Businesses: Tax Liability
Lord Foulkes of Cumnock Excerpts(12 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sassoon
My Lords, I think that we probably call it Her Majesty’s Revenue and Customs these days. That aside, I will of course pass on my noble friend’s representations on this important matter.
Lord Foulkes of Cumnock
My Lords, will the Minister tell the House whether the decision by Her Majesty’s Revenue and Customs to put Rangers Football Club into liquidation was made by officials or was referred to Ministers?
Lord Sassoon
My Lords, as previously in answer to any football club tax questions, I can say only that I cannot talk about individual taxpayer matters for reasons of confidentiality, which the noble Lord, Lord Foulkes of Cumnock, well knows.
Financial Services Bill
Lord Foulkes of Cumnock Excerpts(12 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Hamilton of Epsom
My Lords, this Bill is of major importance—this is not my idea; it comes from the Minister—and is very significant indeed. However, for some reason the Minister wants to shuffle it off into the Grand Committee Room. The Bill needs close scrutiny and will bring forth the exquisite qualities of your Lordships’ House. There is a massive amount of expertise here that can make positive comment on the Bill and make it better than it is today. It would be quite wrong if we were to vote for the Bill to go into the Grand Committee Room. It should be debated in Committee on the Floor of the House and I hope that the committal Motion will be negatived by the House.
Lord Foulkes of Cumnock
My Lords, it is seldom that the noble Lord, Lord Hamilton, and I agree. We were introduced into the House on the same day and I found it a privilege to be introduced on that day. However, I fully agree with him on this issue. I returned from the Recess to find this Motion on the Order Paper. I was not aware of it before and, as far as I know, there was no consultation about it. Members did not know that it was going to be remitted to a Grand Committee. I may have shown a lack of acuity in picking this up but I have discussed today the fact that many Members were not aware that it was going to be suggested that this important Bill should be committed to a Grand Committee.
As the noble Lord, Lord Hamilton, said, this is an important issue. It may not be politically contentious but it is vital. As the Minister said, it arises to some extent from a major financial crisis that hit the headlines. He described the Bill as major legislation and, after talking with Members who have been in the House much longer than me, I believe it is very unusual for such major legislation to be remitted to a Grand Committee for discussion. As the noble Lord, Lord Hamilton, said, it would be normal for it to be taken on the Floor of the House.
There may be other reasons—far be it from me to suggest them—why the Government want to remit the Bill to a Grand Committee, but our decisions as Members of the House should be on the merits of the Bill and not on any secondary reasons beyond the basis of the Bill.
It would be unfortunate if we had to divide on this, so I urge the Minister to withdraw his Motion on the basis that there will be further discussion and consultation with all parties and all sides of the House. I hope he will see fit to do so.
Baroness Noakes
My Lords, it is a great pleasure to be in complete agreement with the noble Lord, Lord Foulkes, which is not an occasion I find often to celebrate.
Having been in his position for many years, I understand completely the noble Lord, Lord Eatwell, who expressed earlier his view that we could have a more intimate discussion about issues with the Minister in Grand Committee. Equally, when I was in his position, I always took the view that Bills of major significance, which this one is, should be considered in the Chamber.
There is a particular reason for that. When a lot of issues have to be debated and decided, the only time you can divide in Committee is when a Bill is considered by the whole House, not in Grand Committee. In Grand Committee you have one fundamental opportunity to test the opinion of the House, which is on Report because there is a restricted ability to test matters at Third Reading. So for a Bill like this, with quite a lot of issues, it would be much better for the whole House to consider them so that we can settle them in Committee. Otherwise we will have one of those invidious things where we have to consider how many issues we can deal with by 7.30 in the evening before people go away. You have to take things over from Grand Committee to the whole House on Report.
This Bill is very significant and covers many issues. That has been reflected in our debate over the past seven hours or so. It is our responsibility as a revising Chamber to do this in the proper way by considering it not in Grand Committee but by the whole House.
Lord Lamont of Lerwick
My Lords, I ask my noble friend to think again about this. This may have been agreed by the usual channels but it is not the usual channels that should entirely count on this; it is the will of the House. Almost all the people who have spoken in the debate are present now and a large number of them have expressed the view that this would be an unsatisfactory way of proceeding. The view has been put that this is comparable to the OBR. With great respect, I suggest that this is a much, much more important measure than the OBR.
Secondly, the Grand Committee is a much more restricted form of scrutiny in that you cannot actually vote on amendments; you cannot have a Division. I know that it is the practice of the House that we do not have too many Divisions in Committee on the Floor of the House. None the less, the pressure on Ministers to give a clear explanation to pointed amendments when there is a threat of a Division is much greater and it makes for a much sharper and more lucid Committee when there is the possibility of a Division. Just to have debates in which there are no Divisions and there are many more Divisions on Report does not seem the best and the most satisfactory way of proceeding. I strongly urge the Minister to reconsider.
Lord Foulkes of Cumnock
The Minister has said that he personally does not mind whether the Bill is dealt with on the Floor of the House or in Grand Committee, which is very helpful. He founds his argument principally on an agreement through the usual channels—and I have great respect for the usual channels. However, I fear that, because of the recess, the usual channels may not have worked as efficiently and effectively as otherwise. If the Minister were to agree to withdraw the Motion, which would be preferable to a Division, we could have a few days to have further discussion and consultation. By that time, the groups will have met; the Cross-Benchers will have had an opportunity to meet; and we can consider this matter again. All we are doing is suggesting that this matter be postponed for three or four days.
Lord Sassoon
My Lords, I have every faith in the ability of the usual channels to work these things out very thoroughly, recess or no recess. We should do what is customary and stick with what the usual channels have agreed.
Scotland Bill
Lord Foulkes of Cumnock Excerpts(12 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
I wonder whether I might add a few words at the risk of being classified yet again as one of the terrible toxic twins along with the noble Lord, Lord Forsyth.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
Perhaps I may interrupt the noble Lord. We are speaking on a Motion to go into Committee. Unless the noble Lord has a very different point to make from that of my noble friend, who put it very well, why do we not allow the Minister to respond to that, and then put the Question, go into Committee and deal with the amendments in the normal way? I got the impression from the noble Lord’s first sentence that he was not making a new point but simply supporting my noble friend.
Lord Foulkes of Cumnock
If the noble Lord waited a little longer, he might find out exactly what I was going to say. It is always a good idea to sit and listen, rather than anticipate what someone is going to say and jump up. I used to represent the Leader of the House. I looked after his interests. I made sure that, as a resident of Mauchline, he was well looked after. I hope that he will give me some respect for having looked after his interests for 26 years, a not inconsiderable period of time, and allow me to speak.
I want to add to what the noble Lord, Lord Forsyth, has said. I agree with him in relation to sitting on a Thursday, which is another mischief that seems to have been done. I also want to raise something which the noble Lord, Lord Forsyth, did not raise; that is, the lack of time between Committee stage and Report stage. We have only one weekend between the two. How are we going to be able properly to formulate amendments between Committee stage and Report stage? I am also concerned about the fact that the second day of the Report stage is 28 March. This time, instead of choosing a Thursday, the Government have chosen the day before we go into Recess. It is rather like after the Lord Mayor’s procession when the dust cart comes along to clean up—we are being treated as an afterthought.
