Queen’s Speech

Earl of Caithness Excerpts

Wednesday 16th May 2012 Lords Chamber

[The Earl of Caithness]

My Lords, the fact that we have spent four of the past six sitting days navel-gazing is a disgrace, considering the other matters that surround us. The fact that two of the days of debate on the gracious Speech were devoted to the constitution when we have had to condense all the other important issues into fewer days has done the House no good.

Turning to the economy, we should all be grateful for the measures enacted by the coalition Government when they were elected to power in 2010—exactly the action and leadership that the right reverent Prelate the Bishop of Durham called for in his excellent maiden speech. The Government started in a good fashion to clear up the mess left by the previous Government. They positioned the UK well for what was to come and inspired confidence.

It is extraordinary that sterling and the UK are considered a safe haven at present. UK bond yields are at a record low of 1.9%, with inflation at 3.5%. That brings money and people to the UK, and we need more of that. Although the level of sterling is a challenge, it is also an incentive for us to become much more competitive. It is not something for politicians to weaken in order to avoid taking more challenging decisions. As my noble friend Lord Ashton of Hyde said in his wise maiden speech, gold-plated regulation is a severe brake on business. My noble friend Lord Sassoon needs to address that, as does every Minister in every department.

In Europe we have been incredibly spoilt for the past 50 years. Yes, there have been occasional difficulties —we had to go to the IMF on one occasion—but by and large we have had good and continuous growth. However, imprudent management, a corrupt banking system and an increasing reliance on debt have led us to believe that the cloud-cuckoo-land we were in would never cease. “The end of boom and bust”, crowed Gordon Brown as he led us deeper into the mire, but now we are facing the truth; the eurozone is in complete crisis, as the UK Government warned it would be in the late 1980s and early 1990s, but sadly political will overrode rational thought and argument. The Governor of the Bank of England calls it the “coming storm”. As the euro train heads for disaster, too many people are still trying to preserve their seats in the first-class compartment rather than to stop the train and change its course.

I believe that in the near future our debates on the economy will be of a very different intensity from that of today. I hope that happens before the vote for separation in Scotland, as in today’s world the one thing that Scotland would not be is independent, either politically or economically.

I welcome the Bill to implement the recommendations of the Independent Commission on Banking, but it is too little, too late. The Bill signifies a substantial change of thinking. I tried to do much the same thing in 2008 with my Safety Deposit Current Accounts Bill. I went further than the projected Bill, and if my Bill had been enacted we would not see many of the problems that we face today. However, I was derided by my now noble friend Lord Razzall, who called my Bill “volcanic”, and the noble Lord, Lord Davies of Oldham, termed it “explosive”. My noble friend hardly mentioned that Bill today, and I await with anticipation the comments of the noble Lord, Lord Davies of Oldham.

Our banking system is based on judicial decisions made in the 1800s, which legalised the theft of deposits by the banks and allowed bankers to print money and behave imprudently. On the one side, we have the EU; on the other, we have the USA. In his short time in office, President Obama has accumulated national debt more than 27 times as fast as in the rest of its entire history. That train, too, is heading for the buffers at speed.

The two speeches that I appreciated most on days 1 and 2 of our debate on the gracious Speech were those of the noble Lords, Lord Owen and Lord Giddens. We are not masters of our own destiny in today’s age, but the Government need to position us correctly for what will emerge from the current crisis. In that context, the amendment of the noble Baroness, Lady Royall, is irrelevant, as she had nothing new to offer us today. Part of that repositioning must include a complete revision of our banking system.

I was hugely disappointed that my noble friend Lady Wilcox made no mention of tidal or wave power in what she said about the electricity market. If the Government want electricity prices to be fair, the considerable subsidy given to inefficient wind turbines should be scrapped.

I turn to the draft water Bill. At first, I thought that it was sad that it was a draft Bill, but having sat on EU Sub-Committee D, which has just looked at the EU blueprint for fresh water and the revision of the European water framework directive, I think that a draft Bill to be studied by a committee of both Houses is an excellent way forward. It needs to take our report into account. The whole subject of water is much more complex and intricate than many of us who sat on that committee realised.

