House of Lords

Thursday 30th January 2014 Lords Chamber

Thursday, 30 January 2014.

11:00

Prayers—read by the Lord Bishop of Leicester.

Royal Assent

Thursday 30th January 2014 Lords Chamber

11:07

The following Acts were given Royal Assent:

Mesothelioma Act

Local Audit and Accountability Act

Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act

European Union (Approvals) Act

Hertfordshire County Council (Filming on Highways) Act

Cyclists: Safety

Thursday 30th January 2014 Lords Chamber

Question

11:07

Asked by

[Lord Bourne of Aberystwyth]

To ask Her Majesty’s Government whether they propose to take action to promote the safety of cyclists.

[Lord Popat (Con)]

My Lords, the Government take all road safety, including cycle safety, very seriously and have committed £278 million of funding directly for cycling. Furthermore, the department has made it considerably easier for local authorities to implement a 20 miles per hour speed limit, Trixi mirrors, new designs of advanced stop lines and other highway measures to support cycle safety. We also continue to work with the haulage industry to drive up vehicle standards and awareness of vulnerable road users.

[Lord Bourne of Aberystwyth (Con)]

I thank the Minister very much for that response, which is very encouraging. Many of us wish to encourage safe cycling. In that context, is the Minister in a position to seek to secure a review of all the measures relating to cycling safety—restrictions on heavy goods vehicles, cycling lanes, the 20 mile an hour zone that he mentioned and the vexed question of cycling helmets—and involve in that review cycling organisations, motoring organisations and other relevant bodies?

[Lord Popat (Con)]

My Lords, we are continuously reviewing a number of safety measures. On cycle helmets, this week I had a brief discussion with the Secretary of State in the presence of our Minister for cycling, my honourable friend Robert Goodwill. Our approach is non-legislative—we do not want to make cycle helmets compulsory. We would rather encourage and support people to wear helmets for safety. It is not good to burden cyclists. We would rather see more cyclists on our roads and cycling safely.

[Lord Berkeley (Lab)]

My Lords, I was pleased to hear the Minister's comments on cycle helmets, because that is not the issue that needs to be addressed. He said that he was encouraging local authorities to spend more money on cycling. Will he confirm that there will be some ring-fenced money for cycling, as local authorities’ resources are very stretched? Will he further confirm that much of that money will be put towards better use of road space for separate cycle lanes so that cyclists can feel safe in respect of other road users?

[Lord Popat]

My Lords, the investment in cycling safety in any area depends on the local authority, but we have allocated £278 million of funding and are spending double the amount in this Parliament compared to the last one. Local authorities make their own assessment of dangerous cycling spots in their areas and can apply for cycle safety funds. With regard to cycle lanes, new roads are designed in such a way as to take cyclist safety and cycle lanes into account.

[Lord Bradshaw (LD)]

Will my noble friend give us some indication of how best practice in the world of cycling is actually applied? Do the Government encourage cycling? What do they do, or is it left to local authorities and charities?

[Lord Popat]

My Lords, we need to see more cycling and safer cycling. Hence, we have allocated funds for local authorities to make it as safe as possible. We encourage cycling and want to see more cyclists on our roads. It is the best and cheapest means of transport.

[Lord Aberdare (CB)]

My Lords, as both a cyclist and a motorist, I am often struck by the number of cyclists riding with no lights after dark, creating a hazard both for themselves and for others. What educational or other steps can the Minister take to improve the standards of cycling behaviour and to ensure that, where necessary, the law is enforced equally for cyclists and motorists?

[Lord Popat]

My Lords, lately there have been conflicts and hostility between the cyclist and the motorist. The Government are doing everything possible, along with the Mayor of London and Transport for London. We have launched a THINK! campaign for motorists and cyclists to eliminate those problems.

[Baroness Sharples (Con)]

Does my noble friend agree that the safety of pedestrians is equally important?

[Lord Popat]

My Lords, pedestrians should expect to be able to use the pavement and our roads safely, without any collision or confrontation with cyclists. Where cyclists cause problems, it is a matter for the police to take the necessary action. We want to see safe cycling, not dangerous cycling. The noble Baroness raises a very important point about pedestrians, who do sometimes have problems with cyclists, and the Government are taking the necessary action through the police to make sure that bad, dangerous or careless cycling on our pavements is prohibited.

[Lord Davies of Oldham (Lab)]

My Lords, the greatest danger to cyclists, particularly in our towns, comes from heavy goods vehicles, which are responsible for 20% of cycling deaths, and a much greater percentage in London. Will the Minister note that the Mayor of London is at present berating the Government for their failure to accelerate actions in Europe to make European-wide provision for safety in terms of heavy good vehicles having the necessary equipment to see cyclists more readily? Will the Minister also join in Labour’s campaign to make cycling safe by addressing problems with heavy goods vehicles?

[Lord Popat]

My Lords, the differences between the Mayor of London and the Government on heavy goods vehicles cropped up this morning in the papers. I do not have a briefing on that subject but would be very happy to write to the noble Lord. We work continuously with a number of stakeholders, including the haulage industry, to make heavy goods vehicles safer. We have introduced Trixi mirrors and passenger left-hand side mirrors, and we will introduce sidebars for lorries. A number of other measures have also been taken, including written and oral tests for haulage drivers. However, we have to wait for what we call the cycle delivery plan, which will take a number of factors into account and is due out in autumn this year.

[Lord Geddes (Con)]

My Lords, following up the supplementary question asked by the noble Lord, Lord Aberdare, does my noble friend agree that one way of improving cycling safety is to persuade cyclists to obey the law of the land?

[Lord Popat]

I thoroughly agree with my noble friend.

NHS Property Services Ltd

Thursday 30th January 2014 Lords Chamber

Question

11:15

Asked by

[Lord Warner]

To ask Her Majesty’s Government what assessment they have made of the performance of NHS Property Services Ltd in disposing of surplus properties and operating within their working capital.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, NHS Property Services is on target to dispose of 97 properties by 31 March 2014 and a further 100 properties by 31 March 2015. The department has provided the company with a £350 million flexible working capital loan facility, of which £271 million had been drawn down as at 27 January 2014. This working capital support is in line with the department’s expectations for a start-up company of this size and complexity.

[Lord Warner (Lab)]

I thank the Minister for his Answer, but what action has been taken to improve the performance of this company in controlling its costs? What action has been taken to reduce its running costs, given the large number of staff that it inherited, and what action has been taken to improve the professional competence of those staff and to collect bad debts, which have been a rising problem for this organisation?

[Earl Howe]

My Lords, on administration costs, the company is already reviewing the way in which its strategic asset management and facilities management functions are structured. It is probably inevitable that the consolidation of 161 PCT and strategic health authority estates into one will throw up duplication, overlap and operational policies that conflict. These all need to be rationalised and a commercial ethos introduced. It is vital that the skills are imported into the organisation to match that challenge.

[Lord Mawson (CB)]

My Lords, for the past six years, we in St Paul’s Way in Tower Hamlets have been pursuing the Government’s policy of integration in health services, bringing together a school, housing, health and community services centre on one street. I was asked to lead this project following a murder and considerable racial violence on this housing estate. The overall transformation project has been very successful, and I must declare an interest. However, the primary care premises elements have stalled and we are going backwards in terms of dental outreach facility. Can the Minister explain how NHS England engages with NHS Property Services, the CCG, local GPs and local partners to deliver in an effective and timely manner the kind of innovative and integrated premises we all agree are essential?

[Earl Howe]

My Lords, I pay tribute to the work that the noble Lord does. However, it is important to understand that the decision as to whether a property in the NHS Property Services portfolio is surplus to requirements and should therefore be sold resides with the commissioners; that is, NHS England and clinical commissioning groups. It is up to the commissioners how they wish to utilise the estate.

[Lord Brabazon of Tara (Con)]

Is my noble friend aware of the situation of Putney Hospital, which closed about 15 years ago and has only recently been sold to Wandsworth Borough Council, but is still undeveloped?

[Earl Howe]

My Lords, I am not aware of the detail of that particular case, but I will gladly write to my noble friend about it.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I refer noble Lords to my interests in the register; I should have done that yesterday on another health Question, for which I apologise to the House. Can the Minister confirm that the chairman of this organisation resigned early, that capital money was raided to cover a revenue shortfall and that, only months after the organisation formally started, an investigation has been mounted by the National Audit Office? Given that the shares in this company are owned by Ministers, will Ministers take responsibility and can the noble Earl confirm that this was forecast in the NHS risk register, which the Government have not yet published?

[Earl Howe]

My Lords, the noble Lord has painted rather a black picture of the company, which we believe has got off to an extremely good start, contrary to his impression. The company’s former chair asked to step down six months earlier than planned because the company had completed the transition phase early, and it was agreed that a chair with a different skill set was needed to oversee the rationalisation of the company.

As regards the company’s cash needs, we made £350 million available to the company as a working capital loan. That was planned some six months ago and was needed in large part due to the slow payment of invoices by the company’s customers, many of whom were themselves new organisations set up as part of the reforms, so it is not altogether surprising that cash flow initially was slow, but the situation is improving.

[Lord Colwyn (Con)]

My Lords, can my noble friend tell us what efficiencies and successes NHS Property Services has actually made?

[Earl Howe]

My Lords, it has been a good start for the company. It has generated £22 million from sales of surplus assets and savings of £2 million a year on the running costs of those disposed properties. The company is also harnessing economies of scale—for example, savings to date of £1.2 million by standardising the procurement of electricity across the whole estate. The company is now exploring how to make savings across other utilities and services, such as legal services.

[Lord Turnberg (Lab)]

My Lords, following the response to my noble friend Lord Hunt’s question, can the noble Earl tell us why the National Audit Office has decided to conduct an investigation so soon after the establishment of this organisation?

[Earl Howe]

My Lords, the National Audit Office is indeed looking at the company—only to assure us and itself that the company is properly organised and structured. We welcome that, as does the company. There was no sinister purpose or concern underlying that process; it is perfectly normal and natural.

[Baroness Manzoor (LD)]

My Lords, can the Minister confirm best value for money on all properties sold and that there has been proper consultation with local organisations on all NHS estates?

[Earl Howe]

My Lords, I can assure my noble friend of that. The company ensures best value by marketing through an arm’s-length open market process, which ensures that the market value is achieved in a sale. Where necessary, the sale price is supported by a district valuer or other third-party independent valuation.

[Baroness O'Cathain (Con)]

My Lords, I ask my noble friend: when people are appointing chairmen to such organisations, could they look at their skill sets in advance rather than getting rid of them because of their lack of skill sets?

[Earl Howe]

My Lords, it is important to understand that the chairman who has stepped down had a very good set of skill sets, but it is not the skill set that we now need to take the company forward. The task at the beginning was to consolidate a very complex portfolio of properties, and that was done very successfully. The task now is different: it is to manage those properties effectively and to get maximum value for the taxpayer for the properties that are sold.

Broadband and Mobile Coverage

Thursday 30th January 2014 Lords Chamber

Question

11:23

Asked by

[Baroness Neville-Rolfe]

To ask Her Majesty’s Government what progress is being made with the rollout of broadband and mobile coverage across the United Kingdom.

[Lord Gardiner of Kimble (Con)]

In October 2013, superfast broadband was available to 73% of premises—up from 46% in 2010. By the summer of this year, an additional 40,000 premises a week will have superfast broadband available to them. The aim is to reach 95% of premises by 2017. More than 99% of UK premises are covered by one or more mobile networks. All four mobile network operators are rapidly rolling out 4G mobile broadband.

[Baroness Neville-Rolfe (Con)]

My Lords, truly comprehensive broadband offers a unique opportunity to create a vibrant national market by increasing competition and access for small businesses and consumers and by helping economic development. I thank my noble friend for his answer, but can we be more ambitious and set a target date of, say, 2015, for achieving comprehensive broadband coverage and eliminating those “not spots”—a rather ugly new term—throughout the whole of the UK?

[Lord Gardiner of Kimble]

My Lords, the UK broadband impact study found late last year that for every £1 the Government invest in broadband, the UK economy will benefit by £20. The broadband infrastructure will have a very positive impact on the growth of the economy and across communities within the country. Indeed we are ambitious. The Government have invested a further £250 million, in addition to the initial £530 million and, even more recently, £10 million in a scheme to reach out to the most remote areas.

[Lord Winston (Lab)]

My Lords, I declare as an interest my employment at Imperial College and my connection with the outreach educational facilities at the college. In proceeding with all alacrity with broadband, will the Minister take into account the huge need for educational fast transfer, which is going to be of growing importance in education? Increasingly, young people use the web much more than they use television, and it will be an important educational facility, both for universities and indeed for schools.

[Lord Gardiner of Kimble]

I entirely agree with the noble Lord. The education sector is one where superfast broadband is going to be very important indeed. I am very pleased to report that 43 of the 44 projects involved in the rural broadband scheme are now in delivery. One more will be signed up shortly in Northern Ireland. This is all about rolling out as much as we can, to as much of the country as possible, as fast as possible, so that all communities and all age groups can benefit from this advance.

[Lord Avebury (LD)]

My Lords, has my noble friend seen the report that nearly half a million children of school age have no access to broadband whatever and that this is affecting their achievement in education? What steps will the Government take to deal with this appalling phenomenon?

[Lord Gardiner of Kimble]

I very much hope that if my noble friend were posing this question in 18 months’ time, we would have a different result. Particularly the rural broadband scheme which is reaching out to remote areas, but also the super-connection for the 22 cities, is all about providing to schools and businesses the opportunity to take advantage of the internet.

[Baroness Jones of Whitchurch (Lab)]

My Lords, the Minister will know that there has recently been a damning NAO report which identified that, far from promoting market competition, BT is now expected to win all of the 44 contracts on broadband. What are the Government doing to intervene on this issue, given that the NAO report also says that it does not have a strong assurance that the costs, the take-up assumptions and the extent of contingency contained in the BT bids are reasonable? What is being done to get value for money for the taxpayer on this issue?

[Lord Gardiner of Kimble]

My Lords, I should first declare that I own a few BT shares—I emphasise, a very few.

BT is in that situation because Openreach has so much of the infrastructure. There are arrangements and regulatory environment requirements through Ofcom on price and also on other operators using BT property. There are very important safeguards for the consumer through Ofcom, and that is why we are in the right position.

[Lord Inglewood (Con)]

My Lords, while welcoming the extra money that my noble friend has explained to the House, will he tell the House whether the additional rollout will take place in a more flexible and competitive manner than has hitherto characterised the rollout thus far?

[Lord Gardiner of Kimble]

My Lords, I certainly think that the rollout is gathering pace in those parts of the country that have not had the advantage that other parts have. We certainly want to ensure that the Government’s investment, and indeed the commercial investment, is sufficiently flexible that as many people as possible gain advantage as soon as possible.

[Lord Berkeley (Lab)]

Will the Minister say when Cornwall and the Isles of Scilly will get this? I thought they were a priority area. They are a rural area and they should be a priority, but the Scilly Isles do not even have 3G yet.

[Lord Gardiner of Kimble]

That is very interesting. I will look at it in even more detail because, funnily enough, I was meeting some people from Cornwall only two days ago, who said that in fact Cornwall has been very successful and that there is quite a good degree of capacity there because it has a great tourist interest. There has been a great increase in the number of visitors, and we need to accommodate that. However, I will look into that because one of the assurances I had was that Cornwall and the Isles of Scilly were well provided for.

[Lord Stoneham of Droxford (LD)]

Is my noble friend aware that in many rural communities, from Droxford in Hampshire to Harbottle in Northumberland, there is great uncertainty about their potential access to speedier broadband and the speeds that they will experience in future? Can he tell us what further plans the Government have to improve communications with these communities, and whether they have the funding in place to reach 90% of households by 2015?

[Lord Gardiner of Kimble]

My Lords, this is technical, but we believe that virtually all homes and businesses will have access to standard broadband by the end of the current intervention, which is next year. That means being able to use iPlayer and e-mail, and having normal transactions. Certainly, the rural broadband scheme is to ensure that all parts of the country, from the Highlands and Islands to the Isles of Scilly, will all gain the benefit of it.

Employment: Private Sector Jobs

Thursday 30th January 2014 Lords Chamber

Question

11:31

Asked by

[Lord Harrison]

To ask Her Majesty’s Government, in the light of the report by the Centre for Cities in respect of the proportion of private sector jobs created in London, what steps they are taking to rebalance the economy across the United Kingdom.

[Lord Newby (LD)]

My Lords, the Government are taking a number of steps to ensure that the recovery is balanced across the UK through local enterprise partnerships, enterprise zones, city deals and growth deals. The latest figures show an increase in private sector employment of 928,000 outside London over the past three years, compared to 307,000 in London over the same period, so nearly 80% of all private sector employment growth has come from outside London.

[Lord Harrison (Lab)]

My Lords, according to the recent report, most of the new jobs have come from London and the south-east. Does the Minister share my concern about that? Does he understand that concern against a background of declining exports, a parlous balance of payments situation and the matter of small businesses having access to finance in order to grow jobs still not having been resolved? How will we rebalance the economy and how and when will we know that the economy has indeed been rebalanced?

[Lord Newby]

My Lords, there are a number of measures but one of the key things is what is happening to employment and unemployment regionally. In the past quarter, unemployment fell more quickly in Scotland, Wales and four English regions than it did in London. There is big growth in a number of regions outside London, which is extremely welcome.

[Lord Howell of Guildford (Con)]

My Lords, when it comes to rebalancing, is my noble friend aware that more than 40% of our export earnings come from the services sector, at which we are extremely good? Manufacturing is doing extremely well but services are doing very much better. Can he assure us that the Government will do everything to reinforce and encourage this sector, particularly in international dealings in an increasingly digitalised and networked world where services are the main growth area?

[Lord Newby]

Absolutely, my Lords, and in a number of the major trade delegations that the Prime Minister and other senior Ministers have undertaken in recent times, promoting services has been uppermost in their minds. One of the great strengths of the UK in terms of professional services is that the standards we set here through bodies such as those for chartered accountants and the legal bodies have a worldwide reputation, which underpins the credibility of British companies seeking to sell their services internationally.

[Baroness Armstrong of Hill Top (Lab)]

My Lords, does the Minister accept that in the north-east there is still a long way to go? Last week’s figures on unemployment showed that the north-east is the region where unemployment has not gone down. The Government’s action in local government finance—putting more money into the least deprived areas and taking it from the most deprived areas—means that the most deprived are seeing cuts of 25% in the services that are critical for those who are suffering from the poor economic position. We do not moan in the north-east—we are proud of it—but it is about time the Government recognised that there are still challenges and that they have a responsibility.

[Lord Newby]

My Lords, the Government recognise that there are still challenges and that we have a responsibility. That is why, for example, the Government have concluded city deals with Newcastle and Tees Valley and are helping those cities grow and why the industrial strategy around the automotive industry has had such a beneficial effect on Nissan’s employment in Sunderland.

[Lord Shipley (LD)]

My Lords, is the Minister aware that the inward investment arm of UKTI has no regional targets? Would it not be a good idea if it did? Otherwise it can fulfil its national targets by bringing inward investment into London and the south-east.

[Lord Newby]

My Lords, that is an interesting idea, and I will pass it on to colleagues in BIS. While in the past year there was a 22% rise in inward investment overall, which bucked a downward trend internationally, there was an increase in FDI of 191% in Wales and 41% in Northern Ireland, so it is not the case that all benefit of growth and inward investment is coming to London and the south-east.

[Baroness Donaghy (Lab)]

My Lords, as the Minister knows, earnings are not keeping up with prices and the housing stock in London is not keeping up with demand. How will his Government protect the losers in this equation who far outnumber the winners?

[Lord Newby]

My Lords, I do not agree with that basic proposition. I do not think the losers far outnumber the winners. I remind the noble Baroness that there was an increase in employment of some 450,000 in the past 12 months. All those people are winners. Many people on modest incomes have benefited by several hundred pounds as a result of the increase in the income tax threshold. There are very many winners already, and as the economy continues to grow, there will be a lot more.

[Lord Hamilton of Epsom (Con)]

Does my noble friend accept that past economic recoveries have always started in London and the south-east and they then spread to the rest of the country? The noble Lord, Lord Harrison, and other noble Lords opposite should be patient. I am sure the benefits will come through by May next year.

[Lord Newby]

My Lords, one of the interesting things that came out of the cities report, to which the noble Lord, Lord Harrison referred, was the beneficial effect that London has on the rest of the country. For example, that report shows that in Southampton in the period 2008-12 local firms cut their employment by 7% but London-based firms investing in Southampton increased their employment by 24%. That is the way in which a successful London helps the rest of the country and why the Centre for Cities came to the conclusion that constraining London’s growth would harm the UK economy generally.

Business of the House

Thursday 30th January 2014 Lords Chamber

Timing of Debates

11:38

Moved by

[Lord Hill of Oareford]

That the debate on the Motion in the name of Lord Lang of Monkton set down for today shall be limited to 6 hours.

Motion agreed.

Scotland: Independence Referendum

Thursday 30th January 2014 Lords Chamber

Motion to Take Note

11:38

Moved by

[Lord Lang of Monkton]

That this House takes note of the implications for the United Kingdom of the forthcoming Scottish independence referendum.

[Lord Lang of Monkton (Con)]

My Lords, I am honoured and delighted to be able to introduce this debate on the implications for the United Kingdom of the Scottish independence referendum. I feel strongly that the question of independence for Scotland raises issues that should involve the whole United Kingdom. I welcome the number and range of interests across the House, and from across the nation, that the debate has attracted, in particular the participation, with her maiden speech, of my noble friend Lady Goldie. The House will look forward to what she has to say.

Although the referendum is now less than eight months away, I hope that today’s debate may cast a broader and more illuminating light on what has thus far been a deeply introspective debate within Scotland. Alas, PG Wodehouse gave us the English view:

“It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine”.

We Scots have to work on that.

Scotland, for all its capacity for complaint has, over the centuries, been a full—indeed, more than full—partner in the magnificent success story of our partnership of nations and, I believe, has many friends among the other partners. With Northern Ireland and Wales, there is a kind of fellow feeling against the might of England, yet over 800,000 expatriate Scots live in England and 400,000 English people live in Scotland. It is a source of great regret that so many expatriate Scots are disenfranchised in this referendum. They may think of themselves as British and take pride in that and in their Scottish antecedents, yet north and south of the border, within two generations, countless numbers of Britons could become foreigners to their kith and kin.

For generations, Scots and English have lived alongside each other, sharing a British heritage. They fought shoulder to shoulder in the battles of the past three centuries and still serve together today; we all take pride in that. Together, they built and administered the empire before turning it into the Commonwealth, with Scots very much to the fore. Both countries are woven into the fabric of the United Kingdom. Must they now, both Scotland and England, disavow that shared history? Would that not dishonour the sacrifices, made in common cause, of those who died for the United Kingdom, a nation now to be cut in two if the present generation of Scottish nationalists have their way? I earnestly hope not.

There is nothing positive about an independence campaign that would destroy so much. However deep-rooted the fellow feeling and the sometimes grudging respect with which Scotland has jogged along within the UK, I believe that it would evaporate rapidly after a yes vote. Notwithstanding the rose-tinted spectacles of its present Government, Scotland would become a competitor of England, not a compatriot. The Governments of the remaining UK and its devolved Administrations would be obliged, regardless of sentiment or blood ties, to fight their own corners, fiercely if necessary, in the ensuing relationship. It would risk becoming like an increasingly hostile divorce, in which the parties continued to live next door to each other afterwards.

Where would that leave Wales and Northern Ireland? No wonder we hear that they feel worried and unsettled. If Scotland leaves, the population of the non-English part of the United Kingdom would be reduced by over half. The Principality and the Province would begin to look like mere add-ons to an overweening England. Surely no one would want to send vibrations from Scotland that might reopen old wounds elsewhere, but the trauma of a broken union would shake all its parts. The once-united kingdom would shrink, not just physically, but in the eyes of the world. Others would see it as diminished: diminished in size, diminished in population, diminished in strength and diminished in authority. The mother of parliaments would be viewed as unable to hold itself together. An historic partnership of peoples would seem to be crumbling and Britain’s international prestige and influence would crumble with it. Our standing in the Commonwealth would change, our standing in Europe, in NATO, the UN, the World Bank and the World Trade Organisation—one could go on. These are just some of the arguments why Scotland’s departure would be so negative and so bad for the UK.

Many specific issues have emerged in Scotland thus far, during many months of debate. I wish that I had time now to address them all in detail, but I am confident that other noble Lords will do so during the debate. Much detailed work has been done, both by the United Kingdom government departments and by many respected independent bodies. However, almost none has been offered by the nationalist Administration in Scotland. A much-heralded White Paper was published by them. We had been told that it would answer all our questions. However, at some 650 pages, it has used its very length to obscure its emptiness. It is a wish list. In reality, the governing party that wants to take Scotland out of the UK has no answers to any of the challenges that a separate Scotland would face. On almost all of them a separate Scotland would be a supplicant, based on blind optimism and reliant on concessions from others for its viability.

Take the vital issue of the currency, on which the Governor of the Bank of England was so lucid in his warnings yesterday. The SNP White Paper asserts that the pound belongs to Scotland as much as it does to England, but that is not so. It belongs not to Scotland or to England but to the United Kingdom, which the SNP wants to leave. If a separate Scotland were to use the pound as its currency, with or without the United Kingdom’s consent, it would find that its fiscal and monetary policy would ultimately reside with the nation that it had abandoned. Scotland would not have a viable central bank. It would not be able to print money in a crisis and it could not be a lender of last resort. In effect its status would have changed from that of partner to that of dependency.

On the economy, the SNP takes pride on the one hand in Scotland’s wealth, while on the other it claims that, liberated from the United Kingdom, Scotland would become one of the world’s wealthiest nations. Yet that is what Scotland is already and that wealth has been achieved as part of the United Kingdom, not just overnight but built up over three centuries. Only last month, the Centre for Economics and Business Research forecast that the United Kingdom, currently number six in the world’s GDP table, would overtake France within five years and possibly even Germany later. Who would a separate Scotland overtake and how? We should be told that. The SNP’s answer is a vague reference to growth, yet at present throughout the western world only America is growing faster than the United Kingdom, and by only a fraction. Oil is, of course, the great panacea, but as we all know it is a commodity of volatile value, which is decided by world markets, not by Finance Ministers. No responsible Government could possibly base a national budget on oil.

At present the Scottish economy has strengths, but it also has vulnerabilities. For a start, it has too high a preponderance of public sector jobs and too low a proportion of wealth creators. Scotland does not have many large companies and more than 80% of those companies that employ over 250 people are owned outside Scotland. Of the large Scottish companies such as Standard Life, the Royal Bank of Scotland and Scottish and Southern Energy, most of their business is conducted outside Scotland. For such companies the inescapable introduction of another tax regime, separate regulators and administrative structures and the need to redesign their pension schemes would almost certainly drive some of them south.

Consider the banks in particular. We are told by the Treasury that the assets of Scotland’s banking sector are equal to over 12 times Scotland’s GDP—an astonishing figure. That would not attract the confidence of the outside world or indeed of the bank’s own directors. They need an established lender of last resort, stability and long-term security, but there would be no stability and no safety net in a Scotland in which any new financial crisis emerged. As fast as the new country established a separate financial jurisdiction, its banks would be scuttling across the border to find a lender of last resort. Already the UK Treasury has had to step in to underwrite, for a nervous world, some of the potential debt liabilities of a separate Scotland.

However, one of the present strengths of the Scottish economy—and that of England—is the extent of economic integration that exists between the two countries. Around 30,000 people travel in and out of Scotland every day to work. The postal, telephone and e-mail services hum with transactions every day between the two countries and the roads and rail services are kept busy. Those are the arteries of a united economy. Cut them and both countries would bleed.

A paper published by the Department for Business shows that in 2011 Scotland’s trade with the rest of the UK represented almost 30% of Scottish GDP. Indeed, in 2011 Scotland sold twice as much in goods and services to the rest of the United Kingdom as it did to the whole of the rest of the world. Perhaps more surprisingly, Scotland is the second biggest market in the world for goods and services from the rest of the United Kingdom; only the United States takes more. So it seems clear that, at present, the United Kingdom forms a highly efficient single market, an ever closer union of peoples that has actually worked. The OECD has recognised it as the most market-oriented, economic and regulatory environment among its membership. No wonder the United Kingdom has among the highest employment rates in the world. Why put all that at risk?

Membership of the European Union offers no escape. It seems clear that the Scottish Administration’s plans to gain quick re-entry via Article 48 have already been rejected and that no special treatment can be gained under Article 49. It might take years, if it happened at all. What is more, the new Scotland would not take with it any entitlement to a budget rebate on entry but would have to start contributing to the remaining United Kingdom’s budget rebate. It seems probable that it would have to join the euro eventually and to join the Schengen group, which would therefore mean that Scotland could not belong to the United Kingdom’s and Ireland’s common travel area. That in turn would lead inexorably to the rest of the UK having to set up barriers and customs posts across the 95-mile border between Scotland and England, with all the hold-up and disincentive to trade that that would entail.

All this would add up to a new country with big problems, but England would surely prefer to see its neighbour as rich and successful, rather than have its second biggest customer in decline. For the first time in 300 years, England would have an undefended northern land border; it would have a country to its north that wanted to join NATO but refused to pay the nuclear entry fee. The implications for the UK’s defence are immense. I have no doubt that other noble Lords may wish to expand on that important matter and on many others.

I would like to spend a few moments in addressing what I believe could happen after the referendum if, as I passionately hope, the outcome is that the Scottish electorate vote no. The very fact of the referendum shines a light on our now complicated constitutional arrangements. I welcome the Prime Minister’s firm commitment not to discuss any further constitutional change ahead of the referendum, because that would only cloud the issue of separation—just what the separatists want. It is absolutely right that we should address the referendum question head-on, with no distraction. The question of whether or not to walk away from the rest of the United Kingdom will be one for the people who live and vote in Scotland, but what happens afterwards will not be. More devolution, or less, is a quite different matter. It is a matter for the whole United Kingdom, and that includes Wales and Northern Ireland as well as England. As others have pointed out, to resign from a club is for the individual member; to change the rules of the club is for all the members.

There seems to be an extraordinary mood among many in the Scottish political parties who oppose separation, who believe that they can simply agree on a shopping list of further powers for their Parliament and that such powers will be granted as of right. Scotland is going to have to abandon this mood and, I say gently, get real. Devolution is not just about Scotland; it affects everyone. A power devolved to one part of the United Kingdom creates imbalances elsewhere. Devolving a power is not about favours, still less about demands. It is the quality of government that matters, rather than the quantity. It is about responsibility and accountability, not just power. The present arrangements give the Scottish Government power to spend 60% of all government expenditure in Scotland—that is comparable with the German Länder and more than the Australian states and the Canadian provinces—but the responsibility is to raise only 20%. Such is the lack of accountability that has developed.

Scotland had for years devolved to it a 3p in the pound discretionary power to raise or lower income tax. It was not used. The SNP Administration even allowed it to lapse. Now there is a new Scotland Act, the 2012 Act, on the statute book for two years. It contains the biggest fiscal transfer in British history, which will soon give the Scottish Parliament the responsibility to raise 10p in the pound of its revenue locally with a corresponding cut in its block grant, and to raise more than that or less than that if it so chooses. Except on borrowing for capital expenditure, there is no upper limit to the use of that power. The Act even grants the power to invent and impose new taxes with the consent of the United Kingdom’s Parliament, but why did it give that power if it did not intend to allow it to be used? Therefore, Scotland now has the power to raise and spend what it needs to implement the policies that it judges necessary. It does not need to wrench the country out of the United Kingdom to achieve that. I find it very strange that that Scotland Act, and the authority that it brings to Edinburgh, has gone entirely unmentioned in the referendum debate so far.

However, all these changes bring anomalies elsewhere. In particular, I believe that the position of England needs to be considered. Already one can see the beginnings of a kind of identity crisis developing there. Two of the serious flaws of the Scotland Act 1998 can surely no longer be allowed to fester—namely, the West Lothian question and the Scottish spending block, in particular the Barnett surplus. You cannot solve the West Lothian question just by ignoring it. One option to solve it that I have suggested in the past is by setting up not a separate English Parliament but an English Grand Committee within the Westminster Parliament. It is not a perfect answer, I know, but it was made to work for Scotland for 100 years before devolution and, with a little imagination and possible adaptation, it could be made to work for England. There is also the work of the McKay commission, which offers a means of diminishing the democratically offensive aberrations of the present position. It is almost a year since the commission’s report appeared and I hope that my noble and learned friend will indicate when the Government intend to respond to it. On the Barnett surplus, everyone knows that the basis of the present distribution of funds is out of date. We know that that, too, created an imbalance that can be put right. A fair-minded Scotland would agree. We need an up-to-date measurement of relative need in Scotland and elsewhere in the United Kingdom.

The United Kingdom will never settle down again, comfortable in its own skin, unless these anomalies are ironed out. They need to be addressed in a positive and broadminded way. We need to look at them not from the point of view of the outstretched hands of devolved Administrations but from the point of view of the United Kingdom as a whole, and in its overall interests as well as those of all its parts, all of which should have a say.

I believe that we need a new approach. We need to refresh our understanding of what the United Kingdom is, its strengths and its core values. We need renewal. In short, what we need is a new unionism—a unionism that unites us, binds us and brings us together again and brings constitutional stability to the whole United Kingdom. We need to demonstrate its virtues and its fairness, not through ad hoc disbursements here or there but through a thorough and open reappraisal of our nation’s central strengths and how devolution fits into that. Above all, it is time to put the politics of grievance behind us. Others have suggested that a Joint Committee of both Houses should be set up after the referendum with broad terms of reference. I support that as one option, but we need the commitment of all the major political parties to work together in the national interest. We can turn the challenge of separation into the opportunity for reinvigoration. The break-up of Britain proposed in the referendum—this destructive, negative and irreversible process—does not need to happen. There is a positive alternative for Scotland and all of us within the United Kingdom. I beg to move.

11:58

[Lord McConnell of Glenscorrodale (Lab)]

My Lords, I thank the noble Lord, Lord Lang of Monkton, for securing this debate and for the very comprehensive way in which he introduced it. He and I have disagreed on many occasions over the past 30 years but he has always been consistent and honourable in his contribution to the public debate in Scotland and throughout the UK, and we saw that approach again today.

Like the noble Lord, I welcome the noble Baroness, Lady Goldie, to the House, and I look forward to her maiden speech. We fought a hotly contested election in 2007, when she was leader of the Scottish Conservatives and I was leader of Scottish Labour. Both she and her predecessor—the late David McLetchie, who fought nobly for devolution over many years and was a very able Member of the Scottish Parliament and leader of the Scottish Conservatives—made a real contribution to the success of devolution in those early years. I am very pleased to see her join us in this Chamber.

