaken since 1998. Can I ask a specific question with regard to an asset in Lothian? Have there been any discussions with the Crown of State or with the Treasury as regards the inclusion of Fort Canard as an economic asset in Scotland? Yes, there have been. I have had those discussions myself with the Crown of State. We have made our position very clear that the current Fort Canard as an economic asset in Scotland should be part of the devolved scheme. How is that discussion progressing? Is it meeting with an open mind? Well, we are discussing it. Certainly, there has been discussion on the issue in the Racky Committee. There is a view that is in fact a legal interest that is already part of the Crown in Scotland. That, to me, is the only logical conclusion that can be arrived at from the current state. I cannot see how it can be argued any other way. It is a material issue that we have to advance in the discussions. Certainly, from the Scottish Government's point of view, it is illogical and inconsistent for Fort Canard to be somehow exempt from the devolution of the current state functions and assets in Scotland. Does it remain the position that returns from any investments that are made in Scotland by the Crown of State after the transfer point would flow to HM Treasury? In my view, that should not be the case. I will finish this off with the Crown of State area. Rob, very quickly. That question about Fort Canard seems to raise in our mind the point that it is a policy decision rather than a legal need to exclude Fort Canard. If that is the case, is it possible to argue that, in fact, the revenues generated in Scotland from Fort Canard could possibly be devolved to us, assigned to the Scottish consolidated fund? In a sense, a proposal of that type essentially begins to tamper with the overall principle of the devolution of the current state functions. If we do that, we will get into the mechanics of the scheme. If we do that, we will begin to restrict and undermine the principle that many colleagues across all different political persuasions for many years, as long as I can remember, have argued for the devolution of the Crown of State assets in Scotland. I think that that gets us into that territory. Thank you, Deputy First Minister. We are going to have to conclude at that stage. Is there any remaining questions? We shall write to you, Deputy First Minister, and I would ask you to respond to those as quickly as you can. I thank you for your constructive way and your officials who are going to wait about your engagement with the committee. I now suspend this meeting and I want to start at 10.15 at the latest if we possibly can. Welcome back. We begin with our second panel of witnesses. We are in place to resume the meeting. Our second panel consists of the David Medell, the Secretary of State for Scotland, Professor Adam Tomkins, who is a constitutional adviser, Colin Faulkner, the Deputy Director of Constitutional Policy in Scotland Bill and James Dowler, who is the Scotland Bill manager. Welcome all. I think that the Secretary of State will want to make an opening statement, convener. I am delighted to be here. I want to make a very short opening statement, because I very much welcome the opportunity to attend the committee this morning as the Government moves forward in implementing in full the all-party Smith commission agreement. That was a manifesto commitment of this Government, and that is what we are doing at the earliest possible opportunity. I was very glad to meet yourself and some other members of the committee as one of my first meetings as Secretary of State for Scotland. I want to continue the productive discussions as the bill passes through both the House of Commons and House of Lords. I want to ensure that the committee is fully aware of the Government's thinking throughout this process, and we will be happy to return to the committee as appropriate. The committee's interim report was thorough and has already contributed to the quality of debate in both parliaments. I look forward with interest in the outcome of the further engagement work that the committee is carrying out over the summer. The bill has four days of committee stage on the floor of the House of Commons before our summer recess, and I anticipate that the report stage will follow that recess in Westminster. In making the Scotland Bill as effective as possible, I will continue to be constructive and look for ways to work with members of both parliaments and to continue working closely with the Deputy First Minister and the Scottish Government. Indeed, we are meeting this afternoon. I am confident that the bill reflects the Smith commission agreement as the president of the Law Society of Scotland, among others, has confirmed. There will, of course, be questions of drafting and emphasis that should rightly be debated, and the bill's continuing passage presents further opportunity for refinement. I am very pleased, however, that the central purpose of the Smith commission, the greater financial accountability for Holyrood that comes with control of around £11 billion of income tax revenues and £4 billion of fat, is not in dispute in any way. That is a hugely significant measure and one that I am committed to delivering in statute without delay. The bill has undergone considerable refinement since the draft clauses were published in January, including confirmation that the Scottish Parliament will be able to set a 0 per cent rate of income tax and a new clause to top up reserved benefits. A number of additional clauses have been added to improve the technical operation of the bill's measures. Before I answer your questions this morning, I would like, however, to be very clear about the Government's position on so-called full fiscal autonomy, which has been the subject of amendments lodged at the committee stage in the House of Commons. Full fiscal autonomy was not in the Smith commission agreement, and independent analysis shows that it would be bad for Scotland, leaving us with £10 billion less to spend by 2020. The Government will resist changes to the bill that would be bad for Scotland and therefore full fiscal autonomy amendments will not be added. Thank you, Secretary of State for that opening statement. I think that we'll begin on the welfare area, Secretary of State. Linda Fabiani. Thank you, convener. Secretary of State, you're on record, as are others of your Government, in saying that the legislation that you put forward matches the Smith agreement. The Scottish Government obviously says and what doesn't, and you would say and they would say that, but the committee cross-party unanimously agreed that the draft legislation did not meet the spirit or substance of the Smith agreement. We now hear from the House of Commons library that very important parts of the proposals and welfare are not met in the draft clauses. I would draw your attention particularly to the Smith agreement calling for new powers to create benefits in areas of devolved responsibility. The draft legislation is quite clear in its benefits for areas of responsibility devolved by the bill. Can you explain that difference? I can clearly explain the position. I think that the House of Commons library response should be read in detail, because the House of Commons library does not say that the bill is not meeting the Smith commission requirements. It says that some aspects of the Smith commission are dealt with in the bill and some will be dealt with outwith legislation. I made very clear at the second reading of the bill in the House of Commons that I wanted to address the issue of benefits in devolved areas, because there is continuing discussion about how that can be best achieved. There are those who advise that the Scottish Parliament already has powers in relation to benefits in devolved areas. When I appeared last before the welfare reform committee of this Parliament, two types of benefits were suggested as examples of the benefits that were perceived to be appropriate under that sort of