The most serious issue concerns the sequence of events for dealing with this legislation as between here and the Scottish Parliament. We are rushing it through and dealing with it quickly in Committee—we shall deal with it even more speedily on Report—and yet the Scotland Bill Committee reported on 13 December 2011 and that report has not even appeared on the agenda of the Scottish Parliament. When will it appear? I have been led to believe that the Government may have had some indication that there will be a legislative consent Motion. The Minister should tell us whether that legislative consent Motion is going to be tabled. If the Government know about it, if they have been given any informal indication that it is going to be tabled, we need to know that. It is ridiculous that we should be left in the dark. My noble friend Lord Barnett was left in the dark on a whole range of issues earlier and I have complete sympathy with him. This seems to happen an awful lot.
I hope the Leader of the House will give the House a little more information and allow it an opportunity and a little more time to discuss matters instead of things being done by a little clique behind the scenes.
Lord Wallace of Tankerness
That is perfectly fair and I will come on to address that. I was simply making the observation that there is, currently, an outstanding legislative consent Motion, which was actually supported by many members of the current Scottish Government. It is certainly our intention that we should have a legislative consent Motion from the Scottish Parliament in favour of the Scotland Bill, and I and my ministerial colleagues have been working very hard to secure the support of the Scottish Parliament for such a Motion. I am sure the Scottish Government would acknowledge the same.
We have been working together to consider and to assess the request for amendments to the Bill. It would be wrong to speculate on the outcome of the work being undertaken with the Scottish Government, but the key point is that I can assure the House that we are working hard to ensure that the Scottish Parliament will vote in favour of a legislative consent Motion for the Bill. It would not be appropriate to get ahead of discussions between Ministers—as noble Lords have highlighted, it is for the Scottish Government to propose a legislative consent Motion and we must allow the interministerial discussions to continue and not get ahead of them. However, I know that my right honourable friend the Secretary of State had conversations yesterday with the Scottish Government. Indeed, before coming to your Lordships’ House today, I was engaged in discussions about moving forward, to get into a position where we can get an agreement.
The Sewel convention is about respecting the devolved areas for which the Scottish Parliament is accountable. It provides that the United Kingdom Parliament will not normally legislate on devolved matters without the Scottish Parliament’s consent. I believe we have gone further than with any other Bill in considering and taking on board the view of the Scottish Government and Parliament, and we will continue to work to reach agreement. The Secretary of State has made clear, in letters, phone calls and meetings with Scottish Government Ministers, that we will properly consider all their requests for changes to the Bill. I understand and readily recognise that noble Lords are keen to hear the outcome of the discussions with the Government, but I urge noble Lords to continue with their thorough scrutiny of the Bill, alongside our work to agree a legislative consent Motion. I hope that by the time we come to Report, it will have been possible to update your Lordships on the intergovernmental discussion.
Lord Foulkes of Cumnock
It would be helpful to be updated at that stage and to set a target, in our plan, for an update to take place on the ministerial discussions. Given the upcoming recesses and the fact that the Bill will have to have Royal Assent before the final Dissolution of Parliament ahead of the Queen’s Speech, we do not have much time. It is important to plan the sequence of events. Can the Minister indicate what his target date is for the legislative consent Motion to go to the Scottish Parliament? Is it between Report and Third Reading, which would seem to be the logical time?
Lord Wallace of Tankerness
I agree with much of what the noble Lord says. He is right to point out that prorogation is sooner rather than later and that it is necessary to get Royal Assent before that. As has been acknowledged, it is not for United Kingdom government Ministers to table the legislative consent Motion, but the Scottish Government are well aware of the proposed timings and of the stages when any amendments would have to be laid so that your Lordships’ House would have adequate opportunity to discuss them.
Before I gave way to the noble Lord, I was about to indicate that I hoped it would be possible to update your Lordships before Report on intergovernmental discussions. It would not be helpful—and no doubt many of your Lordships present have engaged in such negotiations—for negotiations to take place by telegraphing from one parliamentary Chamber to another. That would be counterproductive. However, I reassure your Lordships that serious efforts are being made to reach agreement. Given the point made by my noble friend Lord Forsyth about the important issues we have to debate today, I hope we can agree to move into Committee so that we can get on and debate them.
Lord Wallace of Tankerness
My Lords, I hope that I can reassure the noble Lord, Lord Grocott, that this is not an abuse. The matter was agreed because we were meeting a legitimate concern and expectation, expressed by a number of your Lordships across the House, that we should defer some sittings of the Committee until such time as the United Kingdom Government’s consultation had concluded. That was welcomed at the time; and because of that, the timescales inevitably had to be short.
Lord Foulkes of Cumnock
With respect to the Minister, all that was agreed was that the discussion of the referendum should be taken in Committee. There was never any discussion about Report across the Floor of the House.
Lord Wallace of Tankerness
There was an expectation across the Floor of the House that we should defer Committee discussion until the end of the consultation. It was agreed between the usual channels that if we did that, it would necessitate a shortened period between Committee and Report—if only for the obvious reason of being able to get to Royal Assent, as the noble Lord pointed out.
Lord Forsyth of Drumlean
My Lords, this is an important amendment, which provides for a referendum if the sections of the Bill that introduce for the first time a Scottish income tax are enacted by the Scottish Parliament in such a way that Scottish taxpayers end up paying a higher rate of income tax than people in the rest of the United Kingdom.
I should point out that the order of consideration of amendments that has been circulated to the Members of the House is not actually the order that I have in front of me now. I do not know whether it is possible for further documentation to be provided so that we are all on the same page, as my amendments are now grouped with those from the noble Lord, Lord Foulkes.
The original provisions in the Scotland Act, which provided for a Scottish variable rate of income tax, gave the Scottish Parliament the power to raise income tax by 3p in the £1 on the basic rate alone. It did not apply to either of the other rates of income tax and was limited to 3p. As Secretary of State I well remember campaigning long and hard on the tartan tax, which is a much better name than the Scottish variable rate. The Bill seeks to abolish the 3p variable rate, although it was something that the Scottish Parliament voted for in a referendum. It was something that people campaigned for and against; it was subject to argument.
It seems extraordinary to get rid of something done by referendum without having a referendum to endorse that. I am no fan of the Scottish variable rate; I thought that having the power to set a higher rate of income tax in Scotland would result in great disadvantage to Scotland if it was ever used—and I am delighted to say that it never was used. Many people enjoy jobs and prosperity they would not otherwise have enjoyed had those powers been used, so I welcome the fact that the Bill abolishes the tartan tax and gets rid of the variable rate. This is great progress, but unfortunately it goes on to create a new power for the Scottish Parliament not just to set the basic rate of tax within a limit of 3p but to set any rate of tax that it chooses that will affect the basic and higher rates of income tax. That is a huge change, way beyond anything that was set out in the Scotland Act and way beyond what was put to the Scottish people in a referendum.
The amendment would give the Scottish people the right to decide whether these sweeping powers, which will inevitably make Scotland the highest-taxed part of the United Kingdom, are appropriate and desirable. In our consideration of the Bill at earlier stages, it has become apparent that in respect of many of the tax powers there is perhaps not widespread knowledge of this in this House or the other place. The extent to which people in Scotland are aware of the potential impact of the power is limited. I simply cite evidence the recent discussions in Scotland about more powers for the Scottish Parliament, which clearly show that many people advocating those powers do not realise that they are already in the Bill and, in some respects, beyond what they desire.
It is important, too, that this provision should be subject to a referendum not just on the principle that the previous Labour Administration, who took office in 1997, thought it appropriate to have a referendum but because so many of the details about the operation and implementation of the tax, and its extent and the scope, are not actually provided in the Bill. For example, as the Bill stands, people with income from savings or dividends will not pay the Scottish income tax, but people with income from pensions will. Why is that? How is that going to distort the relative desirability of pension and savings investments of a more conventional kind? The Bill does not give the Scottish Parliament the ability to change the thresholds for income tax purposes or the ability to increase the rates by differential amounts, so it would be impossible for the Scottish Parliament to set a higher rate of tax while keeping the basic rate at the same level. Why is that? Should those matters not be subject to debate and consideration?