I cast my first vote in 1979—a yes vote for what was then called the Scottish Assembly. I remember the occasion even now, and the disappointment that I felt as an 18 year-old in casting my first vote and not succeeding in achieving devolution for Scotland at that time. I have consistently believed all my adult life that a strong, devolved Parliament within the United Kingdom for Scotland—a Parliament that was autonomous in its decision-making, had real legislative powers and provided a voice for Scotland—not only dealt with the anomalies in our British system of government but provided the best way forward for Scotland and the United Kingdom in government and in action.

In September, Scotland will vote on a different proposition. Much as I disagree with the timing and many of the rules under which the vote is taking place, I hope that it is decisive and binding for this generation, and that we can move on. As I said yesterday at Questions, I really welcome yesterday’s intervention from Mark Carney, the Governor of the Bank of England. I hope that the way in which he laid out the facts and the analysis that he wished to present will be repeated by others over the coming months. We need to move from the divisive, rather negative debate that has taken place in Scotland over recent months and years to a really well informed, high-level debate over these six months that allows people to make the right choice, and then to make a choice that we can all believe in afterwards.

I could probably speak for seven hours about this topic, but today I have seven minutes and I will stick to two points in particular. First, the choice in September is not between an independent Scotland and an unreformed, old United Kingdom. It is a choice between an independent Scotland and a reformed United Kingdom, a United Kingdom that has not just devolution in Wales and Northern Ireland and not just major reforms to many of the cities of England, but a strong, devolved and autonomous Parliament in Scotland. Despite the disagreements and reservations that I have about the policy direction of the Parliament over the past six years or so—the way in which certain decisions have been made for reasons of political posturing, such as the disgraceful decision to return Megrahi to Libya—I still absolutely believe that devolution is not only right for Scotland but has been good for Scotland, and that devolution throughout the UK has been good for the UK.

As I always expected, devolution has allowed Scotland at times to go down its own road in relation to policy and legislation. Where that has happened, yes, there have been differences between Scotland and the rest of the UK, but by and large those choices have resulted in improvements for the people of Scotland, in health, education and, particularly, the economy. When I took over as First Minister back in 2001, Scotland’s economic performance was lagging well behind the rest of the United Kingdom, and our employment position was much worse than the rest of the United Kingdom. Over a period of years, with the right policies in place, we made a difference to turn that situation around.

Secondly, the Parliament has been an opportunity for national leadership. On issues of sectarianism, for example, or on the important issue this year for Scotland of the Commonwealth Games, we have seen the country come together. The Parliament has provided a focus for people to come together in the national interest to change circumstances or to provide new opportunities.

Thirdly—this is particularly important—the Parliament in Scotland has provided an opportunity to be more creative, to try out new ideas to tackle long-term Scottish problems. I will give two examples. The first is the population decline that we experienced decade after decade. With the support of the Home Office and the Government back in the early part of the past decade, we took a different approach to in-migration. With that and other measures, we have actually seen a reversal of that long-term decline and, for many years now, year after year, an increase in Scotland’s population. The second example is in relation to the ban on smoking in public places. I know that many noble Lords were involved in that debate. The UK Government were all over the place on this issue but in Scotland we took a decision to go ahead. We have been proven to be right and that policy was then translated elsewhere in the UK. Without a Parliament in Scotland that decision would not have worked. Experiments in Scotland in the past, such as the poll tax, had not worked. That experiment did. It worked because the Parliament had the support of the people and an opportunity to show national leadership.

I think that it is very important that when we have this debate this year, we do not only address the long-term issues identified by the noble Lord, Lord Lang, today. There is also a need for the whole system of government in the UK—this Parliament in London and the other Parliaments and Assemblies of the UK—to debate what this new United Kingdom looks like, not just in relation to powers that move between different levels of government at different times, but in relation to how government is conducted here in London. What is the relationship between government at the centre and government in the devolved Assemblies and Parliaments? We must have a debate this year that ensures that people in Scotland are choosing between independence on the one side and that reformed, devolved United Kingdom, on the other, which provides real hope and the best of both worlds for Scotland.

12:06

[Lord Steel of Aikwood (LD)]

My Lords, it is a pleasure to follow the noble Lord, Lord McConnell, and I join him in thanking my noble friend Lord Lang for introducing this important debate. I too look forward to the maiden speech of my noble friend Lady Goldie. Having listened dispassionately to her trenchant and witty speeches from the Chair of the Scottish Parliament, I know that she will contribute greatly to our debates here.

In the three years that we have been discussing this matter, the debate has tended to focus on whether Scotland would be better or worse off as an independent country. I would argue that that is not the right question. If to separate off from the United Kingdom and become independent is the right thing to do, surely the cost of doing it is immaterial. The question is whether it is the right thing to do. I would argue that it certainly is not.

I do not know whether other noble Lords have received through their letterboxes this card that I have received, published by the Scottish Government. It is an advertisement for their White Paper, urging people to read it online or borrow it from their local library. It claims that Scotland’s Future—the title of paper—“sets out the facts” on independence. Of course it does nothing of the kind. It sets out, as my noble friend said, a series of wish lists. There is a big difference between a wish list and the actuality. We had an example of this a few weeks ago when the First Minister of Scotland indicated a wish to attend the funeral of Nelson Mandela. He even had his officials call the office of Prince Charles to see if he could get a lift on the plane. That was turned down, possibly on the grounds that he had not been invited—I do not know.

The First Minister has been totally consistent in his view of his own role. In an editorial in the past week, the Scotsman asked:

“How could a Scottish Government visit to a Ryder Cup event in Chicago come to cost almost £470,000? And was it really necessary for First Minister Alex Salmond to stay in the upmarket, £1,200-a-night Peninsula Hotel? … Even making full allowance for various purposes of the visit, was it really essential that the First Minister had 17 bag-carriers, advisers and functionaries?”.

The answer to those questions is yes, it is. He has been utterly consistent. He is already behaving like the head of state of an independent country. Therefore we should not scoff at that. That is what the future holds for us if we go down that particular route.

Professor Gavin McCrone, who served so many Governments as Chief Economic Adviser, has said on the matter of the currency union proposed by the SNP:

“Scotland would have very little influence on monetary policy, and fiscal policy would, in effect, be overseen by the rest of the UK”.

In other words, the Government here and the Bank of England would continue to run the economic policy of Scotland. What sort of phantom independence is that?

When it comes to the European Union, if noble Lords have got as far as page 222 of the White Paper, this paragraph is very revealing. I quote it in full:

“We recognise that specific provisions will need to be included in the EU Treaties as part of the amendment process to ensure the principle of continuity of effect with respect to the terms and conditions of Scotland’s independent EU membership, including detailed considerations around current opt-outs, in particular the rebate, Eurozone, Justice and Home Affairs and the Schengen travel area”.

That is a long wish list, just in one paragraph of page 222, and the fact that the President of the Commission, the Prime Minister of Spain and others have said, “You’re not on”, is entirely unimportant in the Scottish Government’s view.

Noble Lords on these Benches know that my great guru in political life was Jo Grimond. This is what he wrote about the issue, long before we had any form of Scottish Parliament:

“I do not like the word devolution as it has come to be called. It implies that power rests at Westminster, from which centre some may be graciously devolved. I would rather begin by assuming that power should rest with the people who entrust it to their representatives to discharge the essential tasks of government. Once we accept that the Scots and the Welsh are nations, we must accord them parliaments which have all the normal powers of government, except for those that they delegate to the UK government or the EEC”.

That is the right way forward for all the UK political parties after the no vote. We should be concentrating on what needs to be reserved to retain the benefits of the union rather than what more should be devolved.

The big issue that so far has not been properly debated in Scotland is whether we really are content to jettison our whole history in the United Kingdom. We were the home of the enlightenment. We had four universities for our small population when England had only two. We contributed substantially to the growth of empire and Commonwealth through our explorers, missionaries and engineers. A few months ago, I had former President Kenneth Kaunda to lunch here in the dining room. He talked eloquently and passionately about his upbringing in a primary school founded by the Church of Scotland in what was then northern Rhodesia. That was part of our contribution to the Commonwealth as we know it today.

Do we in future retain the glory of our defence forces, which the noble Lord, Lord Lang, mentioned, and with which we fought two world wars? Do we really imagine that persons serving in our Royal Navy, Royal Air Force or regiments would wish to leave those and join some small, independent defence force in Scotland? Do we keep our participation in the British Broadcasting Corporation, or do we have our own SBC—no doubt, as it would have been last week, feeding us on a diet of Eddi Reader murdering Burns’s simple melodies?

The union, after the referendum, should use a reformed Upper House here to strengthen it and give it, if you like, a quasi-federal nature, recognising that nearly 10% of those living in Scotland were actually born elsewhere in the United Kingdom, and that nearly 1 million of those born in Scotland now live elsewhere. I am certain that in this debate we should strengthen and emphasise the glory of our interdependence, rather than the bogus independence on offer.

12:13

[Lord Cullen of Whitekirk (CB)]

My Lords, I, too, thank the noble Lord, Lord Lang, for instigating this debate and for speaking so well in it. I wish to address a specific subject: namely, the funding of research in the context of independence. I do so with an interest in this matter as chancellor of a Scottish university.

It is clear that research is an area in which Scotland punches above its weight. Recently, in the context of the debate about independence, the Scottish Science Advisory Council cited a report, the International Comparative Performance of Scotland’s Research Base, in support of the statement:

“Scotland’s science and research base is among the best in the world. It ranks first in the world, in terms of the rate its research papers are cited relative to GDP, and second in the world, in terms of impact”.

That standing relies on Scotland being part of the UK’s “common research area”. UK research councils play a major part in supporting research through the funding of researchers and providing their own facilities in different parts of the United Kingdom. They also have a central role in the strategic co-ordination of research across the UK.

The effect of Scotland becoming independent would, taken by itself, be that the research councils would have no responsibility for supporting research in Scotland. The relationship between Scotland and the rest of the UK would be an international one. The facilities of the research councils in each country—by that, I mean the fixed assets—would, it seems, belong to that country.

In their White Paper, the Scottish Government state that the best research operates across boundaries, and that it is clearly in the interests of both Scotland and the rest of the UK,

“to maintain a common research area including shared research councils, access to facilities and peer review”.

They also say in the White Paper that after independence this Government—that is, the Scottish Government,

“will seek to continue the current arrangements for a common research area and funding through established UK Research Councils”.

They go on to say that, with independence, they would intend to negotiate with the Westminster Government what they call a “fair funding formula” for Scotland’s contribution to the funding of the research councils, adding:

“Providing a direct contribution from the Scottish Government budget in this way would create more transparency and clearer accountability around our investment, enabling Scottish interests to be better and more consistently reflected in the identification of Research Council priorities”.

So far, despite indications that something was coming, there has been no explanation from the Scottish Government as to how such an arrangement could be arrived at and what it would involve. It appears to be some form of “buying in” to the UK research councils. It would indeed be a novelty for them, for example, to fund pieces of research in another country—research which might or might not include research activity in the rest of the UK.

That prompts certain questions such as the following. What might be the terms that would be required of the Scottish Government for such an arrangement? What would need to be done to avoid Scottish researchers being placed at a disadvantage, especially in regard to cross-border collaboration, which is so important, and the use of facilities? Would it be feasible to maintain the present system of a single peer review for Scottish researchers? Would UK research councils remain responsible for co-ordinating research across the UK—that is, including Scotland? Would it be possible—and, if so, how—to establish and maintain a Scottish influence over the research agenda and priorities? Those questions I have posed from a Scottish point of view but most of them apply to the UK because we have a system in which there is a high degree of integration across the whole of the kingdom.

There can be no doubt that it is vital to protect and enhance the quality of research wherever it is done and, with that, the excellence of the research base. Science, technology and innovation are key drivers of competitiveness and economic success. That is why this subject is so important.

12:18

[Lord Forsyth of Drumlean (Con)]

My Lords, I congratulate my noble friend on his brilliant speech and on finally stirring up the media south of the border to talk about the importance of the union and the United Kingdom and of the decision that lies ahead.

It is a great pleasure to follow the noble and learned Lord, Lord Cullen, who has done such distinguished public service in Scotland. We will never forget the way in which he dealt with the sensitive issues following the Piper Alpha disaster and Dunblane. His words about research are well worth consideration and I may return to that if there is time.

I know that it is a cliché to say, “United we stand, divided we fall”, but it applies to companies, political parties and families, and it certainly applies to countries. That is what is at stake here. It is important that we remember how this union came about in 1707. The truth is that it was an arranged marriage. It was a deal, and the deal was that the English got defence and the Scots got money.

They needed money because of the disastrous experience of the Darien project, where Scotland tried to build its own empire, its own colonies, and failed. One-quarter of the money in circulation in Scotland was lost, along with thousands of lives, in that failed venture where Scotland and England tried to continue to compete with each other. The brilliance of the Act of Union was that a partnership was formed and we started to work together, rather than against each other. And, hey ho, after about 20 years of misery—because the Scottish economy was protectionist and we had to adjust to free trade—suddenly prosperity bloomed. We had the Age of Enlightenment. Scottish philosophers such as Adam Smith, Scottish engineers and Scottish architects were dominating not just the United Kingdom but the globe.

It is very important to remember the financial aspect. All that money, one-third of the GDP, had been lost on the Darien scheme. A new institution, the Royal Bank of Scotland, was formed on the back of that scheme. Today, 300 years later, the Royal Bank of Scotland, with £40 billion lost—nearly one-third of Scotland’s GDP—again was rescued by the union. With 300 years’ experience, what kind of madness is it that cannot look to the past or to the present and conclude that the United Kingdom needs Scotland and Scotland needs the United Kingdom?

I said that the other half of the deal was defence. What happens if Scotland leaves the United Kingdom? Where will our nuclear deterrent be? That is let alone the effect on Scotland of the loss of 10,000 jobs at Faslane, and the loss of future defence contracts for the shipyards, with a further loss of jobs and everything else. But what about the position of the United Kingdom, which would be forced in practice to give up its nuclear deterrent? Where would Scotland be if it was cut off from the intelligence sharing and resources that we have, when we can see the threat that we face from terrorism? What of the British Army and the other armed services? Are we to say, as Mr Salmond proclaims, to the Scots men and women who fought in Afghanistan and Iraq so bravely with the union flag on their shoulders, “You have got to choose between the British Army and Alex’s Dad’s Army. You have got to choose whether you wish to be, in effect, mercenaries working for a foreign country or go off on this half-baked idea which Salmond proposes”? It is insulting. The lesson of the union and the prosperity that came was that free trade and a global outlook—not an inward-looking outlook—are the keys to success.

My noble friend Lord Steel mentioned the role that Scots have played. I wrote down some names which ring down through history, including Watt, McAdam, Telford, Dunlop, Bell, Logie Baird, Watson-Watt, Fleming, Simpson, Livingstone and Carnegie. If we turn to politics, Gladstone, Bute, Rosebery, Bonar Law, MacDonald, Bannerman, Home, Brown and Blair were all Prime Ministers who came from Scotland. Scots have played a hugely dominant role in the United Kingdom. The idea that we are disenfranchised is the politics of nonsense.

Together, Scotland, England, Wales and Ireland have saved Europe three times. First, we saved it from Napoleon; secondly, from the Kaiser; and, thirdly, from the Nazis. When the bombs were falling in the East End in the Blitz and in Clydebank in Glasgow, we knew that we were one nation which was forged over the centuries. It is a disgrace that people should seek to break up that family tie, that bond, which has been created through our history and our common heritage, without any single indication of why it could be justified.

Can noble Lords imagine a United Kingdom with Scotland sheared away? It would be a rump. We would be an object of curiosity around the world. The prestige, the influence and the power that we still have is no longer with an empire, but we still have influence and relationships through the Commonwealth. We have institutions that are copied and admired around the world. Why should we let this constitutional Lothario enable the break-up of that union?

A week ago, Scots throughout the globe were celebrating the bard, Robert Burns. At the risk of boring the House, I remind them of his address to the Dumfries Volunteers:

“Be Britain still to Britain true,

Amang oursels united;

For never but by British hands

Maun British wrangs be righted!”

12:25

[Lord Browne of Ladyton (Lab)]

My Lords, I am extremely pleased to follow the noble Lord, Lord Forsyth of Drumlean, and I join in the thanks and congratulations to the noble Lord, Lord Lang of Monkton, on securing this important debate. In the debates on the Scotland Act last year, I rather unkindly suggested to the noble Lord, Lord Forsyth, that Scotland had given up listening to him a long time ago. With his characteristic quick wit he came back to me immediately and said that he was never aware that Scotland ever listened to him. I can say unequivocally and, I think, uncontradicted by those who have heard him today that we all hope that the people of Scotland—my fellow Scots—listen to what he had to say today.

On that subject, perhaps I may say how pleased I am that the noble Baroness, Lady Goldie, is in her place today and that she will contribute to this debate. I certainly know that the people of Scotland listen to her, and we all wait with eager anticipation for her contribution.

I intend to concentrate on one subject alone in these few minutes: the profound implications of the forthcoming Scottish independence referendum for the defence and security of the UK.

The United Kingdom presently enjoys a very high level of security. However, although we face no existential threat, in the words of the national security strategy:

“Today, Britain faces a different and more complex range of threats from a myriad of sources. Terrorism, cyber attack, unconventional attacks using chemical, nuclear or biological weapons, as well as large scale accidents or natural hazards”.

Consequently, the task of our Armed Forces and our wider security machinery extends far beyond conventional defence. They discharge that remit to an extremely high level of competence. But that competence is built on partnerships—between us and international organisations such as NATO and the EU; between us and our allies, the US, Germany and France; and between Scotland and the rest of the UK. We can meet 21st century threats only with collective capabilities and shared approaches, and independence can only divide that capability, leaving us a little more disparate, but certainly leaving the people of Scotland more remote from the collaborative friendships that have served us so well for the past 70 years.

Let us consider intelligence as but one example. Scotland’s Deputy First Minister, Nicola Sturgeon, accepts that countering the threats facing Scotland would need,

“an independent domestic intelligence machinery”.

However, no part of the existing UK’s intelligence machinery can be disaggregated to an independent Scotland, and no effective intelligence organisation can be domestic. It would have to start from scratch and look outwards to threats that could emanate from anywhere in the world. What Scotland has already, which helps to provide security for its citizens and protect the prosperity of its businesses, could be replicated but not easily, certainly not quickly and not without considerable expense. As we wait for that, Scotland and the rest of the UK may be less effectively secure.

Further, while our relationships across the board with the US may often be misdescribed as “special”, we do have a unique defence and intelligence partnership of trust with the US. It allows us access to intelligence material without which we would be much hampered in containing the 21st century threats that we face. Although obviously secret and perhaps arguably requiring greater parliamentary scrutiny, it is essential to our security. It is improbable that an independent Scotland, particularly one intent on unilateral nuclear disarmament, would enjoy the same relationship. That also has implications, as the noble Lord, Lord Forsyth, said, for intelligence sharing with the so-called “Five Eyes” partners—Australia, Canada and New Zealand—NATO allies and, indeed, with the rest of the United Kingdom.

We must also recognise, as the noble Lord, Lord Forsyth, said, the very human dimension to this debate. Traditionally, Scotland has provided disproportionate numbers of soldiers and operatives to our defence and security forces. I think that I can say without fear of contradiction that no UK unit is without a Scottish presence—nor for that matter an English, Welsh, Irish or Commonwealth comrade. Thousands of Scots serve in our wider intelligence and security forces. Serving with distinction, they form an unbroken line back through Iraq, Afghanistan, countless peacekeeping missions and other crises, and two world wars, and deep into our history. This shared heritage and tradition is stronger than its individual components. The loss of them will not serve the interest of anyone in these islands, especially not the interests of the Scottish people.

Scots are everywhere in the defence architecture of NATO, where they enjoy considerable influence. They are accorded that influence because of their individual contribution but also because they come from the tradition, training background and experience of service in the UK Armed Forces. The armed forces of most European states of similar size to Scotland are restricted by their scale to home defence and exercises and to limited international involvement. Those few countries that are the exceptions established their military capability over years when defence spending was considerably higher, and that opportunity is gone for decades. Why would serving Scottish men and women choose to leave that tradition and join the armed forces of an independent Scotland when they could stay where they are and also enjoy the opportunity of promotion, advancement and the influence of being part of a UK larger force?

The inevitable loss of human and intelligence capability during the early decades of a separate Scotland, added to the loss of jobs in defence industries, the local impact of the removal of the Faslane naval base, the huge start-up costs for unique armed forces, the loss of access to intelligence and the loss of scale, will create very real risks to the people of Scotland and significant challenges for the rest of the United Kingdom. In the words of General Andrew Mackay, former GOC 2nd Division and commander of British forces in Afghanistan:

“It is easy to argue from within the comfort of a nearly 300-year-old Union that an independent Scotland would only require a small fighting force. It is not likely to be so comfortable after you have jettisoned your allies and you are on your own”.

12:32

[Lord Maclennan of Rogart (LD)]

I, too, thank my noble friend Lord Lang for initiating this important debate. In following the noble Lord, Lord Browne, it occurred to me that Scotland has played a very significant role in the United Kingdom. He spoke entirely about defence. I shall not confine myself to a single subject but I do recall that, at the end of the First World War, Field Marshal Haig delivered his war memoirs to the home of Richard Haldane with a note on the front page saying, “To the man who made victory possible”. Haldane was a Scot, educated in Germany and Scotland, who had restructured the British Army when he was in Asquith’s Government. That seems to me to be symptomatic of the role that has been played by so many Scots in constructing the civic society which has blossomed since the Act of Union. The list of Scottish names mentioned by my noble friend Lord Forsyth was highly indicative of that contribution. I think he mentioned Logie Baird, but there are others in television, such as John Reith, the first director-general of the BBC. We have had—and have—in this House Scottish Members who have played a significant role in representing Britain. I think of the noble Lord, Lord Kerr of Kinlochard, who was a Permanent Under-Secretary at the Foreign Office and secretary-general of the Convention on the Future of Europe.

The Scots have become integral to the United Kingdom and have helped to make it Great Britain. However, it seems to me that we need to recognise that the constitutional arrangements for the United Kingdom are not ideal. It was certainly sensible to devolve power to the Scottish Parliament, and I remember very well the discussions that I held with Robin Cook on the way to take that forward. However, we now need an overview of the structures of the United Kingdom. We need to recognise that Wales, Northern Ireland and England must have more responsive and less centralised government. An important decision that should be taken, before the outcome of the referendum, is to establish a convention on the future of the constitutional arrangements of the United Kingdom. It has to be accepted that independence is an illusion. No country in the global society in which we participate is totally independent, and the more we contract our relations with external powers, the more we shall find that we lose influence. Decentralisation to levels at which decisions can be effectively taken should certainly be part of the remit of this convention that I am advocating.

There is some evidence that there is a strong sense in England in particular that government is too centralised. I am not suggesting that we should carve it up into economic regions, because the history and identity of the different parts of the country of England seem not to be reflected in the rather artificial regions which were created some years ago. None the less, I hope that that step will be taken before the referendum in order to enable the Scots in particular, but others as well, to recognise that the choice that faces this country is not between the status quo and independence.

The fact of the matter is that our constitution has been developed gradually, change by change. The time has now come for our citizens to play a considerable part in the discussion about how we can recognise the limitations of our national power, recognise the strength of what we can do at national level and formulate—not in a short timescale but in open discussion—how we can improve our constitution so that the public can, once again, engage and sense our democracy is working and that the leaders of our democracy reflect the views of the electors.

12:40

[Lord MacGregor of Pulham Market (Con)]

My Lords, I, too, thank my noble friend Lord Lang for an excellent introduction to this debate. In fact, he said so much of what I had wanted to say that I hope not to repeat it, but it was an excellent contribution.

I intend to be as brief as I can be on the issues and to consider them under three headings. The first is the economic implications. The Select Committee on Economic Affairs in the House of Lords produced a report on The Economic Implications for the United Kingdom of Scottish Independence in April 2013. We did so because we believed then that all the issues of an economic nature were not being put before the British people, including the Scots. We believed that voters in Scotland deserved the best evidence-based assessment of all the economic issues before they exercised their votes.

Since then, we have come a long way. We have had various government reports on various economic issues and, of course, we have had the Scottish Government’s paper, Scotland’s Future. In all that paper’s 648 pages, it lists many of the goodies that could come Scotland’s way and makes many commitments and promises, but it gives no price tag. It reminds me of the Labour Party’s 1987 election manifesto where it made many spending commitments—until we added up the bill for the taxpayer. I happened to be Chief Secretary to the Treasury at the time, so I remember it very well. As a consequence, Labour lost the election heavily. I say that by way of comment on the Scottish Government’s paper, because it does not address many of the real issues but simply says, “This will be so and that will be so”, with no argument.

On the economy, we are a still a long way from getting the issues properly assessed by the public at large. There is the big issue of the loss of access to the single market, which we went into in great detail. The Barnett formula will no longer apply, which I welcome because I have long thought that it is well out of date—it was meant to be temporary anyway and should have gone a long time ago. However, it will be compensated for as far as Scotland is concerned by the revenue from North Sea oil—that was one of the analyses that we made. On the other hand, the revenue from North Sea oil is highly volatile and is not permanent, so it cannot be depended on in the same way as Scotland originally depended on the Barnett formula. The costs of financial regulation, regulators and many other separate institutions will have to be taken into account. The sharing of the UK’s public debt, including PFI, public sector pensions and many other liabilities is crucial. I was struck by one figure that we came across which showed that the total support extended to RBS during the financial and economic crisis was the equivalent of 211% of Scotland’s GDP. Scotland simply could not sustain that sort of support and one questions whether some of the banks would have to move their headquarters elsewhere because of that.

Defence is a particularly important issue—I shall leave it to others to talk about aspects of that—because it has huge implications for the rest of the UK’s citizens and taxpayers. The cost to the rest of the UK of the proposals from Scotland on defence could be huge, and that will have to be a major issue in any negotiations that take place.

I turn to the EU. At first, Scotland indicated that it would join the eurozone and then said that it would not. It then indicated that there would be no technical problems with being a member of the EU and now it acknowledges that membership will have to be renegotiated. In particular, as I understand it, one of the commitments required of new members is that they will have to join the eurozone, so there is a big issue there. Of course, there is absolutely no guarantee that Scotland’s membership will be accepted, because a single vote from any other member state could exercise a veto. There will be many who will be very worried about the implications for them, so that is a big issue for Scottish voters.

The proposal for Scotland to use sterling as its currency and all the issues that that involves—lender of last resort and all the Bank of England issues—have been widely exposed overnight by the new Governor of the Bank of England’s excellent speech in Scotland. It means that I do not have to comment too much on it, but what he has said is highly timely and salutary, and will certainly require a lot of further follow-up.

One concern that our Select Committee had was that these issues were not being put fully before the British people—as I said a moment ago. However, we wanted to go further, so that not just the issues were put forward but the red lines of negotiation were established before the vote took place. That is fundamentally important, because those red lines and some of the issues that I have talked about—defence implications, currency and all the rest—should be spelt out beforehand so that voters understand what will follow in the negotiations. It is no good just waiting and saying that these are all issues for the negotiations because we do not know what the outcome of the negotiations will be, and I think that the outcome in many cases will not exactly be very popular to a Scottish voter at the end of the day. It is very important that the red lines are established at the beginning and, yesterday, the governor made a very good start.

So much for the economic implications; I want to say a word about the political implications. Ironically, for the Conservative Party in the rest of the UK—if I have to put it that way—we benefit from a vote for yes, because we have only one single Scottish MP in the House of Commons. None the less, a vote for yes is an outcome that I profoundly hope will not happen. Of the political implications I want to mention just one. I have seen the Answer given to yesterday’s Oral Question relating to the position of Scottish MPs in Westminster if there is a yes vote and whether they would still be eligible to sit in this Parliament after the date of Scottish independence in 2016. Obviously, that could happen, because the general election will be in 2015, the Scottish vote will precede that and then, in 2016, if it is a yes vote, there will be an independent Scotland. It is no good to say, “Just wait and see what happens”. The Advocate-General for Scotland replied yesterday that it would be a matter for negotiation. I do not think that it is; it is absolutely clear that we cannot have Scottish MPs with no constituencies, no constituency interests and no wider interests in the Westminster Parliament if Scotland votes yes and becomes independent. That should be established and worked out now and not left to a negotiation.

Finally, on the wider issues, I am a Scot, born, brought up and educated in Scotland; I have many Scottish ties still. I have of course been an MP for an English constituency for many years. I often thought that the two reasons why I was selected for adoption there were, first, that I had a lovely wife and, secondly, that there were many Scots in Norfolk, many of farming backgrounds. Due to this, I profoundly believe that, although I do not have a vote, all parts of the United Kingdom will continue to gain as a result of being part of the wider kingdom. One key implication of Scotland leaving the UK is that all parts of the United Kingdom, not just Scotland, would be the poorer, and that is why I profoundly hope that it will not happen.

12:47

[Lord Hope of Craighead (CB)]

My Lords, I, too, pay tribute to the noble Lord, Lord Lang, for initiating this debate. He has done a valuable service to the House by raising the profile of this issue at a critical time in our national affairs.

I would like to say just a few words about our legal systems and what the Treaty of Union, to which the noble Lord, Lord Forsyth, referred, had to say about them. In 1606, King James I and VI said of the English system, perhaps rather to the surprise of the Scots, of which he was one, that it was the best law in all the world. His vision was for the English law system to be the system throughout Great Britain. One hundred years later, that was not how the commissioners saw matters when the Treaty of Union was formulated. What was provided there, with great care, was that Scotland would be able to keep its own legal system, which by then had developed, in all time coming. In Article XIX, it was provided that no causes in Scotland were to be heard in any of the English courts sitting in Westminster Hall. At first sight, the idea was that the two systems would be kept entirely separate, standing on their own two feet. The two would never meet: one country, two systems.

However, that is not how the union worked in practice, and it is typical of what happened in so many aspects of the way in which the union has worked. It did not take very long for canny Scots lawyers to spot that the House of Lords did not sit in Westminster Hall, and that led them to bringing appeals before this House. In 1709, the House held that it had jurisdiction to hear appeals from Scotland. That gave rise to an increasingly close association between the English and Scottish legal systems which has lasted for more than 300 years—woven into the fabric, as the noble Lord, Lord Lang, put it. That is reflected today by the fact that the United Kingdom Supreme Court hears appeals from all parts of the United Kingdom, as this House did in this very Chamber for so many years before the Supreme Court was created, and by the fact that the court now has justices from Scotland and Northern Ireland among its membership.

There is a very important question as to what is to happen in Scotland if the referendum were to result in a vote for separation. Typically, the White Paper does not say a word about that, but I am not going to say a word about it either, because our concentration today is on the United Kingdom, not what is to happen in Scotland alone. For that purpose, I want to say just a little more about how that has developed since 1707.

It took a little time before the Scots judges began to sit in this House—the first was in 1867, as it happened—but a few years later, the Appellate Jurisdiction Act was passed, which provided for permanent Lords of Appeal in Ordinary and, more or less, since then there have always been two Scots Law Lords, and now two Scots Justices of the Supreme Court. The total has reached 21 over that period, but merely to mention the figure is only part of the story. It has always been understood that the Scots Law Lords could sit on appeals from other parts of the United Kingdom—as, indeed, those from England and Northern Ireland could on Scots appeals—and this has been greatly to the advantage of all three jurisdictions.

It could perhaps be said that the Scots have pulled somewhat above their weight in contributing to the development of law elsewhere in the United Kingdom. One has only to mention the name of Lord Reid, who sat as a Law Lord in this House for 26 years, from 1948 to 1975, the longest serving Law Lord of them all, to make the point. It is not only his long service that marks him out as one of the outstanding lawyers of his generation: the quality of his judgments, the perception of the issues that they raised and their clarity were all outstanding, and are cited every day in the courts up and down this country. There is no time to go over the contribution that others have made. My part is perhaps enshrined in the fact that I am shown in a portrait in Committee Room 1 delivering the House of Lords’ last judgment in an English appeal. Earlier this month, I was referred to in a case which came from Northern Ireland and, just yesterday evening, a decision by Lord Reid in an English case was referred to in the Supreme Court. The fact is that our contributions have been built into the entire system as part of its fabric.

This brings me to the consequences for the United Kingdom if that tradition is broken. The process of cross-fertilisation of ideas across the border will cease. The tendency to prefer principle to precedent, which is one of the characteristics of the Scottish approach, is also at risk of being lost. So, too, will be the breadth of experience which has always marked Scots judges out in comparison with the specialists from England. Of course, the loss of the two Scots justices, if and when this has to happen, can be made good, but the breadth of vision which comes from having what is at present a court for the entire United Kingdom that draws its ideas from a broad canvas, cannot.

As I said at the start, it was not anticipated at the outset of the union that these two legal systems should grow together as they have, but that is what has happened, as it has been appreciated on both sides of the border that their systems draw strength from working together with each other while respecting their differences, rather than working separately. Both sides have a lot to lose if that relationship is broken—jettisoned, as the noble Lord, Lord Steel, said earlier—as it is bound to be if the right of appeal is to be ended and Scottish justices are no longer present. I, for one, would very much regret that development.

[Earl Attlee (Con)]

My Lords, your Lordships are doing extraordinarily well at keeping to time, but timings are quite tight. If noble Lords speak when the indicator shows seven, they are in the eighth minute. If too many noble Lords do that, we will run out of time.

13:09

[Lord Lamont of Lerwick (Con)]

My Lords, I, too, congratulate my noble friend Lord Lang on the brilliant speech with which he introduced this debate. It is a pleasure to follow the noble and learned Lord, Lord Hope, who, if I may say so, always brings a very Scottish sense of wisdom to our debates. It would be a tragedy if he were removed from this House because of independence.

This is the first time that I have ever dared intervene on the subject of independence for Scotland. As a Scot who has lived in England for a long time, I have always felt that one was not very welcome intervening in the debate. Unfortunately, I do not have my father's Glasgow accent, but I have always said that it is not necessary to sound like Rob Roy to prove one is a Scotsman.

Scottish independence would, I believe, diminish what remains of the UK in the eyes of the world. It would be the end of Britain. It is often forgotten that the name Britain came into existence only after the Act of Union, and the name would make no sense if the northern part of this island were to be removed. If Scotland became independent, people around the world would wonder what had gone wrong, what had happened. It would be just as if Illinois or Florida broke away from the United States—people would feel that the standing of the United States, its viability, was somehow diminished.

