buried the subject and look forward to further colleges becoming living wage accredited employers in the future. DåНwch yn d весь, nes i yng HCF. Mynd hollu yn cael ei ddweud mewn ym Mhôys No. 1, 4, 4, 3, 2 i ddim i'r Name of Kenneth Gibson on Scotland's fiscal framework. I invite members who would like to be considered to speak in this debate, to press the request to speak buttons now, please. I will allow a few seconds for members to change places. Colin Kenneth Gibson to speak to and move the motion please on behalf of the finance committee. Fourteen minutes or so, Mr Gibson. Thank you, Presiding Officer. One of the key priorities of the finance committee throughout the current session has been to ensure effective parliamentary scrutiny of the implementation and operation of further fiscal devolution. The committee has carried out a considerable amount of work on the fiscal powers arising from the Scotland Act 2012, and that has given us a firm grounding for our scrutiny of the fiscal powers that will arise from the work of the Smith commission. A primary focus has been on the recommendations within the commission's report for an updated fiscal framework for Scotland. The committee is strongly of the view that the workability and effectiveness of further fiscal devolution is largely dependent on the revised framework. It is therefore essential that it is subject to rigorous parliamentary scrutiny. However, as it is not included within the Scotland Bill, it will not be subject to formal legislative scrutiny. Rather, the framework is being developed in private through negotiations between the UK and Scottish Governments. Understandably, both Governments have agreed not to provide a running commentary on the negotiations, and it is entirely reasonable that they discuss the intricacies of those negotiations in private. At the same time, it is also entirely reasonable that both Westminster and our Parliament have sufficient time to comment on a draft of the framework prior to its final agreement by the two Governments. The committee therefore welcomes the commitment from the Deputy First Minister that this Parliament needs to agree the fiscal framework prior to being asked to agree the legislative consent motion for the Scotland Bill currently being considered at Westminster. The committee would welcome a commitment from him during this debate that this will include sufficient opportunity for Parliament to scrutinise a draft of the proposed framework prior to its final agreement with the UK Government. I will now turn to some of the substantive issues within the committee's report. A central issue for the committee is the extent to which the new fiscal powers and the fiscal framework will provide the Scottish Government with the flexibility to pursue separate fiscal policies to the UK Government. The Deputy First Minister stated in his response to the report and I quote, It is essential that the fiscal framework provides the Scottish Government with genuine flexibility and choice to pursue its own distinctive policy. However, the committee's concern that the UK Government command paper published in response to the Smith commission suggests a much greater level of constraint. For example, paragraph 2.2.7 of the command paper states and I quote, The fiscal framework must require Scotland to contribute proportionately to a fiscal consolidation at the pace that is out by the UK Government across devolved and reserved areas. The Deputy First Minister made it clear in evidence to us that he did not accept this wording, which does not reflect the Scottish Government's position. It would be helpful if the Deputy First Minister could confirm during this debate that he would not ask the Parliament to support a fiscal agreement that requires Scotland to contribute proportionately to fiscal consolidation at the pace that is out by the UK Government. Integral to fiscal flexibility will be the extent of the additional borrowing powers to those already devolved as part of the Scotland Act 2012. The current Scotland bill, though, does not include any new borrowing provisions. Scottish ministers have indicated that they expect amendments to be introduced as the bill proceeds through Westminster. In relation to current borrowing, the committee does not believe that a cash limit is appropriate given the Scotland-specific cyclical risks that are potentially faced by the Scottish Government post-Smith in future years. Instead, the committee supports a fiscal rule such as a requirement to balance the budget over the economic cycle. We welcome the Deputy First Minister's agreement with her recommendations on current borrowing. The committee noted that the block grant adjustment method in relation to income tax is intended to protect Scotland from some of the cyclical volatility within the UK as a whole. The two Governments have previously agreed the whole firm method for the indexation of the block grant adjustment following the introduction of the income tax powers in the Scotland Act 2012. The Deputy First Minister has indicated that I believe that the whole firm method is also the most robust mechanism for indexing the block grant adjustment in relation to the income tax powers of the Scotland bill 2015. However, the committee heard from some witnesses during her inquiry that the whole firm method may penalise Scotland due to us having both a relatively smaller number of high-rate taxpayers and slower population growth. Indeed, Professor Holtam himself had previously advised the committee that his indexation method is, and I quote, not in the devolved territory's interest if his own tax base is inevitably slower growing than that of the UK. The committee asked the Scottish Government whether it has carried out any analysis of the impact of the number of higher-rate taxpayers and population growth. The committee also asked whether consideration has been given to the indexation of the block grant adjustment on the per capita tax base rather than overall growth of the UK tax base and whether any analysis of that approach had been carried out. The Government did not provide an answer to either question in its response to our report. In subsequent or leverage to the committee, the Deputy First Minister confirmed it and I quote, we are doing that analysis as part of our discussions with the UK Government. Given his previous emphasis on the need for transparency in relation to the block grant adjustment, it would be helpful if the Deputy First Minister could confirm during this debate that the analysis will be published prior to the Parliament being asked to agree the fiscal framework. On capital borrowing, the committee supported the introduction of a prudential capital borrowing regime on a statutory basis. The Devolution, Further Powers Committee, is also supportive of the move towards a prudential regime. Will the Deputy First Minister welcome the committee's support for the introduction of a prudential regime? He made it clear in oral evidence that he is seeking prudential borrowing in addition to existing capital departmental expenditure limits, a matter with which the committee concurs. The committee also agreed that there needs to be a fiscal rule governing the medium to a long-term limit on net debt, and we agree, too, with the Devolution, Further Powers Committee, that consideration should be given to a debt rule as a percentage of cyclically adjusted GDP. A related issue is the question of moral hazard, which was explained by one of our witnesses as, and I quote, when the sub-central level of government believes it can engage in ill-disciplined policies and ultimately has to be bailed out by the centre. Our witnesses agreed that the question of a possible bail-out needs to be addressed at the outset, and the committee has recommended that moral hazard needs to be explicitly addressed in the fiscal framework. One of the primary concerns raised during our inquiry related to the second no-detriments principle proposed by the Smith commission. The committee was content with the first principle that neither Scotland nor the rest of the UK should be adversely affected as a result of the decision to devolve further powers. However, the second principle that is intended to apply to policy decisions of the two Governments after the devolution of tax or spending powers is much more problematic. None of our witnesses could provide an example of a similar principle in any other ffiscally federal country, and it was pointed out that any methodology to implement the principle would be complex and likely to provoke disagreement. The committee recommended that the second principle be treated as a high-level guide for both Governments in the application of the fiscal framework and in adjusting the block grant. Even as a high-level principle, further what needs to be done on refining the boundaries within which the principle applies. I think that it is very important what was said about the no-detriment. However, the recommendation of 174, the unanimous recommendation, should be an independent arbitrary between the Treasury and the Scottish Government. Given that no Department of State, no devolved administration has ever had a satisfactory relationship with the Treasury judging in its own court, would you say that powerful unanimous recommendation should be a prerequisite for any agreement on a fiscal framework? I believe that that should be the case. One of the things that came through quite strongly in terms of the evidence that we took was that the Treasury is sometimes quite Byzantine in terms of the way that it works, both in terms of transparency and the formulas that it used, and I am sure that colleagues will explore the matter further as we proceed. I will now turn to the Scottish Fiscal Commission. The Scottish Government introduced a bill to give the commission a statutory footing last week. The policy memorandum states that enactment of those legislative proposals will play a vital role in delivering the Smith commission recommendation that this Parliament should expand and strengthen independent scrutiny of Scotland's public finances. Colleagues will be aware that the finance committee has already carried out a considerable amount of work on the proposals for a Fiscal Commission in Scotland, and we will be the lead committee in scrutinising the bill at stage 1. We agreed our approach at the stage 1 inquiry just this morning, and we will publish our call for evidence on Friday and hope to publish a report before Christmas recess. The committee published its report on proposals for a Fiscal Commission in January 2014. Our main recommendation was that the commission should adhere to OECD principles and, in particular, principles of independence, non-partisanship and transparency. As part of our inquiry in the Fiscal Framework, we focused on an enhanced role for the commission post Smith. Witnesses identified two main roles for the commission. Firstly, there was a general consensus that it should produce its own forecasts. The committee recommended that the draft Fiscal Commission Bill should be amended accordingly. The Scottish Government responded that it is not persuaded that the commission should prepare the official forecasts. That still leaves open the question of whether it should be able to conduct its own forecasts. The committee will consider that issue further as part of our stage 1 inquiry. Secondly, there was also strong support for the commission having a wider role in monitoring the adherence of the Scottish Government to its fiscal rules and the sustainability of the public finances. The committee recommended that the draft bill should be amended to include those roles. The Deputy First Minister responded that it may be desirable for the commission to have a future role in assessing the Government's performance against fiscal rules. The committee will also consider that issue further as part of its stage 1 inquiry. The committee also considered in detail the transparency of the Barnett formula and the need for improved intergovernmental fiscal relations—intergovernmental relations on fiscal rules—and that will be covered in detail by the deputy convener, John Mason, in his closing speech. Finally, I would like to finish by again emphasising the significance of the fiscal framework to the new devolution arrangements. It is therefore essential that this Parliament is given an opportunity to scrutinise the draft framework prior to any agreement between the two Governments. I would like to move the motion in my name. I thank you. I now call on John Swinney, Deputy First Minister, 12 minutes. I am grateful to the members of the France Committee for the report on Scotland's fiscal framework. The written submissions and the oral sessions all underline the importance of a sound fiscal framework for Scotland's future. I agree wholeheartedly with the points that the convener has just made. The fiscal framework is an integral part of the devolution of further responsibilities, and it is essential that the work that is undertaken to develop the fiscal framework properly takes into account all of the relevant considerations that will be important in ensuring the financial future of Scotland under those responsibilities. The work has helped to shape how we approach the programme of work around the on-going negotiations on a fiscal framework. I would like to provide some context for the work on the fiscal framework that is currently under way with the United Kingdom Government. Paragraph 94 of the Smith commission report recommended that the devolution of further tax and spending powers to the Scottish Government should be accompanied by an updated fiscal framework for Scotland. Crucially, Smith said that it was for the Scottish and United Kingdom Governments to jointly work together, via the Joint Exchequer Committee, to agree the revised fiscal and funding framework for Scotland. That is the process in which I am currently engaged with the United Kingdom Government. My overarching aim is to ensure that the new fiscal framework is fair and workable, and that Smith also identified that Scotland's budget should be no larger or smaller simply as a result of the initial transfer of powers. We want a fiscal framework that gives the Scottish Government the flexibility it needs to create a fair and prosperous Scotland and the ability to use the powers that we have in an effective way. That has to be about genuine autonomy and choice. We know that that must be done in a responsible and sustainable manner, building on the platform of our existing fiscal powers. However, we need a fiscal framework that will ensure that further devolution provides the right incentives and increases accountability, linking the Scottish Government's budget to Scottish economic performance insofar as that is possible given the range of responsibilities that is transferred under the Smith commission's report. Scotland should retain the rewards of her success in the same way that we must bear the risks of the policies and actions that we take forward. It is essential that the fiscal framework allows us to pursue our own distinct policies that meet the needs and the wishes of the people of Scotland and do not tie us to United Kingdom Government policies. I agree with the committee at paragraph 24 of its report where it is stated that, while Scotland's revised fiscal framework needs to be consistent with the United Kingdom's overall fiscal framework, that does not mean that it needs to mirror each other. For fiscal devolution to work, it is essential that the Scottish Government has some flexibility to pursue distinct fiscal policies consistent with the overall UK fiscal framework. I believe that to be a central argument in the process that led to the Smith commission's reforms and it must be a central argument in how the fiscal framework applies to