The effect of implementing this power in the Bill would be that any higher income tax in Scotland would be a disproportionately heavy burden on the lowest paid compared with the highest paid, which strikes me as a rather extraordinary thing to do. Of course, in the Bill the amount of grant that is being reduced is the equivalent to 10p on income tax, which is a curious position. Why not have all the revenue from the income tax? Why have the 10p? These matters are being debated in Scotland now.
I hesitate to mention the late lamented poll tax, or community charge, but one of the problems with the poll tax was that it raised a relatively small part of local government revenue. The same was true of the rates, and therefore in order to make an increase in expenditure that fell for its burden upon the poll tax or the rates, you required a disproportionately large increase in the amount. One of the issues here is how this income tax power would operate. The Minister gave figures earlier in our deliberations and, as I understand them, 1p on income tax would raise £420 million. That is a relatively small sum when one thinks that the Scottish Parliament is having to reduce its funding by £3 billion to meet the deficit reduction requirements. Allowing for a reduction in yield, that is the equivalent of allowing for 8p on the basic rate of income tax. On my calculations, that is a 40 per cent increase, whereas 8p on the 50p rate of income tax would be a very much smaller percentage increase.
A number of issues about the operation of this income tax, both in its scope and in the limitations on the powers of the Scottish Parliament, have not been debated or considered at all in Scotland but ought to be, and almost certainly would be debated or considered if there was a requirement to have a referendum before these powers could be implemented. The most important thing about taxation—the very nature of the other place—is in ensuring that taxes are not levied without consent, and that those raising the taxes are subject to the accountability of the people. This is a huge change. It is not one that I welcome but I acknowledge that I am in a minority, in this House and in the other place, in forming that view.
The people of Scotland should have an opportunity to have an explanation of what is being suggested, and the chance to give their verdict on it. This amendment attempts to do that, and in doing so it merely reflects the view of all parties when they campaigned for devolution in the first place, which was that there should be a referendum on the tax-raising powers.
Lord Foulkes of Cumnock
I wonder whether everyone in the House is absolutely clear, because I am slightly confused about it, that we have now degrouped from my amendments the amendments tabled by the noble Lord, Lord Forsyth, on the referendum on taxation powers, so we are just dealing with Amendments 53, 55, 56 and 57.
Lord Wallace of Tankerness
It is certainly my understanding, and I think it is the understanding of my noble friend, that the amendments tabled by the noble Lord, Lord Foulkes, Amendments 66 to 69 and Amendments 75, 76, 84 and 86, are now grouped with the amendments to which my noble friend has just spoken. We are at the moment trying to get a fresh piece of paper that sets them out. It is my understanding that they are on much the same subject.
Lord Foulkes of Cumnock
We are very confused, because I got a draft that said that, but the paper from the government Whips’ Office with today’s lists for your Lordships’ House lists the Questions that were tabled, my noble friend Lord Barnett’s Motion and, as the main business, this Bill and the target for today. It then has the grouping for amendments. Everyone picked this up on the way in, and I have assumed that that is the basis on which we are debating.
Lord Forsyth of Drumlean
I have the same problem. I have a revised list that I got from the Whips’ Office and it would be really helpful if the revised groupings could be made available. It is of course not for me to give the noble Lord advice. He can insist on degrouping his amendments, but as they are about referenda it would make sense for them to be grouped together.
Lord Foulkes of Cumnock
I specifically asked in an e-mail, which got a response from the clerks’ office, for my amendments to be degrouped from those tabled by the noble Lord, Lord Forsyth. It is not that I want to be disassociated from him completely, but because although I have tabled the appropriate amendments to allow a referendum, the basis on which I will argue for that—and I hope to argue for it later, which is why I wanted to clarify this now—is entirely different from the basis on which the noble Lord, Lord Forsyth, is arguing for it. I actually want the Scottish Parliament to be given full fiscal responsibility and to have all these additional taxation powers, but only if they are approved by the Scottish people in a referendum. That is an entirely different basis of argument, and why I wanted it separated. Can I assume from the list that I have that we are dealing just with Amendments 53, 55, 56 and 57 now, and that my Amendments 66 to 69 will be dealt with after Amendment 65, tabled by my noble friend Lord Barnett? Is that agreed?
Lord Lyell
My Lords, I was delighted to see my noble friend Lord Attlee here, because I was about to follow some of his grandfather’s advice: that a period of silence from me had been welcome until now. Today, however, I shall break my duck regarding income, in strong support of my noble friend Lord Forsyth. This is a preliminary strike about dividend income and pensions income.
I am sure that my noble and learned friend will be able to give advice at an early stage, but on page 25 of the Bill we come to Clause 31, headed, “Income tax for Scottish taxpayers”. At lines 34 and 35 in Clause 31(3), new subsection (3C) refers to Section 16, which I presume to be that of the Income Tax Act 2007. It says that it,
“has effect for determining which part of a Scottish taxpayer’s income consists of savings income”.
As a non-practising member of the Institute of Chartered Accountants of Scotland, but very much as a consumer who takes advice, I seem to recall that until 10 years ago one’s income tax was classified as earned and unearned income. Indeed, my colleagues with whom I worked then have confirmed that. However, we now have this completely different concept of savings income, earned income and other income being applied to Scottish taxpayers. It would be different from any other United Kingdom definition of what savings income or other income will be. Perhaps my noble and learned friend will be able to take note of that and cover it at some stage. However, I support most strongly what my noble friend Lord Forsyth has said at this stage. I am happy to let your Lordships know that this will be the first of one or two efforts from the mouse that roared, as I call myself—that is, the accountant in the backwoods of Angus.
Lord Forsyth of Drumlean
I venture to suggest that I cannot think of any way in which any politician of any party, with the setup as it is in respect of the taxation powers and the way that the block grant will be calculated—subject to later review, but even assuming that Barnett survives—and given the levels of public expenditure and the position we are in, would be able honestly to do other than to tell the voters that income tax will have to go up. The numbers simply do not add up.
Let us just take the promises being made by the First Minister. On the whole, if you promise people free health care, free prescriptions, free bus travel, free nursery care and free this, that and the other and you do not have the money to pay for it, whoever comes in will find it very difficult to reverse that. Those are all very expensive requirements. If a Chancellor of the Exchequer gives the First Minister in an election year a bisque so that he does not have to cut public expenditure to meet the budget deficit requirements and the cuts have to be made in the subsequent year, you are building up very substantial gaps. I said that the gap on the budget deficit was about £3 billion. A tax-varying power where one penny on income tax raises merely £400 million will not get you very far in that respect. It is a delusion. If anyone in this House believes that the power will be used to reduce taxation, I think they are misguided.
I entirely agree with the noble Lord that we must be careful to focus on the issue of independence. He is absolutely right about that. Where I believe that the Bill is playing into the hands of the nationalists is that they are saying: “Look, you cannot play golf with one club. You cannot run an economy simply by having limited tax-varying powers that relate to one part of the income tax yield. You need corporation tax powers so that you can get growth so that the yield goes up”. That argument has a certain degree of logic to it—if not, altogether, a degree of fantasy.
