But im proud of the work this government has done to devolve spending powers and real powers to local authorities through the city deals, the devolution of some Decision Making and spending to local enterprise partnerships through the local growth deals, i think these are really good moves. Im delighted that were going to see in Greater Manchester a new Greater Manchester metro there. This is great news. But i dont see the need for a lot of extra tax power, no, im a bit skeptical of it. But who controls the tax . And in reality in england is less than 5 , around 2 of total taxation is actually controlled by local councils. Thats the council tax. Can you have real devolution of powers to local communities unless they have some say over the taxation thats raised in their areas, the rates of it and the amounts . Can the people of england well, if you take away the system works now, what weve tried to do as a government is to make sure theres a better connection between decisions made locally and finance. So if you build homes, then you should get the money that goes with those homes to help provide the infrastructure. If you attract business to your area, you keep a greater share of the Business Rates and also obviously councils are still responsible for setting the level of tax. So i dont accept that theres no connection between the decisions made locally and the money that local councils get. We have moved from the situation years ago where a very large proportion of councils expenditure was raised from what they set. And its a tiny portion. In the last 4 1 2 years moved to a situation where local councils, the consequence of their decisions and the money that flows to them are better linked than they have been. If we take those examples of the new homes bonus, the real the is thats a tiny fraction of the expenditure thats raised and controlled by councils themselves. Our major cities in this country are in a far more constrained position than any of their counterparts in europe who have much more power to determine at local level the taxes they raise and how theyre spent. I mean, isnt that the real freedom and real devolution we should be looking for . Well, look, i think what we should be looking for is what were doing which is city deals which have been welcomed up and down the country by labor leaders, liberal leaders of local authorities, cross Party Everyone says these city deals that have devolved real money and real power the power to raise tax. About fiscal devolution, ha was actually welcomed by the mayor of london, the leaders of the london cross party, the leaders of the core cities who all said to actually enable them to have the powers to dwom growth in their area sto enable cities to grow the way we want them to. This is cross Party Agreement to our report. It just seems the government is the odd one out here resisting. I think youre being a bit churlish. This government has done more than its predecessors to go to white hall and say what money can we find, what powers can we find, over skills, over transport and devolve those to local authorities. If you listen to city leaders of birmingham, manchester, they say it has actually at least transferred powers and money for these city deals to go ahead. Look, if you got a whole different plan for how you want cities to work up cancel tax bills and the rest of it, fine, put it on the table. And no one is saying, Prime Minister, that we dont welcome the transfer of spending powers. Were saying thats only half the story. The leaders of our major cities including the mayor of london have actually concurred with that. In the end, the communities in england, the voters in the cities of england cant be trusted with their own taxation as the people of scotland can. I seem to be at the moment the only party leader who is prepared to say to the people of england, you should have some of the rights in terms of rights over legislation that are being given to scotland and wales. If i might say your party is very happy to have discussions with other parties about devolution in scotland, about devolation in wales, youre happy to have discussion about devolution in, but in england you seem prepared to have any discussion. Order, order. Those remarks belong in a different venue. They dont. I totally dont accept that. Because theyre not an answer to the question. They are an answer to the question. What clyde is saying why dont you give to the cities of england what youre giving to the people of scotland and wales. The answer to that the people who should be giving that are the people of england. I dont accept the argument hes putting. All i would say is if we talk about an agreement in cross party because the report was cross party and again it is the mayor of london as well as the labor leaders of the major cities who are all saying that real devolution has to involve fiscal devolution as well as that of spending powers. Devolving powers to the english mps well return to that. The point i was making. You disagree with it. You have equivalence for england as you do for scotland and wales, something the labor party doesnt accept. We ought to be trying to get crossParty Agreement in england as in wales and scotland. In 2016 scotland will currently retain ten pence of income tax. That may change through the smith process. Its not a new tax, but its a reallocation of existing funding, will mean a reduction in the bloc grant to scotland. Its a balance, as it were. We, all parties, passed this scotland act in the house. And the treasury seemed quite happy with it. Obviously you were quite happy with it. If the hague process and the lord smith process indicate that this could be possible as part of a broader solution on devolution in england, would you, Prime Minister, accept income tax assignment as part of the answers on english devolution . Thats a very good question. I think that is quite difficult. I