arrangement. One was in relation to prisoners leaving prison and being supported in that circumstance. The other is related to educational matters, both of which, in my view, are powers that the Scottish Parliament already has. However, I have committed—again, I can commit to this committee—that I am determined to ensure that that provision of the Smith committee is met. We are in an on-going discussion with the Scottish Government. Obviously, it will be debated at committee stage in the Westminster Parliament next week. However, I give the committee an undertaking that that part of the Smith commission will be met when the bill passes into legislation. Are you committing, then, Secretary of State, that you will take amendments to ensure that there will be powers to create benefits in areas of devolved responsibility? Therefore, the idea of additionality for the individual will be guaranteed. In relation to people who have been sanctioned, the Parliament would have the right to create additional benefits without any veto being applied by Westminster in those terms. I think that we are blurring the lines here because there are two different types of benefit arrangements. I had understood that we were talking about the ability to provide benefits in devolved areas. That area is one in which there is an on-going discussion as to how that can best be achieved. As I say, I am undertaking that we will get a resolution of that issue so that what was said in the Smith commission is met. There are different views as to how that can be achieved in relation to the ability to top up existing benefits, which, as I am sure the committee is very much welcome, was put on to the face of the bill because that was a clear reflection of what was in the Smith agreement. That is an ability to top up benefits if the Scottish Parliament should so decide. However, it is not the devolution of the conditionality provisions in relation to universal credit and the related benefits. I also ask the Secretary of State about whether the Government has been quite clear that there will be a further £12 billion cuts in the welfare budget. Will, where those cuts fall, be made very clear prior to any devolution under the Scotland Bill? I think that you now have 56 colleagues in the Westminster Parliament, and I am very much welcomed them to that Parliament. I am sure that they will be very active in the debate around the budget and other funding of welfare in Scotland. Clearly, they will look to ensure that they have the maximum amount of information on the impact of any Government policy in relation to Scotland. We had John Swinney not long ago before us, and we had a discussion about introducing a new benefit in any area that is currently devolved, and the area that we discussed was housing. It was quite clear in the Deputy First Minister's view that, currently, as the bill is drafted, we would not be able to introduce a new benefit in the area of housing. If that is the case, there is obviously a requirement for clarity to be arrived at between the UK Government and the Scottish Government. Will you commit just to making sure that, in the area of housing, for instance, this Parliament will be able in the future to bring forward a new benefit in that area, if it so chose? I am certainly committed to the ongoing dialogue with the Scottish Government to ensure that the Smith commission provision in relation to devolved benefits is met in full. I am very happy to discuss that. I am seeing the Deputy First Minister very shortly, and I am very happy to have that specific issue as part of that agenda or as to follow on. What is helpful in regard to those discussions, particularly around those provisions, is understanding what the Scottish Government wants to do and how that can be achieved. Well, it is actually what Smith wanted it to do. That is the issue. I am clear what Smith wanted. He wanted that the Scottish Parliament could make provision of benefits in relation to devolved areas, and that is what I am committed to delivering. If the Deputy First Minister has not, in my own dialogue with him, talked me through the issues and concerns that he has in relation to housing matters, then I will be very happy to listen to that. I will give an example of housing. You have quite rightly said exactly what Smith said. Unfortunately, the bill is currently drafted, and our understanding is that it would only apply to areas that are devolved within the bill, not areas that have full devolved responsibility. There is a new answer that needs to be sorted out. What I am committing is that there is an on-going dialogue on that issue. You said, convener, that the question of additionality for the individual Smith was also very clear that when you looked at the overall picture of what household was receiving, that if, in Scotland, we decided to top up or create a new benefit, it should not automatically be taken off in another element, for example under universal credit, and that was the flexibility that was desired. I would hope that the Secretary of State will take that on board as well. Obviously, I have heard what you have said. I am not clear. We are getting answers on the generality of a commitment to a dialogue, but I will let a commitment on a very specific question. Smith said that there should be the devolution of industrial injuries, disabled, and benefit, full stop. What the UK Government has said is that it will devolve industrial injuries, disabled, and benefit for those who are unemployed. That is something different. That is a subset of what Smith said. Will you commit today to an amendment that puts it back to what Smith said, which is that it will devolve industrial injuries, disabled, and benefit? Well, again, I will take away what you said. We have got the debate on Tuesday in relation to the welfare provisions of the bill, and I am sure that that is a matter that will be raised as part of that discussion. I am sorry, but, Secretary of State, this is really a quite simple question. You have committed to Smith. You have said that you will commit to Smith and Full. I have given you a very specific question. It is quite a simple question. Smith said one thing. Your Government has said something else. Will you commit today to saying that you will revert to what Smith said? It is quite a simple question, Secretary of State. I am giving you a very simple answer that I am taking note of what you had to say. I am debating and discussing this matter in Parliament on Tuesday, and we will look at the point that you have raised. You are refusing to commit to what Smith said. No, I am not refusing. I know that that is the sort of semantics that you want to get into. It is a simple question. I do not want to get into that sort of dialogue. What I want to get into a dialogue is that you have made a point. I am very happy to look at that point. You gave the impression that we had heard earlier. I am sure that some of the evidence has a great deal of dialogue on between officials and ministerial. You gave the impression on the two specific issues that this is the first time that has been raised with you. Is that the case? The specific housing issue in relation to the devolved benefits is not the specific that has previously been presented to me. The issues that have been presented to me have been around prisoners leaving prison, being able to support them or on the educational side. I am very happy to look at specifics. This is one of the issues that has arisen in the discussions and continues to arise in the discussions with the Scottish Government, is understanding what the Scottish Government is looking to do with the powers that are being devolved so that we can facilitate a transfer that allows that to happen. It is difficult to argue that a provision does not meet some aspiration unless you understand what that aspiration actually is. I was just trying to get to the issue where all of these meetings between ministers and officials have not been raised with you formally. The housing benefit issue has