Some of us remember that the First Minister interrupted my noble friend Lord Lawson’s Budget, scandalised the House of Commons and was thrown out of the House. We are told now by the nats that that was done to protest about the poll tax. Of course, he interrupted to say, “That is an absolute outrage” when the Chancellor, my noble friend Lord Lawson, announced a reduction in corporation tax and income tax to the same rate of 25 per cent. So there is a fantasy here. We should be absolutely clear what we are doing here. We are committing Scotland to a position where it will have a higher rate of income tax. I am prepared to challenge anybody. Once these powers are in place and are being used—after 2015—I will be astonished if I am wrong about that, in the way that the noble Lord, Lord Robertson of Port Ellen, was wrong when he said that the Scotland Act would kill nationalism stone dead.
Lord Foulkes of Cumnock
I wonder whether the memory of the noble Lord, Lord Forsyth, goes back to the time when the Tories were very powerful in Scotland.
Lord Foulkes of Cumnock
They were, quite a long time ago. I remember it. This goes against the noble Lord’s theory that no one argues that taxes should be reduced. I remember what happened in Edinburgh when local councils raised about 50 per cent of their income themselves through the rates and got the rest through rate support grant. The Conservatives on Edinburgh council—they called themselves Progressives at the time but they were Conservatives—used to propose reductions in the rates and Labour proposed increases, with increased services. The Conservatives made quite a lot of headway by proposing rate reductions, with people having to pay less, and a lot of middle-class people around Morningside and Corstorphine—I live in Corstorphine, so I had better be careful—went with the Conservatives on that. Has the noble Lord given up all hope of arguing the case for tax reductions along the lines of his predecessors?
Lord Foulkes of Cumnock
My Lords, the noble Duke has raised a very important issue. I had indicated my intention to oppose Clause 30 stand part, and this is grouped with the noble Duke’s amendments.
The noble Duke has raised one or two of the anomalies. My noble friend Lord Maxton intervened with another. I hope that the Minister will listen carefully to this because this whole issue is bristling with anomalies. There are all sorts of difficulties that could happen. When we got an informal briefing from the Minister and some of his staff, I raised the question of students—postgraduate and undergraduate students, researchers. There are all sorts of people who would be difficult to identify as Scottish taxpayers or not. There are diplomats and civil servants who move up and down regularly who might be difficult to identify. We have heard about people on the ferries and the sleepers. There are fishermen who could be classified in this way. There are all sorts of difficulties that arise.
There are some people in Scotland who may have a residence in England, Wales or Northern Ireland, but also a third residence overseas. How do the days resident overseas come into the calculation? This question was raised when we used to have residence qualifications for Peers’ allowances and I recall that it created tremendous problems, which was one of the many reasons why we moved to the arrangement we now have. This is an absolute minefield of anomalies.
If the theory of the noble Lord, Lord Forsyth, is right—he has been arguing it very carefully—that Scotland is inevitably going to be a much more highly taxed area than England, imagine the situation that could arise on the border. The noble Lord, Lord Steel, might look at this; it might be a way of regenerating the borders. More and more people could live just over the border, living in England to pay English tax but coming into Scotland to take advantage of the better services in Scotland. There are all sorts of difficulties that could arise.
We were most grateful to the noble and learned Lord, Lord Wallace, and the noble Lord, Lord Sassoon, for organising the seminar. I do not know about other people who went to it, but I came away with more questions at the end than I had at the beginning. Again, the noble Lord, Lord Forsyth, raised a lot of the questions in that seminar. In his reply, perhaps the noble Lord, Lord Sassoon, can tell us whether, following that seminar and the genuine points of concern that were raised, some further consideration has been given to trying to make a simpler system for identifying who Scottish taxpayers are. The arrangement in the Bill is far too complicated to implement effectively.
Lord Steel of Aikwood
The noble Lord, Lord Foulkes, may not know that there are already people living just south of the border who take advantage of the services in the borders. I refer particularly to people from the Berwick-upon-Tweed area who make good use of the Borders General Hospital because it is a very good facility. I have a simple question for the Minister. How does Section 80F operate? It is about the number of days that people spend in Scotland or the rest of the UK. If we do not have any border controls we do not know who is coming in and out. I am assuming that we are not having that even under Mr Salmond’s proposals. Therefore, I simply do not see how it will work. Perhaps the Minister will enlighten us.
Lord Myners
That is language of asperity. If the Minister does not withdraw, I will move a Motion that the House vote on that. I have made a perfectly reasonable contribution. We are in Committee, so I am perfectly entitled to do that. The fact that the Minister is struggling to answer the question is not a justification for personal rudeness and language of asperity, on which the rules of the House are very clear.
Lord Foulkes of Cumnock
I was here for the paving debate and the Minister did not deal with the specific point that my noble friend Lord Myners has just raised.
Lord Sassoon
This is all very good theatre, but we discussed the basic question of UK residence earlier this afternoon. As I said, I am very sorry that the noble Lord, Lord Myners, was not able to be here to enrich that discussion, but that it not what we are talking about in this debate. We are talking about different matters, which are important and the ones that we should concentrate on.
Lord Sassoon
Well, my Lords, let me give it a go. My noble friend is not easy to satisfy on these things, but I argue that it is entirely consistent with my arguments for the rest of this afternoon to say that this provision, as drafted, gives simple and clear guidance for a category of individuals, namely Members of any of the three parliaments, that they do, for the avoidance of doubt, have a close connection with Scotland and should therefore fall into the “Scottish taxpayer” definition. It is as simple as that. Once one accepts, which I am not sure that my noble friend does, that the close-connection test should be at the heart of this, I suggest that this is a simple follow-on from that, an avoidance-of-doubt provision which is entirely appropriate. We have spoken today about members of the Armed Forces who may not have a choice about where they serve, but it is right that a Member of any Parliament who has chosen to serve a Scottish constituency is for the avoidance of doubt treated as a Scottish taxpayer. They have a clear connection to Scotland which should be recognised and which is consistent with the basic provisions of the test that we are talking about.
Lord Foulkes of Cumnock
However, will the Minister confirm that not all Members of this Parliament are treated as British taxpayers and are not resident in Britain for the purposes of tax?
Lord Sassoon
My Lords, I would like to keep this debate to discussion about Scottish taxpayers. As my noble friend has already said, discussion about the status of Members of this House is something of a diversion whose relevance to this clause I do not see.
Lord Foulkes of Cumnock
With respect, throughout the previous debate, the Minister said that the definition of Scottish residents and Scottish taxpayers was based on British residence. He had used the British example as the template in coming to a conclusion in relation to Scottish residents and Scottish taxpayers, so this matter must be relevant.
Lord Sassoon
Forgive me, my Lords, I thought that we were straying into questions about tax status and Members of this House. We are talking about Members of another place with a constituency in Parliament, Members of the European Parliament and Members of the Scottish Parliament. Most Scottish parliamentarians will already meet conditions A and B in new Section 80D, but there may be circumstances where this may not apply. For example, a Member may have gained or lost a seat at a recent election—it could have happened when an election was held early in the tax year—and decided to move elsewhere in the UK. The test here is that there should be clarity. If the person has been a Member of one of these Parliaments for a Scottish seat for some part of the year and has chosen to be so, they should be Scottish taxpayers for the year, but I appreciate that, depending on whether they come in or go out at different points of the year, the situation could be different. However, this is consistent with what I have been saying today: that the basic test is a close-connection test and that it should be simple and clear. Members of both Houses of the UK Parliament are deemed to be UK-resident for tax purposes if they are a Member for any part of the tax year. If the noble Lord, Lord Foulkes, wants to draw a parallel between the two Houses of this Parliament and what we are applying through the Bill as it stands, I say to him that the situation would be entirely lined up. If you are a Member of either House of the UK Parliament for any part of the year, you are deemed to be UK-resident for tax purposes. That is completely consistent with what is proposed in the Bill for Members who sit for Scottish constituencies. That is how the Bill should stand.
