Hamish Macdonell

Who won in the fiscal framework battle?

It wasn’t quite David Cameron and his down-to-the-wire talks with the EU leaders, but it’s as close as we get in Scotland.

For the last eight months, the Scottish and UK governments have been trying to secure agreement over the financial settlement which will underpin the new tranche of powers to come to Holyrood – the so-called ‘fiscal framework’. After weeks of torpor and inaction suddenly, this afternoon, we got a breakthrough.

Nicola Sturgeon announced the deal to the Scottish Parliament this afternoon, confirming that everything had come down to one crucial, central point. The Scottish Government favoured one model to work out Scotland’s funding from the Treasury for the future and the UK Government favoured another.

The last-minute offer tabled by the Treasury this afternoon would see the Treasury model being used but with the UK Government agreeing to reimburse the Scottish Government for any money it would have received, had its model been in place. The Treasury has also offered a review of the funding formula after five years.

But – and this was the crucial point – if there was no agreement on the way forward after that 2022 review, the funding formula would continue to be based on the Treasury’s model.

It was this last piece of the jigsaw that the Scottish Government objected to. ‘Why would we sign up to that?’ asked the source.

The Scottish Government wanted the review to be neutral and with neither of the models to be favoured if the review fails to reach agreement.

It is understood that the final breakthrough came when George Osborne agreed to this final point in a telephone conversation with the First Minister.

With that in place, the fiscal framework was sealed, the Scotland Bill was saved and Scotland was then poised to get all...

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