Scotland Bill

Earl of Caithness Excerpts

Thursday 15th March 2012 Lords Chamber

[Lord Wallace of Tankerness]

That is two options, for a start, and a third option could be to pass it and park it. We are seeking to reach agreement, and my noble friend has repeated the truism that it will be for Parliament to determine the final shape of the Bill. If Parliament does not wish to agree, that may determine the reaction of the Scottish Parliament to a legislative consent Motion. But I emphasise that, as things stand, much effort is being made and considerable progress is also being made with regard to achieving a satisfactory outcome. As I said to the noble Lord, Lord Foulkes, we hope that we will be able to update your Lordships before the House considers the Bill on Report.

[The Earl of Caithness]

I apologise to my noble and learned friend for not being here when the debate started, but I was in a committee upstairs and may therefore have missed this point. If there are amendments as a result of further negotiations, will the House go back into Committee so that we can speak more than once on them?

[Lord Wallace of Tankerness]

The convention and the devolution guidance notes that update it state that we seek a legislative consent Motion before the last opportunity for amending. In your Lordships’ House, that would be Third Reading. Therefore, it was always anticipated that it would not be necessary to go back into Committee. I hope that after discussing the important point made by my noble friend Lord Forsyth we can go ahead and debate the important issues around the financial provisions in the Bill.

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[The Earl of Caithness]

My Lords, can my noble friend give us an example of the two-way process? If he cannot do so now, perhaps he can include it in the letter that he is going to send us.

[Lord Sassoon]

My Lords, one example is personal allowances, which have a potential impact on tax receipts, and that example is highlighted in the command document.

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[Lord Davidson of Glen Clova]

It is not for me to answer for the Government. Doubtless that will be done in due course but, accepting the kind invitation for the moment, it is plainly desirable to have a coherent starting point. Simply to say, “This can now be devolved and the Scottish Government can set off on their own way, without any regard to what is happening in the rest of the UK”, might be unhelpful not only to the rest of the UK but to Scotland.

I apologise if I did not pick up on his enthusiasm for advancing this in order to reduce the power to create new taxes. I understand his concern about the extent of that power. However, it might be interesting to note that the Holyrood Scotland Bill Committee has accepted that once the future of this tax has been decided, it should be considered for devolution then. Therefore, it would appear that while the noble Lord, Lord Forsyth, is in advance of the Scottish Government in their demands for ever greater powers, at least in Holyrood there has been an indication that they are prepared to wait.

[The Earl of Caithness]

My Lords, I did not find the argument of the noble and learned Lord, Lord Davidson, at all convincing. Does it mean that the UK Government are now not allowed to look at any taxes which they are proposing to transfer to Scotland? If they are looking at air duty and saying, “No, you cannot give it to Scotland as the UK Government are looking at it”, and given that there is a Budget coming up, presumably, to follow the noble and learned Lord’s argument, we should not devolve anything to Scotland.

[Lord Davidson of Glen Clova]

My Lords, it is always a danger to generalise from the particular. In this instance, one sees that we on this side are content that the tax be devolved in due course—but where the people in Scotland, as expressed through their Bill Committee, seem to see virtue in waiting, we would agree with them.

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[Lord Forsyth of Drumlean]

So it is a policy that encourages emigration from the highlands and islands. The very fact that there is this degree of complexity torpedoes any suggestion that it would be possible to give this power to the Scottish Parliament now. Of course, if the regime changed then the revenue would change, and we have already heard at great length how this would be compensated for under the principle of “heads you win, tails you win”, which is apparently central to the Bill.

I entirely take on board the noble Lord’s chastisement. He was absolutely right. I tried to talk about the economic benefits but he is right to focus on the fact that this is not about tax. Actually, the tax revenue is not hugely significant but I believe that the impact of the tax could be, and he gave an example. I remember all the battles that we used to have in the late Lord Younger’s day about saving Prestwick, and I am aware of the stress and pressure on these islands services. I hope that I will not embarrass my noble and learned friend Lord Wallace but this is highly political to the extent that I think the Scottish Government leant on an airline—Loganair—to withdraw an invitation to him to address its 50th anniversary dinner. That is a disgraceful example of the poisonous way in which members of the SNP-led Government behave. Therefore, this is very political and very important to the islands, and I am disappointed that my noble friend is maintaining this St Augustine position, saying that he favours it but the time is not right.

[The Earl of Caithness]

For Wick and the islands, the duty is relieved on the way out, not the way in.

[Lord Forsyth of Drumlean]

So my noble and learned friend was right. That is odd, as it encourages people to leave and not to arrive. It is very strange, although I am sure there is an explanation for it.

