Mr Redwood’s speech on the Scotland Bill during the committee stage, 30 June 2015

John Redwood (Wokingham) (Con): I think that the Committee wants to implement the spirit and the letter of Smith, and I look forward to hearing the Secretary of State’s response to the detailed arguments advanced by the hon. Member for Banff and Buchan (Dr Whiteford). I think, however, that when we are dealing with a matter as potentially wide-ranging as universal credit, we also need to think about the money, and about how far it is possible to operate a very different welfare system in different parts of a country such as the United Kingdom. What we have seen in the unfolding and dreadful Greek crisis is that, if a country belongs to a currency union but has not brought its benefits system into line, and if there is no proper system of sharing revenues and expenditures throughout the eurozone, that becomes extremely damaging, as it has for the poor Greeks.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): I am sure the right hon. Gentleman is not suggesting that there is an in-line benefits system across Europe. The real problem is austerity. The Greeks were told five years ago that, if they followed austerity measures, their problems would end, but their problems have not ended. They have become worse, because austerity makes things worse. It is nothing to do with welfare; it is to do with austerity.

John Redwood: I think that welfare has quite a lot to do with austerity, and I think that we agree. I think that the policies that have been forced on Greece have been too austere. It is quite wrong to make the Greeks cut public spending when they cannot expand their money supply, expand credit or expand the private sector to create the jobs that they clearly need to create in order to make some success out of the cuts imposed on the public sector.

When, after 2010, we conducted policy as a coalition to bring about recovery in Britain—including Scotland—it worked very well, and it was private sector led. We were able to do that because we had a full range of powers over interest rates, money creation, credit and banking, which a nation that has joined a currency union does not have. That is the Greek tragedy. The Greeks are able to carry out only the public sector part of the EU fix, which is the bit that is austere. They are not able to carry out the private sector-led recovery.

Of course, we are not here to talk about Greece; we are here to talk about our currency union. However, I wanted to make that point because, whereas Greece is having to move away from a position in which it shared only currency and is now discovering that it needs to share a great many other policies with the European Union in order to achieve success, in Scotland things are going in the opposite direction.

We have a currency union—a perfectly good currency union, which is supported on all sides. I believe that Members of the SNP are great fans of the currency union and do not wish Scotland to have an independent currency, but they need to consider this: if they do not want proper independence in the sense of having their own currency, and if the currency is to work in the way in which it has worked in the past, there will have to be some basic standards of welfare that are common across the country, and there will have to be agreed systems of transferring money from rich areas to poor ones. There are rich towns and cities in both Scotland and in England. The rule of our system is that those in areas of high income or relative success pay more tax, and those in, say, towns or counties with a lot of poverty benefit from big transfers.

Mr MacNeil: I almost feel sorry for interrupting the right hon. Gentleman when he is advancing a good argument for the redistribution of wealth through taxation, and has also admitted that austerity is not a good idea. However, I think that the mention of Greece is erroneous. If we are talking about an optimal currency zone, a better parallel would be Germany and the Netherlands. The independence that those countries have from each other is welcomed by SNP Members. I hope that the right hon. Gentleman will go a little further than the enlightened remarks that he has made so far, and will agree with us that Scotland and England should be as independent from each other as Germany and the Netherlands.

John Redwood: I am not prepared to go that far. I think that there can be problems in the euro currency zone between Germany and the Netherlands, because they do not have the full range of common policies that they may need. At present, it appears that the Dutch and German economies are sufficiently synchronised for the arrangement not to cause problems in the Netherlands, but that is clearly not true of Portugal, Spain, Ireland or Greece. The fact that there are more countries that it does not fit than countries that it does fit implies that there is something wrong with the fundamental architecture of the euro. That is why I am anxious for us to bear it in mind, when we are debating the issue of how much welfare discretion there should be, that a common welfare system is normally one of the characteristics of successful currency unions.

Yes, I do believe in redistribution. We all believe in redistribution. We believe that, in a civilised country such as ours, we should tax the rich more and give money to those who need support. We have arguments about how much the amounts should be and about the conditions, but we all believe in transfers, and we all believe that the balance must be right.

When I asked the hon. Member for Banff and Buchan (Dr Whiteford) to say how much more an enlightened Scottish Government would like to give, by means of welfare payments, to tackle immediate problems of low income or poverty, she was not able to tell me. That was a pity, because I took it that her intention, and the purpose of the amendments, was to give the Scottish Executive power to increase benefit levels in comparison with the levels, or the range, of benefits currently on offer in the Union. I did not think that SNP Members were seeking these powers in order to be meaner than the Union Government are proposing to be, and I see them consenting to that. I feel that this debate would be richer and fuller if they shared with us the amount of extra money that they would like to spend.

Patrick Grady (Glasgow North) (SNP): Surely the point is that it is for the Scottish Government, whatever their colour, to decide how they want to use the powers. Perhaps one day a Government of the right hon. Gentleman’s colour will be using them. However, no Government would be able to use any powers that had been vetoed by the Secretary of State.