not specifically been raised with me. Would you imagine that it will raise the industrial benefit? Is that an issue that has been raised with you specifically? In the terms that Mr Maxwell presented, it has not been raised with me specifically. I cannot say that in all the wide range of discussions with officials that that issue has not come up somewhere along the line. On 7 June, the Deputy First Minister wrote to the committee, and I am assuming that he sent it to the Secretary of State. There was quite clearly a paragraph that talked about powers to create new benefits. It was me that introduced housing, but it could be housing, education or a whole range of other areas that are within the devolved responsibility. It is quite clear that in that letter of 7 June, that area was clearly brought to the attention of the committee. If you look at my opening speech in the second reading of the bill, I raised the issue of powers to create new benefits in devolved areas. We have had a lengthy discussion about what those powers would mean in practice. It is helpful to be able to talk through what the practical proposal is and to be able to say definitively that it is not met by the bill or any of the other legislative framework or that it is. That is why specific examples matter. I am very happy to take forward with the Deputy First Minister this housing issue, because it is not a specific issue that has been raised, but let us look at it. Anything else on welfare before I move on to another area? Mark. Mark, it is not on welfare. Sorry, it is not on welfare. I do not know if you want to do that. I will come back to that if someone else wants to raise it. Once we have dealt with Mark, we will come to Alex Johnson on taxation issues. I was going to move on to taxation issues. Is there a general issue that I want to cover first, convener? I will cover the general issue first and then we will get into tax. The Prime Minister's questions yesterday said in response to my colleague Angus Robertson raising the devolution committee report. He said, We addressed precisely the points made by the committee in the Scottish Parliament. He refers to that. I am not sure if you have seen the paper that was produced by the Scottish Parliament Information Centre, SPICE, if not, I am sure that the committee would be happy to share it with you. They produced a traffic light system after the bill was introduced, examining the areas of the bill and how they related to the committee's recommendations. There is a lot of red on there, which indicates that there has not been any movement by the bill from the draft clauses in relation to the recommendations that this committee made. I guess that my question to you, and hopefully this is one that you won't have too much difficulty answering, is that, given that the committee's barometer was the Smith commission proposals, can you give us a guarantee that at the end of this process, all of these will have gone from red to green? What I can guarantee is that all those issues will be debated and discussed. Although Mr Maxwell scoffs, Mr Maxwell and others are not the sole guardians of the Smith commission agreement or determining that the clause is definitively one way or another, a lot of those issues are matters of interpretation. The committee reached this agreement unanimously that, in key areas, the draft clauses at that time did not meet the spirit or the letter of the Smith commission. The interim report that came to us following the bill's publication indicates that, again, in terms of the letter and the spirit of the Smith commission and a dispassion analysis to that effect, that does not meet the requirements. My question to you is, if you and the Prime Minister are making public pronouncements and pronouncements at the dispatch box that you are delivering the Smith commission, then surely at the end of this process, all of these red lights will have turned to green. That is not a political analysis, it is simply that if you are going to deliver Smith, that is what needs to happen. Can you give us that guarantee? I am satisfied that at the end of this process we will be delivering Smith info. I do not have any doubt about that. I am sure that some people will not agree with us for their own purposes, but I think that we will be able to command a widespread view that we are delivering Smith info. I am not sure who is operating the traffic lights and what the criteria essentially will be, because a number of matters are matters of debate. We have debated them significantly in the comments. As I indicated to the convener at the start, we have given four full days for detailed debate. People are putting forward a debate on why we should have a instead of the, why certain words should be removed and not included. There is a debate and discussion. That is the appropriate way to proceed. I am reflecting on the first day of debate. I will reflect on the three further days of a debate. I want to get to the end of this process, where, outwith the immediate political bubble, there is widespread acknowledgement that the bill meets Smith info. I will comment on the traffic lights, because I suppose that it is unfair to spice to suggest that they were responsible for the colour of the traffic lights, given that the document that they prepared at short notice was then discussed in private, I believe, by the committee. The colour of some of those traffic lights changed, and subsequently there was less green and more red on that list than spice originally produced. Guys, can we just keep this civil prayer please, Alex? I think that that is not actually accurate, but never mind. Can we get into the taxation issue and the area to do with fiscal framework? I wanted to raise the issue of the fiscal framework and ask how, initially, how discussions are progressing over the fiscal framework and what timescale we are likely to see that follow. I do not know exactly what the Deputy First Minister will have said in his evidence, but from our perspective there was a very productive meeting between the Deputy First Minister, the Chancellor and the Treasury officials to discuss how the fiscal framework should be taken forward. There is to be shortly other such meetings. I think that the basis on which those fiscal framework discussions will take place have been very clearly agreed, and officials will be working very closely over the summer period to try and ensure that. I think that both Governments have agreed that there will not be a running commentary on the fiscal framework, but when there are significant developments, those will be shared with both parliaments. Our anticipation is that the fiscal framework would run in parallel with the discussions of the bill. I have great respect for the fact that work will be done bilaterally at ministerial level, but is there any way that the committee can become involved in monitoring that process as it goes along? From the Scottish Parliament perspective, those are matters to be raised with Mr Swinney and the Scottish Government. It is important in negotiations of those kinds that you are not involved in some form of running commentary, but I think that Parliament here in Scotland and Parliament in London should be advised when there are significant milestones that are reached in that process. However, we certainly want to ensure that the process dovetails with the bill's passage through both the House of Commons and the House of Lords. What process do you interpret being required in order to firm up the borrowing regime? Will that be part of the current legislative process? Will that need to appear in the bill at some point? I think that it is not possible to say in relation to that at this stage. I do not want to make any specific commitments in relation to what the legislative requirements of the fiscal framework might be. I asked the Deputy First Minister about the basis for the assignment of EAT, and he responded that that was part of the wider discussion around the fiscal framework. Clearly, the fiscal