David Cameron said the agreement, reached after months of talks between the UK and Scottish governments, marks a “significant day for devolution”.
He was speaking after Scottish First Minister Nicola Sturgeon confirmed to Holyrood there is now an agreement in principal over how Scotland will be funded when new powers over tax and welfare are transferred to MSPs.
Crucially, she said it “allows the powers in the Scotland Bill to be delivered”.
Negotiations between the Treasury and the SNP administration in Edinburgh had appeared to be in deadlock, with both sides struggling on the key issue of how the block grant Holyrood receives from Westminster should be adjusted once new income tax powers are devolved as part of the Scotland Bill.
The Scottish Government had threatened to veto the Scotland Bill if it believed the fiscal framework – the financial arrangements underpinning the legislation – was not fair to Scotland.
But Ms Sturgeon announced that following a telephone conversation with Chancellor George Osborne, “there is now an agreement in place in principle that I believe we can recommend to Parliament”.
She added that transitional arrangements mean “this deal will not allow a single pound or even a penny to be taken from the Scottish Government budget” up until March 2022, when the method for adjustments will be reviewed.
The agreement comes after 10 rounds of talks between the Scottish and UK governments involving Ms Sturgeon, Mr Cameron, Mr Osborne, Scottish Deputy First Minister John Swinney and Chief Secretary to the Treasury Greg Hands.
Mr Cameron said afterwards: “This is a significant day for devolution. The agreement is a major milestone in delivering a powerhouse parliament for Scotland and will enable us to meet our commitment to make Holyrood one of the most powerful devolved parliaments in the world.
“We have reached a deal which is fair to Scotland and fair to the whole of the UK. It delivers accountability to the Scottish Government and transforms politics in Scotland.
“It means May’s Holyrood elections can be fought on the issues which matter most – how the Scottish Government should use these extensive new powers, rather than what they are.”
The Treasury will give Scotland £200 million to help with set-up costs and the administration of new tax and welfare powers that are to be devolved to Holyrood.
Ms Sturgeon said there had been “give and take” between Holyrood and Westminster during the talks, telling MSPs: “We did not get everything we wanted.
“But when we began in June last year the Deputy First Minister faced a proposal from the Treasury which would have delivered £7 billion of detriment to the Scottish budget over the next 10 years.”
She added: “This deal will ensure the funding for Scotland cannot be changed without the Scottish Government’s agreement. It protects the Barnett formula and it allows the powers in the Scotland Bill to be delivered.”
Scottish Secretary David Mundell said afterwards: “I am very pleased that wehave agreed a deal on the fiscal framework with the Scottish Government. It hasbeen a long negotiation, but we have got there in the end.
“I have always been confident that we would, because I know Scotland’s two governments can work together to reach agreements which are in the best interests of Scotland and the whole of the United Kingdom. It shows that we are fulfilling our commitments and making devolution in Scotland work – just as the Scottish people have said they want.
“This is a genuinely significant moment in the Scottish Parliament’s history, as this agreement will enable it to take on unprecedented new powers and responsibilities, and to become more accountable. The debate is now truly about how the new powers will be used to improve the lives of people in Scotland.”
Meanwhile Mr Osborne said the deal had “secured a stronger Scotland in a stronger UK”, claiming the agreements “are fair to Scotland and fair to taxpayers in the rest of the UK”.
Scottish Conservative leader Ruth Davidson said with the deal on the fiscal framework now in place it “throws a major challenge to the SNP”.
She said the nationalists’ tactics of “grudge and grievance will no longer wash”, adding that the new powers would mean “on tax, on welfare, and on our public services, the buck stops with them”.
She pledged: “For my part, I stand ready to provide the strong, principled opposition to the SNP that is now required more than ever as these new powers come to Holyrood.
“We will protect family finances and we will demand that the SNP uses these powers to take Scotland forward – not back to yet another referendum.”
Scottish Labour leader Kezia Dugdale hailed the agreement as an “historic moment for Scotland”, adding: “Scottish politics will never be the same again thanks to these new powers. We have entered a new and exciting era of devolution.”
She said: “Now that an agreement has been reached every single political party in Scotland must focus on what we can do with these major new powers. The opportunities they provide are huge – we can use the new tax and welfare powers to bring an end to Tory austerity and build a fairer country.
“I want to use the new tax powers to make fairer choices. That means we can ask the richest few to pay a little bit more so we can invest in education and help first time buyers double their deposit by not implementing the SNP’s planned airline ticket tax cut.”
But Scottish Liberal Democrat leader Willie Rennie said the two governments “have not agreed a good long-term deal for Scotland”.
He stated: “The First Minister has still been unable to explain why she has agreed to the Treasury funding model given she has bitterly opposed it for months.
“Cementing the Treasury funding model into the agreement for six years will make it hard to get the Treasury out in the seventh year.”
Lord Smith of Kelvin, whose commission drew up the initial cross-partyblueprint for devolving more powers to Scotland, said: “Today’s agreementbetween the Scottish and UK governments sees the recommendations of the SmithCommission delivered in full.
“The next term of Scottish parliamentarians will be debating and taking decisions over large parts of Scotland’s tax and welfare policy. I believe this will be transformational for our Parliament.
“There should be no doubt that this was a highly complex package of measures to agree. It is difficult to imagine a bigger test of inter-governmental relationships and while it was obviously a very tough negotiation, what matters is that an agreement was reached. This provides an excellent basis for constructive engagement between the governments long into the future.
“When the Smith Agreement was passed to the Prime Minister and First Minister, both gave their word that they would deliver it into law – they have met that promise in full.
“I pay particular tribute to the Deputy First Minister and Chancellor for reaching agreement on the final part of a historic package of new powers.”
Enjoy the convenience of having The Sunday Post delivered as a digital ePaper straight to your smartphone, tablet or computer.
Subscribe for only £5.49 a month and enjoy all the benefits of the printed paper as a digital replica.Subscribe