the management of the public finances in Scotland and creating the scope for this Parliament to be able to take different decisions that allow us to pursue a distinctive fiscal policy approach. The fiscal framework will need to be agreed jointly by both Governments. The Joint Exchequer Committee has met three times to date and will meet again later this month with the aim of concluding negotiations during the autumn. However, let me be clear that the determining factor for me is getting the framework correct rather than observing a particular timescale on that process. The committee has also emphasised the importance of parliamentary scrutiny of the framework and its operation. I heard very clearly the point that was made by the convener of the committee that there should be scrutiny of a draft of the fiscal framework before its agreement. That is a point that I will advance with the treasuring to set out the position of the finance committee and will advise the committee of the Parliament of the response as part of the process that I am taking forward to ensure that Parliament is fully informed about the development of the fiscal framework. The Smith commission report that paragraph 32b recommended that there be proactive reporting to respective parliaments. Paragraph 95.9 also recommended that the two Governments should provide updates to the Scottish and UK parliaments, including through the laying of update reports setting out the changes agreed to Scotland's fiscal framework. The Parliament will be aware that under section 33 of the Scotland Act 2012, Scottish and UK ministers report on the implementation and the operation of the finance powers and functions that are devolved under that act. I would intend to update the Scottish Parliament on the implementation and operation of the fiscal framework in a similar way. However, it is important that the evidence and the unanimous recommendation of the committee will the Scottish Government regard the appointment of an independent arbitration procedure as a prerequisite for agreeing the fiscal framework. John Swinney? I think that that would be an essential part of the process because, to me, independent arbitration gives us the ability to have confidence that we will be able to ensure that in what is necessarily adversarial relationship with Her Majesty's Treasury, there is some assurance that the interests and perspectives of the Scottish Parliament and the Scottish public finances can be assessed accordingly. It is important to recognise that it is for the Scottish Parliament to decide how it wishes to scrutinise the operation of the fiscal framework, and nothing agreed is part of the negotiations of the fiscal framework should prevent the key role that is being undertaken. I recognise that Parliament and the French Committee wishes to have on-going discussions of the fiscal framework and negotiations, and, of course, this discussion today is helpful in informing me of the perspective of Parliament on a variety of different issues that are addressed as part of the negotiations. Information is published after every Joint Exchequer Committee meeting, and I am happy to report back to Parliament at the appropriate opportunity on the issues that are discussed. I gave my commitment to Parliament on 16 September that it will have the ability to consider and analyse the fiscal framework that emerges from those discussions before we move to any acceptance of the Scotland Bill through a legislative consent motion. I have already touched on the committee's views on the need for distinct fiscal policies. There are a number of other recommendations made by the committee that are relevant to the issues with which we are dealing in the Joint Exchequer Committee. We agree with the recommendations for significantly increased revenue-boring facilities. That must give us the tools to manage tax volatility and Scottish economic shocks and to provide us with the flexibility to be able to manage the greater degree of risk that inevitably flows from the management of the responsibilities that will flow from the Scotland Bill 2015. We agree with the committee that the Scottish Government needs more capital-boring facilities in addition to the existing CDL arrangements that we have and the provisions of the Scotland Act 2012. That is important in securing the flexibility to improve economic opportunity in Scotland, as we have shown in recent years with our expanded capital programme. We agree that no detriment is a complex and potentially contentious issue to implement, but it needs to be transparent and sustainable and needs to be applied. Devolution will take time and resources to implement properly. The full cost of administering and delivering the new powers, particularly the welfare package, needs to be met by the United Kingdom Government. As Smith said, the funding needs to be sufficient to support the functions being transferred to the Scottish Parliament and the Scottish Government. Finally, we agree with the committee's concerns about the transparency of the calculations of the block grant adjustment. I will not sign up to any adjustment of the block grant that is not fair to Scotland. I am clear that methods used to calculate adjustments to the block grant should reflect Smith's core principle of no detriment. The baseline for Scottish public expenditure must continue to be set through the Barnett formula. That is what was promised in the VAU. It will inevitably be an adjustment that is then applied to the block grant to account for our new tax and spending powers. Any adjustment mechanism that simply seeks to reduce Scotland's funding year after year irrespective of the policies that we pursue will not be acceptable to this Government. It would breach the VAU, it would breach Smith and we will not agree to such a provision within the fiscal framework. Turning now to the Scottish Fiscal Commission, I welcome the detailed and thoughtful consideration that the committee has given to the creation of the Scottish Fiscal Commission. We have drawn on the committee's findings in developing our legislative proposals. Smith recommended that the Scottish Parliament should seek to expand and strengthen the independent scrutiny of Scotland's public finances. I believe that the Scottish Fiscal Commission and our draft bill that places the commission on statutory footing will enable that to happen. Our proposals will create a very different relationship between the Scottish Government and the commission. The commission ultimately has a veto over devolved tax forecasts. I revise downwards our non-domestic rates forecasts in the 2015-16 budget after the commission reported that the initial buoyancy assumption seemed optimistic. That stands in contrast to the relationship between Her Majesty's Treasury and the OBR, characterised by paragraph 3.9 of the Charter for Budget Responsibility, in which it states in the summer 2015 publication, that the Government has adopted the OBR's fiscal and economic forecasts as the official forecast for the budget report. The Government retains the right to disagree with the OBR's forecasts. The committee questioned our approach to forecasting. The forecasting approach that we have set out in our legislation maximises transparency, as both the forecasting methodology and the results of independent scrutiny are publicly reported. In drawing my remarks to a close, the Scottish Government has made clear that we will not bring a legislative consent motion to this Parliament without an agreed fiscal framework that is fair to Scotland. That remains the case. As I told Parliament on 16 September, we see the fiscal framework and the bill as one and the same thing. There is no point in having the powers if we do not have the fiscal framework that allows us to exercise the powers without prejudice to the interests of Scotland. In considering legislative consent, the Parliament will consider the bill as a whole and also as individual provisions and whether it reflects the recommendations of the Smith commission. The Secretary of State has promised substantive amendments at report stage, and I await those with considerable anticipation. On 16 September, the Parliament again pointed the Secretary of State to the work of the cross-party devolution for the powers committee in identifying amendments that need to be made to deliver the Smith commission. The Secretary of State should now take heed of the Parliament's view. I commend the committee for its work on Scotland's fiscal framework and will engage further with it on the important work that is taken forward to ensure that the fiscal framework is designed in a fashion that meets the needs of the people of Scotland and the Scottish Parliament. I now call on Jackie Baillie, eight minutes or so. Thank you very much, Presiding Officer. Everybody, of course, loves a good mystery. There is nothing quite like that page turn of those moments of dramatic suspense to keep a reader completely engaged. Finally, that moment of satisfaction when the plot comes together and you find out who has done it. However, what I am describing is, of course, a work of fiction. Unfortunately, though, that rather resembles our experience of the Joint Exchequer Committee. That is far more serious, though, because the Joint Exchequer Committee is exactly where the discussions take place between the Scottish and UK Governments about the fiscal framework. Those discussions currently are shrouded in complete mystery, and frankly, I do not think that that is good enough. The fiscal framework are the rules and institutions that govern our approach to the nation's finances—how much you borrow, debt levels, how we co-ordinate financial policy with the UK Government. It is essential to making sure that we have robust policies in place, but we are about to witness the single biggest transfer of power from the UK Government to Scotland since the creation of the Scottish Parliament itself. We absolutely need to make sure that we take our responsibilities for raising taxes seriously and that the financial mechanisms that we put in place are robust and transparent. I am genuinely at a loss to understand why the cabinet secretary is unable, or perhaps even unwilling, to share with this Parliament who are allies to him in this project and, indeed, with the people of Scotland, precisely what is going on. It makes it quite difficult for us to engage in a meaningful conversational dialogue if both Governments are not telling us about their proceedings. Let me agree with the convener. There is a balance to be struck. I do accept that. There are sensitivities, and we need to allow for those negotiations, but I do not believe that the information provided has so far been sufficient. In one second, we get communiques from the Joint Exchequer Committee. They have met three times. I have asked questions of the cabinet secretary, and I do not begin to know how long the meetings are, but the communiques of what they discuss are becoming shorter and shorter and shorter. I give way to the cabinet secretary. I understand the importance of parliamentary scrutiny, and I am doing my level best to inform the debate, which is what was the substance of my response to the committee and my contribution to the debate today. I wonder whether Jackie Baillie could perhaps set out what she thinks should be the approach that is taken forward, which can help with my discussions with HMT. Jackie Baillie I am indeed happy to do so, but in the space of time allocated to me, it is not going to be possible to do that justice. I am happy to engage with the cabinet secretary, but the problem that I have at the moment is that the amount of information in his communiques are so bereft of detail that it is difficult to know what discussions are indeed happening. There was indeed a vague commitment from the cabinet secretary, I recall, to setting things out in the autumn. All I can say to him is that my central heating is now on. Autumn has arrived, and we are no closer to getting the kind of detailed information that would enable a dialogue between Opposition parties and this Parliament with the cabinet secretary. I am curious, did he agree to this lack of transparency? Will he now publish the discussions that have taken place today, and can he tell the chamber when he expects those discussions to conclude, because he has tied that to the Scotland bill and the legislative consent motion? Are we to expect that after the Scotland bill has passed? Will an LCM run alongside the Scotland bill? What is his timetable? I think that that would be very useful for the chamber to understand. The committee report itself makes a number of comments about transparency. It points to a need for a much stronger, more transparent parliamentary scrutiny of intergovernment relations following the Smith agreement. Professor McEwen, in evidence to the committee, observed that most intergovernmental exchange still takes place below the radar, which raises questions about the capacity of the Scottish Parliament and the UK Parliament to give effective scrutiny. Similarly, the Royal Society of Edinburgh states that typically intergovernmental relations in the UK have been ad hoc, informal and undertaken on an issue-by-issue basis with little opportunity for public scrutiny. The RSE supports the development, as I do, of a much stronger joint ministerial committee system, with clearer guidelines, more regular meetings, enhanced transparency and indeed publicity. Professor McEwen herself argues that there needs to be a degree of transparency prior to meetings of the formal institutions, so that the Parliament has the opportunity to contribute its views in advance. Likewise, there needs to be a degree of transparency in the aftermath of meetings to allow for parliamentary scrutiny on the content of discussions. It is fairly clear that there is a need for transparency and better scrutiny, yet what we have are the UK and Scottish Governments appearing to make backroom deals, cutting out both Parliament and people, subverting the democratic process and placing further devolution in jeopardy. That is simply not good enough. I appreciate that negotiations will be sensitive, but there is a precedent here for the publication of Minutes and Agendas. Mr Swinney will remember that the two Governments have previously agreed to provide the minutes of the Joint Exchequer Committee to the Scottish Parliament and the UK Parliament. Minutes were indeed received for the JEC meetings on 27 September 2011, 18 June 2012 and papers were supplied in advance for the September 2011 meeting on an exceptional basis. I have to say, if they could do it then, why can't they do it now? Let me turn to the committee's deliberations on an independent arbiter. A number of witnesses agreed that there was a need to establish an arbiter, a genuinely independent body that is responsible for advising on the calculations that underpin the system. A body also required to adjudicate in the event of any disputes between Governments that they cannot resolve between themselves. I find myself in the very strange but happy position of agreeing with the former First Minister on that point. The cabinet secretary himself also agrees that there was a case for an independent arbiter, so I welcome that. I look forward to scrutinising the bill on the Fiscal Commission, because we on this side of the chamber do not believe that it is ambitious enough or, indeed, sufficiently independent enough. I think that I am in my final minute. I cannot allow you, if you wish. I am happy to give it to you. I thank the member for giving way. On the question of the independent arbiter, I just wonder if she thinks or agrees that that would really take a change of culture and thinking at Westminster. Does she have any sign that that might happen? I absolutely do agree that it takes