framework discussions will cover quite a lot of very complex areas. There are some areas—perhaps the basis of assignment—where there are relatively straightforward decisions in principle to be made. Does that mean that, in an area like EAT, it is possible that an earlier decision might be reached in an earlier announcement made? I certainly think that that is possible, but it is part of a package of measures. The fiscal framework is an overall package. If you are asking whether that is technically possible, the answer is yes. Is that part of the package? It is not possible to say at this stage. I also asked the Deputy First Minister a couple of questions about specific tax areas. One was clause 12, where he set a requirement that the Scottish Government may not vary the rate of income tax for different types of income. He clearly had no difficulty with that. Was there a particular reason that prompted you to include that provision in clause 12 of the bill? We have looked to get the balance right in relation to income tax in terms of the Smith commission position overall. The overall concept of income tax is a UK-wide concept, but with the opportunity to develop distinct arrangements within Scotland. I very much again hope that the committee welcomes the fact that we have made absolutely clear that there will be the possibility within Scotland for a zero-rate band that effectively allows for an increase in the personal allowance. Should that be the view of the Scottish Government? That is helpful. The other specific area that I asked Mr Swinney about was in regard to land rental or royalties in relation to fracking on shore oil and gas extraction. His response was that the fact that the power to licence fracking is devolved. Mr Swinney's view was that, for completeness, the power to tax fracking should be devolved as well. I think that many people outside might be quite surprised that that was the Scottish Government response. Nonetheless, I would be interested to know why it is that your Government feels that the power to raise revenue from on shore oil and gas extraction should be reserved and not devolved along with the power to licence it. If we are following what was set out within the Smith commission, that specific proposal was not made at that time. That is why it is not reflected in the proposals that we have brought forward. It would not be relevant if the Scottish Government ultimately decided not to permit fracking on the basis that, presumably, they are keeping that option very firmly open. What would be the implications from a UK Government point of view of devolving that tax per hour? Would it pose you particular difficulties to do that? I am not aware of that specific request having been made. All the requests that we receive that go beyond Smith, we look at. That is the commitment that has been made. If such a request was made, we would look at it. Specifics, I think, are in for the Secretary of State's understanding, is that the Scottish Government is seeking amendments that would allow a land rental regime parallel with that, which DEC operates in England and Wales. Presumably, that is one that will be put forward in amendments in the course of the next few weeks. I will look out for them. Is there one other contributor in the tax area? Mark McDonald? It is just around the principle of no detriment. The first principle is fairly well established and well agreed in terms of the transfer of powers. Obviously, there are discussions to be had between the Scottish Government and Treasury around the fiscal framework and how much flexibility will be afforded to the Scottish Parliament and the Scottish Government within the fiscal framework. Do you have a view in terms of your input to the discussions that will take place around how the second no detriment principle should apply and also in terms of how much flexibility should be allowed for within the fiscal framework for Scotland and to pursue a different policy approach should it choose to do so? In terms of the latter point, it is not the intention of the fiscal framework to constrain the powers that are being devolved in the bill. I am very clear on that. In terms of how the Scotland office is involved in this fiscal framework process and will continue to be so, as we would say in the best interests of Scotland, and in arguing to ensure that the Smith commission agreement is met in full and, as I have said before, is not in any way restricted by that framework. However, I am not going to get into a discussion of how the negotiations will be managed because I think that that falls into the category of a running commentary.  I wonder if I could say to the state to ask you about amendments that have been proposed in the House of Commons to the Scotland Bill that I presume that you are very familiar with to the clauses that have been drafted in relation to Crown Estate. The one that I wanted to ask you about, firstly, 31A and 1B, which would require the relevant functions of the Crown Estate in Shetland, Hawking of the Western Isles to be transferred to the councils for those areas, that is obviously very much what Smith said, Smith Agreement said, it is also what this committee said. Have you got a view on that particular amendment, Secretary of State? I am looking at all amendments. I am sure that that is what you would expect me to say. In the previous Parliament, there was obviously a Westminster Parliament. There was a committee report that was very supportive of devolving the Crown Estate responsibilities directly to local authorities, but the UK Government view is clearly that it is a matter for the Scottish Government to determine what the balance is between it and local government within Scotland. Therefore, although I am sympathetic to what the amendment is trying to achieve, I would caution that it is unlikely to be accepted on that basis. I thank you and similarly on a new amendment, I think that it is 23A, which is obliging the Treasury to make a scheme transferring all the existing functions of the Crown Estate to Scottish Ministers. What is the Government's take on that amendment? I think again that amendment is unlikely to be accepted, but I am not going to entirely prejudge the debate that we will have on day 4. The power of the Treasury to make the scheme subject to approval of the scheme by Scottish ministers would be inappropriate again for the Treasury to be obliged to make a scheme—as it may only make a scheme—if the Scottish Ministers agree. Therefore, that is a matter again where we need to continue to work with the Scottish Government to ensure that we have maximum agreement around that scheme. It allows me to raise the point that the convener and the deputy convener made in relation to the evidence that the Deputy First Minister was giving earlier on, because he told the committee that the Scottish Government has tabled a paper to the UK Government on the intergovernmental working relationships that they consider are necessary to achieve the sensible outcomes, not just on these matters that are currently under discussion, but for the future. The Deputy First Minister said that the UK Government had yet to respond to that paper. Will you be able to update the committee on your thinking on those suggestions? We are engaged in an on-going dialogue with the Scottish Government. I want us to have much better intergovernmental working on a more general level. That was one of the personal recommendations that Smith made. We want to work in a much better way with the Scottish Government on a whole range of issues. I believe that we are making progress, because my approach is a constructive one to achieve agreement where we can, to recognise that there are many areas where we are not going to necessarily be in agreement, but to be able to have a mature way in which we can deal with those processes. We continue to have that dialogue when I meet the Deputy First Minister this afternoon. One of the issues that we will be discussing is how we look at proposals that have been made