The departure of Scotland would diminish us internationally. It would have an effect on our standing in international institutions where voting power, as in the EU, is often determined by population. For example, we would have fewer votes in the Council of Ministers and fewer seats in the European Parliament. Sir John Major has said that Britain might well lose its seat on the Security Council of the UN. I do not know if that is right, but I notice that the Scottish Government's White Paper on independence states that an independent Scotland would support the United Kingdom in trying to retain its seat on the UN Security Council. How would it do that? Where are the diplomats? It has no embassies. It does not have a history of independent diplomacy. How would a tiny country be able to help a diminished, smaller UK? If that is a real problem, it is a perfect example of how we are better off together.

There is a curious thing about how Mr Salmond presents independence. He presents it as a situation in which nothing will change: the Queen will be there, the Scottish regiments will be there, the pound will be there, the Bank of England will be there. It was Lampedusa, the Italian writer, who said that things have to change in order to remain the same. For Mr Salmond, things have to stay the same in order to change.

Boris Johnson has referred to a cat’s cradle of legal and political ties. I am sure that there are many things that have not been thought of that will have to be unscrambled. I am sure that the issue of citizenship will throw up many problems. Let us take one. At present, British citizens living outside the UK cannot pass on citizenship for more than one generation, so children of UK citizens living in Scotland, if there is an independent Scotland, will be UK citizens, but not the children of their children. For many people, that could pose family problems. Let us take another question: civil servants. In many countries, the state reserves certain posts in the Civil Service to its own nationals. Will that apply in Scotland, with no UK citizens being able to work in the Scottish Civil Service; indeed, will it apply in the UK? What about the Foreign and Commonwealth Office? What about the Ministry of Defence?

Then there is the issue which the Governor of the Bank of England touched on yesterday: the question of the currency. Mr Salmond believes that in exchange for assuming part of the debt of the United Kingdom, he can have part ownership of the Bank of England. If Scotland is going to have its own fiscal system able to decide the balance between spending, borrowing and taxation within its own boundaries and determines its own deficit, that will have an effect on the rest of the UK—on the Bank of England, on monetary policy. If Scotland runs an excessive deficit—let us say, 10% of its GDP—that will have an effect on interest rates for the rest of the United Kingdom. So there would have to be some agreed fiscal limit on borrowing by an independent Scotland. There would have to be some arrangement—like that, dare I say it, between Germany and Greece and the peripheral countries of the eurozone. I am not saying that Britain would treat Scotland as Germany has treated Greece, but there would have to be some agreement.

The words sovereign, the King, sovereign, the coinage and sovereignty, the concept of independence, are all intertwined. Independence without your own currency is a very constrained form of independence. Mr Salmond wants to have a Prudential Regulation Authority that would apply throughout the UK and an independent Scotland, but public opinion will ask why the Bank of England should stand behind Scottish banks. It was expensive enough bailing out RBS when it was a British bank. Are we really going to be expected to bail it out if it gets into trouble as a Scottish bank?

Then we have had the issue of UK debt. The Treasury was forced to say that it would guarantee all existing debt, right up to the point of Scottish independence. Mr Salmond saw that as an own goal. It may have helped him a little in the argument, but the Treasury was forced to make that announcement because of the markets. The markets were nervous about an independent Scotland. There can be no doubt that an independent Scotland would have to pay a higher rate for borrowing simply because it has no track record and there would be uncertainty about what sort of fiscal policy it would follow.

Why is there all this desire to separate? It seems very much to be based on oil. One section of the country thinks it could make itself better off overnight, simply by grabbing the oil—but God put the oil under the North Sea, not Alex Salmond. There is a parallel with Shetland, where I come from. Shetland was not part of Scotland at the time of the Battle of Bannockburn. Shetland could claim part of the oil; Shetland could go independent. I am not saying it will, but how would Scottish nationalists regard that? They would regard it as destructive and selfish. Are we Scots really so different from the English? Well, of course we are—but not so different and not so much better that we need to have a Government of our own. We have been together for so long, achieved so much together. Ripping the blue out of the Union Jack would be a wretched business which would do nobody any good at all.

13:01

[Baroness Liddell of Coatdyke (Lab)]

My Lords, I too congratulate the noble Lord, Lord Lang, on achieving this debate, and on his excellent introductory speech.

Your Lordships’ House may not be aware that the noble Lord, Lord Lang, has already been under attack for having the audacity to mention the First World War. He has been under attack from a Mr Keith Brown, a member of the Scottish National Party and a Member of the Scottish Parliament. Frankly, that kind of attitude shames me as a Scot. Like many members of your Lordships’ House, I lost someone in the First World War. I lost my great uncle. I come from a tradition that has always gone out to help others. That is what the Scots are famous for. It is a sign of the contempt with which those of us who believe in the United Kingdom as a family are treated that such attacks are made on the noble Lord, Lord Lang.

I want to take up some of the themes of the noble Lord, Lord Lamont. Like him, I thought the remarks of the Governor of the Bank of England yesterday were excellent. It is quite amusing—this came on the day after Mr Alex Salmond made a remark that England and Scotland will be great pals. The first thing that frightened me about that was the echo of the negotiations in the run-up to setting the level of the euro. I was there. A lot of male bonding went on. The night before the big debate, there was a football match on television. All the Finance Ministers disappeared off to watch the football match, so the sort of thing I was hearing was, “So-and-so was a good chap so he’ll stick to his word on the euro”, and “That guy over there, he was a very nice chap, very convivial in the bar—he will stick to his word on the euro”. I am sorry but that is not good enough. If you are going to enter into a currency union, we now know it is not enough to trust the word of others. You need a firm agreement. We were helped at that time by the five economic tests with which Britain judged whether we should enter the euro. We have to have a similar set of tests, set by the Treasury and the Bank, on what will be right for the rest of the United Kingdom. Do not let us forget—if Scotland votes yes, Scotland becomes a foreign country.

The other aspect is that if you are a best pal or you have a best pal, best pals know that family comes first. The family of the rest of the United Kingdom will be the moral and legal obligation of the Government of the rest of the United Kingdom. We are bandying about that phrase—United Kingdom. It will be pointless if there is a yes vote, because one part of the kingdom will have gone. We will have to find other terminology for the rest of the United Kingdom.

Fiscal rectitude will be absolutely essential in a currency union. You have to be absolutely confident that those in charge of that Government are fiscally correct. The noble Lord, Lord Steel, referred to the First Minister’s visit regarding the Ryder Cup. I applaud the activities to get the Ryder Cup. As noble Lords know, I have a great interest in tourism. It is a major Scottish industry and one of Britain’s major industries. Working together we have made it a major export earner. How on earth anyone other than Paris Hilton could have spent either £51,000 or £54,000 on accommodation for one person at the Ryder Cup, I fail to understand. What angers me also—as a Scot, because we always look after the bawbees—is Mr Salmond’s response that he was not interested in the fripperies; that our concern about whether it is £51,000 or £54,000 is “frippery”. That is twice the average wage. That is the kind of sweeping gesture—dismissing coherent argument—that has so debased the nature of this debate.

Fiscal rectitude will also mean keeping within public spending constraints, and because of those constraints and the commitment to a 3p reduction in corporation tax, revenues for expenditure elsewhere will necessarily be reduced. One area that significantly worries me, and my noble friend Lord Browne referred to it in relation to defence and the security of this country, is that our counterterrorism activity in Scotland will of necessity be reduced. We will not have access to the same degree of intelligence as at the moment, and we will have porous borders unless a huge chunk of public expenditure from the new Scottish Government is going to go to making our borders secure. That is a huge task. The borderland between Scotland and England is not Waziristan. You can cross it on a Sunday afternoon walk. It will be extremely difficult to secure those borders. There is an implication for the security of the rest of the United Kingdom if you have loose borders and a big land mass. We are a third of the land mass of the United Kingdom. It really increases the risk to great cities such as London.

I am also very conscious of the fact that the financial services sector is a crucial part of the Scottish economy. We have been slightly blinded because of the bad behaviour of the banks; we have forgotten that the other parts of the financial services industry are famous for their probity and are a significant part of the economy. They are all mobile—they can move in the blink of an eye. Why would they wish to remain in a small country when, as major players, they can operate elsewhere?

Perhaps it is because I am the first woman to speak in this debate that when I look at the implications for the United Kingdom, I immediately think of divorce. Divorce is never easy for any party. It is often the weaker party who comes out of it worse. We are not talking about independence, which sounds a nice positive thing. We are talking about separation and we are talking about divorce. That is probably why so many women in Scotland are increasingly in favour of the union.

I will end my remarks there because I know your Lordships are very anxious to hear the noble Baroness, Lady Goldie, address the House. She will be an asset to the House and I look forward to hearing her remarks.

13:09

[Baroness Goldie (Con)]

My Lords, it is a privilege to make my maiden speech in this Chamber on such an important subject as the United Kingdom and Scotland’s continuing place within it. By way of preface, may I take this opportunity to thank all the staff here for their unfailing help and courtesy in guiding this rookie through the hoops of admission and introduction? I should also like to thank your Lordships for the warmth of the welcome extended to me, not only today, and most recently by the noble Baroness, Lady Liddell, but also when my noble friends Lord Sanderson and Lord Selkirk introduced me to the Chamber.

I am Scottish born and bred. I grew up in the Renfrewshire countryside, which in many ways is very similar to the Ayrshire countryside of Robert Burns, whose birth we have just been celebrating. As he encountered the merle, the mavis and the corbie, so did I. When Burns wrote:

“A Rose-bud by my early walk,

Adown a corn-enclosed bawk,

Sae gently bent its thorny stalk,

All on a dewy morning”,

I knew the scent of that wild rose. I had witnessed such mornings. I had a great sense of pride in being Scottish. The highlight of my childhood week was listening to Jimmy Shand and his band on the radio, learning the old Scottish tunes and jigging round the kitchen floor.

In primary school, Scottish history was an important part of our studies, but there was also a wider arena of which I was aware and could not be unaware. I grew up in the very recent aftermath of the Second World War. My father was a Glasgow Highlander in the First World War. I knew from an early age that there was a United Kingdom, that Scotland was a part of it, that these were natural concomitants and that there was nothing incompatible with that partnership and also being proudly Scottish. That perception was reinforced when I went to an excellent secondary school, Greenock Academy. There I was to learn in detail about the history of the United Kingdom: how the Act of Union came about—and, importantly, as my noble friend Lord Forsyth said, why it came about—and what had been possible down the ages within that unique partnership. Going to school in Greenock was also to see at first hand the significance of the Firth of Clyde as a port and maritime route, an eye to the rest of the world.

Being at school in Greenock was also to understand the strategic importance of that area for the Royal Navy in time of war. Of course, in modern times the nuclear submarine base at Faslane on the Clyde has been a British defence facility of major strategic significance. After school, I was to study law and practise as a solicitor in Glasgow for many years before entering the Scottish Parliament in 1999, where I currently serve as an MSP. This autobiographical meander is merely to illustrate that from childhood through my formative years to adulthood, Scottishness and Britishness have been in my very fibre as innate and inalienable conditions.

Just as I feel part of a family within this House, I feel part of a family of nations: proud nations which constitute the United Kingdom, our United Kingdom. When I look at how together we overcame Nazism, how we fought and continue to fight against terrorism, how we exercise global influence through NATO, through being a permanent member of the United Nations Security Council, through being members of the G7 and G8 groups of countries, and how together we faced global recession and the failure of banks, I see a partnership which is relevant, which works and which is a success.

Threaded all throughout the fabric of that United Kingdom are the people and families of our individual nations. What a strength these threads give to that fabric. The famous words of the poet John Donne:

“No man is an island, entire of itself;

Every man is a piece of the continent, a part of the main”,

could refer equally well to the United Kingdom. We are not defined by some diverse geographical blobs on a map. We are proud of our individual nations, and rightly so, but it is what we constitute together—this union—which is so unique and so powerful. We reach across boundaries; we are not divided by borders. To remove any part of that structure diminishes the rest. It puts the balance out of kilter, so that those who remain are affected every bit as much as those who leave. That constitutional dismemberment imperils the whole United Kingdom.

If I have a plea to your Lordships, it is this. Do not think that the independence referendum in September is Scotland’s business alone. It is not. The whole of the United Kingdom is affected by this debate. Wherever we live within the United Kingdom, if, like me, you value it, then we all need to step up to the plate to keep it. I and my fellow unionists in Scotland need the support of our fellow unionists in England, Wales and Northern Ireland. We are better together; now is the time to stand together.

13:15

[Lord Hennessy of Nympsfield (CB)]

My Lords, it is a great honour to be the first to congratulate the noble Baroness, Lady Goldie, on her fine maiden speech. Her arrival in your Lordships’ House is as timely as it is welcome because she has been at the epicentre of the questions before us today. The noble Baroness’s wisdom, which we have already felt today, will continue to be a boon to this House and so will her company, for she is hugely liked and admired across the political spectrum for her gift for friendship and for her generosity of spirit.

As a non-Scot, and the first non-Scot to speak in this debate, it is hard to know how to declare one’s interests in a debate of this kind. In my case, they come in three varieties. First, I had one Scottish grandmother and, since last year, have close family living in Scotland, in the Northern Isles. Secondly, to adapt the opening line of General de Gaulle’s memoirs, I have always had “a certain idea” of Scotland. More than that, I have had a love of Scotland since my first visit, aged 10, in 1957 when we went from London by car to the Isle of Skye via Edinburgh and Inverness on the way up and the Clyde and Kilmarnock, where the family lived, on the way back. The third interest is difficult to declare because, as many of your Lordships will understand, male Brits of my age were brought up not to speak of emotions in public—quite the reverse. However, I cannot conceive of my country, the United Kingdom, without Scotland as part of it. My fear is that without the Scottish connection England will become a shrivelled nation, psychologically as well as geographically, and more inward looking after the equivalent of a family break-up.

Just think of the benefits that, over the past three centuries, have poured over the border from the family in the north to the family in the south, enhancing the lives of both family branches. We all have our own list—we have had several today—but here is mine in headline form. There are the continuing fruits of the Scottish Enlightenment, which we feel every day in the prowess of Scotland’s universities. I should declare an interest in that the noble and learned Lord, Lord Hope, gave me an honorary doctorate at the University of Strathclyde a few years ago, which I wear with pride. There is Scotland’s industry and flair for invention; its gifts for public, judicial and military service; its writers and actors; and the variety, spice and bite that Scotland has brought to our Parliament and our political philosophies. That is quite enough emotion from me— probably too much—save to say that if Scotland separates, whatever the position in international law, I shall always regard it in my mind as part of my country until the day I depart for what will still, I hope, be a UK enclave in the sky.

Perhaps I may concentrate today on one aspect of what I regard as the regrettable decision taken by the Cabinet at the turn of 2012-13 that Whitehall shall not engage in any contingency planning for Scottish separation. The future of the Royal Navy’s Clyde submarine base in such an eventuality is of particular concern to me, as I am a firm believer in the need for the United Kingdom—or heaven forbid, the “remainder of the UK”, as Whitehall calls it—to sustain a nuclear weapons capacity through to the mid-21st-century as the ultimate protection against a highly unlikely but potentially utterly catastrophic contingency we might face in an unpredictable world. Sir Kevin Tebbit, a former Permanent Secretary at the Ministry of Defence, has accurately depicted the UK as the world’s most reluctant nuclear power. It is to our credit, however, that we go through a great and often anguished debate each time we face an equipment or an upgrade decision. But were we ever to give up our nuclear weapons, it should be after we have had the fullest and best informed national conversation possible, not on a side wind swirling out of the Scottish question.

Having visited Faslane and Coulport, I have some idea of the magnitude of any attempt to recreate them in England or Wales in both logistical and financial terms. My research colleague, Dr James Jinks, has furnished me with the original February 1963 study, now declassified in the National Archives at Kew, of possible bases for the Polaris force. This was the list: Devonport, Falmouth, Milford Haven, Loch Ryan, Gare Loch, Loch Alsh, Fort William, Invergordon, Rosyth and Portland. The Gare Loch was chosen for good reasons: it has deep water in which to dive quickly down the Firth of Clyde off Arran, and three possible exits en route to the patrol area—through the North Channel straight into the Atlantic, up the north-west coast of Scotland and out through the Minches, or south down the Irish Sea and through the Western Approaches.

Should an independent Scotland strive to remove the SSBN and SSN forces from the Clyde, which the SNP is pledged to do, there are now only two possible sites for relocation: Falmouth and Milford Haven. Can you imagine the planning process and the construction efforts required, let alone the cost? We may be able to take a stab at imagining these things, but the Ministry of Defence cannot under Cabinet orders. The solution, in my judgment, would be a sovereign base arrangement for Faslane and Coulport on the Cyprus model, but that idea is, I fear, regarded with horror in both Downing Street and the First Minister’s residence. I profoundly hope that the question does not arise.

I shall finish with a thought about the union post a referendum decision in Scotland not to separate. Although the union will be intact for now, there will remain the danger of a creeping estrangement between Scotland and England, especially if the SNP forms the next post-referendum Government. There could well be a continuing, perpetual drizzle of complaint about Westminster and Whitehall which would induce still more resentment south of the border and poison any conversations about further devolution. If the post-referendum relationship is one of surliness and sourness, we shall all be the poorer. I was very struck by the words of the noble Lord, Lord Lang, about learning to do things once more as a union. Post-September, if we are still together, it will be necessary to sing a song of the benefits of union. The union quite simply is a 300 year-old international success story. It has done great things for our people and for the world in peace and war. It can still do more, much more.

13:21

[The Duke of Montrose (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Hennessy, and, if he is the first Englishman to speak, to hear him nailing his Scottish qualifications so boldly to the mast. The House owes a debt of gratitude to my noble friend Lord Lang for securing a debate on this broad topic. I also thank my noble friend Lord MacGregor and his committee for the work they did and the report they produced.

The economy is the key area and the one in Scotland on which the issue is likely finally to be settled. A small indication of the problems that might arise for the rest of the UK can be speculated on from the fact that on independence, the rules of golf in England might be temporarily suspended. The authority of the Royal and Ancient Golf Club of St Andrews operates in most countries only if they already have their own national organisation with which it can be affiliated.

As we argue with each other in the field of politics, we allocate meaning to words and concepts that are narrower than their original meaning. In this case, it really does not have to follow that a Scottish nationalist is one who is looking for separation and independence. Surely the first feature of a nationalist is that they treasure the assets their country derives from the past and look to the best outcomes for the future. If the rationale proposed is only looking for a major break with what has gone before, then that is the role of an insurgent or a revolutionary rather than a nationalist. Perhaps those who adopt that label should consider which category they wish to belong to. In Scotland, there is a lot of rhetoric about the first concept, but much of the effort is to achieve the second.

I come from a family tradition that goes back at least 900 years in Scotland, and we have been intimately involved in her development. Whatever choice the Scottish people make, I for one will remain with Scotland. A fundamental element of that choice centres on deciding whether a secure future is assured by what has been characterised in the title of a well known play as the “black black oil” and has been regarded by many as Scotland’s black gold, or whether we should shape our future on what is on offer from Scotland’s grey gold: the brain power and inventiveness of her people, which was so well illustrated by my noble friend Lord Forsyth.

When we come to agriculture—I must declare an interest as a farmer in Scotland—there are numerous areas where we find differences. As the noble Lord, Lord McConnell, mentioned, Scotland has gone down a different road from time to time. Just the other day, we had a visit from my right honourable friend the Foreign Secretary, who said how much Scottish agriculture benefits from participation in the common agricultural policy as part of the United Kingdom. What nobody seems to have told him was that at that moment the Scottish farming industry was seething. The fact was that EU moneys had been received under a scheme whose aim is to bring about what is termed “convergence”, because Scotland is lagging well behind the EU target for support compared to the aim of the policy. The UK Government then decided that they would apply their own idea of convergence and use the money as a way of offsetting the reductions that other parts of the United Kingdom would have experienced from the cuts that they had proposed in the Budget.

Looking today at the wider effects of Scottish independence, there are many ways, as my noble friend Lord Lang of Monkton described, that the UK will be diminished. The issue that stands out for me is that if independence takes place, the remainder of the UK will become almost entirely dependent on external countries for its oil and gas. My noble friends Lord Lang and Lord Steel mentioned that Scotland will lose out on the EU rebate, but another element which will arise from a diminished UK and Scottish independence and which the rest of the UK might like to consider is that in terms of land area, Scotland, at 78,000 square kilometres, represents nearly one-third of the British Isles, but at the same time, at 89,000 square kilometres, it will take over responsibility for 59% of British territorial waters. When it comes to the UK economic zone and fishing, it will take over about three-quarters. This will have considerable implications for the Scots in terms of regulation and defence, but it is also a very considerable reduction in what the present UK represents.

13:26

[Lord Robertson of Port Ellen (Lab)]

My Lords, we are fortunate that the noble Lord, Lord Lang, has obtained this debate today, because, as has been said, it draws attention to a critical issue for this country that applies to more than Scotland. This debate reflects the importance of that subject.

The noble Lord, Lord Lang, and I were on opposite sides of the House of Commons. I shadowed him for a brief period before he was replaced in government by the noble Lord, Lord Forsyth. I remember having a discussion with the noble Lord, Lord Lang, relating to his hyperactive successor. The noble Lord, Lord Lang, said, “I come from the anaesthetic school of politics”. The anaesthetic school and the hyperactive school did not save the Conservative Party from oblivion, but the Scottish Parliament did. The electoral system that the noble and learned Lord, Lord Wallace, and I created has given us the likes of the noble Baroness, Lady Goldie, who has enlightened us with her wisdom and charm today. That is one of the advantages of our electoral system, but there were some unintended consequences which I have no doubt the electorate will, in due course, remedy.

There is something bizarre, strange and surreal about a debate on dismembering the United Kingdom and creating a separate Scottish state. The nationalists do not like to be called separatists. The word “separation” is somewhat toxic to them—for good reason, because it means something. If you are going to create a separate state, you are a separatist, and we need to pin that to them. What is surreal is that Scotland is not an oppressed colony. Scots are not discriminated against. We are not disadvantaged inside the union; in fact, Scotland is the second most prosperous part of the UK after the south-east of England. Scots in their hundreds of thousands live and work in England, Wales and Northern Ireland, just as people from these other parts do in Scotland.

Scots play a huge, maybe disproportionate, role in British life. We wake up across the country to the voice of Jim Naughtie on the radio. During the day, we have Ken Bruce and Eddie Mair, and we go to bed after Kirsty Wark has filleted some hapless interviewee. Scottish voices dominate British industry, commerce, culture, academia, trade unions, institutions and organisations. We are not some persecuted minority yearning to escape oppression. We are all of us fortunate to live in a single-language, integrated country where people move, work, trade and socialise without any restraint, divisions or boundaries.

Our native Scottish culture—as diverse inside Scotland as it is different from that in other parts of the kingdom—is not intimidated or threatened by anyone. We have our own Parliament. The proudest part of my long political career is the part I played with the noble and learned Lord, Lord Wallace, in bringing about that Scottish Parliament, which now legislates on nearly every domestic issue that people care about. Within it, as my noble friend Lord McConnell has said, we experiment, we pilot, we make mistakes. We invent and tailor laws to what Scotland wants. It is, as John Smith once memorably said, the settled will of the Scottish people. We indeed have the best of both worlds: part of a strong country respected in the world and punching its real weight—that of a settled state—in the highest levels of global governance; and simultaneously controlling our domestic affairs within a genuine, unconstrained Scottish agenda.

I am proud to be Scottish. I am profoundly comfortable being a patriotic Scot—just as I care about being British and European. When I chaired the North Atlantic Council as secretary-general of NATO, I revelled when we had NATO Foreign Ministers’ meetings with an English Foreign Secretary, Jack Straw, and a Welsh British Ambassador, Sir Emyr Jones Parry, jousting with a Scottish British secretary-general. It was not just entertaining—although it certainly was that—but there was on display a mix of cultures, comfortable and distinct in our own multi-identities inside a polyglot, voluntary, successful union of nations: a vivid example to a continent and a world bleeding throughout history from inter-nation violent conflicts.

That is the spirit of our union, now threatened by a totally unnecessary and unwanted divorce. Just like most divorces, as my noble friend Lady Liddell said, the separation will promise damage, turbulence, negativity and friction. It will do nothing to solve the global problems that face us today and will face future generations.

13:32

[Lord Crickhowell (Con)]

My Lords, the people of Scotland should be as grateful as those of us taking part in the debate for the fact that my noble friend Lord Lang has secured it, and for the manner in which he introduced it. Our people and institutions have intermingled and grown strong through three centuries of union. It has been a huge success story. Those who live in Scotland will have a vote in the referendum; huge numbers born in Scotland who live and work abroad will have no say; and the rest of us are hardly allowed a voice. History may judge that it was an insane way to decide the future of a nation, let alone of a United Kingdom.

All those who were born in Scotland and who live and work elsewhere have every right to be indignant at their treatment. They may be deprived of a vote, but I hope that many of them will add their voices to the campaign in favour of the union and will try to influence their friends and relations who live in Scotland. The rest of us, many like me with Scottish relations, must make it equally clear how much we would deplore what would be a tragic family divorce. Like others, I think that that is the right word to use.

Most divorces have painful consequences. If the vote were to be yes, the complexities of dismemberment would be enormous. Under international law, in the event of a vote in favour of independence, Scotland would become a new state and the rest of the UK would be a continuator state. The notion that,

“all current laws … will continue in force after independence day until they are specifically changed by the independent Scottish Parliament”,

as asserted in the Scottish White Paper is quite simply wrong. Acts of Parliament that are UK-wide in scope may establish public bodies that are under a statutory duty to act in the public interest of the UK as a whole, not in the interest of a foreign power, while government departments and agencies would operate only in the rest of the UK on behalf of its citizens, and not in the new state. UK institutions, including the Bank of England, would become institutions of the rest of the UK, whereas the UK’s assets and liabilities would fall to be apportioned equitably. The Bank of England would become an institution exclusively of the rest of the UK, notwithstanding any historic contribution made by Scotland.

My authority is the magisterial report by Professor Alan Boyle of Edinburgh and Professor James Crawford of Cambridge, together with an analysis presented to the Constitution Committee by our special adviser, Professor Adam Tomkins, professor of law at Glasgow. The Scottish Government want to keep the pound and retain the services of the Bank of England, under a formal currency union agreement. The governor, Mike Carney, in his Edinburgh speech this week made it absolutely clear that, for a successful currency union, you require fiscal and political union if you are to avoid sovereign debt crises, financial fragmentation and large divergences in economic performance. It is almost impossible to conceive how the necessary political union could be created on the back of a vote for political independence. The Select Committee on Economic Affairs, in its important report, ended its devastating analysis of this vital question with the words,

“the proposal for the Scottish Government to exert some influence over the Bank of England, let alone the rest of the UK exchequer, is devoid of precedent and entirely fanciful”.

The positive case for the retention of the union needs to be made with great force, as it has been this afternoon. The people of Scotland have made, and continue to make, an immense contribution to a partnership that is of benefit to everyone within it. As so many have said, dismemberment would be damaging for both Scotland and the rest of the UK. The outcome concerns us all, because we all benefit from integration.

As a number of noble Lords have pointed out, defence presents a particularly striking example. The defence analysis paper explains with great clarity how Scotland benefits from UK defence capabilities that protect everyone in the UK. The level of spending and economies of scale mean that the UK is able to maintain world-class Armed Forces and equipment, as well as the essential structures and services that are required to make them effective. All defence assets, physical and human, are integrated across the whole of the UK, fitting together as a jigsaw under a seamless UK command and control arrangement. Similar benefits accrue to the defence industry, where, again, Scotland and the whole UK would be massive losers from dismemberment.

We need to get the message across: we are all in this together. With children and grandchildren who have blood and genes drawn almost equally from Wales, England, Ireland and Scotland, I say with particular fervour that I dread the possibility of a divorce at the heart of the United Kingdom family.

13:38

[Lord Kerr of Kinlochard (CB)]

My Lords, I first offer a warm welcome to the noble Baroness, Lady Goldie, of Bishopton, which is famous in Scotland for its Royal Ordnance factory. It is clear that we have a big, new gun in our armoury, here in this House.

I offer my congratulations to the noble Lord, Lord Lang, on his brilliant speech. I need not speak to what I was going to talk about, because two propositions are already absolutely agreed: first, that Scotland would be worse off without the union; and, secondly, that the rest of the union would be greatly worse off without the Scots. That has been absolutely agreed this afternoon. I think that every speaker before the noble Lord, Lord Crickhowell, was a Scotsman, which may have something to do with that, but both propositions are true. It is also true that the Scots are a notably modest race.

I will address a slightly different proposition. Supposing that one got the wrong answer and the Scots decide to go for secession, what would be the responsibility of the United Kingdom? The angle I will touch on—I am sorry, but it will not enhance my reputation in the House—is the task of ensuring that the Scots get into the European Union. That is a very difficult task, which would be the responsibility of all of us, including the United Kingdom Government.

Of course, the route in that was suggested by the First Minister in his White Paper and all his oratory does not work. However, I will not go into Article 48 versus Article 49 again; the verdict is clear, so I do not have to. The President of the European Council, the President of the Commission and all heads of government and Foreign Ministers who have addressed this question so far are clear that the route in would be via an application for membership once the country became independent. That poses a problem, for three reasons. First, the European Commission cannot negotiate with the applicant until an application is received, and only a sovereign state can be an applicant. Secondly, all member states have to agree the terms which have been negotiated. Thirdly, all member states have to get them ratified in their countries. If you cannot sign the treaty because you are not yet a sovereign state, you cannot pre-negotiate the terms of that treaty, at least formally.

What is the way around that? One needs to find a way around it because, as the noble Lord, Lord Lang, said, we all have an interest in a prosperous Scotland, and we all have a moral responsibility toward the Scottish farmers, fishermen and exporters, the enterprises and the individuals whose legitimate expectations would be dashed and whose rights would go if there was a hiatus between Scotland’s secession from this union and its accession to the European Union. On the face of it, there is quite a high probability that that might arise. My solution is that it would be the United Kingdom Government’s job to attempt to negotiate informally the terms of Scotland’s entry into the European Union and the transitional arrangements for the period before all three stages of that process were complete and the treaty was ratified.

Three conditions would have to be met. First, a great many of the Scottish Government’s negotiating positions would have to be abandoned straightaway. One could not negotiate the impossible. An example is the question of the rebate. It is impossible as an applicant to secure the agreement of all member states, many of whom are much poorer than you, that you should not have to pay the full subscription. Therefore, an applicant Scotland would not secure a rebate. The UK rebate would go down, because UK GNP and the VAT base would go down; UK receipts would go down; and the rebate, which rebates two-thirds of the difference between the two, would also go down. Therefore, there would be a reduction in the rebate here. It is absurd for Mr Salmond to tell us that in addition to having a reduction in the UK, Thatcher rebate, we must write a cheque and send some money to Edinburgh so that it gets a rebate too. That does not work; we could not possibly pay twice, so that position would have to go. There is no point in an applicant country going to Brussels and saying, “I would need a rebate”.

The second condition is that the divorce terms would have to be absolutely clear. I am sure that the Council would be unwilling to allow the Commission to negotiate with a country that has not yet defined what its independence is. What independence means in terms of frontiers and currency would have to be clear. The Scottish and United Kingdom Governments would have to agree a precise scenario before any negotiations could start. Even then, the lawyers might object to the start of the negotiation, saying, “They aren’t sovereign”, so the negotiations would have to be conducted by a UK team flying the union jack. You cannot stop members of the Council negotiating with the Commission. They would have to operate on agreed instructions from the London Government and the Edinburgh Government. Even so, they might have a very hard task, because some member states could wish, if the occasion arises, to make the Scottish path to membership of the European Union as difficult as possible in order to dissuade secession movements in their own countries. That is the best I can come up with, and it is not certain that the road I am describing would be open. However, it would be the UK’s responsibility to try.

Edinburgh needs to become much more realistic, and we could not wash our hands of the problem. If the Scots say that they want to be independent, we have an interest and a responsibility to try to get them into the European Union as quickly as can be arranged. It will be extremely difficult. We all now have a responsibility to make clear to the Scots, before they vote, that there is a real risk of a hiatus—of falling into a costly crack between secession from this union and accession to the European Union.

13:46

[Baroness Neville-Jones (Con)]

My Lords, I add my thanks to those of other noble Lords to my noble friend Lord Lang for securing and leading this debate and for the wisdom of what he said. The noble Baroness, Lady Goldie, is no longer in her place, but it is a great pleasure to have her in this House. I agree that we have a great new weapon here—her call to arms was certainly very forceful and also quite right.

Much of the comment on the implications of the referendum in Scotland has focused on the economic aspects, but in the course of the debate so far we have also begun to see a wider picture. In a moment I will focus on the security side, which has already been mentioned by some other noble Lords. First, however, following what the noble Lord, Lord Kerr, said, I should just like to say that it is a very unattractive prospect to be caught like a pig in the middle between the Scottish Government and the Council when trying to do something. I see the point that he made—that it would be extraordinarily difficult. It is not clear to me whether the other members of the Council would play ball. That is only one of the many great difficulties that this potential scenario throws up.

Before I go on to talk a bit about the issues that conventionally come under the heading of security—and the list starts with terrorism—I should like to comment on the question of an independent Scotland’s potential membership of NATO. This throws up equally great difficulties when we come to the propositions that might confront us as regards the economic European Union. Why? Frankly, it is pretty extraordinary that a Government who dispute the central tenets of the defence policies of the alliance and seek to remove from their soil the facilities which are so important to nuclear deterrence should simultaneously imagine that they would be wanted or valued inside the alliance which their actions were weakening. It is very difficult to see how the alliance would countenance that. It does not work that way. That is another area where the Scottish people are being sold a false bill, and it is very important that they hear other voices.

I turn to issues that the noble Lord, Lord Browne of Ladyton, mentioned—and I agree entirely with what he said. I want to focus on the threats that this country has been tackling in a major way, from before 2010 but, most particularly, since the national security strategy of 2010. We identified terrorism, cyberattack and organised crime as major threats to the stability of the security and stability of this country. Terrorism and cyberattack were classed as tier 1 risks and organised crime as a tier 2 risk. Despite our great efforts and the investment that has been made since then in combating organised crime, it has enormously grown, and I would not be at all surprised to see in a further security strategy that it came out as a tier 1 risk. My point is, in relation certainly to the other two risks, that those risks are not going away; they are remaining. Daily extensive, intensive and expensive efforts manage to keep them under control.