Lord Sassoon
My Lords, it has been a fundamental principle of devolution from the start that if a decision of one Administration impacts on another, the other Administration should be compensated. We are not doing anything different from the principle under which devolution has existed from the start. Yes, the tax base is shared, so if the UK changes allowances and thresholds, it is quite right that the effect of that should not fall to the detriment of the Scottish Government. As I said, that follows the general principle that applies across devolution spending, as it has from the start.
Lord Foulkes of Cumnock
I am not sure exactly where we are, but as my noble friend Lord Maxton drew my attention to the fact that there is this very interesting dialogue taking place, I was listening carefully to it. I am grateful to the noble Lord, Lord Steel, for his immediate understanding.
I am slightly disturbed because all along we have been talking about giving the Scottish Parliament greater accountability. That is why I am in favour of full fiscal autonomy, as I shall be arguing later. However, even if Scotland has full fiscal autonomy, if at any point it then goes, Oliver Twist-like, back to the Treasury and says, “I want some more”, then that will not be full fiscal autonomy.
With these proposals in the Bill we are halfway towards full fiscal autonomy. I do not know whether the Treasury Minister, the noble Lord, Lord Sassoon, has seen that Alex Salmond has now come up with a list of what he calls shovel-ready projects—an awful-sounding term—that he wants the Treasury to provide huge amounts of money for. This is his technique. I am not sure whether I have got to the nub of the point that the noble Lord, Lord Forsyth, is making but at least it has given him an opportunity to sit down and think for a while. I was enjoying the Forsyth saga—that was inevitable—but I question whether it has revealed a flaw, in that we are not going to get the kind of autonomy that we want.
Lord Sassoon
No, my Lords, I do not believe that it has exposed a flaw. The decisions which under the Bill, if and when enacted, would be for the Scottish Government are quite clear and the Scottish Government will bear the fiscal consequences of those decisions. What I have described is made quite clear at greater length in the November 2010 Command Paper, Strengthening Scotland’s Future. If parts of the UK tax system are not devolved but remain the responsibility of the UK Administration, then, if something changes to the detriment of Scotland, the no-detriment principle will kick in, the block grant will be adjusted and, as set out in the Command Paper, the Office for Budget Responsibility will work out all the numbers and establish the fiscal impact. Of course, the adjustment would not necessarily go one way—it would depend on the nature of the change. We have talked this afternoon as though everything is always going to go in one direction. However, this could conceivably be a two-way detriment that had to be adjusted through the block grant.
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.
Lord Foulkes of Cumnock
I want to test this with one other example. Does the Minister recall when, under a previous Labour Government, the Scottish Executive introduced free personal care for the elderly? As a result of that, the old people who had free personal care no longer got the benefits that they had previously received. Malcolm Chisholm, the then Minister, sought a grant of hundreds of millions of pounds, which he claimed the UK Government had saved because they were no longer paying benefits to the people who were now getting free personal care. Would not that kind of situation arise in a number of areas under the scenario that the Minister is describing?
Lord Sassoon
My Lords, that was not a tax issue, and I do not know the detail of that case, but we are talking about changes to the structure of the UK income tax system, which is something that is done by the UK Government. We are talking about circumstances that are rather far away from a Scottish spending matter that the noble Lord described.
Lord Foulkes of Cumnock
I indicated in my remarks earlier that I had intended to oppose these clauses standing part of the Bill, but because we have had such a full debate on all of their aspects, I do not think that it is necessary.
Lord Forsyth of Drumlean
This feels like Groundhog Day.
I thought that the committee of the Scottish Parliament that looked at the latest Bill just before Christmas last year had wanted to include air passenger duty in it, but I am told that that is not the case and that the committee was prepared to wait. It is certainly not prepared to wait on the aggregates levy. As noble Lords will see, it takes three pages of legislation to provide for the power to obtain the revenue from the aggregates levy. Here, once again, we have a case of St Augustine: “We are in favour of this, but we don’t actually want to do it now”.
The argument being put against including this in the Bill is that it would be subject to legal challenge—the power might be put in the Bill but the result might be that no revenue for the Scottish Parliament arises from it. That is not an argument for not putting it in the Bill. Primary legislation is difficult to achieve, and it is even more difficult to achieve in a decent time in Westminster. I think that my noble friend should accept my amendment—which is probably technically deficient—and extend the range of tax powers available to the Scottish Parliament, if for no other reason than to mitigate the effects which we have talked about at length today of having a narrower income tax base. I beg to move.
Lord Foulkes of Cumnock
While the noble Lord, Lord Forsyth, has been talking, and now that he is talking about aggregates tax, I have been aggregating the time that we have taken to deal with half a dozen or so groups of amendments. I see that we have about twice as many groups still to deal with before we reach the target that the Government have set themselves. We have taken six and three-quarter hours to deal with these half a dozen or so groups of amendments, and at the rate we are going it will take until about 7 o’clock tomorrow morning to deal with the rest.
Although I am prepared to stay here, I think that it really is unfair on all the staff—on Hansard, on the catering staff, the doorkeepers, the civil servants and the clerks of course—who do such a wonderful job on our behalf. It is incumbent on the Minister and the noble Baroness the Whip to start thinking about how the Government will deal with this. We lost one whole day of our Committee stage because the Welfare Reform Bill took it up. We all sat round for a whole day but eventually the Government said, “We are not having it today. You can all go home”. That was a wasted day for many people. We are having a detailed debate on this Bill. I have not participated in much of it but I have been listening to all of it—and yes, as a noble Baroness says, I nodded off on one occasion as well.
It is incumbent on the Government to give an indication to the staff—to everyone around the House—of what will happen. How late will we go tonight and what is the target? They should also give us more time to deal properly with this very important constitutional Bill. It was not dealt with properly in the other place, but it is our responsibility to deal with it properly. There is plenty of time after Easter for Report. We could continue the Committee stage in the two days that are allocated for Report and deal with it properly then. I hope that the Government will give that serious consideration. Otherwise, we will not be treating dedicated staff as we should if we are to be a good employer.
Lord Sassoon
First, on my count of the progress that we are making, I have ticked off 19 groups and we have 10 to go, given the breaking up of groups and regrouping. My understanding is that the usual channels agreed that we should target and complete Amendment 87A. It was made quite clear in everything that I have read that there was that expectation. I very much appreciate all those who support us in keeping the House going, but I know that their expectation and our expectation over the past few days is regrettably that we will rise considerably later than normal today. Rather than spending too much time confirming what the usual channels have agreed, I think we should press on.
Lord Foulkes of Cumnock
Perhaps the Minister’s count is more accurate than mine—I would split the difference—but it is still going to take a long time. We have important issues to deal with such as the Barnett formula, the referendum, the Scottish Consolidated Fund, the Civil Service in Scotland, surcharges, financial privileges, legislative consent Motions and the delay in legislation on a referendum. If we are going to deal with all these things properly, we cannot deal with them now. We have all been sitting here for six and a quarter hours already. It really is important that we consider the staff in this. I hope the usual channels will have another look at this.
Lord Sassoon
Right. I had quite forgotten that we are on the aggregates levy. Let me answer my noble friend’s points. Yes, the Calman commission recommended the devolution of the aggregates levy and, as my noble friend knows, the Government agree with that recommendation. We are committed to devolving the aggregates levy to the Scottish Parliament but, to confirm what he said, we believe that that can and should be done only once the complex legal challenges against it in the European and UK courts have been fully resolved. The Government were clear about their position in the Command Paper for the Scotland Bill, and we remain firmly committed to it.