by the Scottish Government that go beyond Smith, for example. I fear, but I think that what the committee is interested in is the practical machinery. The Scottish Government has made a series of proposals. This committee has given some thought to that. We have made some suggestions as well. As yet, there has been no response, formal or informal, certainly. I take your remarks just now of Secretary of State very much as an informal response. Indeed, they are on the record. What we are interested in is what are the practical things that are going to be done to make sure that there is parliamentary oversight, both at Westminster and in this place, of these relationships. It is not clear to us yet what they would be. Even later, it would be helpful to have the UK Government's formal response to that paper. I would be very happy to make a formal response. I think that it is a balance. We have to improve processes and there is no doubt about that. We also have to improve our ways of working. I think that that is something that I am very much committed to by improving the dialogue that we have directly with Scottish Government ministers and UK Government ministers, looking at ways to resolve issues rather than escalate issues and looking at ways of ensuring that we can move forward into the environment that Smith clearly envisaged, which is having shared responsibilities. Shared responsibilities have to be based on a different type of relationship. We have gone into the area of intergovernment relations, so I am just going to finish that bit off and come back to the Crown of State in Rob Gibson, but Duncan. I could say that it is all very well for you to say that, Minister, about your Cabinet Secretary of State, but we have no means of evaluating, as a committee, whether your statement concurs with previous evidence from the Deputy First Minister. Despite the fact that we have had responses, there has been exchange of correspondence, there are lots of meetings going on, we have not moved on in this issue. Other than, it is interesting to note that you and the Deputy First Minister used the same language, so I presume that there is agreement there that there will be no running commentary on the discussions between ministers and officials. As seasoned parliamentarians, we understand the limits of what we are asking for, and it is not good enough to present simply that there will be no running commentary without the other stuff. Do you agree with the Scottish Government that there needs to be an overhaul of the existing intergovernmental relation? Yes. The Deputy First Minister provided with some information that the UK Government is working to develop appropriate mechanisms. What progress have we made in those working groups to develop those appropriate working mechanisms? What stage are we at? We are still in discussion. To be fair to the current UK Government, we have been in position for a matter of weeks. In the very productive initial meeting that took place between the Prime Minister and the First Minister, it was agreed that the existing mechanisms that were designed in a different time were not appropriate. There is a need to look at how the relationships are between Scotland and the UK Government. The wider devolved context of Wales and Northern Ireland, and one of the things that I think is in the public domain—I hope that it is—was that the Prime Minister and the First Minister would have more bilateral discussions, because that was a more effective way of dealing with issues in relation to Scotland. There was still a benefit of having the wider JMC process involving Wales and Northern Ireland. It is very much about evolving those processes to deal with the changes that have taken place since 1999. We are committed to doing that. I am sure that there will be a memorandum of understanding produced, but it also goes down to just the on-the-ground relationships of trust being able to work together. What very much impresses me, having come into this role, although previously having been a minister, is how well officials are able to work together. I pay great tribute to the Scottish Government officials, my own officials, who work very closely together to achieve a great deal. We politicians get involved and muddy the water, so contrary to the general impression that is created, in 90 per cent of issues that are on-going, the Scottish Government and the UK Government are working closely together in the joint interests of the people of Scotland. Sometimes, from media reports, you would not actually grasp that. The politicians around this table are not involved, that is the whole point. You have stated quite clearly in your introduction today that you want that to be involved, that you seek that openness, that you seek to meet the principles of this Parliament, that the Deputy First Minister seeks to do that.  All that work has been taken place while you were fighting an election. Those same officials were meeting regularly to discuss those issues. Is it time that they produced some idea about what information the committee can expect, how we evaluate your evidence against others and how we evaluate progress on those issues? Is it not time that the parliamentary process was given due respect in all of these discussions? I hope that I have given the parliamentary process due respect. As I indicated, one of my first meetings as Secretary of State of Scotland was with the convener and members of the committee. I am absolutely clear that the committee has an on-going role in relation to the bill. This is not my appearance today of saying, well, take it or leave it. I am listening to the points that have been made. I have indicated the timescale that the bill is going through the Westminster Parliament, so the committee will have continued opportunities to have an involvement in that process. That is my commitment from those things that are in my control. What I will do is undertake to raise with Mr Swinney what you have said, Mr McNeill, and how we can best achieve that. I think that everybody has the same objective, seems to me, that we want to implement the Smith commission in full. We are going to have disagreements about whether the provisions are exactly as some would want compared to others, but the objective is the same. I therefore believe that we can do it. I will bring a second state back to the issue of the Crown Estate, where the issue began. Rob Gibson. Smith commissioned the management of the Crown Estate in Scotland being devolved to the Scottish Parliament together with the revenues generated from the Crown Estate. The Scotland bill removes one of the reservations on the management in clause 31.2, which is fine, but the reservation in paragraph 3, 3 brackets, bracket 8 of schedule 5 of the Scotland Act 1998, is not removed. I will have to seek clarification from my officials in that very specific regard. I will specifically on that issue. Mr Gibson, I will write to you. Well, the legislative competence over revenues as agreed by Smith being devolved to the Scottish Parliament requires some clarity in this point. Can the Scottish Parliament repeal the amended Civil List Act of 1952 to direct the revenues to local authorities, to harbour trusts and so on, for example, because that part of the civil list is a reservation that has not been removed? Well, having raised those very specific points, I will come back to you in writing in that regard. Because we need to be in time for perhaps the Government to think about making amendments to make sure that the devolution is complete, because the complexity of the scheme seems to be something that has missed that point about allowing us to decide how we then move the revenues to other bodies. I understand the point that you are making. It is a detailed point, and you are quite right to highlight the nature of the arrangement that is put forward. I will write to you and copy the members of the committee on that very specific point. Before I move on to Alison Johnstone and the Crown Estate, Rob Gibson raised