think that we come to the whole english votes for english laws issue. I think the wrong answer would be an English Parliament and an english executive so that we have a fully federal system. The last thing any of our constituents want is another full of mps. Were trying to make the Westminster Parliament work better so we can address the english again. I dont think assignment is the right answer. For england. For england. I think the right answer is to address the issue of legislative powers which im sure youll come on to. I think we need to address the issue of how we vote on Financial Issues where, for instance, the local government wants this decided for england, then it should probably be english mps who run on that. Then you have the question of how you handle budgets which i think is very difficult. But i would put it like this. If you give the power to the Scottish Parliament to change income tax, then i think you have to have a way in the Westminster Parliament where english mps are able to avoid tax rates being set by members of parliament whose constituent parts were scottish tax rates, put it that way. Either way, people representing england or parts of england to decide how much tax they want to raise in order to spend the money they think needs to be spent. Look, thats a very good question. I think assignment is in a system way not going to go to an English Parliament is quite difficult to deliver. I think there is probably this question of english votes for english votes is soluble. There has been lots of work thats been done over recent years whether by i think these are i dont think to answer your question, i dont think assignment for england would work. So i think were one at not having an English Parliament do this, but it can be done through the existing mechanism op local government and all you would be doing is reducing the block grant to local government and increasing or allowing them to see transparentally sir, i think i got the wrong end of this debate. Devouring all our income tax does go to local government. But it would be open, hon transparent. I thought you were saying should you have an assignment of england for increase tax. But youre saying why dont we have an assignment to local authorities of what they eventually get in local income tack . As right now without any changes in the numbers but actually all you would be doing, since you wouldnt be changing the number for the local authority, theyd still be getting the same amount of money, but people would see this is actually their income tax. Rather like scotland in 2016, there will be no change unless smith changes it. But that scottish people will see that an element of their income tax is retained in their country. And english local government as a whole would see that an element of income tax is retained through the dclg. Im not quite sure i see the point of that. Transparency and you cant change it. Why are we devolving i have to look and think about this, we have complicated issues before us this morning. But the point about scotland is not only is here an assignment of income tax revenue, were saying and here is the power to raise or lower that depending on the decision us want the make in scotland. I dont quite see the point of assigning revenue to an organization unless you give it the power to poulter it in some way. It could be dangerous because if you assign income tax revenue to say Birmingham City council, if the economy has a bad year and income tax revenue goes down then birminghams revenue would be reduced. All im suggesting is you are currently assigning the block grant and then give it to local government. Why dont you just do it directly so that the elector can see that thissy pay an element of their income tax to Fund Local Government in england. Weve done this thing of transparency sending every taxpayer where the money goes and that shows how much goes to local government and how much goes to welfare. I think i favor that over what youre suggesting, but this is a twoway exchange of ideas so ill take that away. Suggestions about aspects of wealthy have laid themselves to being devolved of scotland. Which areas of welfare, do you think should be devolved . Well, its difficult to answer this because were in the middle of the Smith Commission process and i dont want to say things that make my team on smith any more difficult or your team on smith more difficult. I think the basic principle i think is right is and again, it comes back to this how do we try and settle the United Kingdom into a settlement where we feel its working for every part of the country. Work out which parts of welfare are uk wide and about the solidarity of the United Kingdom. The basic state pension for everyone in our United Kingdom, you know you got the right to a basic state pension when you retire and you got the whole of the United Kingdom taxpayers behind you. To me that is something i wouldnt want to see devolved. In the Referendum Campaign and that element of solidarity with the pension. I cant get religious about other aspects of health care. The arguments about benefits and what have you, theres a strong case for saying you can devolve those things into an aggregate of local Decision Making. Which is due to go to universal credit, then that would mean the role of universal credit in scotland would take a different form to that in the rest of the uk. Are you quite relaxed about that . This is where we have to let smith do the work on this issue. But clear ly given that universl credit is taking so many things within it, you cant say anything regarding that is subject to devolution. So if youre saying might it work differently in scotland to the rest of the United Kingdom . Then that would be a consequence of that. I dont want to go any further otherwise ill put stirs in the pond youve mentioned pensions. Anything else about welfare you would see as sacrosanct