The position is still moving on the court challenge. The European General Court delivered its judgment in the case of British Aggregates Association v the Commission on 7 March this year. The judgment does not conclusively resolve the legal challenges. Appeals can still be brought against the judgment to the European General Court. Once the action in the European General Court has concluded, action in the UK Court of Appeal will resume. As we have discussed at considerable length, the Bill enables the Government to devolve taxes in future, and it means that devolving the aggregates levy after full resolution of the legal challenges can be achieved quickly. I am happy to say that my noble friend’s very extensive amendment technically broadly works. He is too modest. There would be one or two things to look at, but that is not the issue.
To make sure that things continue and we do not lose momentum on this, as a practical and necessary step to prepare for devolving the levy the independent Office for Budget Responsibility will start to provide forecasts of Scottish aggregates levy receipts from April 2012. The Treasury will also notionally assign these forecast receipts to the Scottish budget. Together with the tax powers in the Scotland Bill, this will allow for the speedy devolution of the levy when the legal challenges have been fully concluded. At that time, the order can be drawn up to reflect the position post the completion of the challenges.
I hope I have made it clear that the Government’s desire to devolve the levy as soon as is feasible continues. It is not feasible to do it while the legal challenges are ongoing. The Bill gives adequate powers for that devolution in future. I thank my noble friend for putting forward a carefully thought through amendment, but I ask him to withdraw it.
Lord Foulkes of Cumnock
My Lords, very briefly, I cannot support this amendment. It will not achieve what the noble Lord, Lord Forsyth, thinks it will in terms of fiscal responsibility. I understand why he is suggesting a change from the present arrangement to a needs-based arrangement. That is perfectly valid and he has argued the case very well. However, for as long as we still have mixed funding for the Scottish Parliament—powers to raise taxes and the block grant—there could always be a situation in which the Scottish Government hold the UK Government to ransom and say, “We are not going to raise more taxes. We want more money from the United Kingdom Parliament”.
That is why I think the noble Lord, Lord Forsyth, was coming round in his logic earlier, and will ultimately come round, to full fiscal responsibility. The Scottish Parliament should be given a basket of tax-raising powers, which is what I think Calman recommended, to raise money not just for part of its expenditure but for all of it. Until we get to the stage where the Scottish Government are responsible for making not just spending decisions but revenue-raising decisions, they will not have full fiscal responsibility. I know why the noble Lord is putting this forward but his amendment would still leave an Oliver Twist situation, whereby a First Minister such as the one we have now keeps pressing the UK Government for more and continues to blame them.
Lord Forsyth of Drumlean
Could the noble Lord just explain to me how that would work? What basket of taxes could meet the bill, given that there is a gap between the taxes that are raised and expenditure? How would that work?
Lord Foulkes of Cumnock
That is the conundrum that needs to be resolved, but it can be resolved by giving the Scottish Parliament a full range of tax-raising powers. I know that the argument is that Scotland does not have a big enough tax base to enable it to raise money to fund its domestic services. That cannot be the case if it has tax-raising powers, or you concede the argument that there is a major transfer of resources from England to Scotland to keep services going in Scotland. The First Minister of Scotland says that that is not the case. He says that Scotland is a wealthy country that can manage on its own. Therefore, you should take that as a challenge.
Lord Forsyth of Drumlean
I am most grateful to the noble Lord. However, the First Minister also says that Scotland could join an “arc of prosperity” with Iceland, Ireland and the rest. What the First Minister says and what the facts are are not the same thing. There is a gap; if there was not, we would not be arguing about the nature of the Barnett formula. Of course we spend more per head and of course we do not raise more taxes per head. Therefore, by definition, there is a gap—that is the point. My worry is that the road we are going down will narrow the gap and we will end up with less money and higher taxes in Scotland. That is the challenge. I live in Scotland and I want to die in Scotland. I worry about how services will be funded if we go down this road.
Lord Foulkes of Cumnock
I hope the noble Lord will continue to live in Scotland for a long time and that his life will not end too soon. From what he said earlier, I gathered that he wanted, in his heart, to move towards full fiscal responsibility. He said that in an earlier intervention. How can he not see the point that I am making? I may not have the right solution, but does he not see my point in relation to the continuation of a dual function? If the Scottish Government have the power to raise money and can still get a substantial amount of their expenditure from the United Kingdom Government, the incentive will be not to raise taxes—we have seen that with plus or minus 3p in the pound—but to ask the UK Government for more. That is why mixed funding would create tremendous problems.
“Referendum about further devolution of taxationReferendum about further devolution of taxation
In section 30 of the 1998 Act (legislative competence: supplementary) insert—“(5) Her Majesty may not by Order in Council amend Schedule 5 or make any other provision which removes any tax or excise duty from being a reserved matter (“the proposed devolution of taxation competence”) unless subsection (6) is satisfied.
(6) This subsection is satisfied if a referendum has been held throughout Scotland about whether the proposed devolution of taxation competence should take place and the majority of voters in the referendum vote in favour of the proposed devolution.
(7) Her Majesty may by Order in Council cause the referendum to be held.
(8) The Order in Council shall contain the question that is to appear on the ballot paper.
(9) An Order in Council under subsection (7) may not be made unless a draft of the statutory instrument containing the Order has been laid before, and approved by a resolution of, each House of Parliament.
(10) For further provision about a referendum held by virtue of this section, Schedule (Referendums under this Act) to the Scotland Act 2011 applies.””
Lord Foulkes of Cumnock
Hours ago, when we started this Committee, we got into a terrible fankle over which amendments we were dealing with, the groupings and how one amendment related to another. As we go on through these amendments, that problem will manifest itself even more. There is a lot of overlap and interrelationship, and I am not sure of the groupings. That is probably my fault as well as other Members, as much as it is of the clerks or anyone else. Nor am I sure that the groupings are as sensible as they might be.
However, this group is fairly sensible. The confusion is not in terms of the grouping. The confusion, which is in here to some extent but outside to a greater extent, is when we talk about referenda. That is because we are talking about different referenda. I accept what my noble friend Lord Browne said about this earlier. He is absolutely right and probably we would get unanimity in this House. The crucial referenda is the yes/no on separation. That is absolutely essential and vital. We will discuss that later in Committee. We will all focus on that and will have a really important debate.
I know where I stand on that and I have put down a number of amendments. One amendment deals with a yes/no vote and then moves on—I say a month or so later but it might not need to be later—to looking at how we deal with the situation post that referendum, assuming that we have rejected separation, as I hope that we will. Rightly, there is discussion in advance of the referendum as to whether the parties—the unionists, the devolutionists and the federalists: I keep reminding the Liberal Democrats that they are federalists—all of us, should have a common understanding of how we move forward in relation to the situation post that major referendum. It does not have to be a totally agreed position, which might be difficult.
I was going to move this amendment without reservation until I heard my noble friend Lord Browne earlier. I know that he wonders sometimes whether I listen to him but I listen very carefully to him. I was going to argue that we had a two-question referendum in 1997. The second question was:
“I agree … OR … I do not agree that the Scottish Parliament should have tax varying powers”.
Some 63.5 per cent of the electorate agreed and 36.5 per cent disagreed. A very substantial number were in favour of a tax-varying power.
In his intervention earlier, my noble friend said that, as far as the Official Opposition is concerned, that gives us a mandate not just for the plus or minus 3 pence but a mandate effectively for any tax-raising powers for the Scottish Parliament. That was my understanding of what my noble friend Lord Browne said. If I am wrong, I am sure that he would intervene.