the issue of revenues, and I want to ask you the same question that has been asked by the Deputy First Minister in that regard. Obviously, we have seen a lot of irrelevant things around the keeper of the purse in the past week or so, but I would rather stick to the things that are relevant in terms of the Crown Estate. It requires clarity, because certainly the Deputy First Minister was not in a position to give us a clear answer in that regard. If the Crown Estate happens to make shed loads of money more than it was expected, the question was asked, would that be subject to detriment and therefore would any additional resources that were raised from the Crown Estate activity end up in the Scottish block grant being reduced, i.e. under the no detriment policy? That would not be my understanding. I think that it would be very helpful if you could both yourself and Mr Swinney could discuss that this afternoon and let us know that that is actually the situation, because that was not as clear as it could have been in the earlier process. If you could do that, it would be most helpful. Alison Johnstone Thank you, convener. The committee has heard the legal arguments for Fort Canaird, which is a large retail park in the east of Edinburgh, not being devolved or not being included as part of the devolution of the Crown Estate. I would just like to understand if the Secretary of State has plans to review that, given that the underlying asset, the interest, is owned by the Crown and that the Crown Estate commissioners manage that interest, and it does therefore form part of the Crown Estate. My understanding is that Fort Canaird is not wholly and directly owned by the Crown. It is held by an English limited partnership in which the Crown Estate commissioners manage an interest alongside other commercial investors. The partnership owns property in other parts of the United Kingdom. Is it not the case then that if it is governed by English law, such a partnership is not a legal entity and it is the partners that are the legal owners of the property, and there are two partnerships in the partnership, the Crown Estate commissioners on behalf of the Crown and the Hercules Unit Trust. Since Fort Canaird is in Scotland, the interest that the Crown Estate commissioners have an interest is owned by the Scottish Crown. That is not my understanding or advice on the matter of the legal position, but you have set out some very specific points and I will have them looked at and respond directly to you. There is clearly a view that the clauses transferring the management of the estate to Scottish ministers are overly complex. Is that an aspect of the bill that you will be seeking to amend? I do not accept that they are overly complex because we need to have a shared understanding of what the assets and liabilities are that are involved just for the very point that was made in your previous question. We want that to be clear. I do not think that the scheme is unnecessarily complex, but as the scheme goes forward in conjunction between the Treasury and the Scottish Government, there will be an opportunity for further discussion and analysis of that. I think that the questions on the civilist and Fort Canaird illustrate the complexity of the area. However, I put to the Deputy First Minister the proposition that the Scottish Government's proposed amendments and the position that is laid out in the bill might achieve the devolution of both management and revenues. Clearly, given that, you have to reply to some of the detailed questions, but is it your intention that the bill that is drafted delivers the management of both revenues and management of Crown Estate assets in Scotland? Is it your view that the alternative proposal that was put forward might equally achieve the same end? Our view is that the power of the Treasury to make the scheme is subject to the approval of that scheme by Scottish ministers, and the way in which the proposals in the bill are set out is the way in which it facilitates that. We believe that what was set out in the Smith commission has been achieved by the clause and the process that is set out in the bill. I am very clear that the Crown Estate will be the subject of significant debate on day 4 of the committee stage of the bill. As in all other aspects of the bill, I am listening to the arguments that are being made. I have indicated to Mr Scott that the difficulty that the Government might have in relation to devolution within Scotland being directed by the UK Government, but I am in a mindset of listening to the arguments that are being made. Mr Swinney explained his objection to the scheme as proposed in the bill, as being that the scheme remaining with the Treasury meant that the design of the devolved Crown Estate would not be itself devolved. How would the UK Government respond to that? That is not my understanding of how the proposals would work. The Treasury to make a scheme has to be the subject of approval by Scottish ministers. It is an interest in Scotland. The commissioners obviously look after economic assets and, therefore, they are managed by the commissioners in that respect. That would suggest that questions as to whether it is a policy rather than a legal need to exclude Fort Canard is something that we would like to know your position on before day 4 in the debates. If it is policy rather than a legal need, then the question about any profits from Fort Canard might then become, obviously, a part of the funds that the Crown Estate devolved could keep in Scotland. My position is that what is being transferred under the transfer scheme is the management of all the Crown Estates, wholly and directly owned Scottish assets. For the reasons that I have set out, I do not believe that Fort Canard falls within that definition. Alison Johnstone has made some specific points around the legal framework of that building or complex. I will take that away and look at it and respond accordingly. I ask the Deputy First Minister this morning about this sort of on-going difference of opinion between the Scottish Government and the UK Government about the issue of whether or not there are vetoes contained within the draft clauses. The Deputy First Minister stated that, in his view, there were about eight vetoes contained within the bill, two on universal credit and others on fuel poverty, carbon emissions, home heating costs and some others. You have said a number of times in the House of Commons that, for example, with regard to universal credit, there are no vetoes. The provisions are a timing arrangement. Could you explain what you mean by that? My understanding would be that if the Scottish Government, backed by the Scottish Parliament, wanted to take forward a policy on universal credit and the UK Government disagreed with that, the Scottish Government could not then go ahead. Is that correct? My thinking begins with clause 43 of the Smith agreement, which said that universal credit will remain a reserved benefit administered and delivered by the Department of Work and Pensions. Therefore, what we have to establish is a basis on which the two Governments can operate in a shared space, because the DWP is administering and delivering universal credit. The Scottish Government will have certain opportunities to make changes to part of the universal credit arrangement. We need to have a mechanism for allowing the smooth implementation of the Scottish Government's proposals. That is what is set out in the bill, and it is not. That is why, as I was making the point earlier, we have to move to a different type of mindset here. It is not a proposal to stop the Scottish Government from doing what it wants to do. It is about having mechanisms that ensure that the DWP and Scottish Government can work together to ensure smooth delivery. That is how I see the clause. I do not see it as a veto. I see it as a discussion on how the timing of any changes so that they can be smoothly implemented would operate. The Deputy First Minister gave an example over