So what are these efforts? The annual bill in this country for maintaining capabilities and for the operations of the agencies, and for the cyber intelligence alone, runs at over £2 billion per annum. That does not take into account the contributions also made by the police or other government agencies and the military to our overall strategy. As a result of that overall strategy, we have a well honed machine, which goes under the label of Contest, on which our counterterrorist effort is based and which is being used as a model to combat organised crime. It is because of Contest that we have seen so few outrages since the London bombing, but we should not imagine that it is because they are not being attempted—they are, and there are plenty of them, and the operations of the police and agencies frustrate them.

The whole of the UK benefits from this security umbrella that runs from the centre, but this would change, and it would change radically, in the event of Scottish independence. The authority of the agencies, the legal framework under which they operate and their ability to provide security would stop at the border. The noble Baroness, Lady Liddell, was quite right to say this. The Scottish Government have recognised this, and they know that they would have to set up what has been described as a security and intelligence agency, which would engage in what they have described as intelligence sharing. That is all very well, but the putative budget for defence as well as for security in an independent Scotland is only £2 billion per annum; that includes defence as well as other agencies. For a share of this sum it seems highly improbable that, with set-up costs and operations, an intelligence service could be created that was adequate to act as an effective and trusted partner to UK and other allied intelligence services. To share intelligence, agencies have to be capable of generating their own. I have no doubt that the UK, in its own security interests, would want to do what it could to increase the security of its geographical neighbour and long-time partner, but we have to recognise that the control principle governing intelligence derived from third parties would undoubtedly quite severely limit what it could share. Scotland would lose the benefit of what the UK has at the moment in its membership of the “Five Eyes” community.

That would have important implications for UK security. The UK could not allow a less secure Scotland, if that turned out to be the case, to be used as a back door to penetrate the UK, and we may be sure that that would be tried. Unavoidably, we would have to fall back on securing the English-Scottish border to become a control point, with all the cost and inconvenience that would be involved. That would be true irrespective of whether Scotland were a member of Schengen or managed to persuade all parties involved to be allowed to continue to be in the common travel area of the British Isles.

I have one last point. The border between Northern Ireland and the Republic of Ireland is often pointed to as an example of the way in which it is possible to keep an open border in the face of a terrorist threat, but this is not an apt analogy. The control border is across the Irish Sea, and it most certainly is monitored and can be closed in emergencies. I would hate to think, but it cannot be excluded, that this could happen within Great Britain. The more we diverge in policy and practice, the greater the danger. We would surely be better off by maintaining the open and peaceful border that we have had for 300 years.

13:55

[Lord Brennan (Lab)]

My Lords, the Motion so well introduced by the noble Lord, Lord Lang, wisely invites the House to note the implications of the forthcoming Scottish referendum. Secession by Scotland from the rest of the United Kingdom is of the greatest constitutional importance to the whole nation. What are those implications constitutionally? First, for the Parliament—or should I say Parliaments of the United Kingdom—if there is a yes vote, it is only the first step, or the beginning of the end. There is much to be done, and to be done by this Parliament. The agendas of defence, economics, banking, transport and education that we have gone through today, illustrate the scope of the Act of Parliament and consequential debates that we would have to undergo before we voted to implement actual independence. The Scottish certainly would require the same process, and I have not looked at the technicalities but the Welsh and Northern Irish might also be involved in their Assembly duties.

What is the reality of that? In September 2014, if there is a yes vote, there will be about six months of parliamentary time before the run-up to the 2015 general election for our country. Nothing will be achieved in those six months except, perhaps, a lot of political noise from north of the border if there has been a yes vote. The United Kingdom Parliament, elected in 2015, will have on the present count 59 MPs from Scotland. Let us forget for a moment the party-political demographics of that 59—it is a substantial part of the manpower of the House of Commons. There will come a time after a yes vote, if Parliament decides on an Act of independence to agree to secession, in which those 59 MPs will cease to act. On when and how, I am afraid that I am, as a lawyer, not convinced that this would be a matter for negotiation. I do not see how constitutionally a Member of Parliament can continue to sit in the Commons and act for a constituency that no longer exists as part of this country. In that event, within that Parliament, the structure of politics will suffer a major change. So the implication for our Parliament is much greater than the interests just of Scotland—it is the interests of the whole country.

If there is a yes vote, this Parliament will face a state of affairs in which huge amounts of parliamentary time will be needed to make a decision that the whole country will be looking at, particularly the citizens of England. If there is a no vote, the devolution argument will continue. If, as one suspects, the Scottish National Party wants a 47% yes vote and a 53% no vote, it will then tell the rest of the country, “We are on the way to more devolution. Let’s continue the fight. It will not go away”.

I turn now to the nature of the debate. It will require at the very least long parliamentary debates but also, perhaps, a Joint Committee or a parliamentary commission such as the banking standards commission that we have just had or, as the noble Lord, Lord Maclennan, said, a constitutional convention, probably irrespective of whether there is a yes vote or a no vote. These are major issues which will take up parliamentary time, and the debate has to involve the whole country.

As for the international implications, the international community at the beginning of the 21st century does not do independence-lite. The 70 years since the Second World War have produced a range of international institutions with extremely careful entry and membership requirements which will not be softened or changed for individual circumstances. Apart from the case of colonialism and freedom for various countries which survived that, and other than the fall of communism, I can find only two instances in the past 70 years in which the United Nations has accepted new members—namely East Timor after a civil war involving Indonesia, and South Sudan after a civil war with what is now Sudan. Somaliland has been a non-accepted “independent” country since 1991. It is simply wholly unreal to expect Scotland to enter any of the 10 or 15 international institutions which we can immediately think of that it would need to enter to be a respected and functioning member of the international community.

I never cease to admire the intellect and ingenuity of the noble Lord, Lord Kerr. His description of how the United Kingdom might help Scotland get into the European Union increased my admiration but did not help to convince me of the strength of his argument. Some countries in the European Union will never agree to a country such as Scotland coming into Europe because of their own interests, and neither will the United Nations. We therefore face an independent Scotland being in international limbo for years to come. To whom will the world look to safeguard international interests in which Scotland should play a part but cannot? It will look to the United Kingdom and our international duties will continue as before.

My last point is not extensive. There is no turning back. If Scotland becomes independent, that is it. If it chooses to leave the United Kingdom it will not be welcomed back save in the gravest of circumstances of hardship and need. That is a harsh reality to express but, constitutionally, it is almost inconceivable to think that it would return.

[Lord Ahmad of Wimbledon]

Before the next contribution, I again remind noble Lords that this is a time-limited debate and that when the clock strikes “7”, noble Lords should look to complete their comments.

14:04

[Lord Shipley (LD)]

My Lords, like the noble Lords, Lord MacGregor of Pulham Market and Lord Forsyth of Drumlean, I was a member of the Economic Affairs Committee, which reported last year on the economic impact on the UK of Scottish independence. When we debated the report in this House in June, we said that it was important that voters understood the implications of their vote before they cast it. We said that voters should reasonably expect to know whether membership of the EU would be secure, how long the process of applying might take, what the implications for taxation—both personal and corporate—would be, what the implications for public spending might be, which currency would be used, which fiscal policies would be put in place and what regulatory policies might be different in Scotland from the rest of the UK.

Some of these issues, particularly around banking and fiscal union, have been clearly explained this week by the Governor of the Bank of England. However, there are uncertainties around entitlement to Scottish citizenship, as well as other uncertainties around tuition fees and whether they would or would not be free at Scottish universities for students from England, Wales and Northern Ireland.

Another key issue is the Barnett formula because, if Scotland became independent, the extra 15% of public spending per head would cease. Oil revenues might make up the difference, but such oil tax revenues would inevitably be uncertain because they would fluctuate according to the market price. It is true that, on the basis that 90% of oil reserves would be in Scottish waters, the tax gain from that could make up for the loss of the Barnett formula, but it seems very clear that there would not be any more money available overall for public spending if Scotland was independent.

A further key issue is UK debt, which now stands at £1.38 trillion and rising. Scotland would have to take its share of that debt, but it is generally recognised that bond rates would be higher in Scotland after independence than they are now. The UK can borrow at very low rates but Scotland on its own could well have to borrow at two percentage points higher. What would be the impact on Scottish mortgages, bank loans and inflation?

Another key issue is the nature and benefits of our integrated domestic market. Dividing it into two separate fiscal, regulatory and consumer protection regimes could create serious difficulties for the private sector and increased costs for households and businesses in areas such as pensions and insurance.

I have been, and remain, a firm advocate of increased devolution in the UK, but I also believe that the full independence of any part of it would dislocate the whole of the UK, making it much more unbalanced. It would reduce our international influence, endanger a single labour market and put into doubt the existence of UK-wide communications systems. It would also prevent our sharing of investment and risk across the United Kingdom.

Living in the north-east of England, I strongly support closer working between Scotland and north-east institutions—something that I am very keen to see enhanced, whatever the outcome of the referendum. I was particularly pleased to see the work on the border lands produced by four authors from Northumbria University, Durham University and IPPR North, which examines possible scenarios for the north-east of England and Cumbria if Scotland becomes independent or has maximum devolution within a UK framework. I welcome initiatives such as this because we need a debate in England and the rest of the UK rather than only in Scotland.

I want the United Kingdom to remain united but, equally, I hope for greater devolution to the UK’s constituent parts. I think Scotland will find greater flexibility inside the UK than it would outside because of the constraints that would be imposed on an independent Scotland in areas such as higher borrowing costs. However, I acknowledge that this is a decision for the people of Scotland to take. However, I make a plea to the media based in England. England needs to understand better what Scotland is thinking, on both sides of the independence debate. Too often what I read and hear in English newspapers is an English commentary by an English commentator. UK newspapers, for example, may have Scottish editions with specific pages on Scottish news, but those newspapers do not get sold in England. Over the next few months it would be helpful if newspapers printed in England carried much more Scottish news and articles on the independence debate so that we develop a better understanding of what people are thinking. I should acknowledge at this point that the BBC has started to do this and I welcome that.

A historic opportunity is on the horizon for the United Kingdom. If Scotland votes yes, the consequence would be a new constitutional settlement with the rest of the UK. If Scotland votes no, there will be a debate on devo-max and what further powers could be devolved; I anticipate that. Either way, we shall have the opportunity to undertake a new constitutional settlement across the UK, spear-headed by the debate and the vote in Scotland.

We should start here at Westminster, with English issues being reserved matters for English MPs only. I am not a supporter of a separate English parliament, because it would cover too big and diverse an area and too big a population. Rather, I favour gradual devolution of greater powers to combinations of local authorities with coterminous boundaries with local enterprise partnerships, thus encouraging and securing joint working between the two. There is rising demand across England now for devolved powers from Whitehall, for a place-based system of finance through a single pot covering all relevant Whitehall departments. The recent London Finance Commission report Raising the Capital looked closely at this, but cities across England are now calling for a suite of fiscal reforms including devolution of property tax revenue streams—council tax, stamp duty, land tax and business rates—with the ability to reform those taxes while retaining prudential rules for borrowing.

The debate in Scotland will provoke a great opportunity. I welcome that, but I welcome too one potential consequence: that we will actually have a debate in the rest of the UK on what a new constitutional settlement across the UK might look like.

14:11

[Lord Empey (UUP)]

My Lords, I join others in congratulating the noble Lord, Lord Lang, on securing the debate. His comments and vision at the end of his speech on what a new unionism might look like is the missing ingredient in the current debate, in my opinion. The debate is about whether Scotland leaves the UK, whether it would be better off on its own—that sort of argument. Instead of making the debate about leaving the union as it is, we need to look at how the union could evolve and improve—how we could make things better. If the noble Lord is looking for a response, I can tell him that my party in Northern Ireland—the Ulster Unionist Party—is attracted to the ideas that he espouses and would love to participate in a debate on how we can help the United Kingdom to evolve.

Though I am a supporter of devolution, I am concerned at the way in which devolution is being treated in Whitehall. The issues of the regions are being pushed to one side. That is the mistake that was made on Northern Ireland from the 1920s; it was pushed to a desk at the back of the Home Office and ignored. We are all part of a union, and we should all have a say. The idea of pushing devolution to get the issues off the Whitehall desk is a fundamental error. Large amounts of money are being pumped into the regions, and the regional parliaments should not simply be ATMs that can distribute largesse locally, without any acknowledgement of where it comes from. In what is happening in Scotland, we see before us the downstream consequences of that fundamental mistake.

Of course it is perfectly possible for Scotland to be independent. The people of Scotland have the skills and ability to survive on their own. However, they will do so at a different level of economic and political influence. That is the risk that they run. The forensic approach of the noble Lord, Lord Brennan, a few moments ago was very sobering indeed. Of course, Scotland is not a single unit on this issue. The approach is totally different in the islands—Orkney, for instance. They are saying, “It’s not your oil, Mr Salmond, it’s our oil. It’s got to come through our front door before it gets to you. We don’t need you, Mr Salmond; we can be on our own”. What does that mean? I have never seen such a significant constitutional issue come before us so ill thought-through. Not a quarter of the major issues have even been addressed. We are taking a leap in the dark. The people of Scotland are being asked to walk over a cliff edge in the hope that the SNP will catch them as they fall. The issues are not even worked through in any coherent way.

As the noble Lord, Lord Brennan, made clear, there are also implications for Parliament. Sadly, there may be a few in the other place who look around and say, “If we didn’t have those 40 or so Scottish MPs we could have a different Government. We wouldn’t be dependent on other people any more”. What about the implications for this Chamber? Think of some of the voices that might be stilled in this Chamber. Maybe I will not go there—that might work against my argument—but the fact is that this Parliament would not survive unscathed.

I feel concerned that so little thought has been given to the downstream implications of this, and I am pleased that at least we have been looking at it from the other side of the argument—that the rest of us have some say in this. Following the Bank of England governor’s intervention yesterday, I can say for almost certain that those of us remaining in the United Kingdom in the event of a yes vote would have to determine our response on the currency issue. Are we seriously going to pick up after the Scottish National Party—guarantee it, be lender of last resort? Who in their right mind wants to be an independent country but have their money supply, interest rates, public spending and lender of last resort outside their borders? It is barking mad. That is not independence at all; that is servitude. You are a client state, like some of the old Soviet republics. Sufficient detail has not been debated.

This particularly applies to our Labour colleagues in Scotland: if you look back a few years, this country was led from Scotland. We had a Scottish Prime Minister, a Scottish Chancellor, a Scottish Home Secretary and a Scottish Defence Secretary. The G8 met in Scotland; all the world leaders were there. That will be thrown away. Scotland has punched above its weight consistently inside the union; all that will go. President Obama will not be ringing up; neither will anybody else. Particularly in Scotland, we need more vigour behind the campaign than there has been hitherto.

I will quote a poet for a moment, Robert Frost:

“Before I built a wall I’d ask to know

What I was walling in or walling out”.

I do not think that question has been asked. The nightmare of border posts is hard even to comprehend. I am sorry to disagree with the noble Lord, Lord Kerr of Kinlochard, who is not in his place, but the idea that we would take on the job of negotiating on behalf of the SNP is very difficult. Why should we clean up its mess? I want to see Scotland succeed and prosper but its place is within the union, not outside it.

14:18

[Lord Selkirk of Douglas (Con)]

My Lords, like the noble Lord who has just spoken, I congratulate the noble Lord, Lord Lang, on his profound and perceptive opening speech. I have spoken in this Chamber about the difficulties that I believe any independent Scottish Government would face in trying to create a credible Scottish defence force by plucking out assorted assets and personnel from the closely integrated British armed services. The military covenant, whose key principles have now been enshrined in law, states that the first duty of Government is the defence of the realm, and I wish to concentrate today on the implications for the safety of the whole of the United Kingdom if Scotland chose to become a separate country in the referendum next September.

The recent report of the House of Commons Defence Committee concluded that such a momentous change would result in the remainder of the UK,

“facing the loss of vital personnel, bases and equipment, representing as much as one twelfth of current assets”.

There would be, it warned, a consequent loss of capacity, particularly in the short term. The committee reached the alarming conclusion that the level of safety and defence currently enjoyed by the whole of the United Kingdom,

“is higher than that which could be provided by the Governments of a separate Scotland and the remainder of the UK”.

At the heart of the negotiations after a yes vote in the referendum would be the future of the United Kingdom’s Trident nuclear deterrent, as touched upon by the noble Lord, Lord Hennessy. The SNP is determined to banish those submarines from Scotland’s shores while at the same time seeking the protection of the North Atlantic Treaty Organisation, which is a nuclear-based alliance. In contrast, the Defence Committee reported that Scottish independence on those terms poses a serious threat to the future operational viability of the UK’s nuclear deterrent. The UK Government have made it clear that the horrendous cost of repositioning the nuclear armed submarines would impact financially on the whole of the United Kingdom. Giving evidence to the House of Commons Scottish Affairs Committee, Professor William Walker of St Andrews University said that the creation of a new deep-water facility outside Scotland could take at least 20 years. In what I sincerely hope will be the unlikely event of a yes vote, there is clearly substantial scope for this subject rapidly to become one of the most divisive and hotly disputed issues in any negotiations between an independent Scotland and the rest of the United Kingdom.

[Lord Lea of Crondall (Lab)]

My Lords—

[Lord Selkirk of Douglas]

My Lords, I look forward to the noble Lord making his own contribution later if there is time.

Unfortunately there is not sufficient time to talk about all the implications for the UK of setting up a separate Scottish state. I will, however, deal with one: the possible creation of passport controls on some 21 roads that cross the border. The Scottish National Party insists that such a situation would not arise but no UK Government could fail to act if an SNP Administration in Edinburgh relaxed immigration checks to such an extent that Scotland became a back-door entry to the remainder of the UK. We can well imagine the economic impact and the sheer time-consuming inconvenience for travellers.

Evolution is a natural process and dismemberment is not. The Calman Commission, on which I served, had representation from Labour, Conservative and Liberal Democrat parties, and produced a unanimous report proposing further devolution within the United Kingdom, which has been largely implemented. It represented an evolutionary development. Whatever the SNP would have us believe, the total separation of Scotland from the rest of the UK would represent a severing of one of the most successful political, economic and social unions in the world which has endured for more than 300 years. I fear that this dismemberment would produce nothing but frustration and friction in our common island home.

While the United Kingdom is able to make the best use of finite resources, its disintegration would in all likelihood unpick all the economic integration steadily built up over three centuries. On the international scene, the UK’s coveted place on the UN Security Council and our seat at the top tables in the world’s economic forums could be in doubt and our capability to promote democracy and the rule of law around the globe sadly diminished.

Outward-looking patriotism is not to be confused with inward-looking nationalism. Patriots can love their country and yet be happy to see it as part of a larger entity which can continue to do a great deal of good in the world. I am a Scottish patriot as well as being a British patriot and I wish to continue to be proud of both.

14:24

[Lord Gordon of Strathblane (Lab)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Selkirk, in a debate so ably initiated by the noble Lord, Lord Lang. By happy coincidence, the three of us were introduced to your Lordships’ House on the same day in 1997. More importantly, perhaps, this has also provided a convenient occasion for the noble Baroness, Lady Goldie, to make her maiden speech. I very much welcome the experience that she brings to the House from the Scottish Parliament, which will inform future debates as it has informed this one.

Frankly, I will be very relieved when 18 September has passed, not so much because of the result as the danger of permanent damage being done in the intervening period to what is a very close relationship. It is a severe test of any marriage when one party announces that it wants to consult about divorce. It is difficult to imagine things being quite as warm again in the future. There is a very real danger of that here. In everything we say, we must realise that, no matter what happens, we will all be living together in one very small island off the shore of Europe and we should avoid any statements that make relationships in the future more difficult than they need to be.

A lot of English people to whom I speak are as much hurt as puzzled as to why we are having a referendum on independence. They wonder what they have done wrong to cause the Scots to want to do this. It is very difficult to give them an answer. The noble Lord, Lord Empey, mentioned the Blair Government in 1997. Every senior post was taken by a Scot. Eight out of 22 in the Cabinet were Scots. It is difficult to portray Scotland as a downtrodden nation with those figures. It is easier to make a case that England has been rather abused in recent years. We need to address that.

There is evidence that the English are beginning to address it. I, along with most noble Lords, received a briefing from the Local Government Association this week, saying that devolution seems to work rather well for Scotland, so how about some devolution for us? How about devolution and more equal expenditure? The Barnett formula is under severe threat because, frankly, it is more than fair to Scotland, and we know it. That is why Nicola Sturgeon was so desperately anxious to get an assurance that it will not be re-examined. The English regions will start demanding their fair share, so some damage has been done already.

Damage has been done to Scotland because there is uncertainty where there need not be. Damage has been done to the SNP because the SNP was doing rather well in Scotland. Its first Administration introduced some fresh faces to Scotland and a fair degree of competence as well, which the public in general admired. Now it is showing what might be called it true colours and it will do the SNP harm. This is not its most popular policy. People vote SNP who would not touch independence with a barge pole. That may not be the case in future elections.

The SNP is anxious to pretend that nothing will change. It wants to keep the Crown, to remain in NATO and to remain in the currency union. However, things will change. In my view, we already are independent, in that no one will send tanks up from Carlisle if we decide to vote yes. We are a free nation—I fully accept that we are a nation—and we are entitled to be independent if we want. However, I do not think that we want to. I do not think that the Scottish people want to. The SNP knows that the outward trammels of independence would be unpopular in Scotland. We do not want a separate head of state. We want to remain in the currency union.

The SNP wants to pretend that everything will remain the same. However, in my view, if the SNP says that there will never be border posts, it must accept the consequent reality: if there are no border posts, we must follow the same immigration and terrorism policies as England, otherwise there will be border posts. Likewise, if it says that of course there will not be customs posts at the border, we cannot then pretend that we can have a different level of excise duty north of the border from that in the south. All that will happen is that pantechnicons will roll down the M74, pick up the cheap booze in Carlisle and come back up the road to the black market. All that we are looking for is a degree of consistency. In any case, if nothing is changing, you might well argue, “Why sell a 300 year-old house simply because you do not like the wallpaper in one of the rooms?”. That is what the SNP is effectively doing; it wants to keep the big things but change a few minor things.

Incidentally, I was greatly intrigued by the speech of the noble Lord, Lord Forsyth. As far as I can remember, there is a bit of a coincidence here. The man who founded the Bank of England, William Paterson, was a Scot and the man who was later behind the Darien scheme. This seems to come around every 300 years. The issue was shown up clearly in the Governor of the Bank of England’s speech, which was reasoned. He said that it can be done, but the question for Scotland is, “Do you genuinely think that you will have more influence over Bank of England policy as a foreign country or as part of the UK?”. Once you have asked the question, you realise what the answer is, and it is why, frankly, I wish the referendum were not taking place.

If one considers the issue of broadcasting, my own background, Scotland constitutes 34% of the UK land mass. It takes 1,154 transmitters to cover the whole UK, 235 of which are in Scotland. In other words, more than 20% of the transmitters are in Scotland serving 8% of the UK population. The same problem will arise with broadband. The Scottish Government are doing a good job of trying to roll out broadband, but it will be more expensive in Scotland, simply because we are a less densely populated country with difficult terrain. There is also reference in the White Paper to taking over BBC Scotland. Incidentally, there was a big hoo-hah a couple of years back under Blair Jenkins about a new digital channel. That has now been forgotten. We are going to take over BBC Scotland and then miraculously get all the BBC programmes for nothing. How that works, I do not know.

My concluding remarks relate to Scotland’s place in the world. One of the first television programmes I made was a series called “Scots Abroad”, because I was mesmerised by the achievement of the Scots in building the British Empire. Scotland benefited disproportionately more than the rest of the UK from the industrial wealth of the British Empire as a captive market, brought particularly to Glasgow and the west of Scotland. We also suffered more than the rest of the UK when our manufacturing industry ran down. However, the UK now exercises its power through soft power. I felt genuinely proud of London during the Olympics. London showed a warm side that most people had hitherto not noticed, including Londoners themselves. I hope that Londoners will feel just as proud of Glasgow when we hold the Commonwealth Games in the summer of this year.

14:33

[Lord Purvis of Tweed (LD)]

The distinguished former Member of your Lordships’ House, Earl Russell, described the essential relationship between Scotland and England as that which could be defined by saying that England could brook no equal, and Scotland no superior. The motto of the oldest continuous regiment in the Regular Army, the Coldstream Guards—“Second to none”—is testimony to that. As a borderer, my area has seen the tensions realised over the centuries. No doubt, my ancestors, who were witness to the bloody dispute on Flodden Field, may have some sympathy when I see a less bloody dispute at Murrayfield between the two warring partners in 10 days’ time.

This debate has heard much of poetry and pragmatism. Perhaps your Lordships will allow me to say that the best poetry was best delivered by my former colleague, my noble friend Lady Goldie. If many noble Lords thought that the only Conservative politician to be stranded on a zip wire was Boris Johnson, they need to refer back to my noble friend Lady Goldie, who was the first to pioneer that media stunt in an election campaign in my former constituency a number of years ago.

That, as well as a longer history, has been part of today’s debate. However, in my short contributions to previous debates in your Lordships’ House on this subject, I referred to a girl who would be born in Scotland on the day of the referendum, who would be likely to see the 22nd century, and her granddaughter the 23rd century. In that regard, the noble Lord, Lord McConnell, set exactly the right tone for our national debate taking place in Scotland and across the whole UK: the choice ahead of those of us who have a vote in Scotland is between the ever more diluted and nebulous concept of independence that is being presented or a reformed and refreshed union. I very much respect the contribution made to Scottish politics by the noble Lord, Lord Lang, but I regret his saying in this debate that those of us who are passionate about the union and Britain, and see the benefit that reforms can bring, should be getting real.

A decade ago, when I served on the Scottish Parliament’s Finance Committee, I wrote a paper arguing that while the establishment of a Scottish legislature was unquestionably a good thing, we did not establish a Scottish Government or have the recourse to reforms to Whitehall and Westminster that allowed a more federal type of United Kingdom to be developed. That is why there is an opportunity ahead of us to seize that issue and offer the people of Scotland an opportunity to reject independence but put their faith in a reformed and improved union. I concur wholeheartedly with the noble Lord, Lord McConnell, in his illustrations of the benefits of the Scottish Parliament. To his examples, I could add: land reform, which languished on the shelves of officials who did not secure parliamentary time in Westminster; criminal and civil law reform; the first legislation on freedom of information in the UK, which included its own Parliament in that legislation—something that this place learnt, to its cost, that it should have done; reform of local government; and electoral reform. Many of those instances were put forward through the leadership of my noble and learned friend Lord Wallace and the noble Lord, Lord McConnell, working together in coalition. They saw coalition work in the United Kingdom, after a long break, which was also a contribution that reform can bring. Those are examples of parts of progressive reform in progressive institutions.

The very much admired and much missed John P Mackintosh said in another place in 1976:

“One party, with which I have much sympathy—the nationalists—says ‘If you feel Scottish and want to run your own affairs, you must have the full panoply of statehood—with an army, a navy, an air force, ambassadors abroad and the lot’. I do not think that the Scottish people want that. The other group, the Unionists, say ‘If you feel British, if you value British traditions and respect British parliamentary democracy, and if you think that the big industries have to cover the whole of Britain, you cannot have a degree of self-government which reflects your needs in your own areas.’ I reject both propositions. Institutions have to be the servants of political demands. We have people in Scotland who want a degree of government for themselves at the Scottish level. It is not beyond the wit of man to devise the institutions to meet those demands and thus strengthen the unity of the United Kingdom”.—[Official Report, Commons, 16/12/76; cols. 1829-30.]

That happened. However, we have an opportunity to question whether that system was the best for the future. Is the settlement we have the most stable and beneficial for the rest of the life of that young girl who will be born next year?

A decade ago, I wrote the paper to which I referred. More recently in my work—I declare an interest as a member of the advisory board of the think tank Reform Scotland—I was the author of the devo-plus reports, published in 2012. They sought to establish an objective look at where the most appropriate balance of power and accountability would lie for the most efficient and stable delivery of public services in Scotland, and across the rest of the United Kingdom. We have an opportunity to put the Scottish Parliament on a more permanent constitutional footing, allow it fiscal power commensurate with its legislative power, and ensure that there is proper accountability and elections in the Scottish Parliament, so that when I was an MSP people would not have asked me where the money was raised from for the services on which it was spent, but would have asked simply how it should be spent. There should be more robust legislative underpinning of the financial relationship with the Scottish Parliament. That is unsustainable in the future because the devolved Scottish budget is treated effectively as a departmental budget line in the Treasury documents. It is also no longer sustainable that the funding formula for Wales, Northern Ireland and Scotland can be arbitrarily changed by the Treasury or that, if we consider the Scottish Parliament to be permanent, it can be abolished by a one-line piece of legislation in this Parliament.

It is an absolute pleasure and an honour to be part of a debate to which the noble and learned Lord, Lord Hope of Craighead, has contributed. He said in a judgment on AXA General Insurance v the Lord Advocate in the Supreme Court:

“The dominant characteristic of the Scottish Parliament is its firm rooting in the traditions of a universal democracy. It draws its strength from the electorate. While the judges, who are not elected, are best placed to protect the rights of the individual, including those who are ignored or despised by the majority, the elected members of a legislature of this kind are best placed to judge what is in the country’s best interests as a whole”.

I believe passionately that it is in the best interests of Scotland to remain a successful and progressive part of the United Kingdom, but we need to look very clearly at the form and we need to offer people a positive choice in the referendum. In that regard, I believe that the noble Lord, Lord McConnell, and others are correct in saying that we have an opportunity to provide people with a positive choice for the future.

14:40

[The Earl of Caithness (Con)]

My Lords, unlike my noble friend Lady Goldie, I am not 100% Scot. I certainly have Scottish blood in me but I also have quite a lot of Norwegian blood in me from the old days, as well as English, Welsh and Irish blood. I am not alone in that. Many in the United Kingdom have that combination. That is one of our strengths, being part of the United Kingdom, and it does not worry me. I passionately support Scotland when it comes to sport. If Scotland is playing England, I support Scotland, but if England is playing another country, I tend to support England.

The noble Lord, Lord Steel, said that his guru, Jo Grimond, did not like the word “devolution”. I do not like the word “independence”. Independence in Scotland has a certain ring about it that is quite attractive. If I ask people in Caithness, “Do you want independence?”, they hesitate. If I say, “Do you want separation?”, the answer is no. We are losing the argument by using the wrong word. We must make it absolutely clear that this is total and complete separation. It is the nuclear option; it is the end of the United Kingdom for ever. The consequences are horrific but we have not really touched on them today. In fact, I think that we have very little comprehension of how the markets and the rest of the world will react should Scotland vote for complete separation, because that is what it means. That is one of the messages that we have failed to get over.

Let us just go back to currency, because it is a key issue. It is no good the Government saying that it is not likely that we will have a sterling area. Come on, my Lords, let us be absolutely clear: there is going to be no sterling area. There must be no doubt. The more doubt that is sown in the minds of those who are going to vote in September, the more chance there is of there being a yes vote. The Government have to be absolutely clear. Should they decide that there might be a sterling area, can my noble and learned friend on the Front Bench confirm that the rest of us in the United Kingdom will get a referendum on whether we want it? It is no good the Scots saying, “We want a sterling area”. If the Government say, “Yes, well, in all the circumstances we will have a sterling area”, it will be absolutely right that the people in the rest of the UK decide whether they want to allow that to happen and whether they want to join that sterling area.

If there is to be no sterling area, Scotland has to have its own currency. It has to have its own central bank and it has to be credible. As the noble Lord, Lord Kerr, rightly pointed out, if Scotland wants to become a member of the EU, it has to be its own sovereign state. It has to have a track record. I think that it was the noble Lord, Lord Brennan, who pointed out that there will be a ghastly intermediate area between a country being part of the United Kingdom and it becoming a separate country. That will have huge implications for the rest of the UK, which will have to keep the whole ship steady.

As has rightly been said, if Scotland is accepted into Europe, it not only has to have its own currency but it has to be part of the Schengen agreement. That will automatically put border controls on the boundary between Scotland and England, and that will have an effect on tourism. The noble Baroness, Lady Liddell, was absolutely right to say that tourism is hugely important. When people come to the UK, they are thrilled to be able to arrive in London, come up to Edinburgh and then travel on to the far north. However, they will not be able to do that quite so easily. The Americans are not great travellers at the best of times. If life is made difficult for them, tourism in Scotland will suffer, although it will not suffer so much in the rest of the UK.

What will happen if Scotland is refused entry into Europe, as is highly likely? There will be a country to the north of us which is totally separate from the rest of the UK; it will not be part of Europe and it will have its own currency. There will be huge implications which we have not thought through and have not yet assessed. That is potentially dangerous. Should Scotland become part of the EU, I do not think that that will affect the rest of the UK very much. At the moment we have 29 votes on a qualified majority basis and we will continue to have 29 votes because we will then have a population of about the same size as that of Italy. Scotland will have about seven votes—about the same as Finland. It looks likely that the top four countries will remain with 29 votes, although Germany should probably have a few more. However, I do not think that that would have severe implications for the rest of the UK.

I need my noble and learned friend on the Front Bench to quash another myth. Yesterday, it was put to me, “Don’t worry, Malcolm. We’re going to try independence but, if it fails, we’ll always come back into the UK”. No, my Lords. Will my noble and learned friend make it absolutely clear that once Scotland says yes, that is it? There can be no situation in which Scotland can come in through the back door.

The union of the past 300 years has led to peace, prosperity, wealth and influence for all of us in these sceptred isles. It is a wonderful opportunity that we have grabbed, and every country has grabbed it. The Northern Irish, the Welsh, the Scots and the English have always put people into the mix to make this country great. All that is threatened and there will be huge ramifications for the rest of the United Kingdom. My noble friend Lord Lang, when introducing the debate, said that, whatever happens, we have to have new constitutional arrangements. I totally support him on that. We need to work very hard in the future to make a stronger and better union for the next 300 years.

14:47

[Lord Bilimoria (CB)]

My Lords, the leading Cambridge historian, Dr Clare Jackson, says that politicians on both sides of the Scottish independence debate could learn from King James VI of Scotland, who also became King James I of England. He dedicated his life to creating a truly united kingdom that would see Scotland, England—including the Principality of Wales—and Ireland share more than just a crown. The main thing is that he engaged in a huge public relations exercise using emotive rhetoric, and he knew how to compromise. He made the first attempt at creating a new flag. Dr Jackson said:

“It shrinks the tendency to assume that everything happening now has never been thought of before”—

a point made by the noble Lord, Lord Forsyth. She added:

“Now exactly 300 years after Queen Anne’s death, the 2014 referendum will decide if the settlement she made will last or if Scotland will once again become an independent country sharing a monarch with England, just as it did throughout the Stuart century”.