a change of culture. In fact, a lot of the committee report was imbued with exactly that. I am not a mind reader as to what the Conservative Government think, but I do hope that we might hear some of that when they come to speak next. Let me thank the finance committee for its report. I was not part of the finance committee at the point that it developed, but it is a very robust report, and I commend the conclusions to the chamber. Let me just remind the chamber of what they were, because they say that the workability and effectiveness of the further devolution of our finances will depend on the fiscal framework, so there is no underestimating how important that is. However, there needs to be a willingness to work together between the UK Government and devolved Administrations a culture of mutual respect. From a parliamentary perspective, there needs to be a culture of openness and transparency when communicating into governmental discussions. It is not appropriate for this simply to be a dialogue between two Governments. That is a matter for Parliament, too. Although I concur with the convener's comments in that regard, I do believe that there is more transparency required now. At the moment, Parliament is, relatively speaking, in the dark. The people of Scotland are in the dark, too. The SNP Government must, as a matter of urgency, draw back that veil of secrecy and get on with developing a robust fiscal framework. I thank the committee clerks for all their hard work on this inquiry and, indeed, all the witnesses who gave evidence, both written and oral. We had some excellent witnesses, and I think that the report was a pretty impressive piece of work. I congratulate the convener, too, on his speech today, which I think broadly reflected pretty fairly at the conclusions that we reached. The first part that I want to make is around transparency. I accept entirely the Deputy First Minister's argument that it is neither desirable nor probably not achievable to give a running commentary on all the negotiations and discussions going on between Governments. However, in his closing speech, I would like him to address is there something between a running commentary and the current position that we have now? Although the Communities Committee is clearly intended to not tell us terribly much, and I expect that that is pure protocol, I cannot help but think that there is some possibility that we could get a bit more information that we currently get. Parliament and the Finance Committee in particular have a slightly clearer idea of where we are going. I know that it is happy to give a share, of course. I wonder if Mr Brown would help me in the process by dropping me some comments after the debate of what type of information he believes would be helpful. If he could drop that note to me in writing, I would appreciate that to take forward these discussions. Gavin Gray I am happy to drop that note, Deputy Presiding Officer. If we take, for example, revenue borrowing, which is one of the issues that I know discussed in the last meeting in terms of the Communities Committee, can we get some indication of where there might be agreement or disagreement? Simply to hear that it was discussed does not tell us terribly much. There may be some areas of the revenue volatility borrowing that are completely uncontentious and which are agreed by both Governments and, to the extent that they do not merit or need any further discussion. We can then see where are the difficulties and where are the challenges that need to be faced. If the committee and the Parliamentarians have some idea of where the actual challenges are, we would be well versed to contribute, to send suggestions to the cabinet secretary so that we are getting both parliaments involved as opposed to both Governments. I cite that merely as one. If there are agreements on revenue volatility borrowing, which I am sure there must be some, can we know what those are so that we do not get a situation where there is simply horse trading all the way through to the end and the statement that is made by the cabinet secretary that nothing is agreed until everything is agreed? If we are negotiating and discussing on principle, I suspect that many, not all, could be agreed up front. In the same way that, in a legal case, both sides outlie their arguments before you get anywhere near a judge so that, when you get down in front of a judge, you are discussing only the areas of contention and not wasting time on areas where there is simply no dispute. I think that that is important for the Scottish Government to lay out some of its stall, because it has said publicly, both from the First Minister to the Deputy First Minister and all the way down quite clearly and quite loudly, that they are going to block the Scotland bill, or at least recommend the Scotland bill being blocked, unless the fiscal framework is fair, or in a press release it was fair and flexible, today it was fair and workable. I think that it is only fair to the Scottish public that we have some idea of what the Scottish Government deems to be fair, some idea up front so that we do not get, at the last minute, a rather striking and bland statement that we do not like it because it is not fair. For example, what is the Scottish Government's position on fiscal rules? Do they have any fiscal rules that they believe are required? Do they have a position on a fiscal rule regarding deficit? Do they have a position on a fiscal rule regarding debt? Do they accept the recommendation of the committee that those rules, once agreed, should be put into statute? The committee discovered that there is only one fiscal rule since 2010 that has not been put into statute. Does the Scottish Government accept that? Of course. Let's just say for a second that he was a Treasury minister and Jackie Baillie's promotion came into effect, but let's say that he was a Scottish minister. Presum that Gavin Brown would not agree to a fiscal framework that did not provide for independent arbitration against it the weight of the evidence to the committee and its unanimous recommendation. What would Gavin Brown do? Gavin Brown. I'm not sure if I have less chance of being a Treasury minister or a Scottish Government minister in relation to the former First Minister's comments. I didn't just correct him. When he said that recommendation 174 was agreed unanimously, if he checks the record, he will say that it wasn't agreed unanimously at all. I dissented from two of the key parts of that recommendation because I wasn't persuaded at the time that the idea of an arbiter who could go between the two Governments and put a final and binding arbitration on them, I wasn't convinced at the time, I'm still not convinced yet, that that is actually workable and plausible. Ultimately, if the former First Minister had spent more time reading the report than being on the Starship Enterprise, he might have been perfectly aware that I had dissented from both of those comments. Let me turn in the final few seconds and I'll deal with it more in closing. Mr Brown, I can give you the time back for the intervention. I'm grateful for that. In relation to the Scottish Fiscal Commission, I have to say that the bill is disappointing and a little bit toothless that has been put forward by the Scottish Government. It does need a wider and deeper role. The key issue where the unanimous finance committee recommendation was that the Fiscal Commission should produce its own forecasts. Nobody dissented from that. We have had evidence from across the planet that that is what happens in almost every country. The Scottish Government hasn't been able to provide any examples of countries where it only looks at the official Government forecast and uses only that to decide whether or not your fiscal predictions are likely to be accurate or not. I ask once again—I know that the Deputy First Minister has staked a position on that, but I think that, quite simply, if he looks at the evidence, if he looks at experts, I genuinely think that the Scottish Government has taken the wrong approach on that one. I make a pleat about this stage to be open-minded as the bill goes through and make a change there so that we can have independent forecasts. We have much greater chance of getting it right, Deputy Presiding Officer, because there is a lot at stake. We could be right by tens of millions, we could be right by hundreds of millions, and the chances of getting it right are just increased enormously if you have a system of checks and balances, and if you have independent experts who have access to their own forecasts, much more possibility of getting it right than if you rely simply on Government forecasts, and I will close it there. We now turn to the open debate. Speeches can be of seven minutes or so, and I still have some generous time in hand for interventions. I call Mark MacDonald to be followed by Markham Chisholm. I was interested in listening to Jackie Baillie's speech, and she tried to conjure the image of a mystery thriller. Unfortunately, during the course of her speech, the only image that I could come up with was of Jackie Baillie standing outside a room with a cup pressed against the door, trying to listen in to what was happening behind that particular door. I think that there is a balance to be struck, and I think that the point was made by the convener, that what we do not want to have a situation of is essentially the Scottish Government outlining its negotiating position in full and public. I listened very carefully during Jackie Baillie's speech. I did not hear any detail of the kind of things that Jackie Baillie wants to see the Scottish Government laying before Parliament. I appreciate that she said that she only had a set amount of time, but I suspect that she could have at least given us a flavour of the kind of things that she would like to see the Scottish Government laying before Parliament for scrutiny as part of the process that might have perhaps been given an indication of what she was expecting from the Deputy First Minister. I think that the questions around the fiscal framework for me sort of come down to issues around flexibility, fairness and transparency. Flexibility in so far as if we are to have new powers devolved to us, we must have the ability to then use those powers for the betterment of the people of Scotland, and the fiscal framework will determine the flexibility that the Scottish Government has to use the financial powers available to it in order to deliver on that. That is why the issue around the command paper and the subsequent comments by the Secretary of State for Scotland and the fact that those two do not sit well together, as I have said previously, needs to be bottomed out. The command paper at 2.2.5 is very clear. In the context of Scottish devolution, the fiscal framework must ensure that Scotland contributes proportionally to the overall fiscal consolidation pursued by the UK Government, essentially tied to the austerity agenda. However, at the Devolution and Further Powers Committee, the Secretary of State was explicit that the intention of the fiscal framework was not to restrict the flexibility of the Scottish Government. We have two different positions being articulated by the UK Government. It is important that those two positions are explored forensically to determine what exactly will be the position in relation to the fiscal framework and the ability of the Scottish Government to operate within that, and to use the powers that are being granted to it. That is equally true when it comes to the issue around borrowing powers, which, as has been highlighted, are not explicitly mentioned within the Scotland Bill, but we know that borrowing powers are to come to the Parliament. There is a question around what the role of those borrowing powers will be. Will they be supplementary to the current capital del budget, or will they be in place of the capital del budget? That is a not immaterial consideration. If they are to replace capital del, we get into a situation in which we face a revenue hit simply to stand still in terms of capital expenditure in the Parliament, and to go beyond a stand still situation would incur further revenue hit. That is a material consideration as to how fair and flexible the fiscal framework will be. The issue around independent arbitration is important, and Gavin Brown says that he does not agree that there needs to be independent arbitration. The weight of evidence that came before the committee would indicate that having a situation where the Treasury is sole arbiter was the term that we used in the report, or judge and jury, on those matters does not lead to an image of fairness in terms of the way that the fiscal framework will be dealt with. If the Treasury has both an interest in the outcome and is the ultimate decision maker in that outcome, it does not take too much of a leap of logic to suggest that it will serve its own interests rather than necessarily reflecting on the balance of interests and coming to a conclusion on the basis of that. An independent arbiter would be important in terms of ensuring that the Treasury essentially plays fair in this process and does not simply look after its own interests to the detriment of the abilities of this Parliament to exercise the powers that are being devolved to it. On both the committee and the devolution and further powers committee, I have spent a long time trying to come to terms with what exactly the second no detriment principle is going to mean in practice. I think that we are still a long way from getting to that point. I think that the point about a high-level principle is fair enough, but I think that the difficulty that we have is in what circumstances would it apply and at what element of future proofing will there be around that so that, for example, an outcome five years hence is not traced back to a decision that was taken and a call for compensation under no detriment is applied. There has to be some indication of how, for what period of time a no detriment principle applies when the second no detriment principle is being examined. Finally, on transparency, the devolution and further powers committee has done an amount of work on intergovernmental relations and has published a report on intergovernmental relations. One of the recommendations that the committee has come up with is that intergovernmental relations and the scrutiny of intergovernmental relations should become a responsibility of a committee of this Parliament to examine and explore. It has also said that there should be some examination both before and after formal meetings of the two Governments. The question that I would have and the issue that I would have is that I think that it is fair enough for us to do that in this Parliament and to take those steps in this Parliament. My question would be what is happening at the other end of the process and how do we ensure that appropriate scrutiny is being applied at the Westminster end of the process in terms of intergovernmental relations? If our ministers are coming to our committees and talking about both the discussions that they are going to be having and the outcome of those discussions, there has to be also a scrutiny applied to the role of Westminster Governments in that respect. While we cannot compel Westminster Tregy ministers or any Westminster Government minister to attend a committee meeting in this Parliament, that power exists for Westminster Parliament committees and it may be worth them exploring certainly how they would take that forward in terms of the scrutiny of intergovernmental relations. The work that the committee has done—I pay tribute to the clerks for the work that they have done in supporting the work of the committee on this—has outlined the areas that really need to be probed around the