consequentials from Olympics spending, which rumbled on for many, many years without agreement for at least six years, perhaps longer. When he says that it is a matter of timing, it seems to be the case that, if the UK Government disagrees, you may want to call it a matter of timing, but, effectively blocking a policy decision by the Scottish Government, backed by the vote in the Scottish Parliament for six years or longer, does it seem to sound like a veto to me? I do not think that that is a realistic possibility. Within that clause framework, there are reciprocal consultation duties on the DWP, and the reverse argument would be that the Scottish Government or Parliament would block proposals that the DWP has because it wanted to be obstructive. We have to move into a new space here where we have shared responsibilities and that we work together to deliver those responsibilities in a way that is not seeking to obstruct one Government or the other. I take the Deputy First Minister's point in relation to the Olympic consequentials. It feeds into the earlier discussion about improving intergovernmental relations, and he, in discussions that have taken place, has raised that as an example of how we need to have better processes in place. We want to be in a position where both Governments are committing to the process. That is the way that we are going to go forward in the future. We have to have processes, but if we do not have the right mindset, it will be very difficult to achieve things within the shared space. I understand absolutely what you are saying, but I want to clarify again a point that I raised with the Deputy First Minister explicitly that consent for change should not be unreasonably withheld. Is it correct that you decide what is reasonable or unreasonable? I personally, unfortunately, do not have that power. The inclusion of that in the draft is to try and go as far as possible in setting it out within legislation, but there is no intention to withhold that agreement. There is just a need to have a process to agree on timing and implementation. I understand what you are saying, but given the power to decide what is reasonable and unreasonable would rest with the UK Government, and when there is a disagreement, and I want to quote you, you said on Radio Scotland, that ultimately it might be for the courts to decide. Does not that suggest that there is a problem there, effectively, that if ultimately it will be for the courts to decide what is reasonable or unreasonable? That means that, if there is a disagreement, the Scottish Government would have to go to court to try to set it out. Ultimately, that is the key word there. I do not think that going to court in very many circumstances is desirable. There is lots of legislation that is produced by this Parliament and the Westminster Parliament, which people end up in the courts on seeking definitions. I do not want us to be in that territory. I think that what we have to look at is that we are in a new situation of shared responsibilities of Governments having and requiring to work together. That is what people outside this Parliament expect us to do. They do not expect us to sit round and have lengthy debates about what a unreasonably withheld means. They expect that, if the Scottish Parliament has determined that it wants to make a change in relation to the powers devolved as effects universal credit, the UK Government would implement that in a timeous way, but in a way that does not disrupt the whole operation of universal credit across the United Kingdom. That is what the provisions intended to do. I am not looking for legal get-outs in relation to that. I am looking at finding a basis on which we can have shared responsibilities that can be delivered without politicking, without unnecessary bureaucracy and most certainly without recourse to the courts. When are the last questions in this area? Yes, aha. Thank you, Secretary of State. You talked about clause 43 of the Smith agreement in relation to universal credit. It actually says, too, in the Smith report, that the Scottish Parliament will have the power—that is not an interpretation, Secretary of State, it is an intention—will have the power to vary the housing cost elements of universal credit, including varying the under-occupancy charge and local housing allowance rates, eligible rent and deductions for non-dependence. Then, as Stuart Maxwell said, the UK Government needs to consult the Scottish Government. There is a difference between consulting and having a veto. I was quite pleased to hear that you said to Stuart Maxwell that if the DWP wanted to make a change, the Scottish Government could block it. Are you saying now that there is a reciprocal veto that is possible here, or is it still the case that if the UK Government wanted to change the housing cost elements right across Great Britain, as long as it consulted with the Scottish Government whether or not the Scottish Government agreed, you could still impose that change? I think that what I was saying was that there were reciprocal consultation duties in the clause. I think that it was, because I do not accept that there is a veto, so I do not accept that there is a veto on either side. The point that I was making, and it is an important point, is that if either Government chose to be obstructive, that would not help delivering in terms of shared objectives. Therefore, that should not be our mindset. Our mindset and the UK Government mindset is to deliver in relation to those devolved responsibilities within universal credit on behalf of the Scottish Government and to implement what it wants to take forward within the provisions that are devolved. Could the UK Government decide to change the housing cost elements right across Great Britain, and the Scottish Government could not do anything about it, even though the Smith agreement says that the Scottish Parliament will have the power to vary the housing cost elements of universal credit? The Scottish Government will have the powers that are set out in the Smith commission report, and that is absolutely clear on that. However, will the UK Government be able to change the housing cost element across Great Britain? Universal credit will remain a reserved benefit. The devolved aspects are those that are set out in the agreement. I can move into a slightly different area in issues of permanency, because it is something that I am certainly at. The committee took a significant interest in. Obviously, the doctrine of sovereignty lies with the Scottish people and not the Parliament, which is well recognised as a Scottish concept of sovereignty. It was reaffirmed in various ways, including the claim of right, indeed the establishment of this Scottish Parliament. Can I confirm, Secretary of State, that you agree with the concept of the sovereignty of the Scottish people? My position, having listened to this debate, is that it is absolutely inconceivable that the Westminster Parliament could abolish the Scottish Parliament on a whim without the consent of the people of Scotland and hope to retain the United Kingdom. It is absolutely inconceivable that that could happen. That is the reason, having listened to the debate, that I do not believe that it is necessary to set out all sorts of preconditions about how the Scottish Parliament could be abolished. I do not think that it is conceivable that the Scottish Parliament could be abolished without the consent of the people of Scotland and still have any hope that we would retain a United Kingdom. That really was not my question, but did you believe in the sovereignty of the Scottish people? I believe that it is for the people of Scotland to determine how they are governed. Is that not clearly a statement that if it is for the people of Scotland to determine how they are governed in these circumstances, all 11 members of the committee, all five political parties represented on the committee share that view, but we also believe that there should be a referendum in place before this Parliament