Whose voice is heard with greater respect on economic questions, Andrew Tyrie’s or Ed Miliband’s? The question occurred to me as I gazed from a turret window in Tyrie’s magnificent office, on the corner of Norman Shaw North, at Miliband’s no less splendid office opposite, on the corner of Norman Shaw South.

Since 2010, Tyrie has chaired the Treasury Select Committee, while Miliband has been Leader of the Opposition. On questions as various as the Libor scandal, the governance of the Bank of England, the need for competition in retail banking, and the troubles at the Co-op Bank, Tyrie’s committee has exercised a powerful influence. Its report published today on Project Verde – the planned sale by Lloyds Banking Group of over 600 branches to the Co-op – makes scathing criticisms both of the way the Co-op was run and of Lord Levene’s claims of undue political interference in the process.

Tyrie himself is recognised as a serious figure: not infallible, for who in the field of economics can claim to be that, but a man implacably determined to do things the right way, however much effort that may involve, and to tell the truth as he sees it without fear or favour. This interview has taken several months to arrange, with Tyrie insistent that he will only talk to ConHome when he has something to say.

It turns out that he has rather a lot to say. He reveals that his committee is going to hold hearings on fiscal devolution to Scotland, and he is himself very anxious to expound his personal view that North Sea revenues should be handed over to the Scots, as part of a series of measures which he hopes will remove “all four grievances” bedevilling the long-term stability of the Union. He also questions whether HS2 is the right way to provide the extra transport infrastructure the country so badly needs.

But we began by discussing economic policy. In these exchanges, Tyrie argues that whoever wins the general election will find dealing with the deficit becomes harder and harder, because so much spending is ring-fenced.

ConHome: “Is it really right for Cameron and Osborne, having stressed deficit reduction so much, now to be pursuing tax cuts?”

Tyrie: “Well they’re not pursuing unfunded tax cuts now. They’re saying that as the Government balances the books there will be tax cuts. I can get you the quotation if you want from David Cameron’s speech at the party conference. You’ll find it says: ‘We are going to balance the books by 2018…And as we do that…We need tax cuts…’ There’s a more interesting political question, which is that these are tax cuts being offered before the headroom for them is available, conditional on the headroom, some years out, and for them to have an effect on economic behaviour those pledges have to be believed.”

ConHome: “Cameron, in his own commentary on this, given during his visit after the conference to Afghanistan, pointed out that there have already been tax cuts in this Parliament: he meant things like raising the basic rate threshold.”

Tyrie: “OK, there are at least two things in play there. There’s the question of the overall tax burden. Then there’s the question of the individual areas that have been subject to cuts. And yes, by taking a lot of people out of tax, many people have had huge tax cuts, hundred per cent tax cuts if they’ve been taken out of tax altogether.”

ConHome: “What on earth are the Government going to cut in order to balance the books?”

Tyrie: “There the Government has said that they’re looking hard at the social security budget. The government and indeed all political parties to varying degrees have ring-fenced large parts of public spending, in particular health, schools and overseas aid. And the more you cut into the rest, the smaller the amount left to cut with each successive wave of cuts, and therefore the higher the percentage cut that the rest will have to bear. At the moment, those three [health, schools and overseas aid] are just under half total spending. They will reach half, on current plans, in a few years’ time, in 2017, and then they will be more than half in the course of the next Parliament. This means that the areas that are not ring-fenced are going to have to find a higher proportion of the spending cuts in each successive round. This is a point that the Treasury Committee has been alerting people to.”

He pointed to paragraph 89 of the Treasury Committee’s 2014 Budget Report, which states: “Ring fencing distorts spending decisions. It also weakens rigorous scrutiny of spending in ring-fenced departments…Each successive round, seeking reductions from an already smaller non-ring-fenced base, will be more difficult than its predecessor.”

Tyrie: “It’s the classic case of what political parties may find it expedient to say, or come under pressure to say, for electoral purposes; and what may be the most appropriate arrangement for running an economy. Because clearly if you want to find savings you would want, as an economist, to have the full range available to you. If you’re looking at it as a politician, you’re thinking well I’d better not tamper with this or that, and indeed all three parties have ring-fenced quite a bit.”

ConHome: “Is politics weighing too heavily in this?”

Tyrie: “Well ring-fencing will become increasingly problematic, whoever is in power.”

ConHome: “So do you think it’ll have to be abandoned in due course?”

Tyrie: “Well it’ll be increasingly problematic.”

ConHome: “When will it become unbearably problematic?”

Tyrie: “Well you can come back and we’ll discuss that over another cup of tea. The extraordinary thing about this recession, from a political perspective, is not how much disagreement there has been between the major parties, but how much agreement. Compare that to 1979-1984. Then there was this great cleavage in British politics over how to run the economy. In this recession the major issue, deficit reduction, has been treated remarkably similarly. Now it’s true that at every stage, Labour have proposed less deficit reduction. But even now it’s the case, as we come up to an election, that, while there is daylight between the parties on deficit reduction, it’s not a chasm. The Institute for Fiscal Studies have come to the conclusion that the difference is worth £29 billion over a Parliament. On reasonable assumptions, Labour would be running a policy £29 billion looser. It is a substantial number, but it is not a chasm between the parties.