fiscal framework. One of the things that the Scottish Government is focused on and we should support them in this is ensuring that flexibility, fairness and transparency are at the heart of the fiscal framework that we will hopefully see presented to Parliament once the negotiations have concluded. I now call Malcolm Chisholm to be followed by Linda Fabiani. There are many important recommendations in this report with all of which I agree. I suppose that the most controversial part relates to the fiscal commission and I think that we should welcome the fact that the convener and other SNP members have been willing to challenge the Government both in relation to the need for the fiscal commission to do its own forecast and also with the recommendation that the commission should judge the performance of the Scottish Government against fiscal targets and assess the sustainability of the public finances. I myself have also become a little concerned about the way in which the fiscal commission appears to be acting as much as advisers as independent scrutineers. I think that that is an issue that needs to be addressed in the context of the forthcoming bill. Intergovernment relations are another important part of the report, and by chance we have another report about that, which came out yesterday from the Devolution Further Powers Committee. Although we cannot debate that report today, I think that we can summarise it in one sentence to say that its main theme is to emphasise the importance of far more parliamentary scrutiny of those matters. That clearly chimes with a main theme of this debate, particularly as it is articulated by Jackie Baillie. Both committees are absolutely clear that the existing institutions for intergovernment relations are not fit for purpose. Of course, the finance committee makes the crucial recommendations from which Gavin Brown dissented that consideration should be given to establishing an independent body to advise on the calculation of the block grant. I give way to— I thank Malcolm Chisholm for giving way, and he and I are both members of the Devolution and Further Powers Committee. On the issue of further scrutiny, if you would agree, it takes two to tango, and it will require agreement from UK Governments as well for some of the detail to be made public following meetings between ministers. The block grant adjustment clearly is a key issue for the whole of the fiscal framework, and the finance committee emphasises that the calculation of the block grant must be open and transparent, which it clearly is not now and never has been. We have to have the right initial adjustment to the block grant and then crucially a fair indexation. That has already been established for our initial taxes, but the key issue here, of course, is income tax. It seems that the UK Government has accepted the whole-term method, which of course indexes to the growth in the UK tax base, but the committee has asked interesting questions about that in relation to whether it should perhaps be the capital growth in the UK tax base and has asked the Government to look at that, as well as at the whole issue of higher tax rate pairs perhaps increasing faster in numbers in England than in Scotland. I am glad to hear that an analysis is being done, and clearly it will be very interesting to see the results of that. The block grant adjustment of course relates to no detriment principle 1. Far more problematic is no detriment principle 2. The committee said that it should only apply a major uncalculated impact on the budget of the other Government. The key thing here is that we are absolutely clear that it should not relate to tax competition. The example of air passenger duty is often given in that context, and I am reassured that, in that regard, George Osborne appears to agree. There may not be too many issues where most people in the Parliament agree with him, but he did say at the Treasury Committee earlier this year that tax competition was something that we should allow. In fact, he went on to say that no detriment was principally about the block grant adjustment. I am fairly modestly reassured by what George Osborne has said about that. Another main theme of the report is flexibility. There have been concerns expressed about that the UK Government might want to constrain the fiscal flexibility of this Parliament, as in fact some of us are concerned about what appears to be trying to constrain our social security flexibility in some of the provisions of the current Scotland bill. We must have flexibility—this is the committee saying this—and I agree to pursue a distinct fiscal policy that is consistent with the overall UK framework. However, as the cabinet secretary said, he should not need to mirror each other. The committee pointed out that we should have more flexibility on spending any tax surplus, if such we should have. We should not really need the UK Government to dictate what we do with that. Also, although the committee has recommended a debt rule in the medium and long term, it should not necessarily be the same as the UK. That theme of flexibility on a whole range of issues runs through the report. Finally, and perhaps most important, is the whole issue of borrowing. There is obviously borrowing to cover cyclical volatility and revenues. As Gavin Brown suggested, there probably is quite a lot of agreement about that, although we do not know the detail of it. Far more contentious, I suppose, is the whole issue of capital borrowing, since one of the main differences between perhaps the Scottish Government's economic policy and the UK Government's and indeed the Labour Party's economic policy and the UK Government is more of an emphasis on the positive role of capital borrowing and be prepared to do more than the UK Government is currently countenancing. The committee recommends prudential capital borrowing on a statutory basis. That is a very important recommendation of the committee. Related to that, of course, was the whole issue of moral hazard. John McLaren and Angus Armstrong were both interested in that regard. John McLaren said that there should be free access to capital markets for borrowing. While Dr Armstrong supported that, he emphasised that responsibility and liability need to be aligned. To quote him, it would be anomalous for one Government to control tax and spending and another Government to have ultimate responsibility for the debt that arose. That is the trade-off. We want to have a prudential capital borrowing on a statutory basis, but, clearly, we have to take full responsibility for the repayment of debt. Given that the seven minutes says up, I would conclude by agreeing with the Scottish Government when they say that the fiscal framework must be fair. I hope that everybody in the chamber agrees with that, but I would draw the conclusion from that that an unfair fiscal framework has the ability to torpedo fiscal devolution. Therefore, we must have a fair fiscal framework before we agree the Scotland bill. Many thanks. I just say to members that I had indicated the seven minutes or so, but if members feel they wish to contribute a bit more than that, then there is time in hand. Linda Fabiani, to be followed by Chick Brody. Thank you very much, Presiding Officer, and colleagues. I welcome this report and it very much mirrors in part what we have heard in the devolution and additional powers committee, because we are also taking evidence on the proposed Scotland bill. My overall feeling about the report from the finance committee is that it is very focused and that it consistently calls for flexibility, which I think is absolutely essential in this debate when we are looking towards a fiscal framework. If you look at paragraph 24 of the fiscal framework report for fiscal devolution to work, it is essential that the Scottish Government has some flexibility to pursue distinct fiscal policies consistent with the overall UK fiscal framework. I do not think that that is anything that anyone should disagree with, because, after all, we want that flexibility to ensure that Scotland retains the rewards of success in the same way as we must bear the risks. The Scottish Government reflect very much on the issue of flexibility, because it talks about looking to balance risks and opportunities to Scottish funding and allocating the risks to the Government's best equipped to manage them. It also looks at providing incentives and increasing accountability and saying that this framework should give Scotland as much genuine fiscal choice as possible. I think that that is extremely important. Of course, the Deputy First Minister has made it very clear previously in the chamber that it feels very strongly that this has to be the right fiscal framework for Scotland and that you could not possibly agree to a legislative consent motion that would cause any risk to Scotland at all and not be the best deal. I find it very difficult to imagine why anyone could possibly disagree with that. Surely everyone in the chamber agrees that we should always look for the best deal for Scotland. Jackie Baillie alluded to a separation of the Scotland bill in the fiscal framework when she was talking about transparency. I do not believe that you can separate those things at all. I am willing to have clarification on that. I was simply seeking information from the Government as to what their intentions were in bringing forward a legislative consent motion. I hope that, in his summation today, the cabinet secretary will shed some light on that. I reiterate that the fiscal framework is absolutely integral to the Scotland bill. You cannot possibly separate those two. As it is borrowing—again, borrowing both revenue and capital is something that the finance committee has talked very clearly about—again, it is looking for that flexibility, that ability for the Scottish Government to adopt its own fiscal policies within that overall UK fiscal framework. It has said that the level of borrowing powers for current spending will need to be significantly increased and commensurate with the risks faced by the Scottish Government post-Smith, because there will be a degree of volatility that has to be addressed. Currently, the Scottish Government's borrowing limit of just over £2 billion over 10 years and so on is not adequate to look at anything, even the limited powers that may come to Scotland through this latest Scotland bill. There was a lot of discussion from witnesses, as well, about borrowing. I think that there is some concern, too, if you look at the capital borrowing aspect, that this must be, in addition to the capital departmental expenditure limits when the borrowing for capital spending comes in. Again, the committee, as did many witnesses, supported the introduction of a prudential capital borrowing regime on a statutory basis, and others have spoken about that. Scotland's councils are already able to borrow on a prudential regime, and it would seem to me quite sensible that this is something that should be very seriously considered for the Scottish Government. Moral hazard was raised by Malcolm Trism. It was interesting—there was not an awful lot said about that in the finance committee's report, but there were quite a few submissions received by the finance committee about moral hazard facing the UK Government from the actions of a devolved Scotland. I felt that it somewhat disregarded the relationship between issues of revenue-raising and the expenditure that the revenue has been raised to support. It also ignored the submissions of moral hazards facing this Parliament the other way round, which it could face by some Westminster's actions that we have to guard against. We have already witnessed, over the years, UK Governments playing games with the devolution settlement and the Barnett formula. People remember local government finance, although devolved responsibility when this Parliament wanted to design a new system of local taxation. It turned out that the current Government under Gordon Brown, as in the Treasury, took the view that, if Scotland exercised its devolved power and responsibility, the UK Treasury was entitled to bank a £400 million windfall because council tax benefit would be withdrawn from Scotland. That is the kind of moral hazard that the UK Government might impose. We also have to guard against why I am pleased that John Swinney is clear that we will not enter into any kind of agreement that could have a detriment to Scotland, which brings me to the next point. There are no detriment principles, and that is also addressed in the Finance Committee's report. However, it is difficult to see how that can operate in a simple and mechanical way, as the quote used in that report. That will have to be subject to regular negotiation between Scotland and the UK if we go ahead. It is a difficult one, because I know that there was a lot of discussion about what no detriment actually meant. There is also a lot of discussion about how the Barnett formula has worked out, and I thought that it was quite interesting. Again, listening to all the calls for transparency that we have heard, we listened to Professor Keating talking about an expert on the UK Treasury coming to give us evidence, talking about how impossible it is to work out how the Barnett formula actually works and the secrecy that is apparent in the UK Treasury. I have to say that I have not heard the unionist parties in here screaming for transparency and openness when it comes to the Treasury rules. It seems to me that there is still an element of people in the chamber more interested in criticising the Scottish Government than getting behind them to actually fight Scotland's corner. The reality is that, in all the discussions that we are having about the fiscal framework, without a significant change in attitude at UK level in the Treasury and some of the parties in the chamber, we would be in Scotland negotiating the fiscal framework issues with the UK with one hand tied behind our back. I would like today to be a bit of a turning point. I recognise that the Scottish Government and John Swinney, as Deputy First Minister, are absolutely right. You cannot expect Scotland to enter into an agreement that could damage Scotland. If everybody gets behind that, I think that it will be a very good footing to move forward on. I now call on Chick Brody to be followed by James Kelly up to eight minutes. To welcome this debate this afternoon, it has been just over a year since the historic referendum. It has been a year of change in Scotland, and Scotland, as a consequence, is continuing to evolve and grow in confidence. The fiscal framework that we espouse to should be one that allows for growth of confidence, but also economic monetary and covering all aspects of our society. The Finance and Committee report mentions one of the key questions of the outset, which is to what extent the Scottish Government's fiscal policy is constrained or limited by the UK Government. The Smith commission stated that Scotland's fiscal framework should be consistent with the overall UK framework. In my opinion, that is misconceived. I lied to yes, but consistent no. As the committee pointed out, the command paper seems to go beyond that interpretation, where it states that Scotland contributes proportionally to the overall fiscal consolidation pursued by the UK Government. That is recognised by SIFA, who agreed that although the fiscal framework needs to be consistent, it does not necessarily mean that the content has to exactly reflect the UK fiscal policy objectives, guidelines or mandates. In fact, as in any devolved situation, temporary though that may be, there has to be flexibility to pursue distinct fiscal policies as an input to an overall agreed fiscal framework. If we are to bear risks in that framework, we must secure and recognise the reward that