that really should be a uk wide responsibility . To me the pensions is the most fundamental. But, you know, i think you can make arguments about others both ways. And youll be quite relaxed if your welfare reform agenda sort of slightly derails if some of these aspects get devolved . I hope not. Because i think welfare reform is necessary. Its been successful. A number of people on out of work benefits is radically reduced in scotland as well as in the United Kingdom. People are getting back to work. Numbers are down in the rest of the United Kingdom. And the welfare bill, its important that we get that under proper control and working age welfare is still a very large bill and theyre still i think ways we can better allow people to keep more of the money as they choose then taking it off of them and giving it back in payments. Thats an argument im trying to answer your question by saying to me the pension is the absolute cornerstone. What does it mean to be british . As well as the shared institutions, the shared history, the place in the world, the things we do together. Theres this solidarity aspect in the union which i think is terribly important. That if scotland has a bad year, the whole United Kingdom is behind scotland. And if england has a bad year, that solidarity particularly attracts itself to the argument about pensions. Identify the pending per head on health. £203 higher than in england. That gap could actually get wider. And yet youve told us that reforming it isnt on your horizon. Could you set up how it could possibly be right if youre someone living with heart disease, dementia, arthritis and cancer on one side of the border, there should be so much less of a pot the spend on your health care than there would be if you were the same person living on the other side of the border. I dont think there is so much less of a pot. As i said in answer to earlier questions, if we didnt have the barnett formula, wed have to come up with some other formula that would distribute money according to need, and wed have a debate about that. What we have with barnett is a system where if we spend more in england has a consequence for scotland and that leads to the overall level of Health Spending money that is available in scotland, but, of course, the Scottish Government has a complete power to spend less than that amount of money, more than that amount of money or the same. It has that choice. And again, sorry to repeat myself. But as you increase the amount of tax and revenue, you increase the relevance of the barnett formula. The choice isnt with barnett, it comes geography whether youre living five miles south of the border or north of border. It doesnt fund according to need or deprivation, all those things that have to health seems so unfair. Thats a good point. What barnett determines is how much block grant goes to scotland and how much stays in england. And then its up to the Scottish Government to then decide not only how much to spend overall on health but also how to distribute Health Spending as per need within scotland. And thats a decision they rightly make. Thats a devolved decision, as is Public Health. So of course theres a difference between england and scotland, you have to have a formula between the two nations, but then within the two nations we have the department of health and decide how to spend the money and equivalent authorities in scotland on how to spend their money. I agree. But there needs to be a formula about how its distributed. But isnt the issue with barnett that the size of the cake is so much different. So if you have a much larger cake per head to spend, then thats something you cant get around. Youre always going to have that. And that is purely an accident of geography. The accident barnett, you know, the distribution of money between england and scotland is determined by the barnett formula. But as i said, if you didnt have that formula, youd have to have something else. It would still then be an accident of geography if you were living just one side of the border or the other side of the border as to which pot your money was coming from. So youve got the national distributions, then you have the distributions within each nation, which should be done by the authorities. Of course, but coming back to the fact that if you have a larger cake to distribute in first place and that that is a larger cake per head of population, that its very difficult to make adjustments for that that seem fair across borders, and i think that i think thats really important. Because i know, but one more go at this because i think its important. If scotland and england were exactly the same size and same scale and there was a radically different distribution, it would have more power. I often say to english colleagues who say why dont the barnett formula, is so unfair. If you take all the extra money that scotland gets from the barnett formula and distributed it among the 55 Million People in england, its not a pot of gold. Its not some so i think if you believe in the United Kingdom as passionately as i do, you have to find arrangements that seem fair between the countries. We shouldnt kid our conit is wents that theres a pot of gold called the barnett formula. Its not true. Because there are 55 million english people. Dont overestimate the size of this thing and also recognize that it will shrink in significance as we devolve fiscal powers. I take the point that it will shrink significant. Could you set out to what extent the uk government is actually able to influence Health Policy in scotland . This is really important. A pity there isnt someone from the snp here, wed have a really good fight about that. Although were not here to be political. But very, very clear, the spending, the block grant that scotland gets is dependent on the barnett formula. But once that money has gone to scotland, it is absolutely up t