“On the other hand, there is a bigger gap opening up both on the balance of tax and spend, and on supply-side policy. Labour have been giving more emphasis in some cases to direct controls on the economy, energy price controls, rent controls.”

One area where Tyrie sees an urgent need for greater spending is on transport: “We have to do something about our creaking infrastructure. Infrastructure has been the pauper at the table in Treasury negotiations. But I’m not at all convinced that HS2 is the right way to spend this money. The economic case for HS2 simply has yet to be made. We need to increase capacity on the West Coast main line, but I think we can do that more cheaply and get a higher return by investing what’s left over in other ways. We need to look at the returns from a wide variety of transport projects. That includes substantial further improvement of the roads. The roads programme is lagging behind the recovery and there is an economic cost to not making these investments, which will grow as congestion rises. The third thing we need to do is we must increase airport capacity.”

Tyrie has strong views on how to preserve the Union. During this interview he revealed that the Treasury Select Committee, which he chairs, “will be holding hearings on the whole fiscal devolution issue in the coming weeks and months, and we’re in the process of putting together who we’ll see.” He does not expect the committee to draw conclusions. But he himself already has a series of recommendations made in a personal capacity, which include handing North Sea revenues to Scotland.

ConHome: “How are we going to preserve the Union?”

Tyrie: “If we’re going to get long-term stability in the Union, we need to address all the parties’ grievances, and there are four: two Scots and two borne by the rest of the UK. The Scots feel we still exercise more control than the UK should over their tax and spend policy. We should err on the side of radicalism. The Strathclyde proposals are the very minimum we should be considering.

“The second great grievance – these are personal views, not those of the Treasury Select Committee – is that the Scots feel that the rest of the UK has benefited at their expense from the oil revenues. Well I think there’s a strong case for saying that the oil revenues from that part, which is most of it, of the continental shelf which can be said to be attached to Scotland, should go to Scotland.”

Tyrie pointed out that “the benefits which the English say the Scots have gained from the Barnett formula broadly match the revenues over the last third of a century – there’s been some very interesting work done on this by Professor Brian Ashcroft.” He turned to “England’s grievance about the Barnett formula”, which since the late 1970s has guaranteed higher public spending per head in Scotland than in England.

Tyrie: “The more fiscal devolution takes place, the less problematic Barnett is. But in the long run, formulae of that kind affect all four nations, and I would support a coming together of the four nations in a long-term commission to study how to allocate resources between them, based on an assessment of need – one which they can all accept. It’s not easy stuff. It might take years. But it can and should be done.

“The fourth grievance is the West Lothian Question. And here everybody is rushing to wrap themselves in the McKay report. But even in its more radical sections, that falls decisively short of a solution. It does not deliver English Votes for English Laws. In order to achieve that we have to go a step further than McKay, for example by implementing the proposal of the Democracy Taskforce led by Ken Clarke, on which Sir George Young and also served. This proposed something more radical than the grand committee of McKay, but much less radical than an English parliament. We have a long tradition of constitutional adaptation in this country, and in my view we should at least try the Clarke proposal, which was, in a nutshell, that only English MPs would vote on Bills that affected only England in Committee and at Report stage, but at Third Reading the Government using non-English or, where appropriate, Welsh votes could vote it down. When academic experts warned us that there would be gridlock, I found the most decisive response came from Ken Clarke: ‘No there won’t, there’ll be politics.’”

ConHome: “Is Number Ten receptive to these proposals?”

Tyrie: “I think Number Ten has an open mind.”

Two other points about the recent Scottish referendum worry Tyrie: “The first is with respect to the conduct of the referendum. There have been numerous allegations of intimidation during the campaign. I’ve no idea of the veracity of these, although a number of them were made by very senior journalists. I think these should be looked at properly, and the right people to look at it are the Scottish Government.”

ConHome: “Well they’re not going to be at all keen on doing that, are they? Since most of the complaints were made against the Yes campaign.”

Tyrie: “They I hope will be above that kind of political consideration and will bear in mind the importance of the integrity of election and referendum processes.”

ConHome: “Could the Scottish Government investigate these allegations with the necessary impartiality?”

Tyrie: “Well they need to appoint an independent person. And the second point is that I’ve been struck by the number of people I’ve met who consider themselves Scottish, and were born in Scotland, many of whom have spent much of their lives in Scotland, who’ve found themselves disenfranchised, because they were living outside Scotland at the time.”

Tyrie wishes to change this so that if you were born in Scotland, you could apply for a vote there: a rule which would apply to any referendum held in one of the nations which make up the United Kingdom. There is a parallel here with the right of UK nationals living abroad to vote in elections.

He offered some final thought about the forthcoming general election: “The election it seems to me will be about probably two major themes. The economy – people’s welfare and sense of well-being – and leadership. There is a possibility of a third issue, which events could throw up, which is if there were to be an escalation of foreign intervention. We’re still living in the shadow of the Iraq intervention and we have still not removed the pernicious neo-conservative mantras from the blood stream of British politics. The doctrines of regime change and pre-emptive action are extremely destabilising to international order. The military intervention now in progress is part of the clear-up operation from ‘the shaking of the kaleidoscope’ as Tony Blair called it, the destabilisation and disorder in the middle east which has come with the 2003 war.”

ConHome: “What about immigration?”

Tyrie: “I think there’ll be a lot of talking about it. I’m not sure there’ll be quite so much voting.”