Perhaps I may put it to my noble friend that it is entirely possible that the Bill will be amended at a later stage to remove this general power to create new taxes by order. It is a very important constitutional development which goes way beyond the importance of air passenger duty and the aggregates levy. It seems that my noble friend’s assumption that we can always just use this general power and not have the tedium of primary legislation may not survive the passage of the Bill through this House. What will he do then in order to give the Scottish Parliament the opportunity to benefit from air passenger duty? If the position of the opposition Front Bench is one of “not yet but this is something that we can do in due course”, I have to say that I think the chances of getting primary legislation to amend the Scotland Act to provide for air passenger duty in the absence of this order-making power are pretty limited. However, being a reasonable sort of chap, I have a compromise to propose to my noble friend. Many of us in this House do not like the general order-making power for introducing new taxes. This is being justified on the basis that we might want to introduce air passenger duty at a later date, or introduce an aggregates tax at a later date—I do not think that we have heard about any others.

Why not bring forward a government amendment to amend that order-making power in line with the Calman recommendations so that it is for specified taxes and not generally open? In that way, everyone will be happy, constitutional propriety will be fulfilled, and the Government will meet their commitment set out in the manifesto in respect of Calman. On that basis, I beg leave to withdraw my amendment.

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[The Earl of Caithness]

My Lords, I would like to join in the discussion on this almost Second Reading series of amendments. Twenty minutes to introduce an amendment seems to me a little long.

I support the premise made by the noble Lord, Lord Foulkes. To my mind it is utterly ridiculous for any Government or Executive to have responsibility for 60 per cent of the expenditure but for raising only 4 per cent of the income. That is a certain way in which to upset every other member within the union. If one looks at that 4 per cent, it is quite staggeringly low. When countries such as Germany raise closer to 30 per cent of taxes locally, it seems that a huge amount of leeway can be given to Scotland. It is only by giving Scotland tax-raising powers that one will get accountability. You cannot get it any other way.

The so-called Barnett formula never started off as a formula; it was a device, as the noble Lord, Lord Barnett, has admitted. It has become a formula, and a political formula at that. All that it does at the moment is transfer to Scotland the equivalent of the oil revenues that Scotland is due. It is interesting to note that the needs spending gap in Scotland derived through the Barnett formula over the past 24 years totals about £128 billion in real terms yet the amount of revenue from North Sea oil that Scotland would have been due is about £134 billion. The great advantage that the Barnett formula has given to Scotland is that it has evened out the funds. If Scotland had had to rely on the oil revenue alone, given price fluctuations it would have had much greater difficulty in balancing the books than has been the case.

Therefore, in principle I agree with my noble friend Lord Forsyth that we should amend the Barnett formula. However, in doing so, I follow the noble Lord, Lord Foulkes, in saying that we should give the Scottish Government the responsibility for raising a lot more revenue and thereby make it more accountable.

[Lord Lyell]

My noble friend, who has far more experience of finance than I ever will have, mentioned Germany; I used to call it the Federal Republic of Germany. In 1983 I took a course in German at the Berlitz language school. I was given excellent advice on how to pay tax. Your Lordships may have heard me refer to this matter on Second Reading. I will quickly go through it again. For every €100 you paid in tax, the local tax office took €15 of that. For the noble and learned Lord, Lord Davidson, and me, the local tax office would probably be in Forfar or Dundee. The balance of €85 was split, with 50 per cent going to the state, which might be Baden-Wurttemberg, Bavaria or North Rhein-Westphalia, and 42.5 per cent going to the federal budget. My noble friend mentioned 30 per cent. I do not know how much of that would go to his Gemeinde—his local area—how much would go to the state, say Baden-Wurttemberg, and how much would go to the federal system. That is one example of how taxes are distributed.

My noble friend and the noble Lord, Lord Foulkes, are right to suggest giving the Scottish Parliament the power to raise taxes. However, the whole system should be looked at. As my noble friend Lord Forsyth has pointed out, we are planning what I call an asymmetric federal system. I am delighted to warn my noble friend on the Front Bench that we have hardly started to have a proper dig into the matter of who is a Scottish taxpayer. It is rather like a sort of dance that he goes on about; he talks about a close connection as if one is dancing with someone. When we consider who is a Scottish taxpayer, we should be aware that that will affect masses of English people, but we will come to that matter another day. In replying to my noble friend Lord Forsyth, will my noble friend the Minister take on board his idea that this Bill may go through but at least we can look at having a better tax system than that which is planned—certainly in the Bill before us—possibly on the lines of what happens in the Federal Republic of Germany or Switzerland? You can look at how this is done elsewhere, but what is proposed in the Bill is a mishmash that will provide eternal difficulty, eternal grounds for gripe, and screams of, “We are not satisfied”. There will be all this and more. There is a problem, and I hope that when the Minister winds up he can give me some reassurance and take on board the point made by my noble friend Lord Forsyth.