If that is the case, there is an argument that we do not need a further referendum on tax-raising powers. We have effectively the mandate with the second question of the 1997 referendum. That now appears to be the view of the Official Opposition. Before we come to whether this amendment is voted on, withdrawn or whatever, is that also the view of Her Majesty's coalition Government? Do they believe that the vote on the second question in the 1997 referendum gives a mandate for this Parliament to give, without a referendum, the Scottish Parliament any tax-raising powers—and I mean any powers, not just income tax? My belief that we needed another referendum was based on the fact that there was an implicit understanding that it was going to be plus or minus a percentage of income tax. That would be the limit of the tax powers that were going to be devolved. That was my understanding, but I would accept correction. If that is the mandate, I would welcome it.
I was going to quote at length from an interesting article in Scottish Affairs, written in the winter of 1998 by Charles Pattie, David Denver, James Mitchell and Hugh Bochel, but because of the hour I will shorten it. It is an analysis of the results of the 1997 Scottish referendum. I want only to quote one part, and this is really in tribute to the noble Lord, Lord Forsyth:
“In 1995, however, Labour came under serious attack on the issue from the Scottish Conservatives when Michael Forsyth became Scottish Secretary. Forsyth focused on the tax varying powers in Labour’s proposals, the ‘tartan tax’ as he called it. Labour struggled to find an effective response and there was a fear that New Labour’s carefully constructed image as a low tax party might be tarnished. In the face of considerable controversy within Scotland, therefore, the Labour leader, Tony Blair, announced in 1996 that a referendum would be held consisting of two questions, one on the principle of devolution and the other on tax varying powers”.
So we have the noble Lord, Lord Forsyth, to thank for the fact that our Prime Minister took what I think was the correct decision—under pressure, according to this article, from the Scottish Conservatives and particularly from Michael Forsyth, as he was then—to include the second question.
That second question having been included and having had such a substantial majority, my noble friend Lord Browne having given us an assurance that the next Labour Government will accept this as a mandate and the current Opposition accepting it as a mandate to introduce any taxation, the question remains: what is the position of Her Majesty’s Government? Assuming that it is the same position, I would argue that this Parliament can then legislate for what the noble Earl, Lord Caithness, and I agree is the best way forward, which is full fiscal responsibility. Some people call it full fiscal autonomy, but it is important to have the word “responsibility” in it. The noble Earl put it very well indeed when he said that it is the responsibility for raising money as well as for spending money.
Lord Forsyth of Drumlean
It may be that the lateness of the hour and the number of amendments we have dealt with have addled my brain, but I do not really understand what the noble Lord is arguing. I thought that this amendment was about providing for a referendum, but he appears to be saying that the power in the Bill which allows for the imposition of new taxes by order before both Houses should be used to deliver complete fiscal autonomy. Can that be true?
Lord Foulkes of Cumnock
I have been listening carefully to the debate, but my brain might be addled as well. When did we start? I believe it was at 3.30 this afternoon—I am sorry, we started at 12.30 pm, so we have been debating for eight and a half hours. Perhaps I did not explain myself properly. I said earlier that I would move this amendment, but that before we introduce full fiscal responsibility we need a referendum. That is because if we had a referendum for plus or minus 3 pence on income tax, this will go a great deal further than that and therefore we need a referendum to give the authority to introduce that extra tax-raising power. However, my noble friend Lord Browne said earlier that the referendum result in 1997 gives us the necessary mandate to introduce full fiscal responsibility. No doubt he will repeat that when he comes to speak. What I want to know is what the Government think about it.
When I talk about full fiscal responsibility, that is not what some people talk about as devo-max. There are two things. One is the fiscal devolution, the tax-raising powers. The other is the spending powers, or the powers over services being devolved. We have effectively gone far enough in relation to that. Some people would argue that devo-max should include devolution of welfare, pensions or other aspects that are currently part of the United Kingdom responsibility. I would counter and argue very strongly against that. Donald Dewar, my noble friend Lord Sewel and others worked very hard on this to make sure that we gave maximum devolution of functions. We did that. Where we did not do it was to give the responsibility for raising the money to pay for exercising those functions. That is what I am arguing today.
Lord Forsyth of Drumlean
My Lords, given the journey that we have embarked on, I suspect that the noble Lord may get his wish if we do not see the fragmentation of the United Kingdom. I have an abiding image in my head of the noble Lord, Lord Foulkes, sitting at 3 am in his underpants responding to these cybernats.
Lord Foulkes of Cumnock
As my noble friend Lord Sewel said, that would not be a pretty sight, I can assure you. The cybernats deal with these things at 3 am; I can assure the noble Lord, Lord Forsyth, that I do not—I do it at very sensible hours in a careful, co-ordinated way. I urge him to remove that picture from his mind, otherwise it might corrupt him.
Lord Forsyth of Drumlean
I am doing my best. I am very worried, because I am also tempted to divide the Committee, if only for the pleasure of seeing the noble Lord vote against his own amendment. He started off making the case for his amendment and then seemed to argue that it was not appropriate.
The noble Lord, Lord Browne, was right to warn us that the world has moved on and that referenda are dangerous in the context of taking our eye away from the main issue, which is independence. All this chat about devo-max and additional powers puts us exactly where the separatists want us to be. The last thing they want us to discuss is what the consequences of independence will be for Scotland. My party leader contributed to that by suggesting that we could look at that after the referendum. Others have said the same, and I am sure that the right focus is to do that.
However, the Bill has been caught out by the passage of events and it does not seem unreasonable for the considerable tax powers to be subject to a referendum. I was therefore attracted to the noble Lord’s amendment. However, I do not for the life of me understand his argument that that question, given its limited scope, gives permission to go down the road of fiscal autonomy. At the very least I would like the opportunity to see some numbers. The speech of the noble Lord, Lord Sewel, was right on the button. It went to the heart of the difficulties being created by people embracing concepts and policies without looking at the numbers, the arithmetic and the fiscal and financial consequences, which are subject to assumptions.
The other day, someone in my party—an accomplished policy wonk—was challenged with the notion that the Scotland Bill and the move towards taxation would inevitably result in discussion of the Barnett formula. He said: “Oh, there is no way that people will ever take that money away from Scotland. We are safe”. We must not make these assumptions. These are deep waters. I am not with the speech of the noble Lord, Lord Foulkes, in support of his amendment, but I think that the amendment is reasonably sensible. We should be guided very much by the pertinent point made by the midwife of this whole exercise, who must feel like someone whose child has turned into a delinquent adolescent. We have to find a way of gripping the issue. Whether it is a federal or some other solution I know not, but I am sure that we should not distract attention from the referendum on the future of the union.
Lord Wallace of Tankerness
My Lords, we return to the issue of the referendum. In the group of amendments to which the noble Lord, Lord Foulkes of Cumnock, has spoken, there is an amendment that would require a referendum to be held before further taxation powers can be devolved and a referendum that would be required before Part 3 of the Bill would come into force. Somewhat curiously, Amendment 75 would ensure that the finance provisions in Part 3 of the Bill—other than the consequential amendments related to the Scottish rate of income tax and the powers in Clause 37—and the clause related to Antarctica in Clause 14 would come into force only two months after a referendum in which the majority of participants had voted in favour of Parts 1, 2 and 3 of the Act. We have an opportunity for many referenda—or referendums. I am a supporter of referendums in the grammatical sense—not in the sense of holding them—but we are not going down that route at the moment.
As the noble Lord, Lord Browne indicated, the debate quickly moved on to devo-max and other variations on that. I do not intend to follow that, as I think that the amendments are about whether we should hold a series of referendums. On that issue, I remind the Committee what the Calman commission said in paragraph 3.91 of its report:
“Tax devolution can provide accountability. We concluded in our First Report that the devolution of all taxes to the Scottish Parliament would not be consistent with the maintenance of the Union, and this remains our view”.