goes with those risks. On borrowing and on fiscal rules, the IMF stated that the most common rules are a sub-national devolved level in the EU and the OECD seem to be a combination of a budget balance rule and a limit on the overall accumulation of debt. The report gives examples of those in Belgium, which, with borrowing, is supervised by an independent high-finance council, independent of both parties. It also gives examples in Spain. Of course, in Germany, the lender uses borrowing to finance shortfalls in revenue. Central government in Germany has no power to place restrictions on the borrowing activities of the lender. The lenders themselves have their constitutional and statutory framework to control borrowing. There are other examples of even more flexibility in the provinces, in Canada and in the states in Australia. I agree with the committee that fiscal rules should be agreed through negotiation with the UK Government and not imposed on Scotland. There has to be a parity of esteem and respect of the different elements of an overall framework. I would like to ask the member whether he sees any sign of a change of attitude or culture at the Westminster end. I am persuaded that I believe that the capabilities of our negotiators will encourage them to see the light. The definition of balanced budget rules is of importance. The AMF pointed out that devolved Governments should be allowed flexibility to absorb cyclical variations in their revenues over a number of years. The SIPFA view is that there should be a balanced approach to the current budget over the economic cycle as agreed between the separate Governments. I agree with the committee that the level of borrowing powers for current spending will need to be increased and that there should not be a cash limit on current borrowing. However, the respective Governments should agree a balanced budget fiscal rule. We have already mentioned independent arbitration. I exercise the role of the Belgian authorities who have an independent high financial council to agree that. Greater powers over revenue and expenditure imply and accept greater risk and volatility in Scottish budgets. Borrowing powers need to be flexible up or down to accommodate those risks. Countries such as Canada, Switzerland and the United States do not impose limits on their devolved states. Scotland should have free access to capital markets. We have talked about the issue of moral hazard being addressed by the agreed framework, but I believe that Scotland is mature enough financially and the cabinet secretary and his officials have shown in the past seven years that we have a background of balanced budget capability and are more than able to be responsible to deal with the issue and to negotiate and change the culture at Westminster. The issue of no detriment principle has to be agreed from the outset. Decisions made on local determination of tax and policy making has to be known from the outset and made public in the interests of fairness, transparency and what I said before, the esteem in respect is required by both Governments. The funding model for Scotland, the Barnett formula, is becoming even more confusing and there needs to be a clear understanding on the methodology and operation of Barnett going forward as flexibility is required as increasingly more revenue-raising powers are devolved. The Scottish Government has published a consultation on a draft bill to place the Scottish Fiscal Commission on a statutory footing, and that is an important step forward. The issue of scrutiny and forecasting, I believe, is of vital importance to the performance of Scotland's economy. Often, forecasts are made on the Scottish economy based on UK Government assumptions, which are often questionable and not based on real data. The Office for Budget Responsibility two years ago in the UK fiscal outlook said that when it was looking at Scottish taxes that its methodologies in trying to attempt a realistic forecast were a work in progress. That was bad enough then, but in 2015 it said that there had been no substantial change in that methodology. The committee report itself questions the availability and quality of economic and fiscal data for Scotland. SNAP, the Scottish National Accounting Project, was set up seven years ago to, in its own word, fill some of the gaps, some large gaps in the national accounts data that is available for Scotland from the OBR. Scottish Government officials were asked recently for an idea of progress being made, and they responded that they would consider that they are not even halfway where they need to be. They believed that that is because, and I refer to the point that I have already made about the OBR, because of the lack of appropriate UK data. Presiding Officer, this is an extremely important issue, in fact probably the most important issue that we faced recently. Scotland needs to have data that is reliable, accurate and is up to date as possible. It needs to have support to ensure that we have accurate national accounts, and not just based on UK Government assumptions, we need a macroeconomic forecasting model for Scotland. Where I would ask the committee to investigate further is whether the current models on producing national accounts and forecasting are of sufficient size and scale to deliver it accurately for Scotland. Lastly, Presiding Officer, it was stated in evidence that we should be looking at a Scottish equivalent of the OBR. There might be an argument for going a step further, ultimately, and to look at the establishment of a Scottish treasury as part of an implementation of a fiscal framework overseeing borrowing and the devolved framework. It probably will come. A Scottish treasury is looking at providing accurate forecasting and national accounts. We only have to look at the two foreign autonomous regimes in Spain, the Basque country in the Vara, which has its own treasury departments. The Basque autonomous community ranks first in Spain in terms of per capita income, with a gross domestic product, GDP per capita being 40 per cent higher than that of the European Union, and 33.8 per cent higher than Spain's average. Presiding Officer, I agree with much of what the committee report has had to say, but I believe that we must take the opportunity to set up a framework, perhaps a treasury, and enable Scotland to continue to prosper and grow with confidence in growth's economy. I thank the finance committee for the work that they have done in relation to their report. To the outside eye, that might seem a fairly dry parliamentary debate on a dull Wednesday afternoon as it is outside. People might see it as being dull within the chamber, but I will do my best. It is a very important issue, because if you think about it, the debates that we have in here, the more impassioned debates about how we best grow the Scottish economy, how we build a strong health service, how we achieve attainment in education, how we get a fair local government funding settlement, and where that all flows from. A lot of it flows from the Scottish budget. Clearly, the fiscal framework will have a dramatic impact not only on the size of the Scottish budget, but on the choices and priorities that different political parties in the chamber are able to outline. The report makes a number of very important points. First of all, in relation to no detriment, the principle of no detriment is very important. As we go through those changes, there is no adverse effect to the Scottish Government. Of course, it should be remembered that the reason that the principle is so important is that within a Scottish context, if you look at the UK-related spending that is related to Scotland, as the GERS figures point out, we spend more than we take in in tax. That is why the principle of no detriment is so important. In terms of the first principle, no government should gain or lose through any of the changes that are made. There is general agreement about that, and there is an emphasis on the importance of transparency in terms of how it is implemented. In relation to the second principle of no detriment, which relates to policy changes, there seems to be looking at the report and listening to some of the contributions. Although he is not here to actually agree with Mark McDonald, it is not clear as to how that would operate. It seems to be the case that there would be guidelines around it. I think again that the importance of the discussions between the two sets of Governments and the transparency on those discussions is very important to ensure that there is no adverse effect and that the second principle of no detriment is so important. I take what he has just said that it is not clear how it would operate. Some people would go further and say that it is impossible to see how it would operate. Would you go that far? I would make the observation that, from the committee's deliberations and witnesses that appeared before the committee in the various contributions, that people are struggling with how it would operate. I think that we have to try to engage with that in order to find a way forward. Ultimately, what that is driving at is that, if there are policy changes, we are seeking to ensure that there is no detriment to the Scottish budget. That has to be the objective. We have to try to find a way through that. In terms of the Scottish Fiscal Commission, I think that members have made some important points in relation to forecasting and the independence of forecasting. Forecasting is very important in terms of financial planning for the Government. Particularly when we see vast array of changes coming through here, not just to the way that the budget is organised but to the potential impact on the economy, the forecasting element is absolutely crucial. It is also important to look at the performance targets coming out from the Government. I know that this is something that the Government and the Finance Committee have struggled with through the years, not just looking at the targets but trying to link them to outcomes. The Scottish Fiscal Commission gives an important way forward with independent forecasting and proper monitoring of performance. In terms of the impact of those changes, it will change some of the political debate around the Parliament. It turns the emphasis to us from a simple block grant arrangement to one where we are responsible for collecting the taxes and spending the money. That will have some interesting implications when it comes round to election time. The parties will then need to outline not only what their commitments are in terms of spending plans but how they would directly raise the money in order to fund those commitments. Recently, when we had an education debate a couple of weeks ago, Labour was talking about using the new tax rate raising it to 50p in order to promote educational attainment. There was quite a lot of silence from the SNP benches when that was put forward. It will be interesting to see how the different parties tackle that as the new powers develop. It will also be very important to link it. A lot of discussion this afternoon has been about some of the technical detail, but it is important not to forget how we link that back to our local areas and to the challenges that we face. For example, Shelter Scotland said yesterday that it reckoned that in order to tackle a housing crisis, Scotland needed 12,000 more affordable homes a year. We know that there are still nearly 600,000 people in Scotland not being paid the living wage. I know that, in my constituency, there are now more people in the population, but there are less GPs to cover that. One of the challenges in that is how we use the new powers and the new arrangements in order to not only fund the existing commitments that the Scottish Government has, but to look at some of the new challenges that are coming up. It is very important that we get the fiscal framework correct. It is important that there is respect and transparency between Governments. It is important that it impacts on the Scottish budget, it impacts on the Scottish economy and, ultimately, it impacts on people in all our constituencies and regions. I agree with James Kelly that, although that is a dry and technical subject, it is of critical importance in terms of the decisions that will be made in this chamber, and also in terms of changing the terms of the political and economic debate in Scotland. It seems to me that the overriding imperative must be to ensure that the fiscal framework, which is agreed by the UK and Scottish Governments, is one that allows the Scottish Government of whichever party or parties the flexibility to raise much more of its own revenue, the ability to determine its own spending priorities and the capacity to benefit from increased tax revenues in the event that we are able to successfully grow our economy and to do so to a far greater extent than is currently the case. Other members have focused on the role of the Scottish Fiscal Commission, so I do not intend to address that issue in my own remarks this afternoon. Instead, I would wish to focus on the specific issues of the borrowing powers, which will be available to the Scottish Government and which have been touched on by other speakers this afternoon, and the block grant and funding formula, which will underpin the further powers that are coming to the Scottish Parliament. One of the key questions highlighted by the finance committee in developing a revised fiscal framework is, I quote, the extent to which the Scottish Government's fiscal policy will be constrained by the UK Government. Mr Gibson, in his opening speech, referred to Governments following ill-disciplined policies, and it is worth reflecting in all of the discussion about the need to ensure that the Scottish Government operates in a fiscally responsible way that the current level of UK debt stands as at quarter one of 2015 at a staggering £1.65 trillion, and that is 81.58 per cent of gross domestic product. One of the key issues is the direct controls that are exercised by central government on the amount to which the Scottish Government will be able to borrow. The Smith commission proposed additional borrowing powers for two purposes—firstly, to ensure budgetary stability and to provide safeguards to smooth public spending in the event of economic shocks and secondly, to support capital investment. The committee examined the options for fiscal rules that will act as a constraint on the level of borrowing that the Scottish Government has at its disposal and it examined the options for current and capital borrowing. There was general agreement among witnesses that current borrowing powers should be commensurate with the additional level of risk that the Scottish Government faces following further devolution. Linda Fabiani referred to paragraph 58 of the committee's report, which stated that it is clear that the level of borrowing powers for current spending will need to be significantly increased. The committee also went on to say that the Scottish Government will require substantial new powers to manage any volatility, and the committee was in principle supportive of considering the proposal to allow current borrowing for preventative spending, as that is clearly about investing in the future. However, it is clear that the method for indexing the adjustment of the block grant will have a direct impact on the scale of the current borrowing powers required. Turning then to the issue of the block grant adjustment, while there is an agreement to use the whole firm method for the indexation of the block grant adjustment following the introduction of the Scottish rate of income tax, there are real doubts about the extent to which this mechanism will allow Scotland to withstand risks at a UK level and UK-wide economic shocks that Scotland may be exposed to. The