I thank the noble Lord, Lord Lang, for his excellent speech in leading this debate. We have heard all the arguments so far and we will continue to hear them. We have heard about Alex Salmond and his SNP’s wish list and the serious consequences. As the noble Lord, Lord Robertson, said, Scotland is tiny. It has 8.4% of the population of Britain and contributes 8.1% of the GDP. From the noble Lord, Lord Forsyth, we heard about the famous Scots in every field imaginable, not just today but historically, always doing brilliantly. Scotland has so much that we need and it has so many hidden gems. Wearing my Cobra Beer hat, Heriot-Watt University very kindly gave me an honorary doctorate. The university has the International Centre for Brewing and Distilling, one of the three finest in the world, and it must remain not just Scottish but British.

Alistair Darling clearly pointed out that Mark Carney, the Governor of the Bank of England, had said that,

“the failings of the Eurozone show that to have a successful monetary union you require fiscal and political union”.

I have said that time and time again. Mr Darling said that,

“the Governor’s judgement on currency unions is devastating for Alex Salmond’s currency plans. Why? Because the whole point of independence is to break the fiscal and political union that makes monetary union possible”.

Of course, Scotland has always had its own bank-notes—and long may they keep them.

Let us remind Alex Salmond about 2008. I have just returned from my annual week at the Harvard Business School. In March 2008, Alex Salmond made a speech at Harvard University and spoke about the “arc of prosperity” through Ireland, Iceland and Norway. He referred to,

“the lesson we draw from our neighbours in Ireland—the … Tiger economy”.

He went on:

“With RBS and HBOS—two of the world’s biggest banks—Scotland has global leaders today, tomorrow and for the long-term”.

We are discovering the strength of that Scottish financial sector—but look at what London has done.

Let us keep this in perspective. In a currency union, Scotland has 10% of GDP and Britain has 90%. If it ever breaks up, we know who will call the shots. Losing the strength and security of the UK pound would have a profound impact on the Scots. The noble and learned Lord, Lord Wallace, as Advocate-General for Scotland, sent us a letter which clearly stated:

“The UK Government’s position is clear—Scotland benefits from being part of the UK, and the UK benefits from having Scotland within it”.

The letter gave a list of the “Top 20 Benefits of the UK”. He very clearly spelled out the Government’s stance on the matter.

One prediction following the assumption made by the House of Lords Select Committee on Economic Affairs was that it would result in Scotland accruing around 90% of oil revenues. Its report described this as the,

“economic bridge over which Scotland would pass to independence”,

and expected it to make up for all the loss of finances allocated by our Treasury under the Barnett formula. However, as has been said, the impact of prices in the oil market could just throw this, as could the length of time that oil will last. It would be a very unpredictable source of revenue.

Looking ahead, the university sector in Scotland is strong and we are proud of it. The Scottish Government are maintaining free access to higher education for Scots and people from the EU—except for people from England and Wales. In research funding, to this day, 15% of research for Scottish universities comes from UK charities. If Scotland breaks away, that will not last.

The Prime Minister has assured Mr Salmond that the reform of the Barnett formula, which gives Scots £1,364 per head more spending than the UK average, was “not on the horizon”. He did not say that it will never happen but Scotland has the assurance that that is not on the horizon. On 27 November 2013, YouGov published a poll which asked British citizens how they would vote—if they were able to—on whether Scotland should be an independent country. The response, by political party, was: Conservative, 65% no; Labour, 60% no; Liberal Democrat, 62% no; and even UKIP respondents voted 55% no. The response by gender was: males 57% no and females 54% no. It is overwhelming that the people of Britain, let alone the people of Scotland, do not want this.

Let us look back at history. Adam Smith, the great economic theorist and moral philosopher, never saw himself as Scottish. He was north British. Edinburgh, the Athens of the north, was a great centre of learning and at the heart of the Scottish Enlightenment. The wonderful Balmoral Hotel, where I have stayed, was known as the North British Hotel until the 1980s.

I will draw on my experience in India. The partition of India into India and Pakistan was a huge mistake. It did not last. My father fought for the liberation of Bangladesh. The united India of 1947—despite many attempts by parts of India to break away—has stayed united, and it is stronger united. Scotland today has the best of both worlds, being an independent country but being part of the United Kingdom.

Any Government will have many priorities, but the top four are: first, the security of citizens, both external and internal. If Scotland breaks away, we have heard that defence will go for a six. The second and third priorities are health and education, which the Scots have anyway. The fourth is the economy, and Scotland would be far weaker by being outside the UK.

The key issues are not just practical but the emotional. King James played on the emotional to get unity, and the noble Baroness, Lady Goldie, in her excellent maiden speech, said that she was equally proud to be both Scottish and British. My father’s regiment, the 5th Gurkhas shared battle honours with the Cameron and Gordon Highlanders. As a colonel, he made a pilgrimage to Inverness to visit the regiment because it meant so much. These are emotional identities.

In conclusion, my friend Amartya Sen, the Nobel laureate, speaks of identity. We have multiple identities. I am proud to be a Zoroastrian Parsi; I am proud to be an Asian in Britain; I am proud to be Indian; and I am really proud to be British. In the same way, I think that the Scottish are proud to be Scots and proud to be British. David Torrance published a book entitled The Battle for Britain: Scotland and the Independence Referendum. This is not about Scottish independence; this is a battle for Britain and a battle for the United Kingdom, which must stay united.

14:54

[Lord Cavendish of Furness (Con)]

My Lords, I, too, am very happy to thank my noble friend Lord Lang for introducing this debate with such eloquence. His knowledge and unrivalled experience made for utterly compelling listening. I intervene as an Englishman living in Cumbria, not far from the Scottish border. I believe that the forthcoming referendum has significant implications for those of us who live south of the border and for the whole country. I need to declare an interest in that my family own some agricultural land and a holiday park in south-west Scotland near Newton Stewart.

I will leave the technical, constitutional and economic implications of independence mostly to noble Lords better qualified than I to discuss them, except to say that if, as I suspect, the much talked about disconnect between government and the governed has led to the growth of Scottish nationalism, I must point out that that same disconnect exists in England. Certainly, it does in Cumbria. I will say no more about that since it has been touched on by others, other than that I hope my noble friend the Minister will address these anxieties in England and elsewhere throughout the United Kingdom.

Today, I want to touch on the effect, in the event of a yes vote, that such a wrenching asunder would have on the hearts and minds of men and women, mainly on the English side of the border. When I weigh in the balance the possibility of separation, I view the future with great sadness and much foreboding. Those of us whose ancestors lived in the border kingdoms that were neither Scotland nor England might reflect on our sometimes troubled history and on the potential tensions that lie ahead when two nations living side by side start to pursue competing policies on matters of great significance—and this after hundreds years of co-operation.

When independence was last debated in your Lordships’ House before Christmas, my noble friend Lord Steel drew attention to the contribution that Scotland had made to the building of the empire and the Commonwealth, which I think he touched on again today. He said that Scotland’s contribution was greater than its population would suggest, as was the enormous contribution that it made towards the defence of Britain during two world wars. The noble Lord, Lord Steel, said:

“I take pride in that”.—[Official Report, 5/12/13; col. 401.]

So he should. English people cannot take pride in the same way, but I suspect that all rational English men and women feel, as I do, a sense of profound admiration and gratitude for the part that Scotland has played in the historical achievements of these islands over the past 300 years.

I reflect with awe on the Scottish Age of Enlightenment that followed the Act of Union and the benefits it bestowed on England, the British Isles and the world beyond these shores. It is often said—I think that the noble Lord, Lord Hennessy, touched on it—that we English are too buttoned up to articulate our affections. How difficult it is, we are told, for an Englishman to say, “I love you”. Is it possible that the deep wells of English affection, esteem, gratitude and kinship are not seen and felt by the Scottish people? Is it possible that these real and enduring sentiments fail to be heard in Scotland simply because we English express them clumsily or not at all?

One quite simple test I might apply to the extent to which Scottishness is valued south of the border is that I would judge it to be a near-universal thing that when an English person is going about his or her business and finds their opposite number to be Scottish, confidence and trust more often than not characterise the encounter. It has always been my instinct that the English-speaking world developed a set of values that are quite different from virtually anywhere else in the world. I do not say that they are better values; I merely say that they are different. These somewhat vague instincts were confirmed for me by reading Daniel Hannan’s book, How We Invented Freedom & Why It Matters. He traces how in these islands people in pre-Norman times would meet in forest clearings where they laid the foundations for a form of government under which the state was the servant and not the master.

We remain the heirs to that ancient tradition. It led to Magna Carta and through it we continue to preserve our freedoms, our property rights, the sanctity of contract, our independent judiciary, habeas corpus, trial by jury and, most of all, representative government. Although Scotland has a subtly different legal system, as was mentioned by the noble and learned Lord, Lord Hope, it is surely beyond doubt that we share with the Scottish this highly successful and ancient culture and set of values. Certainly, both our countries understand what it means to walk in freedom under the law. That is surely the basis of true kinship.

It is surely also true that whenever these freedoms have been under threat, so strong has been the yearning for the Anglo-Saxon settlement, the oppressor has always been absorbed or dispatched whence he came—whether it was overbearing monarch, tyrant or unaccountable official. One of my ancestors was brought down by such high-handedness; his passing was not mourned then, and neither do I do so now. But the most important aspect of this Anglosphere legacy, and where it is so relevant to today’s debate, is that it is not defined by race, nor is it defined by religious faith nor yet by territory. Those who subscribe to it, belong to it. Scotland belongs to it, as does nearly all the English-speaking world.

It might be tempting for a new country to set aside old ways as, of course, it would be entitled to do. If, however, it were to lead to a repudiation of the centuries-old shared inheritance that we have talked about, I think it might lead to a divergence that would be damaging to both our countries.

Unusually for me, I hold in my hand a £50 note. It bears the image of the brilliant Glasgow engineer, James Watt, and his English partner, Matthew Boulton. Between them, and in combination, they enriched Scotland and England enormously. Mr Hannan reminds us that if I were to cut this £50 note in two, neither half would be worth £25. I wish with all my heart that the Scottish people will elect to remain with us, and that if they do we might with profit work together towards what my noble friend in introducing this debate described as the new unionism.

15:02

[Lord Maxton (Lab)]

My Lords, I start by thanking the noble Lord, Lord Lang, for introducing this debate. I go back far enough with the noble Lord. He was the Scottish Whip and I was the opposition Scottish Whip at the same time. That was way back in the 1980s. I also congratulate the noble Baroness, Lady Goldie, or Annabel as many of us would prefer to call her, on her maiden speech and the very good way in which she introduced herself to this House. I hope that she will have a long career within the second Chamber of the Houses of Parliament.

I suppose that I am almost unique. I speak with an English accent but I am, unlike the noble Earl, Lord Caithness, 100% Scots. My mother and father were both Scottish. I will have a vote in the Scottish referendum because I live in Scotland. My wife will have a vote, my three sons will have votes and two of their wives will have votes. But my brothers and my sister who live in England, and their children and their wives, will not have votes. They will suddenly become foreigners if Scotland votes yes. It cannot be right for that to happen. It must not be allowed to happen and we must make sure that the vote is a clear-cut no. I say to those who quite rightly have said that a yes vote is for ever, I am hoping that a no vote will last if not for ever, then for a very long time, and that it will be a long time before this issue is raised again.

I have always been a supporter of devolution. I believe in devolution, but devolution is about democracy. In fact, what has happened in Scotland is that nationalism has been the enemy of devolution, not its friend. It has stopped the natural process of devolution taking place in Scotland. Devolution is about giving power to the people to take decisions within their own communities, at the level at which they ought to be taken, in a democratic fashion. What has happened in Scotland is that devolution has stopped in Edinburgh with the Scottish Parliament. There has been no devolution downwards towards local authorities. There have been changes in the way that we vote in local authorities but not in the powers that they have. We now have a single Scottish police force and a single Scottish fire service and we will continue down that line.

Far from being a friend of devolution, if anything, nationalism and the SNP have been the enemy of devolution and have stopped devolution from evolving as it ought to have done—not just in Scotland but in the rest of the United Kingdom. Devolution could have happened in the United Kingdom if, to be honest, the example of what had happened in Scotland had not been there for the people in the rest of the United Kingdom to see. One of my major reasons for speaking today is to say that and say that nationalism and devolution are not the same thing and we must not confuse them.

Yes, we have to move on. We have to take this opportunity of saying that we have to change the way in which the United Kingdom is governed. What I have to say will not surprise noble Lords who have heard me speak before. The concept of a separate Scottish independent nation state—that is what independence means—in the modern world is so old-fashioned and out of date that it is unbelievable. We may be Scots. I am a Scot. I have a son who played sport at a reasonable level for Scotland. But the idea that we should have a separate state as small as Scotland in a global economy is old-fashioned, out of date and not to be contemplated.

If we are going to look at our constitution, please let us take this opportunity to look forward using the ways in which we now can look at the world. We can buy our goods across the world, which is why the young people are not now in Scotland, despite what Mr Alex Salmond thought, supporting the yes vote. They will support the no vote because they believe in an international world—a world bigger and broader than a nation state, where economies are bigger and broader. Even the United Kingdom national government are no longer able to control properly and fully the economy in which we operate because so much of the economy is now outside our control. It is even outside European control.

When we look at our constitution, yes, let us examine it, but this is not just about handing more power to Scotland: it is about ensuring that we now have a modern constitution within the modern world. I hope that point will be taken.

15:08

[Lord Lyell (Con)]

My Lords, about 50 years ago, I remember the great American speaker, Martin Luther King, saying that he had a dream. That was in about 1963. At about that time, I seem to remember that my noble friend Lord Lang was a member of the Footlights—certainly he had some active theatrical career. I want to thank him very much today for allowing me to realise, not quite a dream, because I am a somewhat cocky brute from Angus, but a hope that one day I would be able to hammer home the economy in the House of Lords. In 1963, as far as I can recall, two members of a great institution—the Institute of Chartered Accountants of Scotland—were in your Lordships’ House. Both now, alas, are no longer with us. The Institute of Chartered Accountants of Scotland has been the greatest influence on my life virtually anywhere, including your Lordships’ House. I hope that the Minister will take that in hand.

I want to concentrate today briefly and in a humble way on not just politics, but the Scottish economy. In 1963, when I was doing my apprenticeship in Glasgow, I remember hearing about something called “growth points”. Your Lordships may remember that in May 1963, Her Majesty, I think, came to open the Rootes factory at Linwood, where a splendid little vehicle called the Imp was to be built. Fortunately, I was kept away from the wheels then.

I have spent the past 40 years in your Lordships’ House. I irritated and bored one of my late noble colleagues in that I always said, “I am an Angus man”. She would go on at me, asking, “What are they saying in the Angus glens?”. I will not hammer it home today all the time but, certainly for me, it is crucial that we discuss great developments in Scotland. I am trained as an accountant and a money man and am particularly keen on the economy of Scotland. Since 1970, during my time in your Lordships’ House, we have seen the rise of the Scottish National Party—charming people; they can be very nice. Your Lordships might want to glance at the English newspaper, the Daily Telegraph, today, where they will find a fascinating article by one Mr Alan Cochrane, who gives one particular view of the tide within one party in Scotland. It is not exactly favourable and pushes on very much in the direction that the noble Lord, Lord Purvis of Tweed, was speaking about after what one hopes will be a no vote in September this year.

I want to concentrate on the aspect of jobs and the economy in Scotland. I look particularly at the need for inward investment—above all, in my own neck of the woods, Angus in Dundee. It was an enormous tribute when the noble and learned Lord, Lord Cullen, mentioned some aspects of research. I am given to understand that, in Dundee, there are world leaders in two or three aspects of life sciences and medicine. We should never forget that there is similar expertise in Edinburgh and Glasgow. We have a huge, world-famous and worldwide talent in Scotland in that particular discipline. I also look at my noble friend the Duke of Montrose, who I think referred to my noble friend Lord Forsyth as being a bit grey—I think I got that right but nobody is less grey than my noble friend Lord Forsyth, who is another Angus man. In the lovely town of Montrose, 25 new jobs have been created with a world-famous pharmaceutical company. Why do such companies come to Montrose? First, roots have already been put down there; secondly, at the moment, the economic climate is very favourable and they are being encouraged into Montrose and Angus.

However, nothing is static. Your Lordships may be startled that most Sundays, being scared witless that the flames of hell may or may not lick me, I attend church in Kirriemuir, which we call Kirrie. I meet many youngsters there, one of whom was head boy at Webster’s. People talk about self-starters, but that young man did things that I could never have thought of and thought of them off his own bat. He studied medicine and worked in an area known to my noble friend Lord Glenarthur, RAF Leuchars. He has taken other holiday jobs, is now thrusting on heavily and will be very successful in Glasgow, where he has just qualified as a doctor. I wonder what 70 year-olds like me discussing politics and economics in Scotland can offer to these youngsters. I am concerned that everything we do and say should improve and help inward investment to Scotland, but particularly to Angus and Dundee. What Mr Carney said in Edinburgh yesterday should be taken on board, studied very closely and admired as an enormous and valuable lesson.

I referred to the tiny town of Kirriemuir, of which I am very proud, and which we refer to as Kirrie. I see the noble Earl is getting excited—I will calm him down. Good, I am so pleased. Kirriemuir was the birthplace of JM Barrie, who wrote the immortal “Peter Pan”. Where did Peter Pan operate? A place called Never Never Land. I do not want Kirrie, Angus or Scotland to turn into that land.

15:15

[Lord Kakkar (CB)]

My Lords, I, too, join in thanking the noble Lord, Lord Lang of Monkton, for the very thoughtful way in which he has introduced this important debate. In so doing, I declare my own interest as professor of surgery at University College London and a member of the General Medical Council because I wish to confine my comments to two very important and practical areas which I think will be profoundly affected if Scotland were to be separated from the United Kingdom. Those are the regulation of the medical profession and the conduct of biomedical research. I do that building on the comments made by the noble Lord, Lord Lyell.

First, I reflect on something that the noble Lord, Lord Forsyth of Drumlean, said earlier, when he recounted a long list of those of Scottish descent who have made a profound impact on the life of the United Kingdom. I would add to that some names of people who have made a profound impact on the way that we practise medicine—for instance, Sir John Hunter, a famous Scottish surgeon who came to England and who is considered the father of modern surgery. He described a methodical and scientific approach to the practice of surgery that still defines how surgery is practised globally and has resulted in the profession of surgery in the United Kingdom having made so many contributions to global surgery as well as being so highly regarded.

We have Sir Alexander Fleming, who discovered penicillin—a discovery that profoundly changed our ability to impact on human health, for which he received the Nobel Prize. Another Nobel laureate, Sir James Black, developed through new pharmaceutical entities beta blockers, which have profoundly changed the way in which we treat heart disease and high blood pressure, and H2 antagonists, which helped us to improve the management of ulcers, avoiding the need for major surgery and treating most ulcers of the stomach and duodenum with drug therapy. From among your Lordships, we have my noble friend Lord Patel, who was formerly a famous and distinguished professor of obstetrics and gynaecology in the University of Dundee and, more broadly in the United Kingdom, a highly regarded chairman of the Academy of Medical Royal Colleges and president of the Royal College of Obstetricians and Gynaecologists. Therefore, the links across medicine in the United Kingdom are profound and have existed for many centuries.

In the White Paper that attended the more formal announcement of the Scottish Government’s proposals for the referendum and for independence, there is in the question-and-answer section a statement about the wish of the Scottish Government that medical regulation continue across the entire United Kingdom as it does at the moment. But I do not think that that is going to be necessarily and easily possible.

At the moment, the Medical Act 1983 governs the way in which the General Medical Council operates. That Act is influenced by the professional qualifications directive of the European Union—which I shall come to in a moment. The situation for medical regulation is that three categories of doctor appear on the medical register. The first is graduates of UK medical schools, including the four schools in Scotland that are recognised as part of that Act as being able to award primary medical qualifications in the United Kingdom. Graduates of those universities, including Edinburgh, Glasgow, Dundee and Aberdeen, will immediately upon successful achievement of their examination and their first year of practice become full members of the register. A second category is those who hold a recognised European primary qualification in medicine. They have registered elsewhere in the European Union and will automatically have registration on the general medical register. The third category is for those who come not from UK medical schools or appear on European registers but are graduates from elsewhere in the world; for example, the United States, Canada and Australia. They are considered international medical graduates and have to take a separate examination to demonstrate their skills before they can apply for registration. Indeed, if they come with specialist skills from elsewhere in the world, they may well have to undertake further specialist training in the United Kingdom before they are able to appear on the register.

That would be the situation for those graduating from Scottish medical schools if Scotland were to separate from the United Kingdom—some 850 students due to graduate in 2016 and some 800 in 2017. Of course, the situation might be solved if Scotland were to become part of the European Union, but, as we have heard in today’s informative debate, that may take many years. In the intervening period, it may not be as simple as to say that we could have some form of legislation in the Westminster Parliament to allow those graduating from Scottish medical schools or those undertaking Scottish training programmes for specialist practice to be uniquely recognised in the remaining United Kingdom, because that will be affected by the professional qualifications directive of the European Union.

It is a very serious problem. Forty per cent of those who have qualified with a primary medical qualification from a Scottish university reside in England. This means that a large number of potential practitioners in the intervening years could be affected by our inability to offer registration and recognition of their degrees. Indeed, if they are not part of the European Union, it is not clear where they will be able to practise apart from in Scotland.

The second area to be affected if Scotland were to be separated from the United Kingdom is medical research. We have heard already in this debate that some 13% of research council funding from the United Kingdom research councils is spent in Scotland with only 8% or thereabouts of the GDP for our country coming from Scotland, so Scotland does disproportionately well. When we look at spending by the Medical Research Council in Scotland, we see that it is close to 17% of its budget, including the many important medical research facilities and units that exist there. It would be unprecedented for a research council to be able to spend its taxpayer-funded opportunities in a foreign country. The infrastructure across the United Kingdom that has put us at the forefront of biomedical research—some 12% of all citations in biomedicine come from the United Kingdom; it is a remarkable intensity of research effort that we are able to contribute globally—would be undermined if the important links between Scottish biomedical research institutions and the rest of the United Kingdom, designed in such a strategic fashion to exploit the most important research opportunities for our country, were to be broken through the separation of Scotland.

15:22

[Lord Cormack (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Kakkar, who, not for the first time, has brought his tremendous and forensic skill in his subject to the debate in this House. It has been a remarkable debate, and I think that we are all very much in the debt of my noble friend Lord Lang for introducing it with such quiet passion and so comprehensively. I very much hope that this debate will be read in Scotland. I would draw attention to one or two speeches without in any way casting aspersions on others, but I hope that what the noble Lord, Lord Kakkar, has just said about medicine will be taken in, as I hope will be what the noble and learned Lord, Lord Cullen, said about research. I hope that what the noble Lord, Lord Kerr, said about the possible membership of the European Union of an independent Scotland will be taken into account, because he did for that subject, with his forensic skill, what the Governor of the Bank of England, Mark Carney, did yesterday when he talked about the implications of a common currency between an independent Scotland and the rest of the United Kingdom.

Like many of your Lordships, I can claim a mixed lineage. I am not quite as mixed as my noble friend Lord Caithness. I must say that the words of the Scottish play came to mind: “Who would have thought that the noble gentleman could have had so much blood in him”.

My earliest vivid memories of Scotland are of being in Stranraer in May 1945, where my father was stationed throughout the war, when victory was being celebrated. Even now, I can think of the wonderful excitement of that day. I was brought up to believe, with my Scottish ancestry, that I was part of a very great country that had done the world a very great service. My two sons have been educated in Scotland. One of them fought side by side with my noble friend Lady Goldie, whom we are delighted to see today, in the election in 1999 for the Scottish Parliament. He lives in Scotland with his family, and at least three of them will be voting in the referendum next year, including my 16 year-old elder granddaughter. That is not at all untypical of people in this country. The noble Lord, Lord Maxton, talked of the unfairness of part of his family being able to vote and the other part not

In 1707, the most remarkable national marriage of all time took place. The marriage metaphor has been used several times during this debate—very tellingly by the noble Baroness, Lady Liddell, when she talked about divorce. The question is: has this marriage, having lasted for more than 300 years, reached the stage where we should have a divorce? I would argue most passionately that it has not. As I have said before in this House, this nation is much greater than the sum of its individual parts. Scotland coming into the United Kingdom transformed North Britain into Great Britain. My noble friend Lord Forsyth, in a truly remarkable, passionate and eloquent speech, talked about all the contributions that Scotland had made to philosophy, the arts, architecture, science, commerce and medicine. How right he was to do so. We have heard of all the Scottish parliamentarians who have held supreme office in the United Kingdom Parliament.

This has been a partnership of equals, although one of the countries is very much smaller in population than the other. If we move towards an independent Scotland, we move towards a little Scotland. Those who are attracted by the eloquence of Mr Salmond—he is remarkably eloquent—should bear in mind that they would be voting for a much reduced country, a country with far less influence in the councils of the world. The point was ably made by the noble and learned Lord, Lord Hope, that Scotland really punches above its weight.

It would be nothing short of a tragedy, in a world where large power blocs will increasingly dominate affairs, if we cut our kingdom asunder. We need the Scottish people in the United Kingdom, and I believe that they derive strength from being part of the United Kingdom. That has been a constantly reiterated theme in this debate. Should we have divorce? No. Why not? For the same reason that many individuals should not have divorce: for the sake of the children. I think of my grandchildren growing up in Scotland. I want them to grow up as proud citizens of the United Kingdom, deriving all the advantages that they currently can. I do not wish them to be part of a small, if perfectly viable, nation that has turned its back on history, that has turned away from the opportunities that it still has.

I want Scotland to continue to be an integral part—a national part with its own absolute identity—of a great country that occupies a position in all the major councils of the world. That is what is at stake in September of this year, and I sincerely hope and devoutly pray that the people of Scotland realise that we want them and we need them, as much as I hope that they will realise that they need us.

15:29

[Lord Parekh (Lab)]

My Lords, we have had an absolutely fascinating and rich debate, led brilliantly by the noble Lord, Lord Lang. While listening to this debate I asked myself a simple question and conducted a simple experiment. The debate is intended not merely for our edification; it is intended to influence people on the other side of the border in the hope that they might act in a way that we would like them to act. So I asked myself: imagine a Scotsman, whether or not he is sympathetic to independence, sitting in our midst, listening to the debate—would he have been swayed by our arguments? What would he feel? If I for a moment am being a devil—devil is not the right word—or if I try to share with you some of the thoughts that I had, I hope you will forgive me.

I think that a Scotsman sitting here would have made two complaints. First, he might say that we are trying to engage in the politics and economics of fear: “If you break away, your kids will not be able to come to our medical schools. You will not be able to share the Bank of England and all its facilities. You will not be able to do all this”. In other words, we are trying to play on his fear. If he is strong-minded or bloody-minded enough, he might say, “Well, this is how our relations have existed for the past 300 years”. Scots have resented, rightly or wrongly, this English sense of superiority—even a certain degree of arrogance—and always felt that we were telling them what they should do. They would say, “This is precisely the language of arrogance that we have resented for 300 years”. I am not saying that that is right. I am trying to imagine the worst and asking myself how I could address an interlocutor who might view our debate in this way. So his first complaint would be that we were looking at the problem almost entirely from the standpoint of what it will do to Scotland, and what harm it will do to Scotland, rather than from a shared standpoint where, as the noble Lord, Lord Cormack, pointed out, we might say, “Look, we have been in it together. If you break away, not only do you suffer, but we who have been part of you, suffer as well. As old comrades, you would certainly not want to do that to us, no more than we would want to do that to you”. So I think that the first thing we would need to ask is how we can conduct the argument not simply in terms of what harm it could do to Scotland but in terms that always emphasise the shared “we”—how we would feel pain and how we would both suffer if that were to happen.

The second complaint that the imaginary Scotsman sitting here might have is that in the debate we have concentrated on self-interest, defined in narrow materialistic terms: economic, educational, political, military, defence and so on. As we know from the history of nationalist movements the world over, people are not guided by economic interests alone. If that were the case, Bangladesh would not have separated, Pakistan would not have broken away. People are guided by deeper emotions as well. What we need to be asking ourselves is: have we been able to appeal to the Scotsman’s emotions? Have we got him to feel that there is a deeper engagement required on his part? We need an appeal to emotions, to shared historical memories, to a common imagination and to a certain shared vision of the future. In other words, telling the Scot that, “This is what we have done together, and if we stay together, this is what we are capable of doing in the future, not only for ourselves but also for the rest of the world. Why do we not continue this co-operative enterprise upon which we embarked 300 years ago?”.

These would be the two points that might come to us from my imaginary, hypothetical Scotsman sitting here listening to our debate. I would therefore suggest that in addressing this question, and in participating in the debate that will take place on the referendum in September, we need to redress this balance in two ways. We should be thinking of the shared “we” rather than merely what harm this will do to Scotland, and we should be appealing to collective memories, shared memories and a shared vision—making sure that we are talking in idioms which they fully share, and which historically resonate with their own memories. People are, after all, guided by a profound sense of what they were and what they wish to be.

How would an argument of this kind be framed if I were trying to convince my imaginary, hypothetical Scottish interlocutor? I have been asking myself that, and I think that I would do it in the following two ways. First, it is striking that Britain has an ambiguous record of dealing with multiethnic and multinational societies. When we ruled over multiethnic societies in the Empire we were not terribly successful and ended up imposing more partitions than almost any other imperial country, including in Cyprus, India, Rhodesia, Ireland and elsewhere. At home, however, our record has been one of the best in the world. We have been able to sustain a successful multinational and multiethnic society in a way that no other country has. Only empires have done that, but we have beaten that record by creating a democratic framework within which a multinational society could be maintained. That has been made possible with Scottish co-operation and encouragement. We could emphasise that what we have achieved is unique in history, precisely because of this. It is not necessary for the Scots to embark along the path of independence when a much more sensible, realistic and imaginative alternative is available to them, as was suggested by the noble Lord, Lord Lang.

The second way in which we might formulate the argument would be to appeal to the liberal democratic social order that we have created. The kind of liberal democracy which we have created in Britain is a beautiful synthesis of English liberalism and the Scottish sense of community and solidarity, each regulating the other. Neither of us alone could have created the kind of liberal democracy that we have. It is not shared by France or Germany; it is unique to us. We can show that this great historical legacy that we have, and which we pass on to the rest of the world, could not have been possible without this kind of joint enterprise. I suggest that appealing to that shared history, and to a shared vision of what we can do together, might be a better way of appealing to the Scots and taking them with us, rather than merely telling them how independence would cost them dear.

15:37

[Lord Moynihan (Con)]

My Lords, not surprisingly, I intend to concentrate my remarks on British sport. Going back as far as 1969, I had the privilege of steering the Welsh senior men’s four at the home countries international in Monmouth. England, our opposition, took an early lead and moved three lengths clear of us. Unbeknown to them, the reeds hidden just under the surface extended well into the centre of the stream following the final bend on that stretch of the River Wye. Taking a wide berth, we passed them with 200 metres to go and, as they were well and truly caught up in the reeds, we fortunately won. I was intensely proud of that crew and treasure my Welsh vest to this day.

The example serves to show that I have no intention whatever of diminishing the pride which is engendered in home countries competing in their own right. Our history has brought with it great benefits to the home nations, but they did not need independence to secure their contribution. Had we in the United Kingdom not given football the laws of the game in 1882, England, Scotland, Wales and Northern Ireland would not have disproportionate influence over world football, as those four votes continue to be matched by only four other FIFA-appointed members of the International Football Association Board.

I want to consider the Motion today in the context of the pinnacle of world sport: the Olympic movement, in which I had the privilege of serving for seven years as chairman of the British Olympic Association. The Olympic Movement has a global impact and brand, making the rings one of the most powerful symbols in the world and lifting the spirit and passion of people across the United Kingdom and the world, not least through the London Games in 2012. Here, as in so much of sport, it was our recent history in the United Kingdom that shaped the modern Olympic movement.

On 14 September 2012, as chairman of the British Olympic Association, I travelled with our athletes from Kelvingrove Art Gallery through to George Square for the official homecoming parade of Scotland’s Olympic and Paralympic athletes. Double cycling gold medallist Sir Chris Hoy, gold medal rower Katherine Grainger and gold medal Paralympic cyclist Neil Fachie took part. Scottish athletes won a record-breaking 14 medals at the London Olympics and 11 medals at the Paralympics. I must be the only Conservative in history to have been given an ovation by a packed crowd in George Square.

It is athletes past, present and, above all, future, who concern me most. We took 541 athletes from across the UK to London 2012 as Team GB. Not one came to seek an independent home nation to represent them. On the contrary, they demonstrated enthusiasm and pride in wearing the vest of a Team GB London 2012 athlete. Of course, they knew that had they represented an independent home nation, they would have received a fraction of the funding and support given to our athletes by the governing bodies, the coaches, the “ologists” and the support staff whom the British Olympic movement brought together.

Talk to the athletes. Talk to Chris Hoy or Kath Grainger and, while understandably they stay out of politics, they will praise to the skies the support they had throughout their careers from their British governing body of sport, which was there to provide them with a performance pathway to gold.

I want the best of British to come together under the banner of Team GB during the Olympic and Paralympic Games. We owe it to young athletes in the United Kingdom to give them all, equally, the best opportunity to succeed and to witness the support and pride I witnessed that day in George Square for the Scottish athletes, for Team GB and for the British Olympic Association.

We have a 100-year history behind us, and I salute the contribution of great Scottish Olympians to British success. Many of Scotland’s finest athletes, of whom we are all proud, have served the United Kingdom with remarkable distinction. The very first British Olympic competitor, and Scotland’s and Great Britain’s first Olympic gold medallist, was the Scot, Launceston Elliot, the single-handed weightlifter—sadly, it is no longer an Olympic sport. Wyndham Halswelle was the first Scot to win an individual Olympic athletics title and is still the only British athlete to win a complete set of gold, silver and bronze medals, excluding relays. A veteran of four Boer War battles, he served Britain with distinction, ultimately becoming Captain Halswelle and being killed in action by a sniper bullet to the head in a trench on 31 March 1915. More recently, the great boxer Dick McTaggart, who won lightweight gold at the 1960 Rome Olympics, spent six years in the RAF. They were great Scottish Olympians and Great Britons. We owe Scotland a huge debt of gratitude. All of us should be immensely proud of the contributions made by its athletes.

