MSPs on the Scottish Parliament’s Finance Committee have said that the Treasury’s current position as “sole decision maker on fiscal matters is not sustainable”.
A report from the committee, which has been examining the impact of further devolution to Scotland, argued that in the wake of the Smith Commission recommendations there “has to be willingness to work with the devolved institutions in seeking agreement on fiscal matters”.
Updating the fiscal framework - which sets out the rules and institutions that underpin tax and spending decisions - will be key to the effectiveness of further devolution, the committee said.
MSPs said while policies north of the border should be consistent with the UK’s overall fiscal plans, the Scottish Government should still be free to pursue its own distinctive measures.
“While Scotland”s revised fiscal framework needs to be consistent with the UK’s overall fiscal framework this does not mean that they need to mirror each other, the committee report said.
“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.”
The committee also said that there must be a “greater willingness within the Treasury” to reach agreement with devolved administrations on how the block grant is arrived at.
The report said: “While the Scottish Government is consulted on the operation of the Barnett formula, the Treasury has the sole decision-making role.
“The committee recommends that there needs to be a greater willingness within the Treasury to seek agreement with the devolved institutions on the methodology and operation of the funding model.”
The MSPs added: “There has to be a willingness to work with the devolved institutions in seeking agreement on fiscal matters post-Smith. This will require cultural change both within the Treasury and at all levels of inter-governmental relations. There needs to be a culture of genuine respect between the various governments within the UK.”
Committee convener Kenneth Gibson said: “Our report makes clear that progress on these matters will only be made if the UK Government - the Treasury in particular - actively demonstrates a willingness to work with the Scottish Parliament and Government in seeking agreement on a revised fiscal framework.”
MSPs also argued there must be “meaningful consultation with both the UK and Scottish parliaments” on the new fiscal arrangements, saying it was “simply not appropriate” for these to be decided by the two governments.
Mr Gibson said: “There needs to be an openness and transparency in intergovernmental discussions and there must be meaningful consultation with both the Scottish and UK Parliaments. This process must not simply be left to the Governments to agree.”