was ever disestablished, because it was a referendum that created it in the first place? I do not think that that is necessary. I simply think that the political situation in Scotland has moved on. It is absolutely inconceivable that this Parliament could simply be abolished by the Westminster Parliament on a whim, as I think Mr Angus Robertson said, and that that would have no consequence for the continuance of the United Kingdom. I just do not accept it. I think that if you were in a situation where you were reaching a referendum in that regard, the whole existing constitutional arrangements would have broken down in any event. That makes the question, why did we have a referendum in the first place? Westminster could have just decided that we were going to have a Scottish Parliament. I think that you and others clearly argued that view was part of the proposal that was put forward, as I recall it, in the 1997 general election, that there should be a referendum. However, as you would accept, the Scottish Parliament could have been established without a referendum having been held. That is a matter of fact. The clause clearly sets out the permanence of the Scottish Parliament. A lot of preconditions around the abolition of the Scottish Parliament are unnecessary, because I just do not believe that it is conceivable that the Scottish Parliament could be abolished and that the United Kingdom could remain intact. There were 11 members of the committee of all shades of the political opinion believed that it should be a part of the process. Neither the committee secretary of state or yourself can determine what shapes of governments might appear at Westminster in times in future. Everything is conceivable if you cannot conceive of what governments might be in place in the future. I think that we will come back to that issue, because it is a pretty fundamental thing that the committee believed in. In terms of that, there is another part of that, which is Sule, which Lewis MacDonald wants to pick up on. Thank you very much. It may be hard to imagine abolition of the Scottish Parliament, but it is quite easy to imagine a UK Government seeking to change the human rights arrangements that apply here in Scotland. That clearly has implications in relation to the Sule provisions, and those are covered by the bill. What is your view, Secretary of State, about how the Sule convention, as it currently exists, applies to any change to human rights legislation in Scotland? Do you have a view on how the current Scotland bill could be or can be amended in order to ensure that the Scottish Parliament consents to any fundamental change in its founding charter? First, in relation to the Sule convention, I am satisfied that the Sule convention, as it is, is set out in the bill. Obviously, we had a debate around that, but I am clear that the Smith commission's intention was to set out the school convention, as it is, in relation to the face of the bill. That is what has been achieved. We have had some debate around the human rights issue, and I have listened to that debate. Obviously, in relation to the Government's wider proposals for changes to the Human Rights Act, it will come forward in due course, but we are very much aware that there are issues in relation to the Scottish Parliament and devolved Administrations, and we will continue to work with the devolved Administrations as we progress that legislation. Is it your view in doing that that any proposal that has come forward in the area of fundamental human rights would require the consent of the Scottish Parliament? We are looking at the bill at the moment. When the bill emerges, it will be clear what its specific ramifications are, not just across the whole of the United Kingdom. At the moment, my position is to set out the benefits that I believe such a bill could bring, not just to Scotland but across the United Kingdom. However, I am very conscious of the issues that you refer to. One area that we need to have a Secretary of State, which is employment programmes, and Stuart McMillan is going to deal with that. Thank you. Do you believe that the employment support clause in the bill matches the Smith recommendations? I believe that it does, but I have committed to the Deputy First Minister to have further discussions. Indeed, I am meeting with Alex Neil as well today, because we have set up, I think, as the committee is aware, something called the joint ministerial welfare group, which is something that is looking at the transfers of powers within this area and the transitional arrangements, which are very important in terms of the implementation. Obviously, I am pleased that further discussions are going to take place, but certainly in terms of section 57 of Smith, it does not highlight anywhere at all regarding any restrictions for the employment programmes. In terms of clause 26 in the bill, why have time restrictions been placed in the clause when clearly Smith does not highlight that? We are in discussion in relation to the employment programmes. It is something that has already been subject to discussion at our joint ministerial welfare group. It is something that is subject to an on-going dialogue. I know the point that you are making. Perhaps when I come back or whenever we will have reached a definitive view, it may be that we will take the view that we currently do, or that we may have a different view. I recognise also that, earlier on today, you said that you were in listening mode. I welcome the fact that further discussions will be taking place, but certainly in this committee we are very clear in terms of our report that we published. We highlighted that there have to be no restrictions placed upon the type of person who can access these services, but, unfortunately, the clause in the bill does not have that. There are on-going discussions in relation to the work programme. I have committed to re-establish the joint ministerial working group on welfare, because I found it an extremely useful mechanism where Alex Neil, Roseanna Cunningham and ministerial colleagues from DWP and Treasury can discuss, but it also provides this forum for discussion between officials. Again, convener, just to put on the record that the working relationship between officials in relation to these very complicated matters has been exemplary, and a lot of very productive work has been done. We want to ensure the smoothest possible transition, because the challenge in relation to the bill is not just in terms of getting it through its legislative process, it is in implementation and it will be a hugely challenging task, but I think that we are in a good place in terms of taking that forward. Obviously, there are a lot of on-going discussions at the moment in terms of the things that are happening across the bill between the Scottish Government and the UK Government. I think that the committee would like to know a bit more about what these discussions are, when they are likely to come to an end, and what conclusions they are reaching. I hope that you will write to us about that, because otherwise we would have just left a bit as a committee. I will be up in the air in terms of the facts and information, so I think that it would be very helpful. You are about to meet with John Swinney. If the Scottish Government agrees, I think that it would be helpful for this committee to get a note of the outcome of that discussion. That would play us into the process a lot more effectively. You have made a number of commitments to write about the things that are being raised with you here today. Lastly, we will write to you, Secretary of State, in terms of picking up some of the things that you will not manage to get to, and I am sure that you will respond to that in an appropriate way. In the meantime, thank you very much for the constructive approach that you have adopted, as best as you can in the circumstances. I thank you for coming along here today, and I wish the rest of my colleagues a happy recess. We will meet again on 3 September.