The future of agriculture depends very much on the reform of the common agricultural policy. Again, Sub-Committee D has fed its thoughts into Europe, many of which have been accepted. However, I fear that there is a marked reluctance among many people in Europe to realise that, with the current crisis, the whole CAP system could collapse at very short notice and that the European grant structure for our farmers could be an anachronism within a short time.

It is hugely important that the Government encourage innovation in farming. Farmers have a very difficult job. There is huge competition for what can be done on the land and there are increasing restrictions. No more land is being created. Producing enough food to feed a growing population will need a whole lot more innovation and encouragement.

On the common fisheries policy, I hope that the European Commission will persevere with the suggestions that it put forward, which were also based largely on Sub-Committee D’s proposals—that was before I was a member of it. If our fishing stocks are to be preserved for future generations, substantial changes such as those proposed by the Commission have to be enacted.

Scotland Bill

Earl of Caithness Excerpts

Wednesday 28th March 2012 Lords Chamber

[The Earl of Caithness]

My noble friend said that what the noble Lord, Lord Browne of Ladyton, had proposed in his amendment was self-evident. For many of us who live north of the border, what we consider to be self-evident is not what the Scottish Executive would consider to be self-evident. This causes huge concern, of which I am not certain that my noble friend is aware. We are very sceptical of what is happening north of the border. What to us might be self-evident, and what might be in a report produced by a UK Government under Amendment 29, still does not bind the Scottish Executive.

I ask my noble friend to reconsider the last point made by the noble Lord, Lord Browne of Ladyton. This will be subject to a legislative consent Motion, and if we can tie the Scottish Executive in under that, we will be happier.

[Lord Sassoon]

My Lords, I hope I can reassure my noble friend that that is exactly what will happen under Amendment 29, because that will require both Governments to provide updates to their respective Parliaments on the implementation of the Bill. If we are not able to give a report that confirms that the criteria envisaged under the Command Paper are accepted by both Governments, that will become clear when we see the first report after the passing of this Bill.

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[The Earl of Caithness]

My Lords, I return to the problem that we discussed earlier when we were on Amendment 16. I have read and reread Amendment 29 and wonder whether my noble friend can help me. Where does it tie in the Scottish Executive in the way in which the noble Lord, Lord Browne of Ladyton, mentioned in his amendment, which was supported by my noble friend Lord Sanderson of Bowden and the point that I raised? I listened to my noble friend with great care when he replied on Amendment 16 but I still cannot find the bit in Amendment 29 that will satisfy me.

[Lord Browne of Ladyton]

My Lords, I welcome the amendment. It is entirely consistent with a request that I have made repeatedly for reports on current progress in relation to the transfer of these powers. I hope that in anticipation of Third Reading, Ministers will take some time over the Recess to prepare at least an outline of a report on progress for the transfer of these powers to the Scottish Parliament. I say that for the reasons that I have articulated. I have a belief, based on information that I have received, that the Scottish Government and their Civil Service are ill prepared for the transfer of these powers. I should like to be reassured that we are transferring powers to people who are building the competence to use them appropriately.

In response to the point made and repeated by the noble Earl, Lord Caithness, about the buy-in of Scottish Ministers, there is a reference in subsection (2) of the proposed new clause to an obligation on Scottish Ministers to report in a similar way to the Secretary of State. However, it is deficient in the sense that it does not satisfy the desire on these Benches, which is apparently shared across the House, that the Scottish Government and the Scottish Parliament should buy in more fully to the whole package of transferring taxation powers for the reason that I gave before. I repeat that some time in the future they may be tested against that package and they should own it. That can be done only if they agree. If they do not agree, it will be interesting to hear their explanation, but I suspect that if it is put to them they will find it so impossible to agree that they will agree.

The reports, which we understand from the Government will be used to answer some of the points that I made earlier, do not in their present form answer those points, although I accept entirely what the Minister said about the Government’s intention to augment the reports in the way he suggested. I do not doubt that for a moment, so he should be clear that I accept entirely that that undertaking can be guaranteed to be delivered. I sense that it will not be enough but I do not want to go back to Amendment 16. I welcome the proposed new clause as it stands and as far as it goes, but it does not go far enough.

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.

--- Later in debate ---

[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.