main concern is that the Scottish tax base may grow more slowly than that of the UK as a whole, due to the relatively lower number of higher-rate taxpayers in Scotland compared with the rest of the UK and the impact of relative population growth. The relatively lower number of higher-rate taxpayers in Scotland compared with the rest of the UK explains why Scotland's income tax contribution to the UK Exchequer is 7.3 per cent, which of course is less than our population share of 8.3 per cent. That point brings home to me the fact that the further powers that are coming to the Scottish Parliament are overly reliant or primarily reliant on income tax as our main source of revenue raising powers. Why would we not have national insurance contributions in order to reduce the burden on employers or capital gains tax in order to devise a fiscal regime or set of incentives for entrepreneurs and manufacturers? Returning to the disproportionate number of very high incomes in London in the south-east of England, which means that we have an income tax base that is lower than the rest of the UK, Dr Jim Cuthbert in his evidence to the committee stated, and I quote, that there are naturally going to be extended periods when the income tax base in Scotland grows more slowly than that of the UK as a whole. On this basis, under whole thumb indexation Scotland will be penalised. Dr Cuthbert also raised concerns about the impact of relative population growth on indexation. He pointed out that, over the past 10 years, the rate of population growth in the UK as a whole has been higher than the rate of population growth in Scotland by an average of 0.22 per cent annually. That means that Scotland has to grow its per capita tax base faster than the UK if it is not to be penalised in the way that it has been suggested. Malcolm Chisholm referred to indexation being based on growth in the per capita tax base rather than the overall growth in the UK tax base, which, of course, was another recommendation of the committee and one that I think is worthy of further consideration. Given the very real threats that have been identified in the evidence given to the finance committee, it is therefore vital that the issue be addressed and resolved moving forward. Mr Salmond raised the issue of independent arbitration, and it led to a rare outbreak of agreement with Jackie Baillie. However, that is not just an essential prerequisite for the approval or agreement by this Parliament of the fiscal framework, but is in fact the logical conclusion and extension of the committee's conclusion at paragraphs 173 and 174 that there is a fundamental need to change HM Treasury's role as the sole decision maker at both a bilateral and multilateral level. Linda Fabiani, who I do not think is in the chamber at the moment, hit the nail on the head when she talked about the issue of transparency. Transparency cannot be a one-way street that has to apply to both the UK Government and to the Scottish Government. Of course, there is no transparency. There is no consultation when it comes to decisions being made by the Treasury in terms of the operation of the Barnett formula. Take the example of the Olympics. The Treasury decided that the Olympics were a UK item, and therefore a reserved matter outwith Barnett. No Barnett consequentials came to Scotland. In contrast, the Commonwealth Games were considered a matter entirely of Scottish expenditure to come out of Scotland's block grant. The point about transparency is one that all members need to reflect on. In the words of Margaret Cuthbert, in evidence to the House of Lords' Select Committee on Economic Affairs, this arbitrary system, determined by one participant body in the system, has to change and become fully participative and transparent. That is something that we need to take very careful cognisance of. In conclusion, the successful conclusion of negotiations on the agreement of Scotland's fiscal framework is one on which the future effectiveness of further fiscal devolution will depend. We need a robust and credible fiscal framework that gives the Scottish Government the flexibility that it needs, and the Scottish Government's budget should not be adversely affected as a result of the decision to devolve further powers. Many thanks. I would like to start by congratulating the committee, as others have, for a very robust report. I would also like to start by quoting from an article in the Herald newspaper of March 15 this year, discussing a study by Edinburgh University's Academy of Government based on a series of interviews with senior figures connected with the Smith commission process. The article says that, having spoken with those key individuals, the researchers concluded that the treasury was very much in charge of the Smith process. Indeed, one of its senior officials headed the secretariat supporting the negotiations. As a result of that article, I went away and had a look at what the university researchers had concluded. Their comments make for very interesting reading. Our interviews made it clear that the treasury was a controlling and steering force in this process. That conclusion is perhaps unsurprising, given previous academic work on the treasury's role in the UK public policy process. The treasury provided numerous technical briefings to the commission members and was the preeminent Whitehall department in the process of defining a fiscal policy package acceptable from a UK perspective. With those comments in mind, by impartial academics, I read the committee's report and, indeed, viewed with increasing concern some of its observations and recommendations. They are clearly designed to ensure that the fiscal framework does not give undue influence to the treasury in a way that is detrimental to Scotland. I congratulate all members of the committee from every party who put that first and put Scotland's interests first. I particularly welcome the committee's expressed concern that the command paper suggests a much greater level of constraint on the Scottish Government's fiscal flexibility than the Smith commission suggested. I also welcome the committee's comments on borrowing, no detriment and the block grant funding formula. I was struck reading the report section on the block grant by some of the comments of witnesses on the Barnett formula. In particular, Professor Keating points out that Barnett has, quote, never been defined, so Barnett is whatever the treasury say that it is. Dr Jim Cuthbert argued that the treasury has, to date, quote, signally failed to operate the Barnett formula transparently, while John McLaren suggested that the new complexities that will accompany the additional tax powers and the changes that come from Smith could make this lack of transparency even worse. Even the select committee of the House of Lords, which is not an institution that I am often found to quote favourably, said, quote, in every funding decision the treasury is judge in its own cause. Judge in its own cause, Presiding Officer, that really has to change given what is at stake for Scotland's public services in the future. That is why I wholeheartedly congratulate the committee for its recommendations that follow paragraph 173, in which the committee notes that it is abundantly clear that the existing institutional IGR framework is not fit for purpose. The increasingly complex nature of devolution and degree of interdependency at both a bilateral and multilateral level requires substantial change to the structure and culture of inter-governmental relations, and in particular the committee agrees that it is clear that the machinery for devolved finance can no longer be left to the discretion of HM Treasury. That is followed on by 174 recommendations, which I will not go through in detail because there are quite a few of them. I endorse the first one for inter-governmental relations to be meaningful in relation to fiscal matters. There is a fundamental need to change HM Treasury's role as a sole decision maker at both bilateral and multilateral levels. Of course, the penultimate paragraph says that consideration should be given to establishing an independent body to advise on the calculation of the block grant, which, as Mr Salmond and others said, is absolutely essential, given the way that the Treasury has operated in the past with devolved administrations. I would also like to draw attention in particular to some of the evidence from Dr Jim Cuthbert. Others have talked about the Hotham indexation method and how it could be detrimental to Scotland's finances in the future, given our slower population growth and lower numbers of high-rate taxpayers. I would echo those concerns and I am pleased that we are going to be looking at it again. There was also another issue raised by Dr Cuthbert and his evidence to the committee, which I thought was very interesting and was worth raising again. That is when he poses the question of a UK Government deciding that it was going to fund extra expenditure on, say, a reserved issue such as Trident by raising UK income tax rates. Dr Cuthbert says that, since defence is a reserve function, public expenditure on Trident is regarded as benefiting the whole of the UK. Public expenditure in Scotland will rise by Scotland's population share of the extra spend on Trident. Since aggregate public expenditure in Scotland is now risen by this amount, the principle of clause 954b is in danger of being breached. To avoid that happening, Westminster will still reduce Scotland's block grant correspondingly. Dr Cuthbert goes on to talk about the implications of that being stark. It means that, if Westminster decides to use an increase of our UK income tax to fund a reserve section, as it is perfectly entitled to do under the current proposals, Scotland faces a very stark choice. It can either cut its devolved services or raise its income tax rates. Dr Cuthbert himself says that there is not necessarily an easy solution to this particular quandary. Although he does offer one, that is the RUK income tax for devolved spending in England. There should be an RUK income tax for devolved spending in England, and another band for reserved taxes. That is probably a debate for another day. We now move to closing speeches. I invite all members who have taken part in the debate to return to the chamber to heal them. I call on Gavin Brown. Eight minutes, please, Mr Brown. I think that this has been a pretty fascinating debate. It has been aided in part by the fact that it had not only the finance committee members contributing, but the devolution and further powers committee 2, who were looking at it from a slightly wider perspective, but clearly had some knowledge on the fiscal framework as well. The combination of contributions from both has definitely supplemented the quality of the debate. A number of speakers made the point, but this is, if not the most important, one of the most important things. We will discuss debate and agree over the course of this parliamentary session. The results of what is agreed will span potentially several parliaments, and, as Smith said, this is an issue that shouldn't require on-going negotiation. It's something that we have to get right first time, so I agree with the cabinet secretary when he says that it's more important to get it right than to make sure that we finish it exactly to a preset timetable. He's quite correct on that. One of the points that has come through from a number of members is the issue of transparency, the issue of what is actually going on at the negotiations between the UK Government and the Scottish Government. I play again to the cabinet secretary in his closing to see if he can address that issue, to see if there is something that can be done to give the finance committee and other parliamentarians a bit more information on what is going on. I accept, as I said, entirely his arguments that we don't want or desire a running commentary, but I simply question if more can be done, because there is a slight concern, certainly, from my side, that the negotiations conclude at some point in the autumn or later on in the year, and we then have an unveiling of the fiscal framework that we are happy to give away. I agree that, in general terms, once the conditions are agreed that we should go forward with as much transparency as we can have. In view of what he said, if we look at the OBR, who works with HMRC to develop the budget input for the UK Government, that the UK forecasts, published by the Office for Budget Responsibility at each UK fiscal event, are prepared by HMRC and are subject to in-house review by the OBR. Neither the nature of the scrutiny nor its impact is made public. Do you not think that that would help us to develop the culture of openness to the basis of those forecasts in the past? I have to say that anyone who has heard evidence from Robert Chaud that Westminster and the Scottish Parliament would struggle to accept the notion that those forecasts are not independent and that they are overtly manoeuvred by HMRC. Yes, of course, some of the initial raw data comes from there, but having listened to Mr Chaud on a number of occasions, there is certainly no doubt in my mind. I think that I can speak for most of the committee anyway. One thing that comes through line and clear is that he is particularly independent. The OBR will not be controlled or dominated by anyone much to the unhappiness, I suppose, over the past couple of years, sometimes from the Chancellor of the Exchequer. What I was trying to lead on to before the intervention was that I do have a slight concern that there will be an unveiling of the fiscal framework. The Parliament is presented quite simply with a binary choice. We either have to accept it in its entirety or reject it in its entirety. If one can draw an analogy—I know that this is not a piece of legislation—but if one can draw an analogy with legislation for something so important, it will be treated more like an affirmative instrument for secondary legislation, where we cannot propose amendments or we cannot really discuss any of the terms. We simply have to accept or reject it at the end of the day in its entirety. I think that it would be preferable if it could be more akin through the process to more like primary legislation, but Parliamentarians and Scotland more widely can make contributions so that we get the absolute best fiscal framework, not just for Scotland but for the UK as a whole, and one that is enduring and sustainable and does not need to be reviewed and negotiated every year or a couple of months. That is certainly the hope that I have. Again, I plead to the cabinet secretary whether that can be addressed in some way in his closing speech or thereafter. I play also, Presiding Officer, in the suggestion on whether we can be told a bit more on what goes on in the actual discussions. The cabinet secretary quite fairly asked for a note from me, which I happily do after the debate, but I talked about revenue borrowing and direct response to him. What about capital borrowing too? Although there may not be an exact agreement on a limit or whether or not there should be a limit, is there a broad agreement at this stage between the Scottish Government and the UK Government that some form of prudential borrowing regime, as suggested by Smith and as proposed by the finance committee, is there a broad agreement that it ought to be a prudential borrowing regime of some sort, or are we not there yet at all? Has it simply not been discussed yet? Has it been discussed and put on ice, or is it something where there is actual progress being made? In terms of the no detriment principle too, there are two parts to the no detriment principle. The first part broadly seems to be accepted by everyone, but what is described as no detriment too seems to be misgivings on all parts of the