With the exception of football, which is unquestionably a professional sport built on clubs and managers who transcend the borders of the world, the remaining 25 summer sports and the winter sports depend for their success on the infrastructure put in place to support British athletes. Of course, the sports men and women proudly represent their clubs and home nations, but in so doing, as at the Commonwealth Games, they leave, albeit temporarily, their sporting home—their British-based squad—in order to compete.

As my noble friend Lord Lang said in his opening remarks, there is a danger of letting this become an introspective debate in Scotland. We should instead focus on the loss to all of us outside Scotland should independence be achieved, for this is our debate. The huge historical, practical and political benefit we derive from the union will be lost to all of us. To break the bonds which connect us would be deeply damaging to the wider interests of British sport and, above all, to the next generation—and not just the athletes of Scotland would be the losers.

15:43

[Lord Sutherland of Houndwood (CB)]

My Lords, I congratulate the noble Baroness, Lady Goldie, on a perfectly turned maiden speech. I look forward to many more. I thank the noble Lord, Lord Lang, for giving us the opportunity to debate this important topic, and particularly for the focus he placed on the United Kingdom. This is the unexplored area of the national debate that we must pursue. I also thank him for his analysis of what the future might hold and should hold. Thinking of this sort is fundamental and we must begin to respond to his comments, as has already happened this afternoon in the House.

My own starting point for this debate is the old saying, “If it ain’t bust, don’t fix it”. It ain’t bust. The United Kingdom is doing great things. It is in comparatively good order, as we look around the world. It has a record of achievement that arises from it being the United Kingdom. I will focus on this in relation to my own patch of the world: universities and research. It is easy to see the advantage to Scotland of the United Kingdom focus on research funding. In 1992, when legislation went through to set up separate Scottish funding councils for the universities, a number of us put great effort into retaining the UK base for research councils. Happily, our arguments—arguments from my fellow vice-chancellors in Scotland, England, Ireland and Wales—won the day. It was not automatic that they would. We combined to say that this was the right direction for research funding in Britain.

The success of the British research effort is extolled throughout the world. America is the great champion; China is beginning to bite very hard and there are other countries, notably Australia, which are pushing on this. However, the British contribution to the building of international knowledge and understanding of our world and of ourselves is massive, and is recognised as such. I have no doubt that one factor in this is that there has been a national United Kingdom focus on research strategy and funding. Long may that continue. It is a reality as well as a matter of reputation, which I will illustrate in a moment.

We have heard these numbers before but, in good House of Lords practice, I will repeat them—but only once, not twice. Scottish universities earn 13% of the total UK research council funds, based on 8.4% of the population. That is a significant gain for Scotland. UK charities spend more than £1 billion a year on research in these islands and, again, Scotland achieves 13%—well above whatever measure you would normally take.

The point is that both the research councils and the charities base their research funding on merit and peer review, not on sectional, national interest. That is why, again, the UK punches above its weight, as does Scotland. Both the UK and Scotland would be diminished if they were to be separated. Siren voices argue, “Don’t worry, it will be all right. All will be well. We will separate and then, perhaps, we will continue with the current arrangements and the amount of money flowing to Scotland will be proportionately high”. Did the current Scottish Government, who are pushing this policy, ask, for example, the Wellcome Trust what it thought about this? The Wellcome Trust is one of the two major drivers of research excellence in this country, particularly in the biological and medical sciences. It says:

“Our future commitment, and the eligibility of Scottish institutions for trust support, would need to be reviewed”.

It will not automatically flow through.

The Wellcome Trust points out that it gives money to overseas bodies, largely to those in countries which are not wealthy enough to have their own research budgets. It has two reasons for doing so, and two reasons for worrying if it had to consider Scotland as an overseas territory. What about additional and diverse regulations applying in Scotland to the use of research funds, as distinct from England? It would complicate its procedures and be an inhibition to it; it has made that plain. It worries, too, about possible changes to the governance of universities. It understands very well that good research practice relates to good governance. If you do not have leadership in universities that cam make strategic decisions—and that is not the direction of the current Scottish Government—your research and other performance will fall back.

The Government in Scotland clearly think that they can do a deal with Research Councils UK in any future separate status. They are whistling in the dark. The noble Baroness, Lady Liddell, made the point that talking about pals in this area will not do. I had lots of pals who were vice-chancellors in England, Scotland, Wales and Northern Ireland, but I can tell you, when they see the numbers spelt out that show what the research councils currently give to Scottish research, there will be no “paliness” about it—it will be a straight deal. I calculate that if they were contributing pro rata, they would put in, roughly, £150 million to £160 million, and they currently get £257 million. That is a huge gap. When that is seen, transparently, I cannot believe that English vice-chancellors will line up to say, “Well, that’s all right then”. Therefore, the idea of a cosy deal on this is nonsense.

The benefits to the UK have been immense. I have already mentioned the volume and quality of research in the medical and biological sciences, and the noble Lord, Lord Kakkar, made the same point. The strength of what goes on in Dundee, Glasgow and Edinburgh, complemented by excellent work in Aberdeen and St Andrews, gives Scotland its reputation. That is based on the current arrangements, which are UK-wide—and long may they remain so.

15:51

[Lord Selsdon (Con)]

My Lords, about 24 hours ago I introduced, on a whim, a Private Member’s Bill called the Scottish Referendum (Consultation) Bill, which aims to make provision for certain Scottish people resident outside Scotland to be consulted ahead of the 2014 referendum on Scottish independence. This was not a plot. I was brought up to believe many things, one of which was that if you were Scottish you had to be a “Mc” or a “Mac”, but only two of each spoke today. As your Lordships know well, there was an extremely important Scot, or Scottish-Italian, called Machiavelli, so I will try, in a certain Machiavellian atmosphere, to suggest something to noble Lords. I am not proposing that Alex Salmond has any Machiavellian tendencies, but he did live in a place called 6 Charlotte Square that belonged to us once upon a time, and I should quite like to get it back.

A name such as “Selsdon of Croydon” does not make you seem very Scottish. However, I am a Baronet of Polmood in the County of Peebles, and my grandfather was MP for Glasgow, Lanark and North Down, and ended up in Croydon—so I am totally United Kingdom. I feel very strongly about these things because we also played a great part: we were the Scottish line, McIlwraith, McEacharn & Co. We shipped more people to Australia than anybody else. Live meat went out, and then, with Scottish help, we developed a chilling machine that allowed us to bring dead meat back, meaning sheep and lambs. Over that period, we shipped thousands of people. Of course, we became Lord Mayor of Melbourne and got a knighthood there, having got a baronetcy in Scotland as well. Therefore, I am Sir Malcolm McEacharn Mitchell-Thomson, Baronet of Polmood in the County of Peebles, and Baron Selsdon of Croydon. Once I saw in a train a sign that read, “Do not pull the chain when the train is standing at the station”, to which someone had added, “except at Woking or Croydon”.

I approach this today with a sense of humour because there are now some great opportunities for us to consult Scots around the world. Noble Lords will find a brief in the Printed Paper Office which the Library helped me to prepare, which says that effectively 5.5 million people were born in Scotland, of Scottish birth, of whom 79% are in Scotland, 15% in “Other UK”, 3.8% in Australia, Canada and New Zealand, and a few in the United States. However, the relationship is not necessarily by birth. Everyone has a domicile of origin at birth, normally from their father. In Scotland, that domicile of origin is of the earliest recorded ancestor, and it passes through the male line from one generation to another unless and until a descendant specifically acquires a new domicile of choice. If the parents were not married at the time of birth, the domicile of origin passes through the female line, and it is estimated that that and related issues may have led to up to 40 million people fairly claiming Scottish ancestry. I feel that we might have a duty to consult these people before the referendum. How that should be done is surely fairly simple.

In my case, with the different family names that I have, I am not ashamed of being a Selsdon of Croydon but I would rather be, as I am, Malcolm McEacharn. Over time, if we look at how the movements went, we can see that the Scythians were the first to come across, of course. They arrived, and when they got to Ireland, or Scottish Ireland, they were welcomed there, as were all guests; then they were told that there was no room so they should go over to the kingdom of Albanectus, which was in fact Scotland—or, maybe, in those days, Albania.

If we look back at our history, it is one of migration; within the Scottish blood there is a desire to travel and to move and to make the best of what you can wherever you may be upon the face of this earth. So the challenge to government is how it could possibly arrange some form of consultation with all those 20 million to 40 million Scots who live abroad, in the empire or wherever it may be. I leave noble Lords with that thought. This is not a major speech, but I think that we have a duty to try to consult the wider diaspora before we make final decisions.

15:56

[Baroness Quin (Lab)]

My Lords, I, too, very much welcome this debate and would like to congratulate warmly the noble Lord, Lord Lang, but with a slight touch of envy. I entered in vain the Private Member’s Ballot to try to secure a debate on precisely this subject, so I very much welcome his successful efforts in so doing today, and the manner in which he introduced it.

I am very glad that the terms of the debate are about the implications for the United Kingdom as a whole, because I have been worried that, particularly south of the border, we have been somewhat sleepwalking towards this situation and not really considering its full implications or how much we should treasure the union that has been so widely appreciated in comments around the Chamber today.

I come to this debate as a borderer—in fact, I frequently walk across the border in the magnificent Cheviot hills—and as someone who was born and brought up north of Hadrian’s Wall, which is sometimes misleadingly referred to as the border, even though we know that in the days of the wall England and Scotland did not exist in anything like the forms that we know today. However, as a borderer, I have always felt utterly at home in both Northumberland and the Scottish borders, and the thought of having an international frontier, and possibly even a different currency, naturally alarms and dismays me.

Let me say clearly that I respect the right of people in Scotland to have a referendum and to decide their future, but I hope that in making their decision they will think of the effect on the rest of us and of our common sense of identity and who we are. Many of us south of the border—I include myself in this—do not want to have to increasingly define ourselves as exclusively English rather than British. There is the even more alarming thought of becoming a foreigner in part of what we think of as our common heritage and country. Many of us are genuinely British. It has been referred to today how many of us have mixed ancestry. I certainly have some Scottish ancestry, although I doubt that I could qualify under the terms of the consultation that the noble Lord, Lord Selsdon, has just outlined—although I am married to a Mac, so that might help. But many of us have that mixed background and have roots in all parts of the UK.

It may be worth adding that many people have come to live in Britain in recent decades, and they chose to settle in the UK rather than in England, Scotland or Wales. Their sense of belonging will also be greatly changed if there is a yes vote north of the border.

Being mixed is a cause for celebration. I was intrigued to note the statistics released by the Macsween haggis company, showing that 60% of its production went to England. Having participated in a Burns night in east Sussex this year, I can well believe it.

My desire to see the union continue is also influenced by my political affiliation. This may not have been stressed much in the debate, but many of us are party-political animals and very much value our political links across the union. Many of my closest political friends are from Scotland and Wales. That is not perhaps surprising given the many important and emotional ties between Tynesiders, Clydesiders, people in the south Wales valleys and the various industrial parts of England. The people in those areas have worked closely together since the beginning of the Industrial Revolution to try to improve living and working conditions and mounted many campaigns with common motivations, principles and ideas. In fact, the National Health Service encapsulates perfectly what I am trying to say. After all, it was created by a Welsh Secretary of State, Aneurin Bevan, in a Government headed by an Englishman, Clement Attlee, under a party founded by a Scot, Keir Hardie. That vividly illustrates what I am trying to say. I am sure that those with other political affiliations will certainly not want to see their strong political affiliations and ties broken through this process.

I strongly support devolution in the UK but regret that it has developed in such a way as to be increasingly confused with national identity. While identity is an important part of devolution, it is not the whole story. Devolution is also about decentralising and taking decisions at the most appropriate level. I regard the outcome of the devolution vote in the north-east of England as a tragedy but believe that the issues it raised have not gone away and will, I hope, be revisited at some time in the future.

In conclusion, if there is a yes vote next September, I will wake up the morning after that feeling that I no longer belong to the country I thought I did. It will be traumatic for many of us but I hope fervently that that will not happen and that in the next few months we will celebrate what we have achieved together and resolve to achieve even greater successes in the future.

16:02

[Lord Roberts of Llandudno (LD)]

My Lords, I welcome the opportunity to take part in this debate because, as others have said, the referendum in Scotland will affect not only Scotland itself but every other part of the United Kingdom, especially Wales. If Scotland leaves the UK, 59 Scottish Members of Parliament will be removed from the House of Commons, 58 of whom are not Conservatives—only one is a Conservative. That would not occur under proportional representation, but 58 of those will be opposition Members. If that happens, it will be much easier to obtain a Conservative majority in England, Wales and Northern Ireland than it is at present. I know that fair-minded Conservative Members will be as horrified as I am that this perpetual Tory majority could squeeze the rest of the United Kingdom.

Wales has never had a majority of Conservative MPs. I looked back to 1885 and found that in that year there were 29 Liberals in Wales and four Tories. In 1906, 1997 and 2001, not a single Conservative was elected in Wales. Therefore, a party which in 140 years has never returned the largest number of MPs in Wales would be ruling in a country which has rejected it time and time again. Usually in Wales the Conservatives will have, say, 20% of the vote, so 80% of the people of Wales will be subject to an alien party, as well, of course, as being subject to England. This would be colonial rule returned. The immediate cry would be for Welsh independence. People such as me who are in favour of a federal solution for the whole UK—we have not really spoken about that—might join the independence bandwagon, because Wales would be ruled by a party that had never been in the majority there, and that represented only 20% of its people.

We have to think of this. England would rule; Scotland would have gone; Northern Ireland would be there; and Wales would be subject to the rule of the 20% over the 80% of the people who were not Tories. A yes vote in Scotland to independence would deny us the opportunity of discussing the federal answer to our demands. We must go to that discussion next: a federal answer should be discussed increasingly in the years ahead.

I speak only briefly today to say that if the majority of the people of Scotland want independence then they must have independence, because the people of a country ruled in this way have the right to give their opinion. On this occasion, however, I think that I can speak for the people of Wales of all parties if I ask them, “Scotland, please stay with us, because otherwise we will see the dissolution—the end—of the UK as we know it”.

16:06

[Lord Nickson (CB)]

My Lords, I am honoured to be sandwiched between two Welshmen. To the best of my knowledge, the Nicksons were border reivers and, before the union of the Crown, stole cattle equally from the Scots and the English. I am delighted that my old colleague and friend the noble Lord, Lord Lang, has had such a wonderful debate and made such a memorable speech to launch it. He has instigated 40 other wonderful speeches around this House, and I hope that he is proud of that because he most certainly deserves to be. He was my boss when Scottish Enterprise came into being; I was its first chairman. Economic conditions were a bit difficult and we had a pretty difficult birth, but we can both be relatively happy that the organisation put up then is broadly still trying to deliver enterprise in Scotland a quarter of a century later. We were also colleagues on another board, that of General Accident.

It is a great sadness to me that most of the companies for which I ever worked in Scotland now do not have their names. General Accident is now Aviva in Norwich, Collins has gone, and Scottish & Newcastle succumbed to the Danes. Scottish & Newcastle had equally good provenances north of the border in Edinburgh and south of it in Newcastle. God help us that it happens but it occurs to me that, were the yes vote to come to fruition and had I still been at Scottish & Newcastle, if it were in our shareholders’ interests we would have moved everything we could to Newcastle pretty quickly. That is what I fear might well happen for business if there were a yes vote. Business wants certainty. It wants to know that it can make long-term investments with the confidence that they will be worth while. It does not want all the changes that will inevitably happen. If there were a yes vote, do not let us think that what happens at that moment will stay; there will be further divergence and further difficulties for business in terms of regulation. Things will become more difficult. Do not let us assume either that this is not being looked at by global businesses, from wherever their headquarters are, whether it is Calgary, Houston or Hong Kong. Do not let us think for a moment that what is going on now in Scotland is not going into their corporate planning for the future.

When I thought about what to say in this debate, I thought that I would talk a little about business, which I have done, and secondly about currency. It would be quite impertinent for me, following what was said by the governor and the speeches made here today, to launch into the issue of currency. However, there is one issue that has not been mentioned. The noble Lord, Lord Bilimoria, mentioned Scottish banknotes. The noble Lord, Lord Cavendish of Furness, produced a £50 note out of his pocket. I have here a £10 note. On it is the face of Robert Burns.

I have not seen that it is on one of Alex Salmond’s wish lists to retain Scottish banknotes. However, I would go back slightly further than the noble Lord, Lord Forsyth, to 1694 and the Bank of England Act, and to 1695 and the Bank of Scotland Act. We then come to 1727, after the Darien adventure, and the RBS challenging the Bank of Scotland monopoly. Ever since then, through the centuries, the ability to produce Scottish banknotes has been defended. If we go forward another 100 years, Sir Walter Scott is credited with leading a campaign to defend the ability of Scottish banks to print Scottish notes. He did it under the most wonderful pseudonym of Malachi Malagrowther, but he got the credit for it anyway. Over another 200 years we have been through various banking Acts, culminating in the Banking Act 2009. All of them have given the right for Scottish banks to produce Scottish banknotes.

However, as we all know, they are not strictly legal tender. They are promissory notes, unlike the Bank of England notes. The governor said yesterday that in negotiations various things would have to be given up in terms of sovereignty. I wonder, if the Government were wishing to be tough, if they might say to Alex Salmond that he cannot have Scottish banknotes any more. In any case, they are only issued by three Scottish banks, two of them largely owned by the British taxpayer, the other owned by the Australians, so how will he have the right to produce Scottish banknotes? However, as I believe that he is a man of great ambition, perhaps he has in mind that having come from the Royal Bank of Scotland, in some 50 years’ time he might see his own head on a Scottish banknote. I hope that that does not happen.

16:12

[Lord Bourne of Aberystwyth (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Nickson, speaking with great authority on Scottish currency, and with perhaps unique impartiality, as his ancestors plundered on both sides of the border. It is a great pleasure to congratulate my noble friend Lord Lang on the securing of this debate. He showed quiet passion and devastating analytical skill in examining the question of Scottish independence. I will also look at the question of currency, but before doing so, I will say how good it was to hear from my noble friend Lady Goldie, who is not here at present, on the occasion of her maiden speech. I have known her for many years. She, of course, led the Scottish Conservatives in the Scottish Parliament while I led the Welsh Conservatives in the National Assembly for Wales. We often had the opportunity to compare notes, policies, horror stories and war wounds—metaphorically, of course. We often joined forces on devolution issues. I know, as she has demonstrated, that she will be a massive asset to your Lordships’ House. I can well understand why Holyrood is trying to hang on to her.

I want to focus on two quite separate issues. The first relates to the desire of the Scottish National Party, in the event of a yes vote for separation, to keep the pound sterling. The proposals of that cheeky chappy Alex Salmond are, of course, incredibly dangerous. It would be open to Scotland, on a strictly legal basis, to use the pound sterling as its currency without any negotiations with the rest of the United Kingdom, in much the same way as Panama uses the United States dollar or Montenegro uses the euro. This would not be a currency union but a decision to have no independent Scottish monetary policy. That would be a disaster for Scotland and it would not be good news for the rest of the United Kingdom either.

Therein, of course, lies the problem for a single currency, because it clearly needs a single monetary policy with a single banking regulation and an integrated fiscal policy. These issues are very much central to what the Governor of the Bank of England, Mark Carney, was setting out in his warning yesterday. It is inconceivable that the remaining United Kingdom—England, Wales and Northern Ireland—would not seek to exercise considerable influence over Scottish fiscal policy, to say the very least, before agreeing to a currency union. Indeed, in all honesty, what we have seen of currency unions in recent years should lead us not to want to touch such a project with a disinfected bargepole.

At the same time, the Scottish nationalists tell us that they want to be members of the European Union. It is very clear that they will have to formally apply to join and to satisfy the other 28 members of their credentials, which is unlikely. They will also have to negotiate an opt-out from an obligation to join the euro, which is virtually impossible. It can only be imagined what all this uncertainty will do to business and jobs north of the border: two sets of negotiations—one to join a currency and one not to join a currency—would be destined to fail. It is the Alex Salmond constitutional hokey-cokey, which would be funny if it were not so serious.

The second issue that I want to touch on has been mentioned by many noble Lords: the constitutional settlement in the light of a no vote, or even in the event of a yes vote. I passionately hope and trust that there is a vote for continuing a union which I fervently believe benefits us all in every part of the United Kingdom in every sense. If, God forbid, there were to be a yes vote, that would still apply. Many speakers, including my noble friend Lord Lang in his excellent introduction, spoke of the need for a new settlement—unionism that recognises the importance of the devolved arrangements in the United Kingdom. In the wake of the vote there will need to be a constitutional convention to look at the powers, not least the fiscal powers, of the constituent powers of the United Kingdom, and at the English dimension which, so far, is the dog that has barely barked on devolution issues. In the case of Wales, a draft Wales Bill is already being looked at, following the response of the Government to part 1 of the Silk report on fiscal powers. I declare an interest as a member of the Silk commission. Part 2 of the Silk report is due to be presented to Westminster in March and will deal with the appropriate place for decisions on other policy issues. That, too, will be relevant in any constitutional settlement. In short, the vote in Scotland is a watershed. I hope that following the vote—and a decisive no vote—there will be such a convention to work out a lasting constitutional settlement for all parts of our kingdom, not least for England.

Magna Carta in 1215 had Welsh and Scottish chapters. The Act of Union, some 500 years later, provided a lasting settlement. Now, some 300 years after, there has been a new settlement. I think that noble Lords will be able to see a clear trend of constitutional settlements. Such a lasting settlement can only be in the interests of all the nations of the United Kingdom.

16:18

[Lord Soley (Lab)]

My Lords, I am delighted to take part in this debate, so ably led by the noble Lord, Lord Lang, not least because it has spelt out many of the difficulties that will face the separatist agenda of the SNP—but also because for the first time, and I very much hope not the last time, I got a sense of the passion in the British people for protecting the union. We heard that from many Scottish Members but I would also like to hear it much more widely. I feel that I am incredibly lucky to have been born and brought up in a group of nations that live together in peace and freedom and under the rule of law and which recognise the cultural differences throughout the United Kingdom. That is one of the most important things that we have and need to protect. One of the messages that I would like to come from today’s debate, loudly and strongly, is that it is time for people outside Scotland to take part in this debate and to say very clearly to the people of Scotland: “We want you to stay. We need you as part of the United Kingdom. You strengthen, not weaken, us, and the reverse is also true”.

One of my objections to the SNP separatist approach is that it has within it—not throughout all SNP voters and not even throughout the SNP membership—a core of narrow-minded nationalism. That also has a reflection in English nationalism. When I hear an English person say, “Well, if they want to go, I don’t care. Get rid of them”, I argue with them, and we should all do so. Why do we want Scotland to stay? We want it to stay because, apart from anything else, the SNP has a dreadful poverty of historical understanding. Basically, they talk about three things: Bannockburn, Culloden and 1707.

There is a much better history—that of the civil war. It was not an English civil war but a war throughout the United Kingdom, although it was not called that then. It got rid of the divine right of kings—in other words, authoritarian government. What did we get in 1707? We got an Act of Union that put an end to the fratricidal killing that took place on both sides of the border, with looting, murder, robbery, rape and everything else. The Act of Union put an end to that over a relatively short historical period.

When I hear Alex Salmond and others talk about separation, I am reminded that nations that break up do not always do so neatly into two parts. The former Czechoslovakia broke up peacefully but with many problems. The former Yugoslavia broke up in violence. The people there also remembered an old battle from 700 years ago and it led to ethnic cleansing. No one pretends that that would happen now with this separatist agenda, but why on earth would one talk of a separatist agenda when we have made a success of a political and economic union that the world envies because it has brought us peace, stability and prosperity? That civil war, followed by the Act of Union, gave us the freedom and prosperity that enabled us to deliver the world-changing Industrial Revolution, which has had no comparison in history apart from the agricultural revolution of 10,000 years ago. We were able to deliver it because we had the freedom to develop it, and it came about not because of Culloden or Bannockburn but because of the much wider recognition of the rule of law underpinning peace, stability and prosperity.

Therefore, the message to all British people everywhere is: start saying loudly and clearly to Scotland, “We want you to stay”. Alex Salmond and others play on the idea of poking the English in the eye, and you can hear that in his language at times. He hopes that some of the English will respond by saying, “Well, we don’t want them”. It plays into the separatist agenda that he believes in.

This is a profoundly serious debate. That is why I took the liberty—and I apologise to those who did not get it—of sending round a pamphlet by the Constitution Society. There are four articles in it but if noble Lords want a good summary of what the problems of separatism would be for Scotland, I suggest that they look at the one by Phillip Blond. It spells out the reality that several speakers have touched on here today—that Scotland can have real independence only within the union. That is also what came out of yesterday’s lecture by the Governor of the Bank of England. Separatism would weaken Scotland and make it more dependent.

Although I would defend absolutely the right of any of the four parts of the United Kingdom to say, “We want to leave”, another thing that needs to be remembered in this debate is that it cannot then dictate the rules to the rest of the United Kingdom. That cannot happen. Therefore, when Alex Salmond says, “We’ll negotiate this and negotiate that”, he has to remember that it is up to the other side to decide whether it wants to be part of that. One thing that Phillip Blond brings out in his article is that you cannot necessarily get what you want; you might not even be able to start on an equal basis in negotiations.

Therefore, I say to the House—indeed, it has been said ably by many speakers and I am pleased to have heard it expressed so well—let us get the passion back into this debate, as we have done today. Let us get the message out and say to the Scottish people that we want them to vote in this referendum and stay in the United Kingdom. The current figures in Scotland on voting preferences show a very large number of “don’t knows”. The almost 1 million Scottish people who live down here, and all those with friends and relatives down here or in other parts of the kingdom or overseas, know that this union has been a great success.

I have never thought of myself as English. I was a confused east Londoner who was never quite sure whether I was a Londoner or British or of the United Kingdom. But, as I grew up, I recognised that the United Kingdom bit was the strength. That is what I wanted and is why I say to this House: “Let us get that message over loud and clear. Let us make sure that the referendum goes the right way in September 2013 and that we can continue in freedom and prosperity”.

16:25

[Lord Horam (Con)]

My Lords, in her excellent short book, Acts of Union and Disunion, the historian, Linda Colley, points out that nationalist sentiment in the UK has always increased during periods of peace. Thus, during the long Victorian peace, we had the Irish issue and home rule; in the inter-war period, Plaid Cymru and the SNP were founded; and now we have an SNP Government in Scotland and a referendum on Scottish independence in the autumn.

Every state in the world has fault-lines of this kind. We are quite normal in that respect and should not excessively beat ourselves up just because we have this problem at this time. Indeed, as migration and globalisation increase—and they will—and memories of our distant wartime past diminish with time, these fault-lines may increase. This problem will not go away. It is also a problem that is a challenge to the whole British polity; it is not just a problem for our Scottish friends. I believe profoundly that the answer to the problem lies in imaginative leadership. As my noble friend Lord Lang so eloquently put it in his introductory remarks, leadership is crucial in this area. We need to look at not only good leadership and good governance but the framework for governance.

In her book, Professor Colley argues that the next thing we should do is establish an English Parliament to match the Scottish Parliament and the Welsh and Northern Ireland Assemblies. Indeed, an English Parliament would be the only way to deal with the West Lothian question. You can ameliorate it by other means but you cannot resolve it. The noble Lord, Lord Bourne of Aberystwyth, made the point about the English dog which is not yet barking. This would deal with some of the underlying English resentment, which I felt as a Member of Parliament both in the far north of England and in London. In those two situations, I felt that bubbling away even though it is incoherent and not yet particularly evident. Given that an English Parliament may be sited outside London, I even think that it could deal with some of the north-south tensions which are growing at the moment. The pull of London is still extremely strong and is likely to continue to strengthen. Therefore, the establishment of an English Parliament and proper devolution around the whole country would ease a number of the problems we are faced with at the moment.

If this were to be a viable runner—obviously it is an argument—when should we begin talking about it?

[Lord Cormack]

Never.

[Lord Horam]

My noble friend Lord Cormack and I have to disagree. We agreed the other night on that terrible Bill of which we have finally disposed but we have to disagree on this. I note that he lives outside London and perhaps has some interest in the north-south dimension. None the less, the noble Lord, Lord Lang, made the pertinent point that it would be wrong to discuss the possibility of an English Parliament and wider devolution before the choice is made in the autumn. I respect his judgment on that and perhaps that is where the political wisdom lies. However, in the context of the remarks of the noble Lord, Lord Parekh, looking at this from afar, as an Englishman trying to see the scene in Scotland as it unfolds, it has occurred to me that adding the idea of an English form of devolution would add something to the Better Together campaign and give it a positive role, which it sometimes lacks at the moment. The noble Lord, Lord Parekh, talked about playing on fear. I do not go that far, but nonetheless it would be a positive element to that vision.

If not before the referendum, I am absolutely at one with the noble Lord, Bourne, in saying that something has to be said about this after the referendum. There has to be some discussion of this problem because again, like the noble Lord, Lord Lang, unionism has to be refreshed. It has to be renewed and we can do that. Again, as the noble Lord, Lord Steel of Aikwood, said, echoing his hero and mine, Jo Grimond, we have to bring government closer to the people. We have become too centralised in this country and people feel impotent. Wider devolution could perform that excellent service which I believe is necessary at this stage in our history.

There is an old saying “never waste a good crisis”. This is not a crisis but it is an opportunity. We should not waste it.

16:31

[Baroness Humphreys (LD)]

My Lords, may I add my thanks to my noble friend Lord Lang for initiating this debate and say how grateful I am for the opportunity of making a contribution to it? It is also a great pleasure to speak after the noble Lord, Lord Horam, and to associate myself with many of the comments made by the noble Lord, Lord Soley.

As one of the final speakers in this lengthy debate, I am very aware that I may fall foul of the repetition, hesitation and deviation strictures of a certain radio programme. I hope that noble Lords will forgive me for that. It also gives me the opportunity to say that everything I would have said had I the knowledge, experience and eloquence of noble Lords who have spoken has already been said.

I have no intention at this point of seeking to sway the views of the people of Scotland as to which way they should vote in the forthcoming referendum. I hope to restrict my comments to some of the implications for the United Kingdom as a consequence of the referendum, whatever the result may be. One of two new realities will face us on the morning of 19 September. We will awake to a changed future either as a still complete but politically uncertain United Kingdom as a result of the no vote, or as a new reduced United Kingdom of three nations. Whether we care to admit it or not, the political equilibrium will have changed.

There is a growing acceptance—many noble Lords have spoken about this already—that the status quo will not prevail, even if the people of Scotland vote no. The present constitutional settlement cannot and will not remain static. A no vote will leave the Scottish people in exactly the same position as they are today: with a settlement with which many are unhappy. A no vote will not mean that Scots are content with the devolution settlement as it stands. They will demand further powers to ensure the degree of self-determination they desire and devo-max will probably still be on the agenda. Commentators have already suggested that a no vote will lead to further discussions regarding the constitutional framework and that there could be a devolution of further powers from the United Kingdom Government. I agree with both those premises.

For many Liberal Democrats, the devolution settlements that devolved power to Scotland and Wales are unsatisfactory and need to be addressed. I wholeheartedly concur with the suggestion made today by my noble friends and noble Lords opposite that a convention be established to examine the future structure of the United Kingdom. As my noble friend Lord Bourne has already said, the devolution process in Wales will continue, as the second part of the Silk commission’s report is likely to recommend the devolution of further powers. I look forward to reading the commission’s recommendations. It will give us a genuine opportunity to cast our eyes again over our complex devolution settlement and help define which new powers will allow the Welsh Government best to serve Wales within the United Kingdom. However, in truth, we need a settlement or constitutional framework that recognises the need for more autonomy across the United Kingdom—for Wales, Northern Ireland and Scotland but also for London, England and the English regions. The Welsh Secretary of State at the time of the Welsh devolution settlement, Ron Davies, said:

“Devolution is a process not an event”.

By beginning the devolution process, the Blair Government set the United Kingdom on a constitutional journey that continues and will be stopped or reversed only with immense difficulty, upheaval and resentment.

Perhaps the time has come to do what Ron Davies never actually did and begin an attempt to define the events towards which devolution supposedly leads us. The only fair and logical way forward for the nations and peoples of the United Kingdom is for today’s politicians and legislators to develop our constitutional framework with the aim of building a shared future where each of the four nations is an equal partner. If we accept the premise that devolution can lead to an “event” then, arguably, that event is the creation of a quasi-federal union between the nations of the United Kingdom. Building a shared future of this kind may take many years and it may be one which the majority of us will never see. However, one thing is certain: the genie is out of the bottle. Powers and responsibilities gained and exercised by Governments in Scotland, Wales and Northern Ireland cannot be contained or taken back. Devolution is a process which can only move forward.

My noble friend Lord Roberts of Llandudno has graphically described the possible electoral consequences for the remainder of the United Kingdom if Scotland votes yes. The political landscape he describes is one which should cause us concern. The picture he paints is of a permanent Tory majority in the remainder of the United Kingdom, which might bring great joy to some of my noble friends on the neighbouring Benches but does nothing for democracy and could lead to a complete splintering of the United Kingdom, as my noble friend suggests.

Perhaps because of the desire not to interfere or offer advice to the people of Scotland, we have been sleepwalking towards a constitutional abyss. If Scotland does not vote to leave the United Kingdom this time, we should breathe a sigh of relief, resolve to take stock and embark on those discussions on the constitutional framework which will enable us to build a shared future. The United Kingdom works precisely because it is united. If we value that unity and wish to see it continue, we will all have to learn that a shared future involves accepting and promoting a new union and that this is far more important than stubbornly defending the old.

15:49

[Lord Trimble (Con)]

My Lords, I join other noble Lords in congratulating my noble friend Lord Lang on securing this debate and, indeed, on the quality of his speech. The debate has also been remarkable for the maiden speech of my noble friend Lady Goldie and, of course, for the many other speeches that have been made. They ranged over a whole lot of topics that I will not say much about. However, after listening to the previous few contributions where noble Lords were wondering about the English Parliament, the bogus West Lothian question and others things like that, I suggest to Members that all these matters were discussed at great length and with great learning in the debates in this Chamber and this House on the Irish home rule Bills. Reading all four of them would be a very good idea and would provide a better understanding of the various issues. However, I shall not allow myself to be tempted further down that way.

I had my mind first turned towards this issue some 25 years ago. My noble friend Lord Kilclooney, who is unfortunately not with us, shortly after he had been elected to the European Parliament in 1979, invited me to spend a few days with him—I had been his election agent. When we were there, we bumped into the redoubtable Winnie Ewing. I discovered that John was on quite good terms with her, because the two of them got into quite a friendly conversation. She had with her two other chaps who I spoke to, and they turned out also to be members of the SNP, who were there on an information visit—they were obviously would-be candidates at some point. I said to them, “You know, if you chaps get your way and get an independent Scotland, it will pose a problem for us in Northern Ireland. What would we do? Do we go with Scotland or stay with England?”. One of them said, “Oh, good, it’ll be just like Dál Riata back again” and the other said, “Oh, no!”—so I was glad to see the SNP was clearly united on this issue.