John Redwood: That brings us back to an important and interesting question. At what point does the transfer of power become destabilising for the currency union and the common transfers that make up our common country? That, surely, is one of the issues that were examined in the referendum, when a majority of Scottish people felt that they wanted to remain in the United Kingdom and in the currency union. Having read and listened to what was said by those who were actively involved in the debate, I suspect that the currency union was rather central to the securing of that vote, and that it was when the parties of the Union said that Scotland should leave the currency as well as the UK, if that was the wish of the Scottish people, that the majority voted to stay in the Union.

Mr MacNeil: I should be fascinated to know the size of the changes in welfare spending that the right hon. Gentleman would find destabilising. The hon. Member for Gainsborough (Sir Edward Leigh) said yesterday:

“the Scottish Parliament spends £37 billion and raises £30 billion”.—[Official Report, 29 June 2015; Vol. 597, c. 1234.]

He described that as “quite responsible”. He also said that the UK raised staggeringly more—£648 billion, an amount that is about 20 times greater—but, of course, the UK also spent a great deal more, with a black hole of £732 billion. Given those figures, and given the difference between the sizes of the states of Scotland and the UK, in terms of both spending and raising powers, just what type of changes does the right hon. Gentleman think would have to hit welfare before it began to destabilise the Union? I suggest that it would be necessary to make a millionaire of each and every unemployed person before that point was reached.

John Redwood: I do not think that it would be necessary to go that far. At present, there is clearly a disproportion between the size of Scotland and that of the rest of the United Kingdom, and, as the hon. Gentleman’s budget figures show, a lot more money is collected elsewhere than in Scotland. That, however, is not the point at issue. [Interruption.] I am not asserting anything; I am just asking a question. We are engaging in a crucial debate on how much welfare power should go to Scotland. I am one of those who agree that some welfare power should go to Scotland in accordance with Smith, but we have to ask how far it goes, and what the consequences might be.

If countries have a common work area and a free movement area, and if they share a language, a labour market and a currency, that arrangement can bring benefits when it has settled down, because it is backed by political union. When we start to unpick the political union, we must ask ourselves at what point that unpicking of that union, or the welfare transfer union, will become damaging. A point will be reached when it does become damaging, because one part of the country will be too attractive, or too unattractive, compared with another part. A single currency area as big as the United Kingdom can work only if there are fair systems for raising money from the rich, wherever they may be in that big area, and giving enough to the poor, wherever they may be.

Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP): Is the right hon. Gentleman aware that parts of the United Kingdom are already more unattractive because of decisions on welfare spending? The bedroom tax is one example. In the highlands, there are some 70 communities with no one or two-bedroom properties on the social register for people to move to. How can it possibly be fair for that principle to apply across the UK, when the people who live there are unable to cope with that heinous tax?

John Redwood: I fully understand the arguments against the spare room subsidy, or the bedroom tax. I understand the politics of it only too well. I do not want to go into my private views now, but it is a matter to be settled within the Union Parliament, and by the Government of the Union, under current powers. It does not make good law to say that if there is a particular benefit that people in Scotland do not like very much, that is the one that we should be able to fix. We need to come up with a settlement for a longer-term period which takes account of the principles.

It is for that reason that I am presuming to spend just a few minutes reminding colleagues that very big principles are involved in this instance. We need to secure the right balance, one that enables Scotland to feel that it can make enough of its own decisions to meet the mood of the majority, but falls short of giving it so much power that the Union’s mechanisms for switching money around do not work. I find it very difficult to make decisions on this Bill without knowing what the financial settlement will be, because it will not work unless there is enough money to make it work, or if England does not think that it is fair to them. Scotland may well find that the financial settlement is not fair to them—I am sure our SNP colleagues will not be shy if that is the case—but England has delivered big majorities for me and many of my colleagues, so we have a mandate and a voice and we need to make sure that the financial settlement that emerges is fair to us. The range of powers that Scotland has will have a bearing on that settlement.

Mr MacNeil: I thank the right hon. Gentleman for giving way; he is being very kind. On welfare, we already share a common language with a country in the common travel area, namely the Republic of Ireland, where people can get up to €188 per week, with extra payable for those who have children. I am not saying that people are going from Liverpool or the north-east of England to a far more advantageous situation in the Republic of Ireland in the common travel area—which they could do—so I think that the right hon. Gentleman’s fears are misplaced. I would almost suggest that his fears are politically motivated and based on wanting to keep powers in Westminster and a deep psychological need for Westminster to over-control aspects of people’s lives around the current UK.

John Redwood: I am afraid that that is a bad example, because it proves my case. Ireland broke from the pound, set up its own currency and then, unfortunately for Ireland, chose the euro, but that was Ireland’s decision and it has had a bumpy ride ever since.

The big difference we need to remind ourselves about for the purposes of this welfare debate is that there is a common currency, so there have to be some limits to the amount of freedom appropriate for welfare benefits. If the SNP wishes to be truly independent and wants an independent currency, I fully understand its position and none of these arguments makes any sense.

I think I have made my point and I hope that Ministers will bear in mind that it is very difficult to come to a conclusion before we know what the financial settlement will be. It is also very important to remember that there is a common work, language and currency area, which means that there has to be some family resemblance in the benefits that are paid.