political divide about it. There seems to be a lack of clarity on what it means and what the implications are. Has there been discussion between the Scottish Government and the UK Government where it has agreed that it should only be looked at in a high-level way, not in any mechanical way, along the suggestions of the finance committee in our report? When the Scottish Government says in a joint communique that options for future governance of Frisco framework were discussed, what does that mean exactly and what kind of options could potentially have been on the table? Again, other members have talked about the Scottish Fiscal Commission and I think that the biggest issue that has been discussed so far over the course of the last couple of years is in relation to the production of forecasts and I reiterate simply my own view and I think the view of the committee that actually they have to have the ability to produce their own forecasts whether they are treated as the official forecasts or not is less important but they have to have the ability if they're going to have rigorous scrutiny and if they're going to be able to do their job properly and that becomes more important with every year that passes as we have greater financial control. I know that most finance ministers won't want to seek control, there's nothing unique in the Scottish Government there but I just genuinely believe given the optimism bias errors that occur from governments all across the planet, it's too important to be left simply in the hands of the Government's finance department. Deputy Presiding Officer, in the last few moments that I have, I conclude by saying this. I think a greater transparency is needed in terms of the process that's on going and in terms of what the red lines of the Scottish Government might be if they are potentially threatening to vote down the Scotland bill if it isn't fair in their words and I think that the finance committee has a clear role to play in that. Given the spirit of Smith and the fact that all the political parties were involved in that along with other stakeholders, where is there a chance for us to make a contribution so that the ultimate fiscal framework that is agreed is one that does endure, one that stands the test of time and one that does what we all wanted to do? Many thanks. Before I invite Richard Baker to speak for eight minutes, and I just put out a call to Mr Gibson if he's in the building. Would he please return to hear his motion debated on Scotland Fiscal's Framework as the chairman of the Finance Committee? Mr Baker, eight minutes please. Thank you, Deputy Presiding Officer. Now, if we behave like that on committee and didn't turn up either on time or to hear all the evidence, we would certainly be for the high jump. I would echo your encouragement to Mr Gibson. I hope that we will be here to reflect on what's been a very good and very constructive debate in the chamber this afternoon, and that does reflect in fairness to the convener as well, playing with the assiduous work of the committee in considering the fiscal framework on which a Scottish Government is going to need to adopt it. As it takes on significant new powers over the finances that it raises, determining how this framework should operate, it will be a key decision for this Parliament and for the future of the Scottish Government's fiscal policy and, crucially, for the fulfilment of the principles and the policy set out by the Smith commission, as well as the number of members have said. There has been a broad consensus around the chamber, not that, as Mr Brown has pointed out, there is an every-year point across the committee in our report, but there is a broad consensus. We need a framework that secures, yes, a sensible approach to fiscal policy, but also one that allows this Parliament to scrutinise its operation effectively. In a few minutes, I have decided to close for those benches. I want to reflect further on three broad themes that members have raised in the course of the debate. First, the need for a framework that secures a disciplined approach to fiscal policy. Secondly, the need for flexibility—many members have spoken about that—so that the Scottish Government can take a distinctive approach to fiscal and economic policy. Finally, I would love to debate around transparency in the negotiations between the Government and the green framework, but, of course, that transparency is crucial once the framework is in place, how its operation continues, how it is rolled out. That needs to be the subject of parliamentary scrutiny, and that scrutiny needs to be able and allowed to happen. The committee has made the case for a framework that underpins a robust approach to fiscal policy, and that is why we have recommended that there should be a legislative requirement for ministers to bring to Parliament a charter for budget responsibility. The committee has quite clearly got its message across on that issue. In place in this, it is a need for Parliament to be assured that ministers are not taking on unsustainable borrowing, which, indeed, would be incompatible with the UK fiscal framework. As Mark McDonald said, organisations such as SIPFA have agreed that Scottish ministers need to have flexibility in the framework to pursue distinct fiscal policies. That is necessary for fiscal devolution to be meaningful. For ministers to have the flexibility that they need, that means that Parliament needs to have appropriate borrowing powers to accompany its new powers on tax. That is something that other members have spoken about and has concerned them. I was a member of the Scotland Bill Committee, head of the 2012 act, when, indeed, Linda Fabiani was the convener and enjoyed her convenership with that committee. She has referred to borrowing. At that time, we had evidence around that bill. I think that the limit of £1.5 billion was proposed, and I accepted at that point that there should be a far higher cap on borrowing around £5 billion. In the evidence that the committee heard on the fiscal framework, we heard the case either for a higher cap again or for a prudential borrowing regime. Ultimately, the committee has recommended that we undertake a prudential regime. In any event, it is clear that, if Parliament chooses to take a different approach on issues such as infrastructure or investment in preventative measures, there should be far greater flexibility over borrowing than is currently the case. We have heard that that can be achieved without significant impact on overall UK levels of borrowing. The committee has made a compelling case for this Parliament to have sufficiently greater borrowing powers. I hope that UK ministers will pay heed to the committee on that issue. The third issue that I want to cover is the issue of transparency, which a number of members have referred to. Jackie Baillie and others have challenged ministers to provide more information on discussion, which are taking place now, on agreeing the framework and acknowledging that we are not going to have a detailed running commentary on the meetings that ministers have. However, once the framework is in place, there needs to be clear protocols and procedures that are established for parliamentary scrutiny. Parliament will need to be able to be assured that the operation of the framework does not disadvantage the Scottish Government's budget. In the issue of block grant adjustment, we might be persuaded of the case for Halton's proposal on indexation. However, as Malcolm Chisholm and others have said, how that is implemented is of crucial importance. If it is not in terms of the growth in tax base per capita in the UK, it could be disadvantageous to the Scottish budget. Whatever mechanism for the block grant adjustment is decided on, it needs to be in line with that no detriment principle. Members have also referred to the second no detriment principle. We need to be clear on how that will be applied. The committee has made the case as Gavin Brown said that it should be a high-level principle. In any event, it is vital that this Parliament is going to be aware of any potential impact that its operation will have on budgets before we agree any changes in policy in the future. Most of all, there must be proper scrutiny in Parliament and in the broader public arena of the operation of the framework itself in the future. That is why I said that, once that framework is in place, we need to have clear processes for scrutiny going forward. The Scottish and UK ministers must be prepared to update Parliament regularly on its operation and provide evidence to committees in both Parliaments. Jackie Baillie made the point powerfully that the current joint extractor committee meetings simply do not provide a transparent or effective mechanism for intergovernmental dialogue, so that has to change. It needs to be in new process in place. Several members have also made the case for independent arbitration of disputes over the framework between the two Governments. As Jackie Baillie said, that is a proposal with which we on these benches agree. We are entering a significant new phase in the powers and responsibilities of this Parliament. The establishment of the Scottish Fiscal Commission is fundamental both to securing a smooth transition in the use of these news powers and to confidence in the forecasts of Government revenue so that we can be assured that there will not be negative impacts on future budgets. We now have an opportunity to establish a Fiscal Commission that builds on models of best practice around the world, which is already in place. That requires a commission that is properly resourced and able to produce its own forecasts, as the convener pointed out in his opening speech in this debate. Given that the commission knows powers will not only inform debate around the operation of the framework, we know from international examples that it will be a good discipline for Government as well. I would ask the cabinet secretary to consider carefully the case that we have made for the commission to be empowered in this way. In closing, there was no unanimity on every point in the report, but there has been a broad consensus reflected in this debate today that we have reached on the great majority of issues around the fiscal framework. That is why, without hesitation, I commend the committee's report to the Scottish Government and to UK ministers as well. I believe that those recommendations are adopted. It will secure not only a robust framework but measures that will be important and beneficial to good Government and to effective devolution as well. I now call on John Swinney to the Deputy First Minister. Thank you, Presiding Officer. I begin on the question of transparency, because I think that it has been an issue that has percolated through the whole debate. Mr Brown asked the question in his closing remarks about how can a broad cross-section of opinion be involved in the discussions in the process? Frankly, that is what I think today is about. Today is an opportunity for Parliament to inform me, because unless we think that what the Smith commission requires us to do is for the Joint Exchequer Committee to bring together UK and Scottish Government ministers to negotiate a fiscal framework, I am going into that. That is what the Smith commission report says. I am going into that to represent the interests of Scotland. I take that deadly seriously. I can assure Parliament on that question. I look to today's debate and the thoughtful report of the Finance Committee to help me to be informed about what is the balance of parliamentary opinion on the issues that are of significance at stake in this whole process. I think that it is a two-way process, and it would be extremely helpful to understand and in order to facilitate that dialogue between this Parliament and the Government, who I do believe can be allies in this process if there was more information available as to where the discussions currently are. I wonder whether there is some mechanism to facilitate that. Let me make two points about that. The first is that I think that I have been very open with Parliament about all of those discussions. I know that Jackie Baillie will furrow her brow at that, because it does not suit her narrative. I have in front of me the official report of the Finance Committee on 2 September, where across 30 columns I was questioned by the Finance Committee about the issues about the fiscal framework. I have also got the Scottish Government's response to the Finance Committee report, which goes to about a further 15 pages of text on the Government's position and our thinking. I have participated in this debate and set out our thinking. I am one player in the negotiation. Where is the Treasury on all of this? If the Treasury wants to work out my negotiating position, it will only need to look at the official report of the Finance Committee, the Government's response to the Finance Committee report and what I have been saying all afternoon and on various other occasions when this issue has been at stake. I believe that I have been very open, as open as I can be, within a process that is a bilateral discussion between the Scottish Government and the United Kingdom Government. I do not say those things in any way to cut Parliament out of the process, because I need Parliament to be supportive of me on the arguments that I put forward. I need to do, as Linda Fabiani suggested in her very thoughtful contribution, that Parliament needs to create a unity of purpose around what Parliament wants to see in that fiscal framework. It is as much in my interest to make sure that that is secured, because I want a deal that will satisfy Scottish parliamentary opinion. That is the only perspective on this that matters to me. I have to ask members to perhaps reflect for a moment on how open the Scottish Government has been with the Scottish Parliament on our negotiating position and how open the United Kingdom Government and the Treasury have been with the United Kingdom Parliament and the United Kingdom public opinion on the issues that are in their perspective. In all of those discussions, I am trying to find a way of being as open as I possibly can be. Mr Brown has been quite critical of the communication that we have issued after each of the meetings. He asked, for example, whether capital borrowing has been discussed. If Mr Brown had consumed the contents of the communication, he would realise that capital borrowing has, of course, been considered, because it is one of the topics that is referred to in the communication. That is why I asked Mr Brown to provide me with some idea of what information he would like to see, and I will try to seek agreement with the Treasury to release that information, because I cannot, in good faith, release that information unilaterally. That would be a breach of the process in which we are involved, which is a joint ministerial discussion between the Scottish and United Kingdom Governments. That is the invitation that I have given to Mr Brown. Jackie Baillie, in her speech earlier on, did not have time in a debate where I have just had a note to say that I have even more speaking time than I thought I had to cover any of the things that she would like me to be negotiating about or arguing for, despite the fact that she was immensely constrained on time. I said that I would give way to Mr Brown. I am sure that the cabinet secretary will accept that I was not asking him if capital borrowing had been discussed. Of course, I have read the communication. To what extent was it discussed, and was there a broad agreement on something that might be less contentious, for example? Is there a broad agreement over some form of prudential borrowing? That was the question. Was it not discussed at all? I think that the only thing that I can say to try to