I mention that just to say that this referendum and its outcome has very particular implications for us in Northern Ireland, and it may result in certain issues that are now sleeping coming awake again. Some noble colleagues often ask me what I think about recent developments in Northern Ireland and I say, “No, don’t worry about them; the only thing that I see on the horizon that might destabilise things in Northern Ireland is the Scottish referendum”. I hope, of course, that there will be a clear no vote.

A number of Members have spoken about family. I intended to say just a few words about family, too, because I think that it is relevant. I cannot emulate the noble Lord who took us through all the branches of all the elements that have contributed to him—I am afraid that we Trimbles have no history. Genealogical research in Northern Ireland is extremely limited, so very little can be said about that—we have some oral traditions, but whether there is any truth in them I have no idea. On the other hand, my mother-in-law is Scots. She grew up on a farm just outside Banchory in the north-east. My wife has more Scottish relatives than Northern Ireland relatives, and two of her sisters have moved to Scotland, one after marrying a Scotsman and the other one after marrying a chap from Manchester—but that is another story that is not relevant to this. Through them, I have two Scottish nephews and a niece, but of the three of them, one is at university in Cambridge, the other is a solicitor in London and the third is looking for work in Stirling. I think that we could all find that within our families, which just underlines the extent to which this referendum and this project will divide families throughout the kingdom.

I would be tempted to go through the various evolutions of the policy of the SNP. One of the amusing things about this debate is the way in which the SNP keeps changing its policy and what it wants to do. I was particularly delighted that the noble Lord, Lord Bilimoria, referred us to Alex Salmond’s espousal of the great arc of prosperity. Well, two of those countries effectively went bust; the third, Norway, did quite well. You could say that odds of one out of three might be attractive to a gambler, but they are not, I think, to a prospective Government.

I will now look not at the very obvious difficulties and improbabilities of the SNP position but will sum up what I think it hopes to do if it wins the referendum. It talks about independence, but it is independence where Scotland will retain the crown, and hopes to be in NATO and the European Union. It wants a currency union; it says that 30% of all cross-border entities will continue; and, of course, it wants to keep the Scottish regiments as well. What does all that add up to if you were to look at it? I know that it is highly improbable that this can be done, and there are huge difficulties about almost all the things that Mr Salmond mentions, but if it could happen, what would it be like? It would not really be “independence” as the word is normally understood. My noble friend Lord Empey said that it would be a client state. I had not thought of that phrase, but it looked to me like a sort of dual monarchy. Where have I heard of that before? Oh, yes: Austria-Hungary after 1860 and the dual monarchy there—which is not a terribly good augury for the future, you might think.

What strikes me is that this is devo-max: what Salmond would get is powers of taxation and more control over expenditure, but leaving all the external things pretty well in place. People say that if there is a no vote, there might be devo-max. If they go down that road, they will be giving Alex what he is asking for at the moment even after he has lost the referendum. That is without going into the question of whether devo-max is a good idea—the answer to which is, no, it is not. Again, to get the argument for that, go back to look at the Irish home rule Bills and see how each Bill, one after the other, cut down on the extent of economic devolution to the proposed Irish home rule parliament. It started off with what Salmond would now call devo-max but ended up with a very minimalist position. It all reflects on the highly integrated nature of the British state, which we unravel at our peril.

The reasons for devolution were quite different. I support devolution and would have touched on some other points as well, but I think we need to be very careful about this. If the worst comes to the worst, yes, there are some implications for us, but a number of suggestions have been made in this Chamber today which we should approach with very great care.

16:46

[Lord McAvoy (Lab)]

My Lords, I, too, congratulate and thank the noble Lord, Lord Lang of Monkton, on bringing this debate to the Floor of the House. We are in the year of the referendum and the timing of the debate will be regarded as kick-starting the real public debate and action on it.

The debate has been threaded throughout by some really terrific contributions from very knowledgeable and creditable people. It has also been marked by the maiden speech of the noble Baroness, Lady Goldie, making her debut today. She is a very welcome addition to the House. I hesitate to say that I look forward to her usefulness to the House, as it may be entirely for the Tory party; nevertheless, she will be an asset to the House and she is very welcome.

Among his many salient points, the noble Lord, Lord Lang, mentioned the issue of sacrifices. I endorse that sentiment. As a nation, we have come through two world wars. We suffered together, we sacrificed together. Although that may not be monetarily relevant, it is socially relevant. I certainly agree with that.

The noble Lord, Lord Forsyth of Drumlean, mentioned various reasons for the Treaty of Union in 1707, but he missed out one. One of the elements in the mix was the panic in the English Parliament that the Scottish Parliament still retained the right to recall the Jacobite James VIII.

Scotland’s place in the union is not just good for Scotland. As many noble Lords have said today, it benefits England, Wales and Northern Ireland. The union is a collective endeavour in which the four home nations are united in the pursuit of the common good. There is a desire by some to break up that relationship while claiming that none of the relationships that proceed from it will be affected. That is simply untrue. Indeed, what is proposed is a leap into the dark, leading to a complex process of negotiation and redefinition. It is simply fallacious to claim that Scotland can leave the union and that all that is positive that proceeds from it can be not simply preserved but somehow improved. Rather, the outcome of a yes vote in September will be the transformation of a relationship of partners into one of competitors—a transformation which will be bad for Scotland and bad for the remainder of the United Kingdom.

The SNP’s vision of an independent Scotland is a fantasy based on the claim that somehow everything will change while, simultaneously, nothing will change and consequently everything will be better. The relationship it envisages with what remains of the United Kingdom typifies that fantasy and how the reality would be damaging for both countries. By retaining sterling, Scotland’s monetary policy would still be determined by the Bank of England. That would effectively mean that Scotland’s borrowing and interest rates would be controlled by a foreign country. The statement by Mr Mark Carney, the Governor of the Bank of England, has surely finally scotched that fantasy of Alex Salmond.

This House’s Select Committee on Economic Affairs seriously doubted the possibility that members of the Bank of England’s Monetary Policy Committee could represent the interests of a separate country. Such a sterling union would mean a fundamental change for the worse. Monetary policy would in no way be determined in the interests of the Scottish people. This also exposes another central falsehood of the SNP’s position: its unique understanding of negotiation—that simply by declaring what you want, you will be given it. This was certainly exposed by, for instance, the noble and learned Lord, Lord Cullen of Whitekirk, describing the damage to the research facilities available to Scotland. I will come back to Alex Salmond in a minute. I do not want to spend too much time on Alex Salmond. We should concentrate on the big examples.

By breaking the political union with the UK, the benefits of four nations working together will undoubtedly be lost, and Scotland’s relationship with the outside world completely redefined. The benefits brought by shared regulation and institutions—namely, a unified labour market, integrated infrastructure and a UK-wide business framework—would either be lost altogether or severely diminished. In the area of defence procurement, which was mentioned specifically by a number of noble Lords, including my noble friend Lord Browne of Ladyton, the damage done to Scotland and to the UK would be long term. I doubt we would be able to recover from it. An independent Scottish state would have lower domestic demand for defence goods and would no longer be eligible for UK defence contracts. The Clyde would never again be able to build complex warships or aircraft carriers for the Royal Navy.

Throughout the world, the United Kingdom is working to pursue the best interests of England, Wales, Scotland and Northern Ireland. There are currently 267 embassies, high commissions and consulates in 154 countries. The idea of Scotland setting up a similar structure is laughable. My noble friend Lady Liddell mentioned Alex Salmond’s comment that we would remain best pals with England. Yet at the same time, he still propagates the idea that despite, in theory, being a member of the European Union, Scotland would bar English students from free tuition fees. Best pals? There is a touch of nastiness there, which we should always remember when we are dealing with Mr Salmond.

By leaving the union, Scotland would be damaging all the other partnerships that spring from it. The legal opinion is increasingly clear that the remainder of the UK would be regarded as the continuity state, inheriting all the international rights and obligations that currently befall the UK, while Scotland would be regarded as a new successor state. As many noble Lords have indicated, Scotland would have to reapply to join the European Union and NATO. Here, again, many in the yes campaign display a shaky understanding of the meaning of negotiation. The Scottish Government’s White Paper declares that an independent Scotland would join the EU, but not the eurozone or the Schengen area. However, this is at odds with the EU’s rules on membership. Any exemption would likely require unanimity among all the member states. At the moment, that seems extremely unlikely. The terms of membership are simply not within the Scottish Government’s gift. Similarly, the desire to become a member of NATO is at odds with SNP commitments regarding Trident. Trident is part of a NATO security umbrella. Any attempt to remove it from the Clyde would undoubtedly impact on Scotland’s relationship with other NATO countries and negatively affect its application for membership.

The union has served to advance Scotland throughout the world, and leaving it would take us into a world of uncertainty. If Scotland were to vote yes to the ending of three centuries of partnership, the remainder of the UK would face the same negative consequences. My noble friend Lady Quin indicated the dilemma of the feeling of closeness and camaraderie across the border with Scotland, and the potential damage to Northumberland and the border counties from having a separate Scotland with fiscal taxation and all the rest of it. Her powerful speech indicated the dangers of that.

A new competitiveness between the remainder of the United Kingdom and Scotland would be damaging to both. While the UK would be regarded as the continuity state in international law, its standing would be diminished—hence the apposite title of this debate in the name of the noble Lord, Lord Lang. Serious questions would doubtless be asked as to why the UK continued to retain a place on the UN Security Council. The UK’s role and influence within the European Union would also be weakened. Furthermore, Scotland’s exit from the union would be a heavy blow against the concept of multinational states. It would prompt serious questions as to the involvement of Wales and Northern Ireland within the union, potentially reawakening terrible wounds within the latter, as was mentioned by the noble Lord, Lord Trimble. It would also have a profoundly negative impact on England’s identity and politics.

The implications for the UK of a Scottish yes vote in September 2014 are unappetising. It would represent a turning inwards, a diminished outlook and a turning away from a relationship of co-operation and partnership into a relationship of competitors. Outside the union, Scotland would find itself having to try to renegotiate its relationship with the UK and international bodies. If an independent Scotland managed to enter into a sterling union, it would represent a highly regressive development. Scots would find that their monetary policy was being entirely determined by a Bank of England no longer capable of adequately representing the Scots.

Scotland’s relationships with all its UK partners would also need redefining, and it would inherit none of the privileges and benefits that currently exist. The upcoming Scottish independence referendum allows us the opportunity to articulate once again the mutual benefits that come from the union and argue for the preservation of this collective endeavour. It allows the Scots the choice of whether to remain partners within the United Kingdom or become competitors outside it.

Once again, I thank the noble Lord, Lord Lang of Monkton, for facilitating this debate. I also place on record our appreciation to the noble Baroness, Lady Anelay, and my noble friend Lord Bassam for agreeing to extend the time allowed for this important debate, which shows the House of Lords at its very best. In my opinion, it shows our relevance to a UK-wide debate. I would like to think that this debate and the powerful speeches here today mark the start of the campaign to keep Scotland within the United Kingdom.

16:57

[The Advocate-General for Scotland (Lord Wallace of Tankerness) (LD)]

My Lords, in sharing the view of the noble Lord, Lord McAvoy, I can safely say that we have had an excellent debate here today, which has benefited from having extra time. I particularly thank my noble friend Lord Lang of Monkton for introducing the debate with a first-class speech which, given that the contributions of all the speakers have emphasised how wide-ranging the subject is and how there is so much to be said, not only captured the breadth of the arguments but did so with considerable focus as well. He set our debate off absolutely on the right tone by raising a number of important issues.

At the outset, too, I congratulate my noble friend Lady Goldie on her maiden speech. She and I were first elected together to the Scottish Parliament when it was established in 1999, along with other noble Lords who are in the Chamber such as the noble Lord, Lord McConnell, and my noble friend Lord Steel. We did parry on occasions. I think that I appeared before her a number of times on the justice committee, where she established a reputation not just for competence—that would understate it—but for being a formidable parliamentarian. Indeed, when she announced that she was standing down from the leadership of the Scottish Conservative Party, one newspaper commentary that I have found said:

“A primary function of a party leader is to lead in the eyes of the voters who have not supported it. Annabel Goldie was good at that—open, inclusive, positive and giving as good as she got, the people understood her—trusted her”.

I think that is a very fair summation of the contribution she has made to Scottish political and civic life. I know that she continues to represent her constituents in the Scottish Parliament, but we all look forward to the contributions that she will make to our debates in this Chamber.

One of the features of this debate has been that Members who have taken part have come from right across the United Kingdom: from Scotland, Wales, Northern Ireland and England. I cannot answer every point that has been raised because there have been so many, but every speech made a valuable contribution to the debate.

I was having the same thought as my noble friend Lord Cormack, who said that he hopes this debate will be read in Scotland. I was thinking that so often in this debate we hear people say that we do not have enough facts. I think the Hansard of this debate will give a considerable number of facts and emphasise many areas. The noble Lord, Lord Kerr of Kinlochard, spoke about the complexities that are involved, and we heard important contributions from noble Lords who have considerable expertise in their own fields of medicine, research, sport, law and defence. Excellent contributions were made that set out some of the facts, consequences and complexity.

My noble friend Lord Caithness asked whether independence is for ever, and the noble Lord, Lord Maxton, answered that question. Yes, people can see from this debate that independence is for ever. As the noble Lord, Lord Brennan, said, there is no going back. It will be a decisive result, and if people vote yes for independence, that is that.

There is one very small matter. I am not saying it is a fact that will change the outcome of the referendum, but the information was passed to me, so I thought I should share it with your Lordships. My noble friend Lord Steel and the noble Baroness, Lady Liddell, referred to the First Minister’s visit to the Ryder Cup and the expenditure of £54,000. I have been informed that when he was First Minister the noble Lord, Lord McConnell, and one member of staff attended the Ryder Cup outside Dublin at the cost of £131.20. Scotland got better value from the noble Lord.

Features of the debate have been the sense of heritage and the sense of family. My noble friend Lord Forsyth gave us a very good perspective on heritage. He said we are one nation forged over the centuries. Other noble Lords who talked about history included my noble friend Lord Cavendish of Furness and the noble Lord, Lord Bilimoria, but noble Lords also talked about the idea of family and, sadly, noble Lords also talked in terms of a family that faces possible divorce, all the trauma that goes along with that and how we want to try to avoid it. That emphasised that the people who belong on this island not only have a shared heritage but have so much in terms of shared family. When my noble friend Lord Caithness was describing his bloodline, I thought that he was the absolute embodiment of Britishness, with all the various parts of the United Kingdom from which he can claim ancestry.

Another feature was the passion that the noble Lord, Lord Soley, mentioned. Noble Lords said how important it is to them that we remain part of a United Kingdom. Some 800,000 people born in Scotland now live in other parts of the United Kingdom and about 500,000 people born in England, Wales and Northern Ireland now live in Scotland. One speech mentioned the 30,000 people who travel in and out of Scotland each day to work. My noble friend Lord Moynihan talked about the Olympic family and how proud we all felt at the success of the British Olympic team in 2012. When he was speaking, I was reminded of the point made by my noble friend Lord Cavendish: when you split a £50 note, each part is not worth £25. Equally, one could say that if you had split the boat of Katherine Grainger and Anna Watkins, who won the double sculls, neither of them would have been in a gold-medal position. That emphasises how much we achieve when working together. We are truly greater than the sum of our parts.

I recognise that what we are debating today has implications for other parts of the United Kingdom and for our parliamentary arrangements. My noble friend Lord Trimble talked about its impact in Northern Ireland. I will perhaps say later that if you try to disintegrate public bodies and institutions that have been brought together and have evolved over a long period, it has costs, even for the part of the United Kingdom that would not have opted to lose Scotland. I also take the point of the noble Lord, Lord Gordon, that whatever the outcome on 18 September, even if it is a no vote, there may well be relationships that have to be worked at to bring about some harmony again, so that we can continue to go forward as a truly United Kingdom.

However the legal position is that, without Scotland, the United Kingdom would continue, albeit, I fear, as has been said by a number of your Lordships—my noble friends Lord Lang, Lord MacGregor and Lord Lamont of Lerwick, and the noble Lord, Lord Parekh—as a diminished United Kingdom. It would be a United Kingdom from which we had lost something very valuable. We have had very clear legal opinion, referred to by my noble friend Lord Crickhowell, from Professors Crawford and Boyle, that England, Wales and Northern Ireland would be a continuing state. Internationally, the continuing United Kingdom would retain its membership of organisations and bilateral treaties. Domestically, each one of the United Kingdom’s public bodies and institutions would continue to function.

That cannot be said of an independent Scotland. An independent Scotland would be an entirely new state. As the noble Lord, Lord Robertson, said, it would be a separate state. I sometimes wonder why a party that wants independence objects to the idea that it might be a new state; I thought that was the whole point of what they were trying to do. Scotland’s future would be based on a series of protracted negotiations with different states and organisations, as well as other parts of the United Kingdom. Which currency would Scotland use? How would Scotland join the European Union, as referred to by the noble Lord, Lord Kerr? Would it have to join the euro or Schengen? These are questions that the Scottish Government have singularly failed to answer. They would require detailed negotiations to pull out of a union of which Scotland has been an integral part for more than 300 years and to establish a new set of international relationships.

However, it is important to stress the positive. As the noble Lord, Lord Bilimoria, said, we have at the moment the best of both worlds. We have a system of devolution that delivers for Scotland. Where it makes sense, key decisions of state are reserved to the United Kingdom and its Parliament to take on behalf of all citizens across the United Kingdom. Equally important decisions are made by the Scottish Parliament in Scotland on issues including education, healthcare and policing. The noble Lords, Lord Robertson and Lord McConnell, and my noble friend Lord Purvis, have indicated that devolution is working. I take the point made by my noble friend Lord Lang in his introductory speech, that somewhere we seem to have lost sight of the Scotland Act 2012. The point is that the position is not static. There is no such thing as the status quo because, in 2015, there will be taxation powers on landfill tax and land-based stamp duty; and in 2016 there will be an important development on the 10p rate of income tax. It is not standing still; since day one it has evolved and developed. That 2012 legislation substantially increases the Scottish Parliament’s power and was proceeded upon on the basis of evidence, consensus and consideration.

At the start of 2013, the United Kingdom Government said that we would set out the facts about Scotland’s place in the United Kingdom: its contributions and the benefits we receive as a result. We have done so. The Scotland analysis papers, details of which I circulated to noble Lords last week, have set out in great detail important issues such as currency, research, defence and, most recently, borders and citizenship. They make a positive case for Scotland being part of the United Kingdom. I do not believe that the Scottish Government have in any way challenged this analysis. Their White Paper last November was their opportunity to make their case. It is widely recognised that they distinctly failed to do so. None of the key issues such as currency, EU membership and, crucially, the terms of EU membership and economic stability, will go away—but none of them was adequately addressed. It was an exercise in assertion and wishful thinking. My noble friend Lord Lang said that it used its length to hide its emptiness. I noted that, in the passage he quoted, my noble friend Lord Steel talked about the principle of continuing efficiency. I have looked that up on Google, and cannot find that principle enunciated anywhere else. It is asserted, and we are all supposed to salute it.

These issues matter because they affect people’s everyday lives—jobs, mortgages and the cost of the food we buy in the supermarkets. This is not an esoteric constitutional debate. It is not a question of nationalist sentiment. It matters to people and their day-to-day lives.

I will pick up on some specific points made by noble Lords. A number of your Lordships made particular reference to the speech the Governor of the Bank of England made yesterday in Edinburgh. He highlighted the principal difficulties of entering a currency union: the loss of national sovereignty, the practical risks of financial instability and having to provide fiscal support to bail out another country. As the Chancellor has previously said, the current arrangement of a full, monetary, fiscal and political union brings economic benefits to all parts of the United Kingdom. That is why we have seen the Chancellor, my right honourable friend the Chief Secretary, former Chancellors of the Exchequer, the shadow Chancellor and the First Minister of Wales—and in this debate the noble Lord, Lord Empey, from Northern Ireland and my noble friend Lord Bourne of Aberystwyth, from Wales—say that in the event of independence, a currency union is highly unlikely to be agreed, and that in those circumstances the Scottish Government need a plan B.

Currency unions do not work without close political and fiscal integration; surely we have learnt that lesson from the euro if nothing else. Scottish independence would create the opposite. Indeed, the objective is to have disintegration. The Scottish Government maintain that they can run an economy differently and better, but that would lead to fuller divergence. To Nicola Sturgeon and others, who claim that,

“the pound is as much Scotland’s as it is the rest of the UK’s”,

let us be clear that a vote to leave the United Kingdom is a vote to leave its institutions, such as the Bank of England, and to leave the UK pound. That is part of the choice that people in Scotland are being asked to make on 18 September.

My noble friends Lord Lamont of Lerwick and Lord Shipley also mentioned the debt issue. The Treasury has set out clearly that the continuing UK Government will in all circumstances honour the contractual terms of debt issued by the UK. We did so because we thought it was responsible to underpin the UK’s credibility with the international financial markets. As my noble friend Lord Shipley indicated, an independent Scotland would be likely to face higher debt interest payments than the rest of the UK, as the National Institute of Economic and Social Research has shown, and would have to rely on a narrower tax base to support its public services and ageing population.

A number of noble Lords who contributed to the debate talked about the European Union. The noble Lord, Lord Kerr of Kinlochard, described, from his vast experience, a potential scenario as to how we might get from A to B, which I will be interested to reread. It would not be appropriate to make any commitments or comments on it except that it takes a while to get one’s mind around the thought that my right honourable friend Mr David Cameron might represent Alex Salmond at the EU Council table. I would be interested to know what the First Minister of Scotland thinks about that. However, the point the noble Lord, Lord Kerr, made was about the complexity of that situation and of the terms of membership. The noble Lord explained why the rebate could not just be split up and a bit allocated to Scotland. There is also the issue of Schengen and the currency. When the Scottish Government talk about the common travel areas as their preferred position on Schengen, that would clearly be a matter for negotiation. They also have to make up their mind. They cannot claim on the one hand that they want a radically different immigration policy from the rest of the United Kingdom, and on the other still maintain that they can have a common travel area. The two do not go hand in hand. They have to square with the Scottish people about which it will be.

The question of the disintegration of the United Kingdom came through in a number of speeches. We are talking about institutions and public bodies that have developed over many years—over generations—and which were not established for the purpose of being broken up. Therefore, when you start to try to unravel them, there are a lot of difficult problems. The noble Lord, Lord Kakkar, mentioned the General Medical Council and all the issues that would flow from that. I think that many of the regulatory bodies in the health service have appeals that go to the Privy Council. The Scottish Government may say, “We can keep it”, but I am not sure that they have thought it through, as they sometimes dismiss the Privy Council as a body to which they would ever wish to appeal.

There are also the issues of the coming together of the higher education research councils and the integration of defence. As my noble friend Lord Selkirk of Douglas said, you cannot just pluck out assets and personnel from a highly integrated armed services.

The noble Lord, Lord Brennan, also underlined the importance of and some of the difficulties with the number of treaties and negotiations that would have to take place. It is worth reminding the House that, in the so-called velvet divorce between the Czech Republic and Slovakia, there were 31 overarching treaties and around 2,000 sub-agreements between the two countries. While it is referred to as the velvet divorce, many important issues were unresolved for a number of years. So there is a whole host of issues that would have to be dealt with.

There is the fact that our trade is so bound up together. Scotland’s manufacturing receives so much of its raw materials from England. In one of our Scottish analysis papers, we show the border effect. When you put up a barrier, albeit between countries that have a long history together and share a common language, there is a border effect, as was shown in the difference in trade between two provinces of Canada and between Canada and the United States. Public bodies such as the BBC, the DVLA, the National Lottery and the Heritage Lottery Fund have all been established on a UK basis. You only need to start thinking of some of the implications. We will publish the next Scottish analysis paper in the series in which we will look at some of those institutions. It is clear that unpicking them is very difficult indeed. To put it into some kind of context, every Administration that I can remember have had private and public grief about IT systems. If you think about having to create new IT systems across the board for so many things, it underlines the difficulties.

The noble Lord, Lord Nickson, expressed a concern that is part of the so-called border effect. You would have difficulties at the outset but, over time, there would be further divergence. That, too, would mean that we would lose much of the advantage that we have as part of the United Kingdom.

The noble and learned Lord, Lord Hope of Craighead, talked of the importance of the legal system and the fact that, in civil matters, the House of Lords and now the Supreme Court has been the final appeal court. So many of these issues deal with commercial legal matters, in which it has been important to have consistency of interpretation north and south of the border. I remember—no doubt the noble Lord, Lord McConnell, will remember, too—that when there was a proposal to move from the House of Lords to the Supreme Court, when we were in coalition government together, we had to think about what should happen and whether Scotland should continue to seek to take civil cases to the Supreme Court. The representations we got from business were about the importance of having that Supreme Court to give consistency of interpretation across the United Kingdom. That was very important indeed.

The noble Lord, Lord McAvoy, referred to the importance of the defence industry in Scotland. A number of those who have contributed have talked about the defence footprint in Scotland, and the number of armed and civilian personnel related to defence. When you look at how much is spent on defence, it is not that Scotland’s defence is a tenth of the total; the entire expenditure on defence in the United Kingdom goes to ensure the security of us all. You cannot start to disintegrate it—it matters to us all. That was particularly true of the case mentioned by my noble friend Lady Neville-Jones, about our security being underpinned by a strong network of international alliances and relationships and how much Scotland benefits from the millions of pounds of investment in the United Kingdom’s cybersecurity.

On the Armed Forces, a point made by my noble friend Lord Selkirk was that you cannot just tell people that they have to leave and give up their careers in the British Army to go and join the Scottish Army—or, for that matter, in the Royal Navy or the Royal Air Force. There are two sides to that. It has been very ill thought-out in terms of what the Scottish Government have proposed, but the positive side is that we do very well as a United Kingdom, with Scotland as part of it, by having our defence secured on that UK-wide basis.

Before moving on to further devolution, the noble Lord, Lord Hennessy, mentioned contingency planning. He knows that the Government have consistently made the point that it would be wrong to start contingency planning ahead of any vote, for the very good reason that we are the Government of the whole United Kingdom. If Ministers within government start splitting up and arguing against each other, that is when you start to unpick the fabric of the United Kingdom.

The noble Lords, Lord Sutherland, Lord Lyell and Lord Kakkar, and the noble and learned Lord, Lord Cullen, also mentioned the importance of research. I do not need to elaborate on what they said about the value of having a United Kingdom in that regard.

Many of your Lordships talked about further devolution, further constitutional change and the opportunity for constitutional renewal. I will not list everyone who made that point but I think there was an emerging consensus that this is something we need to look at in the light of a no vote. One of the things that came through was that devolution does not stop at Cardiff, Edinburgh or Belfast; there is an important issue about it being taken down to local government as well. The First Minister of Wales raised with the Prime Minister the idea of a constitutional convention. The Prime Minister indicated that there would need to be an open, involved and comprehensive conversation about the kind of union we want to see, and that, 15 years after the process of devolution started, we should consider the best way to go about doing so. However, he went on to say that he believed a better time to do that would be once the referendum debate had come to a conclusion as we must first focus on the case of keeping Scotland in the union.

The noble Lord, Lord Parekh, made important points about trying not to be negative. I have tried to show that there is a positive side to arguments that might otherwise be seen as being negative. However, it is also important that those who are arguing for such a fundamental change to the status quo should face and answer some of the key issues that are put to them. I do not believe that is being negative.

We have a proud tradition. To pick up some of the points that have been made, we have walked in freedom under the law and have taken democratic government to many parts of the world. This country led the way in the abolition of slavery. We established a National Health Service and were leaders in public service broadcasting. We have achieved so many things together. I believe that that, together with economic integration, is a very positive argument to put forward.

My noble friend Lady Goldie said that she could be Scottish and she could be British and proud of both. We have heard contributions from noble Lords who are Welsh but feel very British too, from those who are Northern Irish English but feel very British too, and from people from other parts who feel that way too. The noble Baroness, Lady Quin, made an important point about people coming to the United Kingdom—not to Scotland, Wales, Northern Ireland or England but to the United Kingdom. It is important that we retain the integrity of the United Kingdom. It is not something to give up lightly. I hope that on 18 September, people in Scotland will vote to remain part of our United Kingdom. I believe that, far from being negative, a no vote is probably the most positive thing that can happen to the United Kingdom later this year.

17:22

[Lord Lang of Monkton]

My Lords, happily it is not my task to sum up the large number of fascinating speeches that we have heard today. That was the task of my noble and learned friend Lord Wallace of Tankerness, and he has just done that brilliantly. His courtesy and attention to detail was a masterly example of how it should be done. I thank him and the noble Lord, Lord McAvoy, for sitting throughout our debate and listening very closely to what has been discussed.

In all the years I have spent in this House, I cannot remember a debate that was so engrossing from beginning to end, nor can I remember such a consistently high standard of speeches throughout. Indeed, it is hard to think of a more profoundly important subject than the one we have debated today—the survival of the United Kingdom of Great Britain and Northern Ireland.

I congratulate my noble friend Lady Goldie of Bishopton on a superb maiden speech which was very well judged and welcomed by many here today. I say to the noble Baroness, Lady Quin, that she should keep submitting her name to the ballot. There is room for more debates between now and 18 September. Many aspects of this debate, although touched on today, could be expanded in future debates, and I very much hope that they will be.

The Scottish National Party defies the relevance, or even the existence, of this House—it ignores it—but, happily, the British public do not. I very much hope that what has been said today will reach out to a wider public. For me this has been an amazing debate. We have had six former Secretaries of State taking part, five from Scotland and one from Wales; one Scottish former Chancellor of the Exchequer; one Scottish former Chief Secretary to the Treasury; two very distinguished Scottish judges; a chancellor and a vice-chancellor of two great Scottish universities; a clutch of former First Ministers, a Presiding Officer and current and former Members of all the devolved Administrations of the United Kingdom, Scotland, Wales and Northern Ireland; one Scottish former ambassador to the European Union and head of the Foreign Office; one former Secretary-General of NATO; and one former head of the British Olympic Association. We have had more than 40 Lords a-leaping, and I dare say that if we had a pear tree in the Chamber there might be a partridge in it—and it would be singing a unionist song.

More importantly, we have had a lot of brilliant and highly articulate voices from all parts of the United Kingdom, and that underlines what the debate is about and the value that we all attach to the United Kingdom. I hope that the debate has helped to advance that cause. My privilege has simply been to act as convener for the event, and I thank all noble Lords who have taken part. I hope that we have done something to restore to the rest of the United Kingdom a strong conviction of the value of our United Kingdom.

Motion agreed.

Immigration Bill

Thursday 30th January 2014 Lords Chamber

First Reading

17:25

The Bill was brought from the Commons, read a first time and ordered to be printed.

Small and Medium-sized Businesses: Access to Finance

Thursday 30th January 2014 Lords Chamber

Question for Short Debate

17:26

Asked by

[Lord Berkeley]

To ask Her Majesty’s Government what steps they are taking to improve access to finance to small and medium-sized businesses.

[Lord Berkeley (Lab)]

My Lords, it gives me great pleasure to introduce this short debate on improving access to finance for small and medium-sized enterprises. There has been much concern among the SME fraternity about their business health, but I detect little evidence of success in the government policies in that direction so far. I think they feel hard done by by this Government. However, as the National Audit Office said in a recent report:

“SMEs play an important role in job creation. Three-quarters of all new jobs in the UK are created by SMEs”.

That is an amazing figure, really. The report continues:

“It is therefore important that SMEs with potential are able to obtain the finance they need so that they can grow”.

Any trawl of the Government’s website, and of the BIS page in particular, will show the enormous range of support that the Government offer. The Enterprise Minister, Matthew Hancock, set out the Government’s offer to SMEs in December. Many people find the list a bit confusing. Behind all that, the message that the SMEs give is that the biggest problem is a lack of finance. It may not be there and it may be very expensive. Equally importantly, they may need even more finance than they would otherwise because government departments, large companies and others are taking so long to pay their bills that more working capital is required just to keep the business going. I shall speak a bit more about that later.

It is good for the Government to say that they are doing so much, but the experience in the field is rather different. I have a couple of examples. Five or 10 years ago a good friend of mine developed a restaurant in London that is doing extremely well, and has extended it to three or four branches. I saw him yesterday and he said, “I want to expand further, not just in London but to some of the regions—Manchester, and Bristol eventually”. He has a very good track record and is comparatively risk-free, but he found that he could not get the kind of finance that he might have been able to five years ago, and has had to beg round to get enough just to take things further. This can be seen as just a London issue, but it is not—he wants to go to Manchester and other places where jobs are surely important.

Then there is the infamous case of the Royal Bank of Scotland, which was extensively written about by the Sunday Times in the autumn. A gentleman called John Morris, who is not an SME but sadly received the SME treatment, was trying to do up a house into luxury apartments and, towards the end, when he needed £2.5 million to sort out the snagging—there must have been a lot of snagging in that building, but there we are—the Royal Bank of Scotland pulled out at the last minute, causing his cheques to bounce. I will not repeat the long story, but effectively they put him into liquidation, took the building into their property arm and used it. The inference is that they would then develop and sell it and make a lot of money and that the poor man would be left with nothing. He now seeks to sue RBS over claims that the assets were unfairly seized by the property company.

I understand that the Business Secretary, Vince Cable, has called on City watchdogs to examine this very serious allegation. Lawrence Tomlinson, the multimillionaire enterprise tsar, has published a report. What he has said is quite clear. I have a summary of his findings, which show that the,

“RBS is engineering a business into default in order to move the business out of local management and into their turnaround division … This then generates revenue for the bank through fees, increased margins and the purchase of devalued assets by their property division”.

His conclusion is:

“Without competition in the banking sector, these scandals will continue to come to light and ever more business will be hurt in the process”.

I certainly agree with that. The Government need to deal with this issue of size, lack of competition and a certain degree of arrogance, especially as they own RBS.

There is another issue that I touched on earlier. It is the question of finance needed for late payments by big companies. This was debated in the debate to which I contributed on 24 May 2012. That is some time ago. We had a lot of discussion about big companies like National Grid, which seems to have a late payment policy, and even then it does not comply with it. Some 34% of suppliers had to wait 91 days to be paid, according to Dun & Bradstreet. That process seems to be carrying on now.