provide clarity here, and I do hope that the chief secretary to the Treasury does not take exception to what I am about to say, but I think that it is the only way that I can answer Parliament honestly on that question, is that the chief secretary and I have agreed that nothing is agreed until everything is agreed. Mr Brown shakes his head, but if he goes off and asks the chief secretary to the Treasury, he will find that is the chief secretary to the Treasury's position, and it is also mine, because Parliament must understand that on day one, meeting one, I could agree something, and find out in meeting five or meeting 10 or meeting 20, or however many we have, that the detail is unacceptable. I have an idea about issue one that I agreed at meeting one. Parliament must understand that this is an agreement that we will have to look at in the round, because I accept that there will be issues on which I might not get everything that I want. I will try my level best, but I will try to get everything that I possibly can do. Parliament also has heard from me directly—it could not have heard it any more clearly from me—that if I do not believe that the fiscal framework that is proposed and is an offer is acceptable to the Scottish financial public interest, I will not support it and I will not recommend to Parliament that Parliament endorses such a proposition. Jackie Baillie asked about the timescale for that. I can say that what we have agreed is that we will try to conclude the discussions in the autumn. I know that the heating is on. It is on in my house as well. The heating was on during the summer at times in my house into the bargain, but the heating is definitely on. One of the other issues that Parliament has to bear in mind is that the Scotland Bill is not in its yet final form. That is still going through parliamentary process in the House of Commons, yet to go to the House of Lords. There may be, on the basis of what the Secretary of State has said, substantive change in the Scotland Bill from what we saw before the summer recess to what we now face when the House of Commons returns on Monday, and that may have a significant bearing on what the fiscal framework has to do. I cannot give the best that I can offer in terms of timescale, but I will update Parliament on the process. Members of Parliament asked me for some sense of what were the issues that the Government was pursuing. I thought that I had gone through that in my initial remarks, but I will go over some of that again. We very much agree with the committee on the recommendations for significantly increased revenue borrowing facilities, because we have to be able to manage tax volatility and Scottish economic shocks. We agree with the committee that the Government needs to have more capital borrowing powers in addition to the existing CDL and Scotland Act 2012 provisions. We have had a very interesting discussion about the points raised by members of Parliament, Mark McDonnell, Linda Fabiani and Mark McDonnell. I think that they correctly assess the fact that no detriment is an easier principle to assess and to apply at the moment of devolution than it is to try to work out any no detriment application once policies and proposals have been implemented over time. On the question of the block grant adjustment, which Mr Chisholm, Mr Edie and others made and Mr McDonnell made substantive contributions, I have heard very carefully what Parliament has said to me about the hotel mechanism and the importance of a per capita element within a per capita assessment being applied to the block grant adjustment. Those are points very clearly made by members of Parliament, which I will take forward in the discussions that are forthcoming in relation to the fiscal framework. The last area that I wanted to cover was on the Scottish Fiscal Commission, because there has been some changes that the Government has made to the bill on its introduction. We have changed the ability of the Fiscal Commission to prepare any reports that it considers appropriate, so ministers will not direct the agenda of the Fiscal Commission in any way. It will be up to the Commission to prepare reports as they see appropriate. We have put in place a requirement for an external evaluation of the performance of the Fiscal Commission to strengthen its independence and the external scrutiny of the Fiscal Commission. There has been quite a lot of commentary about the fact that the Commission will not be making its own forecasts. It will be in pretty good company in not making its own forecasts, because the Fiscal Commission in Austria, Belgium, Finland, France, Ireland, Portugal, Slovenia and Sweden are in the same position. They comment on the forecasts that are being made by the Governments in those countries, and we are no different in that respect. In fact, I shall retain you even longer if I— It's at your discretion, Mr Spidey. At my discretion, in the interests of courtesy, I will take Jackie Baillie first. I thank the cabinet secretary for his courtesy. In any of those countries, members of the Fiscal Commission advise the Government and scrutinise the Government, surely that is a conflict of interest. I am not sure what the situation is, but the Fiscal Commission does not advise the Scottish Government. It has a veto on our forecasts. I will give way to Mr Brown. In all those countries that he has just described, is it not the case that those Fiscal Commissions do not just have Government forecasts to work with, they have independent forecasts from elsewhere? That is the crucial difference. I have just said that I have put into the bill the ability of the commission to prepare such other reports as it considers appropriate. The commission is free to consider what other opinion it happens to bring together, but its assessment of the forecast is consistent with the approach that is taken in all those countries. I fear that I have detained Parliament too long on the question, and I apologise to Mr Mason if I have eroded his time. However, I think that that has been a helpful debate, but I do hope that Parliament looks carefully at what have been substantial contributions that I have made on the negotiating priorities of the Scottish Government, but also the fact that we must operate in a fashion that ensures that we negotiate to protect the public interests of the people of Scotland. Many, many thanks. I now call on John Mason to wind up the debate on behalf of the finance committee. Mr Mason, you have until almost five o'clock. Thank you very much, Presiding Officer. I know in the past you felt bad that you had to cut me short, so I appreciate all the time that I'm having today. I think that we've had quite a sensible debate, and I think that we'd be honest and say that we don't always have sensible debates in this place, but I think that that has been quite good. Before I turn to addressing some of the key points from this afternoon's debate, I will touch on a couple of the main issues in our report, which the convener was not able, through lack of time, to address in his opening speech, which in fact has featured throughout the debate this afternoon. One of the main issues to emerge from the committee's recent work on further fiscal devolution is the need for much greater transparency and accountability in relation to how the block grant is calculated. The Barnett formula is viewed as being opaque, and there are real concerns about the role of the Treasury as the sole decision maker on the block grant, and I will return to this point later. The House of Lords Select Committee on the Barnett formula, which Joan McAlpine referred to, also found that how Barnett works is opaque and that there is inadequate and inaccessible data. It recommended that the Treasury should publish its workings on the operation of the Barnett formula in a single, coherent and consistent publication. However, it was pointed out to us that this recommendation has not been acted upon in a comprehensive manner. The committee recommended that UK Government publishes details of the operation of Barnett and the block grant adjustments arising from further fiscal devolution alongside each UK budget and autumn statement. That is something that we will pursue when we take evidence from the chief secretary to the Treasury following the publication of the fiscal framework. The committee also examined inter-governmental relations, which was touched on by Alex Salmond in his interventions in relation to fiscal issues. Lord Smith highlights the weakness of the inter-governmental relations in his forward to the commission's report and states that, given a more complex devolution settlement, the problem needs to be fixed. The Devolution Further Powers Committee has stated that the current arrangements are not fit for purpose and the Scottish Government has recognised that the IGR machinery requires overhaul. The UK Government has stated that reformed IGR will be underpinned by much stronger and more transparent parliamentary scrutiny, and the committee identified two interrelated difficulties. First, most bilateral relations between the two Governments take place on an ad hoc and informal basis, which leads to a lack of transparency and accountability. As one of our witnesses pointed out, most IGR takes place below the radar, which raises questions about the feasibility of effective parliamentary scrutiny. There is, therefore, a need for a more formal and structured approach, including at least biannual meetings of both the Joint Exchequer Committee and the Finance Minister's Quadrilateral. There also needs to be a much more systematic approach to the reporting of the meetings of the JEC and FMQ. That should include, as a minimum, advance notification of agendas to allow the Parliament to contribute its views, along with a detailed and timious minute of discussions to allow for effective parliamentary scrutiny. The whole area has been touched on by a number of speakers, including especially Jackie Baillie and Gavin Brown. To be fair, we all do accept on the committee that there has to be a balance. Delicate negotiations cannot always be conducted in public, so there is a trade-off between openness that the two Governments can have between each other and the openness that each Government can have with its respective Parliament. Secondly, the formal institutions that do exist are consultative bodies without any co-decision powers. In particular, as I have already said, there are concerns about the role of the UK Treasury as the sole decision maker on fiscal matters. As many speakers today and as many of our witnesses stated, this is not sustainable. There has to be a willingness by the UK Government to work with the devolved institutions in seeking agreement on fiscal matters post-Smith. That will require cultural change, both within the Treasury and at all levels of intergovernmental relations. For example, the statement of funding policy that sets out the current fiscal arrangements for the devolved institutions has not been updated since 2010, despite the devolution of the fiscal powers in the Scotland Act 2012. While the statement is discussed with the devolved Governments, it is agreed between the Chancellor and the Secretary of State for Scotland. As the Deputy First Minister told the committee, this is absurd. As a minimum, the statement of funding policy needs to be agreed between the UK Government and the three devolved institutions. A number of our witnesses suggested the need to establish an independent body such as the Australian Commonwealth Grants Commission to act as arbiter. That was the point that Alex Salmond was making in his interventions. Such a body could be used to resolve disputes on issues such as the block grant adjustment. The committee recommended that consideration should be given to establishing such an independent body. It is worth saying here that this is one of the big differences, in my opinion, between devolution on the one hand and federalism on the other hand. Yesterday we had a very large delegation visiting the Parliament, including meeting yourself, I think, Presiding Officer, from Bavaria. Although the finance committee only had a relatively brief time meeting with them, there are obviously differences in the way that they operate. The fact is that, in places such as Australia and the United States, there is an entrenched written constitution that makes it possible for the two bodies to go either to the courts or an independent arbiter. Clearly, that is not the case in the UK. The question has to be raised as to whether it is ever possible to satisfactorily resolve that without a written constitution. The final area in our report, which I wanted to mention, was the importance of economic and fiscal data for Scotland. A number of our witnesses questioned the availability and quality of that data. There is also a question about access to HMRC data. The committee has requested that the fiscal commission identify specific areas where economic and fiscal data needs are updating and that those are addressed by the Scottish Government as a matter of priority. I would now like to go on to mention some of the issues that have been raised in the debate this afternoon, some of which were already in the remarks that I have made. The first and most obvious one that we expected to come up with this afternoon was the whole question of forecasting. I think that this is perhaps the one that Gavin Brown highlighted most as to whether the fiscal commission should be doing the forecasting or not. It would be fair to say that there was a range of feeling, a range of opinion within the committee itself. I think that we are all agreed that independence is absolutely essential, but various questions were raised which we perhaps did not really get answers to. For example, if the fiscal commission itself was doing the forecasting, who would be checking or looking at independently those forecasts? An example that one member of the committee raised was Audit Scotland, which is quite a good example of an organisation that comments and looks on something from the outside. In my opinion, it is fairly highly respected and has a big impact because the reports often appear in the media, and yet they are not involved in doing the work themselves. That is certainly one valid way of the fiscal commission operating, albeit that around the world there are a number of ways of doing it. Malcolm Chison, in particular, raised the whole question of whether the fiscal commission should be involved in giving advice and improving the system, but did that mean that it lost its independence? I think that we come back to the independence being the key thing, but I do not think that we have an actual answer to that question. Somebody mentioned, I think that Chick Brody mentioned the desire that some people had for a Scottish equivalent of the OBR. One of the things that the committee would feel is that we do not have to copy England in every regard, but that maybe we could do things a little bit differently in our own way. The question of resources also came up at the committee. I do not think that that has been mentioned today, but if we have two parallel forecasting systems, one for the commission and one for the Government, there is clearly a resource issue and a duplication, and I wonder whether that needs to be the case. Richard Baker mentioned that the fiscal commission needs to be resourced. We were concerned about that as a committee, but I think that we are now somewhat reassured that that is now okay. Secondly, this afternoon, we have had quite a lot of discussion about no detriment. Mark McDonald painted a picture where it is almost impossible in practice to work that out at the part 2 stage of no detriment. The example, often given, has been airport passengers who might not go to Newcastle but travelling since