I found the Question this afternoon on NHS Property Services to be interesting. This is a wonderful example of late payment. NHS Property Services is in trouble because the hospitals and other buildings that sit on its property were late in paying rent. So part of the NHS is not complying with, presumably, its own procurement procedure and is putting another part of the NHS into financial trouble. If the NHS cannot pay itself on time, what hope does anyone else have? I hope that the Minister will make some comment on this.

I am pleased that 18 months—or perhaps it is two and a half years; I cannot count—after this was raised, the Prime Minister has announced a consultation. The headline of an article from 16 October 2013 on the announcement says that, “Government could launch fines for late payment”. The article also mentions,

“a YouGov report suggesting that some 85 per cent of small businesses have endured late payment over the last two years”.

That is a big percentage. The article goes on to say:

“Outstanding payments to SMEs are now thought to exceed £30 billion, and the average business waits 38 days for payment”.

It is not clear to me what if anything the Government are doing about that. Perhaps the Minister can tell me where that has got to. It is a big problem, so how will this be enforced?

There has been a lot paper but a lack of finance, and late payments are causing a lot of problems. In its report of November 2013, Improving Access to Finance for Small and Medium-sized Enterprises, the National Audit Office is critical of the Treasury and the banks. It basically says that the Treasury needs to make things simpler and easier to understand, and urges the business bank to be more flexible and,

“target SMEs’ lack of awareness”.

I do not know whether that is going to happen. It may be that the Minister will tell us a bit about the business bank, but it is not going to directly lend or invest in businesses. What is it going to do? Will it actually help small businesses? I do not know. According to the House of Commons Public Accounts Committee, the answer is basically that the bank will not do very much. The committee’s report recommends:

“The departments should use the establishment of the British Business Bank to start managing the various schemes as a coherent programme”.

There is a lot more there.

I agree with Ed Miliband, the leader of the Labour Party, who says that this problem has been going on for a long time. There is too much power concentrated in too few hands in the banking industry. Four banks control 85% of small business lending. They are not lending, give poor customer service and are risk averse. I support his proposals for a Green Investment Bank and a new British business investment bank, provided that it lends.

In conclusion, small businesses need a climate in which to flourish, which they do not have at the moment. They need confidence. Who is winning? The big boys are winning at the moment. Small businesses need long-term stability and the debate about Europe is not helping. It certainly will not help small businesses. I could go on but we are having a debate about Europe tomorrow. I am much looking forward to the contributions from other speakers, who are much more expert than I am, and to the Minister’s comments.

[Earl Attlee (Con)]

My Lords, I should point out that this is a topical QSD and is limited to 60 minutes, even though it is last business, as provided for in the Standing Orders. Noble Lords have four minutes, and when the clock shows four minutes, they will be into their fifth minute.

[Lord Berkeley]

My Lords, it says on today’s lists that the debate is time limited to 90 minutes.

[Earl Attlee]

My Lords, that is why I came to the Dispatch Box. There is a slight error on the list. The timings are correct but the overall time suggested is not correct.

17:38

[Lord Sheikh (Con)]

My Lords, I should like to thank the noble Lord, Lord Berkeley, for introducing this debate on an important subject. I express an interest in this debate as the chairman of an insurance organisation that helps smaller organisations to place their insurance covers.

I have always supported the cause of SMEs. I echo the words of the Prime Minister earlier this week when he said that SMEs are key to Britain’s economic recovery and make a great contribution with their innovation, hard work and determination. They make up around 99% of all private sector businesses and provide nearly 60% of private sector employment. During this Parliament, a number of measures have been brought forward to help SMEs grow. Among them are the cutting of £l billion-worth of red tape and the extension of small business rate relief. The Government have also worked to make Britain’s tax system more competitive, with corporation tax being the lowest in the G7 and a £2,000 tax cut on national insurance contributions coming in from April 2014.

The problem that SMEs have in accessing finance has dominated debate in recent years, but some important steps have been taken. The £1 billion British Business Bank aims to increase the supply of capital to SMEs and introduce more competition to the banking sector. In addition, businesses that would otherwise lack adequate security for a loan are being helped through the enterprise finance guarantee.

It is also important to remember that banks are encouraged to lend to SMEs. The Government hope to do this by allowing banks to borrow from the Bank of England at cheaper than market rates through the Funding for Lending scheme. More also needs to be done to allow more people to start their own businesses. The Start Up Loans initiative was created to help people to get their businesses off the ground. As someone who promotes Islamic finance, I was very pleased with the recent announcement by the Prime Minister that start-up loans will also be available on Islamic principles. However, we are in a competitive world and there is always more that can be done.

Despite multiple support schemes for small firms, research has suggested that unfortunately there has been limited success. The Federation of Small Businesses has said that current business support is congested and confusing. Many SMEs still struggle to access the finance they need, and recently overall lending to SMEs has fallen. I ask the Government for an explanation of what is being done to ensure that the right support is targeted at the right businesses.

I also believe that more should be done to make these schemes act as a coherent programme rather than a collection of separate initiatives. I ask my noble friend the Minister what, if anything, is being done to this effect. We also need to get more of the UK’s large businesses to play a supporting role for SMEs. Often big businesses do not pay small suppliers promptly. Small firms suffer cash-flow problems because work is not paid for in the agreed time, and they spend valuable time chasing payments.

As someone who has promoted the undertaking or more overseas business, I believe that all exporters, no matter how small, should be able to access high-quality government support. In conclusion, the Prime Minister has said that we are in a global race, and more SMEs should build overseas connections and be involved in enhanced trade.

17:42

[Lord Stoneham of Droxford (LD)]

My Lords, in the brief time available to me, I should like to indulge the House with a parable based on a true story. When I studied the Industrial Revolution at university, I always associated a man called Henry Cort, the inventor of Cort’s puddling process in iron-making, with Abraham Darby, Ironbridge and the northern industrial areas. When I came to live near Portsmouth, I discovered that he was a supplier to the Navy, and, having patented his process, he built a new iron mill at Fontley, four miles from where I live. He needed funds for his new foundry and he borrowed £30,000—worth over £2 million now. He got the funds from Adam Jellicoe, chief clerk of the pay board of the Royal Navy, who secured the money on the patents registered by Cort.

One might wonder how the chief clerk of the pay board of the Royal Navy could afford such a vast deal. He had, of course, a ready source of funds and—you guessed it—he was the Robert Maxwell embezzler of his time. The money had come from the Navy payroll. Poor Mr Cort. The Navy took his patents, and although 8,200 puddling furnaces were built by 1820, Mr Cort saw no financial benefit from his innovation. When the Navy purchases fell back, his foundry bankrupted him. He died in dire straits and is buried in Hampstead.

The lessons of that story for small businesses are as important today as they were then. First, sources of secure funding are absolutely essential for the establishment and growth of small businesses. Secondly, just as important is the guidance of mentors and advisers to innovators if an idea is to reach its commercial potential. Thirdly, funds for SMEs have to be sourced locally by those familiar with local businesses who lend and by small businesses which do not have the time or resources to go further afield. Fourthly, the public sector has a role. The public sector rarely wins prizes for business innovation but it can be a valuable partner to small businesses. It is a purchaser of goods. It should be committed and forced to pay its bills on time but it also can provide seed-corn funding to reduce risk and leverage other sources of funds.

Sadly, our banking system has delocalised just when localism was most needed. The Government have spawned an array of new funding schemes, including the business bank and the green bank, which are all great initiatives. But where does an SME go when it needs to get help and easy access to funds?

Reverting to my local area, we must not underestimate the role of local economic partnerships in providing a hub of activity, advice and funding for SMEs. My local LEP, the Solent LEP, has brought together Portsmouth and Southampton, which is a huge achievement in itself. It is backed by local authorities, chambers of commerce, the universities and local businesses, both big and small. It is now using the regional growth funds to encourage new business development linked closely to job creation.

Bridging the Gap is one of the initiatives to help businesses get going and expand to create specific jobs. The idea came from one of our local MPs, Caroline Dinenage, and it has the support of the local newspapers, the Portsmouth News and the Southern Daily Echo in Southampton, which are keen to have good news stories. They publicise the initiative, which it is hoped will ensure that local businesses can get initial funding and then leverage that with other funding. LEPs are at an early stage but the aim should be for them to become hubs for local business development and job creation, with local authorities, universities and local businessmen driving the development of business and job growth.

17:47

[Lord Bilimoria (CB)]

My Lords, I thank the noble Lord, Lord Berkeley, for bringing this debate before the House at this crucial time for our economy, particularly with regard to SMEs. I have started a business from scratch. There were two of us and we were even smaller than an “S”; then we were an “S”; then we became an “M”; and now I have a joint venture with a large multi-billion global company. I have been there and done it, and seen how difficult it is to raise finance as a growing business. SMEs are the engine of our economy and they need funding to grow.

Confidence is beginning to return to business and businesses want to grow and invest but there is difficulty in raising money. I do not want to banker bash but a number of issues need to be raised, including poor banking lending practices, punitive charges, interest rates, difficult guarantees, the exclusion of certain loans from approval and the changing relationship with banks. In the early days when I started in business, senior bank managers had experience. Now there is a lack of experienced managers. Bank managers do not have the authority to lend more than £50,000 in many cases. I know that many SMEs struggle to raise finance.

Bank managers are terrified of taking the risk. They weed out applications that they think are doubtful. The lack of lending means that businesses cannot grow, innovation suffers, our exports suffer and we become uncompetitive as a country. I hope that the business bank will help the situation. Can the Minister advise us when the business bank will come into operation and action? Awareness continues to be an issue. The Government have a number of schemes but, from what I have seen, just over 50% of businesses know about it. However, that means that more than 40% of businesses do not know about all the support that is available. What are the Government going to do about that?

There are horrible stories about banks which continue to bully SMEs through either restrictive covenants or excessive charges. They find excuses to call in loans, to take security or to break covenants. This is terrifying for a business. Often you can see them extracting extra interest charges, invoking covenants in the original facility letters or instructing new valuations with costs to be met by the borrower. When it comes out lower, the bank may increase the margin, call in the loan or ask for capital repayments. This is distressing for businesses which quite often are just abiding by making payments. I know of personal examples of businesses that have been bullied and have had to pay up to £100,000 worth of excessive legal fees and valuation fees when they have been making their payments and, in the end, they were absolutely fine. Extortionate fees are still being charged and in many cases high street lawyers are conducting the cases. Will the Minister take this up with the banks to make sure that excessive legal fees are not charged by banks?

Will the Minister meet the CEOs and directors of the banks to address all these issues—the valuations, the legal fees, the aggressive attitude and the lack of funding—so that we can have a brighter way forward? Will he also update us on all the government and BIS-led initiatives that exist of access-to-finance schemes—loan guarantees to SMEs, loans for start-ups, the EIS scheme, the Enterprise Finance Guarantee, the Seed Enterprise Investment Scheme. There are so many schemes. Will the Minister tell us what is going on with these schemes? There are also growth accelerators. There are a plethora of them. How effective are they and are they succeeding?

The noble Lord, Lord Berkeley, mentioned the Tomlinson report. It was reported in the Telegraph by Louise Armitstead that more than 1,000 companies have come forward with allegations of morally wrong treatment at the hands of the Royal Bank of Scotland’s restructuring division. Lawrence Tomlinson had told the Treasury Select Committee that his “dossier” of cases against RBS’s global restructuring group has “continued to grow” since he published the report. He claimed that RBS was “killing off” small businesses for its own profit. This person is the entrepreneur in residence at BIS and he recommended that RBS and the Lloyds Banking Group be divided into three separate banks. Does the Minister agree that that is the correct course of action? Tomlinson argued that despite the financial crisis, British banks are still too big to fail and too big to regulate. He said that without radical action there would be,

“nothing to stop 2018 becoming another 2008”.

17:51

[Lord Leigh of Hurley (Con)]

My Lords, I thank the noble Lord, Lord Berkeley, for introducing this important debate. I speak as someone who has spent the past 30 years advising SMEs on corporate finance matters and I draw noble Lords’ attention to my entry in the register of interests which discloses that I am the senior partner of Cavendish Corporate Finance. My focus has been on advising SMEs on their exit strategies, but that has included helping them to raise finance.

In my opinion, this country has a superb track record of encouraging entrepreneurs to start businesses and grow them, and I was personally encouraged by the pro-business environment of the late 1980s under the previous Conservative Government to start my own business. My partner and I each invested £10,000 with a commitment to each other not to draw a salary for a year because we knew that no bank would back us. Accordingly, I have always believed that it is not governments who create jobs but businesses like mine.

Life has moved on since those days and there is increasing recognition that help and assistance has to be given to SMEs, which are the backbone of the British economy, as the noble Lord, Lord Sheikh, said, and more importantly will be the engine of growth. It is clear that the Government are doing an excellent job in facilitating the proliferation and growth of SMEs, unlike the traditional banks, as the noble Lord, Lord Bilimoria, said, whose central control of decision-making, depriving local managers of important decisions, and in some instances disgraceful behaviour, should be investigated by the Minister.

Under the coalition agreement, however, the start-up loans scheme has been a tremendous success with a staggering 10,000 start-up loans being celebrated late last year, as noted in this House. Encouragingly, the number of private sector businesses in the UK has increased to 4.8 million at the start of 2012, which is a record. The Government have encouraged SME entrepreneurs in a variety of ways. More than 3,000 regulations, including those relating to employment, health and safety and the environment, have been identified for scrapping or improvement through the red tape initiative and businesses are now allowed much more flexibility when downsizing.

The one area that does need attention is financing. I remember as a university economics student in the 1970s studying the equity gap, which some may remember was defined in the Wilson report. At that time, a huge problem was financing equity investment into SMEs. I was particularly pleased to see the EIS and SEIS schemes, which have enabled entrepreneurs to raise seed capital from friends and family, helping them to make the big decision to start up.

I warmly welcome the success of the business growth fund, which I see being extremely active in the marketplace carrying out equity investments in businesses. I am keen to see the implementation of the business bank, which should have some £4 billion and will match Germany’s KfW, which has done so much to help the German Mittelstand with much greater numbers. I note the concern of the House of Commons Public Accounts Committee that the main challenge is not new initiatives but, as the noble Lord, Lord Bilimoria, indicated, making sure that SMEs are aware of the plethora of financial help and assistance now available to them. This is the right direction of travel. There is currently a huge range of financial assistance being offered by this Government to SMEs—the problem is communicating that to entrepreneurs.

Finally, I wish to raise a point of concern about peer-to-peer lending—this is not meant to refer to debts between Members of the House of Lords but to crowd funding. Although hailed as the new disruptive technology to challenge the banking industry, and thus welcome, I have some concerns about it and am pleased to note that from April 2014 the industry will be regulated by the FCA. It is still currently a tiny industry, but I wish to express concern at its huge rate of growth. There needs to be much more examination of how the money is lent and the experience of management in making loans and spreading risks for lenders. Peer-to-peer lending should provide a further excellent opportunity for access to finance for SMEs. However, we need to be prepared for failures ahead, as history shows that the current tremendous economic growth, created by coalition policies, will lead to businesses overtrading and could lead to defaults on such borrowing.

17:56

[Viscount Hanworth (Lab)]

My Lords, small and medium-sized enterprises, SMEs, depend mainly on commercial banks to provide finance via loans, overdrafts and credit cards. According to the evidence from a National Audit Office report, lending to SMEs was negative in almost every month from June 2011 to August 2013, which is to say that, during the period, adequate finance was not forthcoming from the banks. We are told that 37% of SMEs use no external finance. More of them use credit cards or overdrafts than loans. Loan rejection rates in the UK are around twice those of France and Germany and, of those SMEs whose loan applications are rejected, 70% can find no alternative sources of finance.

The present dearth of financial support is undoubtedly a consequence of the need of our large banks to reduce their leverage—they have been endeavouring to improve their reserve ratios by limiting their lending. The manner in which they are doing this has caused acute distress among many small enterprises. A recent edition of the BBC’s “File on Four” radio programme, “Default by Design?”, bore witness to this. The programme focused its attention on the practices of RBS, the Royal Bank of Scotland, 80% of which has been in public ownership since it was rescued from insolvency. The Tomlinson inquiry, which was briefed by Vince Cable to investigate the practices of the bank, has alleged that it has been sinking good businesses so that it can profit from their demise. The BBC programme provided evidence to substantiate this allegation, and some startling malfeasance was revealed. A subsidiary agency of the bank was able to acquire the assets of businesses that had been driven into financial difficulties by the effect of the interest rate swaps that the bank itself had foisted on the businesses.

Modern bankers deal with small businesses in a manner that differs markedly from traditional practices. Banks have become increasingly remote from local industry and commerce. In the past, a bank manager would be expected to have an intimate knowledge of his business clients and of their enterprises. Within our lifetimes, the number of private clients of banks has increased dramatically, but nowadays they are dealt with, not on a personal basis, but on a statistical or algorithmic basis, and the same methods are applied to small businesses. The algorithms of banking have two aspects. On the one hand, there is the matter of global resource allocation, which determines the size of the funds that are available for lending, as well as the threshold of creditworthiness. The second aspect is the assessment of the creditworthiness of the potential borrowers, which is also described as their default risk.

A callow young manager can nowadays handle the essential decision in respect of a loan application by a small business in a seemingly objective manner that requires no expert knowledge on his part. The decision depends on a credit score that is formed from an additive combination of measured attributes, both numerical and categorical, that are recorded in a computerised database. The aggregate score is compared to a threshold value, and the request for a loan is granted only if the threshold is surpassed. The typical basis for such decisions is a statistical analysis that covers a large sample of cases. This is a decidedly obtuse way of going about the business.

It is an undoubted statistical fact that a large proportion of start-up businesses are bound to fail. On the other hand, it is among such businesses that the most dynamic elements of a developing economy will be found. It used to be the task of a bank manager to exercise his judgment in discriminating between the businesses that would be viable and those that were bound to fail. The effect of the algorithmic approach is to deny funding to the majority of start-up enterprises on the grounds of the high rate of mortality of the group as a whole. This is profoundly injurious to our future prosperity and to the prospects for employment.

Another dire consequence of the modern approach can arise when, on account of a need to reduce its leverage ratio, a bank such as RBS decides to heighten the threshold that is applied to credit ratings. A group of businesses will then become liable to have their loan facilities withdrawn. It seems that RBS is far more adept at driving its decisions to foreclose on such businesses than it is in assessing their true prospects.

A hit squad called the Global Restructuring Group resides within the bank. The group is intended ostensibly to get businesses back in shape by providing helpful advice and, possibly, by restructuring the loans. Its true purpose seems to be to foreclose on those businesses in a manner that will be most profitable to the bank. This is the kind of abuse that the Labour Party has in mind when it calls for the restructuring of banks and the establishment of new banks to compete with the existing ones.

18:01

[Lord Storey (LD)]

My Lords, I thank the noble Lord, Lord Berkeley, for facilitating this debate. It has never been truer that, in a recovering economy, the importance of SMEs is paramount. I suppose that the direct answer to the question of what steps Her Majesty’s Government are taking to improve access to finance for SMEs is the fact that, at long last, the Government have established a business bank—a business bank that has set itself an impressive target of supporting £10 billion of new and additional lending; a business bank that will help small companies struggling to secure finance.

I was fortunate to sit on the Select Committee which looked at how SMEs could increase their exporting, and the published report, Roads to Success: SME Exports, is an important contribution to understanding the importance of SMEs to the economy and how we could have more of them exporting. We would certainly make huge economic progress.

The Select Committee looked at the barriers to exporting: why should a successful SME choose not to export? How could we encourage them to export more? As you can imagine, the reasons and solutions were complex and numerous, but one issue was paramount in their concerns: that, of course, was access to finance.

It is interesting to note that the SME Finance Monitor report by BDRC Continental showed that businesses with the confidence that they had a chance of getting finance were more likely to expand. However, there is a real deficit of confidence when it comes to SMEs looking to get finance. Only 37% of SMEs planning to apply for finance believed that their application would be successful, whereas the actual rates are a lot higher, at almost 67%. The research identified a staggering 270,000 businesses that wanted to apply for finance but never ended up doing so. The report identifies this lack of confidence in their chances of success as a key reason.

These figures show that SMEs often will not apply because they do not think that they will be successful, when actually the opposite is true. That may be why there is a feeling out there that banks are not being supportive. We need to give confidence to them to go for it. The British Bankers’ Association, with its Better Business Finance initiative, is attempting to increase this confidence by awareness-raising campaigns to change that mindset. The message is: approach lenders and you are likely to get the finance that you need to grow and, hopefully, export.

While I constantly hear that banks are doing all they can to prevent finance and lending, my observational experience is that the situation is not nearly as grim as is often painted. I recently met representatives from Santander to talk about how they are helping families in difficult times. The conversation turned to SMEs, and they told me of their ambition to be the SME bank of choice across the country, and how, in the first nine months of 2013, the bank had increased its net lending to SMEs by 11%, opened 15 new business centres, increased the number of relationship managers and established a capital growth fund of £2 million for fast-growth SMEs, which will include trade missions, mentoring and seminars.

That is just one bank, and I do not want to single it out. I know from other contacts and evidence that banks gave to the Select Committee that other banks are just as committed. Of course, we should also mention the successful Funding for Lending scheme.

I started my contribution to this debate by mentioning the importance of the British Business Bank. Since its launch, it has made an impressive start. Total lending and investment support is up by 65% for the first six months of 2013 compared to 2012; £600 million in new finance is now reaching smaller businesses; 10,000 businesses are already benefiting from its support. Access to finance is the lifeblood of SMEs, just as SMEs are the lifeblood of the UK economy.

18:05

[Lord Taylor of Warwick (Non-Afl)]

My Lords, I thank the noble Lord, Lord Berkeley, for making this timely debate possible.

One evening back in 2007, I was half watching the BBC TV business programme “Dragons’ Den”. A number of people with various hopeless and hapless business ideas had been crushed and humiliated by the comments of the panel. Then, up the stairs walked somebody completely different. He was a black gentleman with dreadlocks named Levi Roots. Instead of the traditional business presentation, he decided to sing his application while playing a guitar. It was such an impressive performance that Peter Jones and Richard Farleigh decided to invest in Levi’s Reggae Reggae Sauce.

Since then Levi has become a multi-millionaire and his sauces and ready meals sell in major supermarkets here and abroad. I was privileged recently to interview Mr Roots for the media. In addition to the surprise of hearing that Levi Roots’s real name is Keith, he was very frank and open about his success. He said that although he always knew he had a good product, he realised he could not take it further without the sort of mentoring and financial backing that he got from the Dragons. The banks were not interested. Levi was one of the lucky ones. But I wonder how many other Levi or Lavinia Roots there are out there.

The ethnic minority business sector contributes an estimated £30 billion per year to the UK economy, but evidence from the Black Training and Enterprise Group shows a gap between the aspirations of minority groups to set up their own business and the actual number who do. Only about 6% do, and the majority fail in the first year of operation.

In July last year, the British Bankers’ Association produced its Ethnic Minority Business and Access to Finance Report. It found that the banks need to do far more to reach underrepresented groups in the SME sector. It also encouraged ethnic minority groups to make full use of initiatives such as the website Mentorsme.co.uk, which helps provide business mentors; and it recommended a series of roadshow events across the country, focusing on inner cities. It also urged banks to link up with the various ethnic minority business groups.

There is something that the report did not mention which I would recommend. The banks and relevant government departments should build stronger relationships with faith groups, because many business people from ethnic minority communities are also members of the Pentecostal church, the mosque or the temple, depending on their faith.

Although the main theme of the debate is finance, I argue that mentoring is just as important, if not more so, in the early stages of a small business. A black teenager was dyslexic in a west London school in the 1980s. It was assumed that he was stupid, so he was put in a remedial class. He left school as a failure, but somehow he got into art college. A few people began to encourage and even to mentor him. That young man eventually went on to win the Turner prize, a Golden Globe and the New York Film Critics Circle prize, and his latest film, which he directed, called “12 Years A Slave”, may win an Oscar and is set to gross hundreds of millions of dollars. His name is Steve McQueen and he has become a huge UK film export. It is a British film because he and many of the main actors are British. Like Levi Roots, everything turned out well for Steve McQueen, but it could so easily have gone the other way. How many other Steve or Stephanie McQueens are we missing out on?

This is my last point. The Lord Mayor of London, Fiona Woolf—only the second female lord mayor since 1189—last week launched the Power of Diversity programme, a series of lectures and conferences to promote diversity. I am glad to say there are some banks involved in that. Hopefully we can soon say, truly, that diversity means business.

18:10

[Lord Stevenson of Balmacara (Lab)]

My Lords, I congratulate my noble friend Lord Berkeley on securing this debate and thank all noble Lords for their contributions. We have heard about the range, diversity and potential for growth and employment that exists in our SMEs. Surely it is common ground in this House that if Britain is to grow its way out of the current cost of living crisis that people are experiencing, and we are to build a balanced recovery that lasts, we need to do all we can to help our small businesses grow and create new jobs.

To create more and better-paid jobs, Britain needs more small businesses and it needs the best of them to scale up. A number of noble Lords have mentioned the resources and skills that are required here, including mentoring, but the main problem always seems to be, and comes back to, receiving finance. In this context, we have heard today about some rather difficult issues being alleged against the Royal Bank of Scotland, owned by the taxpayer. In the press today there are reports that Lloyds is cutting down its SME division. In his response, could the Minister tell us what is going on in our banks?

Several noble Lords mentioned the recently published NAO report. It shows that the flow of new bank term lending to SMEs fell by 23% between 2009 and 2012, that 70% of SMEs have loan applications rejected and get no alternative finance, and that the funding gap—the difference between the funding required by SMEs and the funding actually available—is currently between £10 billion and £11 billion but may reach about £22 billion by 2017. There is clearly a real problem here.

It is this sort of consideration that prompted the Labour Party and its BIS team to back a number of initiatives. The first was to support the UK’s first ever Small Business Saturday, which took place on 7 December. It resulted in an additional half a billion pounds of trade going to small businesses. Initiatives like this can help, but we also think that the Government need to do more to ensure that firms get access to the financing capital they so desperately need. That is why we believe that there should be greater competition within the banking sector. We need something that every other G8 country has—a proper state-backed lending institution and, alongside it, a network of regional banks that really understand local business needs. Will the Minister confirm that the current work on a British investment bank in his department will help resolve that problem?

We will also go further. My noble friend Lord Adonis recently published a report on a recommendation to establish a UK small business administration, which we intend to set up if elected in 2015. This would create a step change in the opportunities for small businesses from government procurement, improve the quality of support available, and operate alongside the British investment bank and the network of regional banks I mentioned. Will the Government also match this initiative?

18:13

[Lord Popat (Con)]

My Lords, I thank all those who have contributed, particularly the noble Lord, Lord Berkeley, who initiated this important and timely debate. I say that it is timely because a lot is happening, although there is a lot more to do. In my response I shall outline the measures that the Government are taking to improve access for our small and medium-sized businesses through schemes such as Funding for Lending, the creation of the British Business Bank, and by increasing competition in the business finance market.

The UK economy is recovering from the biggest financial crisis in generations. Alongside the Government’s strategy for deficit reduction, we have committed to ensuring that businesses can obtain the finance they need for investment and growth. The Bank of England’s most recent Trends in Lending and credit reports show that confidence is beginning to return, helped by interventions such as the Funding for Lending scheme and the British Business Bank. However, we recognise that challenges remain for smaller businesses.

Let me start with Funding for Lending. In April last year, we extended the Funding for Lending scheme to bring non-bank credit providers into scope. We also increased the Funding for Lending allowance that banks earned by lending to SMEs. In November, additional changes and incentives were announced to focus the scheme still further on encouraging lending to SMEs, the sector of the economy where it is now most needed. The evidence to date is that Funding for Lending has kept the overall cost of credit to SMEs down, which has helped in a tough trading environment. However, with the recent changes there is scope for it to do even more to encourage SME lending.

A number of noble Lords, including the noble Lord, Lord Berkeley, mentioned the British Business Bank. Substantial progress has been made in setting up the bank, which will be fully operational in the autumn of this year pending state aid approval. We will need European approval to get the state aid approval through. The chair, the senior independent director and the chief executive officer are in place. Collectively, they have strong financial sector backgrounds and small business lending experience—from the private and public sectors, but most importantly from the banking and regulatory sector—so we will have a good team to run our new British Business Bank. The British Business Bank will support economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for our small and medium-sized businesses. It will do this by bringing together the management of existing government loan guarantee and investment schemes, and it will have the flexibility to develop new initiatives to form a comprehensive package of support for UK businesses. I will outline this in more detail.

Existing British Business Bank schemes are already delivering. They supported total lending and investment of £650 million in 2013, an increase of 70% compared with 2012. As of the end of 2013, over 25,000 smaller businesses were benefiting from British Business Bank support. The Government are determined to build on this level of support. We have developed a new wholesale loan guarantee programme that will make small business lending more capital-efficient for banks, thus incentivising them to increase lending to businesses. Through the British Business Bank, a £300 million investment programme is designed to increase the supply and diversity of finance available to SMEs through non-bank lending channels. It operates on a commercial basis, with the Government investing on equal terms to the private sector. This includes challenger banks and peer-to-peer lenders. Overall, as my noble friend Lord Storey mentioned, the British Business Bank’s resources will help to unlock up to £10 billion of additional financing for smaller businesses over the next five years.

The third point is on competition, which was mentioned by the noble Lords, Lord Berkeley and Lord Stevenson. Alongside the British Business Bank, the Government are also taking steps to increase competition and choice in traditional banking and raise awareness of the support available. There has been an acknowledged overreliance on our four biggest banks, which between them account for 85% of business current accounts. However, action on a number of fronts is being taken to change this. First, two new banks, Williams & Glyn Bank and the Trustee Savings Bank, are being spun out from the Royal Bank of Scotland and Lloyds Bank and will establish a significant presence in the banking market. Other challenger banks such as Metro Bank, Shawbrook, Aldermore and Cambridge & Counties are also growing in scale and significance.

Secondly, significant changes have been made by the financial regulators to reduce the entry barriers for new banks. New entrants now face lower capital liquidity requirements and approval processes have been streamlined. These changes are already making an impact; there are currently more than 20 applications for banking licences being considered by the financial regulators so, given time, we will have real competition and a real regional presence as well. Apart from the five we already have in place with Williams & Glyn and the TSB coming forward, those 20 new applications will, I hope, mean that we will have a substantial number of new banks in the market and that competition will close some of the problems we currently face. Thirdly, the Office of Fair Trading is currently undertaking a market study of SME banking. We await the findings with great interest and will consider them carefully.

Other work to increase competition includes the introduction last September of a seven-day switching service, which makes it far easier for consumers and small businesses to switch their current accounts. In December 2013, more than 83,000 customers switched their current accounts, an increase of 54% on the equivalent figure in December 2012.

A couple of noble Lords mentioned awareness. The banks are playing their part. Last week, the major banks launched a campaign aimed at restoring confidence among small businesses that finance is available. In other words, they are inviting SMEs to apply with a view to lending money to them. A core element of the campaign is raising awareness of the appeals process. If an SME has been rejected by the bank or is unhappy with the conditions it is offered, it now has a right to appeal. To date, more than 8,000 appeals have been submitted, of which more than 37% have been overturned, facilitating an additional £40 million of lending. The scheme provides a vital reassurance that banks will consider all lending applications thoroughly, but it needs greater visibility to encourage more businesses to seek funding. The banks’ campaign to address this is welcome.

The Government also recognise that more needs to be done to raise awareness of their own schemes. The noble Lord, Lord Bilimoria, mentioned a number of government schemes that are in place. We have launched the “Business is Great” campaign, a marketing campaign using digital and traditional media channels to raise awareness among SMEs of the support that is available.

The noble Lord, Lord Storey, mentioned the difficulty that SMEs have in getting export finance. I was privileged to set the remit of and be in the ad hoc committee chaired by my noble friend Lord Cope, which the noble Lord, Lord Storey, mentioned. The committee met a large number of SMEs and listened to the difficulties of raising money. I am pleased to say that the committee’s report has been published. It made recommendations to the Government, and the Government have taken action through UKTI and have come up with a number of schemes to help SMEs to learn more. One in five SMEs exports. If we achieve a figure of one in four, we will clear our huge deficit on external trade. I commend the contribution of that committee because it made a hell of a difference. Unfortunately, for my sins, I had to step down to join the Front Bench.

Credit conditions for SMEs are improving. The noble Viscount, Lord Hanworth, mentioned that there is not enough lending. SME gross lending was 39% higher, year on year, in November 2013, and net lending has been positive in three out of the past nine months, but I accept that although gross lending has gone up, net lending has gone down. Lately, it has picked up. In nine out of those 12 months, net lending dropped, except in the past two or three months when it started to pick up. This is partly due to many schemes that are now available for SMEs to borrow money, not necessarily from their traditional banks.

A number of issues were raised. I will try to be as brief as possible in view of the time, and I will be very happy to write to noble Lords. The noble Lord, Lord Berkeley, mentioned the lack of finance. We have come up with a number of schemes. He mentioned existing businesses that want to grow. I agree with him. The restaurant he mentioned was a classic example of a successful SME business that goes to the bank to borrow money with a view to expanding. From what I have heard, and from having been an SME for 30 years, I know that it is very difficult to raise money, and quite often the banks want to renegotiate existing loans, adding covenants and higher margins. It is difficult for existing successful businessmen to raise money because the banks want to renegotiate and renege on the original contract. I accept that that is an issue that a large number of SMEs face. We have heard stories recently about the banks pulling the plug at the last minute.

The noble Lord, Lord Sheikh, said that SMEs are key to our recovery. Of course they are. They are the engine of the economy. There are 4.6 million SMEs. The good news is that since 2010 about 460,000 SME have been created. The noble Lord mentioned late payments; I will certainly cover that in my letter.

The noble Lord, Lord Bilimoria, mentioned a number of things, some of which I have addressed in my speech. On the relationship between customers and banks, the noble Lord is right. It is important that banks have a good relationship with their customers. Quite often, from what is said, the banks appoint lawyers from their panel of solicitors, who tend to charge a lot more than the market rate. The banks are effectively checking the work done by the customer. There is the same problem with valuation. The banks should really give their customers a choice, whereby those customers can negotiate legal and valuation fees. The noble Lord has asked me to see whether I can have a meeting with the banks’ chief executives; I will endeavour to do so.

The noble Lord, Lord Leigh, whom I commend on his experience in this field, mentioned regulation and the equity gap. On regulation, the Government’s policy is, “One in, two out”. In the past three or four years, we have managed to get rid of a large number of regulations, saving SMEs £850 million.

My time is up. I would be delighted to write to noble Lords who have raised points which I have missed.

House adjourned at 6.26 pm.