That was a view that the noble Lord, Lord Sewel, was expressing. I am biased, because I was a member of the commission, but in much of the analysis that it did in trying to devise the balance of taxation between the United Kingdom Parliament and the Scottish Parliament the commission looked at the implications of any proposal for social and economic union. That echoes the speech of my noble friend Lord Maclennan of Rogart. I refer to a social union not only of constituent countries of the United Kingdom but of the many regions within Scotland, Wales, Northern Ireland and England.
The noble Lord, Lord Foulkes, asked about the 1997 referendum and the noble Lord, Lord Browne, has indicated his interpretation. It is difficult, 14 and a half years after the event, to be too prescriptive about what interpretation you may make of it, but it is clear in 1997 that the Scottish electorate gave a clear mandate for a Scottish Parliament with tax-varying powers. Some 63.5 per cent declared in favour in terms of tax-varying powers and 10 per cent more than that on the idea of having a Scottish Parliament. We have to recognise that the debate leading up to the referendum was around a specific proposal for tax-varying powers, plus or minus 3 pence. Equally, many argued that it was an argument on the ability of the Parliament to assume a degree of financial accountability for taxation and spending decisions. It was an important principle, and a mandate flows from the 1997 referendum that the Parliament should have a degree of financial accountability for taxation and spending decisions.
Lord Foulkes of Cumnock
The Minister used the word mandate, but my noble friend Lord Browne of Ladyton used the phrase “partial mandate”, which is a new legal concept. I know that the noble and learned Lord and my noble friend are both distinguished lawyers, but I do not understand the concept of a partial mandate. What does the Minister mean exactly by the 1997 Act giving a mandate? Is it a mandate for any tax powers or for income tax-varying powers alone?
Lord Wallace of Tankerness
The noble Lord did not quite hear what I said. Many people argued that the Scottish Parliament should have a degree of accountability for taxation and spending decisions. As I said, there was a clear mandate that there should be that responsibility or accountability for taxation. That was why I qualified it, because we should not run away from the fact that it was in the context of a campaign that was very much focused on the plus or minus 3 pence. That was why I was not going to read more into it than that Scottish people clearly wanted a Parliament back in 1997 that had accountability for taxation as well as for spending. Nothing since then has suggested that that has in any way changed. Indeed, it is clear that the idea of increased financial accountability for the Scottish Parliament continues to have widespread support in Scotland. It was certainly the thrust of most of the representations made to the Calman commission that there should be increased accountability. My noble friend Lord Steel of Aikwood said in a Donald Dewar memorial lecture that it was not sustainable for a Parliament to exist on a 100 per cent grant voted from another Parliament and that there was a need for greater financial accountability. That is what we seek to deliver in this Bill and we believe that the scheme laid out in the Bill is significant. It offers new powers to the Parliament to match spending powers with responsibility and accountability and does so very much within the broad framework of the 1997 Act. I do not believe that the additional referendums that the noble Lord, Lord Foulkes, proposes are necessary for the powers contained in this.
The noble Lord asked about the mandate. I indicated in response to the amendment moved earlier by my noble friend Lord Forsyth that the manifestos of the Conservative, Labour and Liberal Democrat parties at the 2010 election contained the commitment to implement the proposals of the Calman commission. The fact that these were widely supported, not just in Scotland but in other parts of the United Kingdom, provides a mandate for the provisions within this Bill.
My final comment, echoing what my noble friend Lord Forsyth and others said, is that the main referendum we have to focus on is the one which will secure Scotland's future in the United Kingdom. That would not be assisted by having the plethora of other referendums which would perhaps be the consequence of the amendment in the name of the noble Lord, Lord Foulkes.
Lord Foulkes of Cumnock
My Lords, as I said at the start, the purpose of my amendment was to have a debate on it. There are a number of amendments, as the Minister rightly said, but I am not sure that the one on Antarctica has anything to do with me. I cannot remember tabling one about Antarctica, but I certainly tabled one in relation to Calman or further fiscal responsibility. I will come back to the Minister’s point on that, because there is an inconsistency in what he says. That is the main point that needs to be made.
First, I totally understand what my noble friend Lord Sewel said. He is absolutely right about redistribution, whether it be redistribution within the whole United Kingdom, within England or within Europe. I am sure that my noble friend, who is a distinguished member of the Council of Europe delegation—
Lord Foulkes of Cumnock
He is a member of the NATO delegation, but he understands the European issues and I am sure that he will know that redistribution within Europe to the poorer areas is as important as within the United Kingdom. I am not suggesting that there should not be some kind of arrangement or formula for that kind of redistribution. There is no reason why it could not be done, and I am sure that the noble Lord, Lord Lyell, who has extensive knowledge of Germany, will be able to indicate that there are arrangements within Germany to make sure that some of the poorer Länder are helped by some of the richer Länder.
That can be done in a federal context as well, which brings me to the noble Lord, Lord Maclennan. He and I ultimately favour a federal system; that is the one stable system that is desirable. We had a unitary system which created tremendous problems and inequalities. In Scotland, it created problems through a lack of political accountability. At the other end is total separation with the break-up of the United Kingdom, which would be disastrous. A federal system has all the advantages of working together but with local autonomy. What we have at the moment is a quasi-federal system, and we need to move towards a proper federal system. I know that he and I agree on that.
The noble Lord, Lord Forsyth, said that he was unsure whether the 1997 referendum gives us a mandate. This is the crucial thing; he thinks that it does not, as I did not when I tabled these amendments. The noble Lord, Lord Forsyth, is laughing but he has spent almost all of today trying to persuade the Minister to concede, to change his mind and to listen to argument. Both Ministers have of course refused to consider any of his arguments but when I take account of what other people say, he laughs and says that I am inconsistent or doing a U-turn. I am just trying to go through the arguments as to whether a further referendum on a major extension of tax-raising powers for the Scottish Parliament would be necessary.
What I understand the Minister to have said is that although his recollection is much the same as mine, when we got that big majority for tax-raising powers in the 1997 referendum, the understanding in the surrounding debate was that it was for plus or minus 3p.
However, he extrapolates, using the new legal concept that my noble friend Lord Browne has devised, that it gives the Government a partial mandate to introduce the new tax-raising powers in Calman. These go a long way, as the noble Lord, Lord Forsyth, pointed out. However, he has reservations and does not think it is enough of a mandate to go for full fiscal responsibility. I find that strange. It is very difficult to understand why, if the referendum was a mandate in the context of plus or minus 3p and is a mandate for Calman, which goes half way towards full fiscal responsibility, it is not a mandate for full fiscal responsibility. Does it go a quarter of the way? I presume that it does if it goes half way. Does it go three-quarters of the way? We do not know. It is a very difficult concept and we really need to think about this.
Lord Lyell
The noble Lord has been very kind in referring to me. He made a passionate comment but he was very much on to something, as was my noble friend Lord Forsyth. I have heard some encouraging noises from the Minister about looking at a federal tax-raising system. I definitely take the initials CB to stand not necessarily for Companion of the Bath but for “cynical something else”. I worry that we will complete our discussions on the Bill and all its mechanisms but, at some stage, this discussion will be kicked into the long grass. It is very much on the side, along with my noble friend Lord Forsyth and the noble Lord, Lord Foulkes, of looking at a federal tax system that will be fair and agreeable and will work. I am worried that, when we finish the Bill, we will have come up with a system that is asymmetric and will not work.
Lord Forsyth of Drumlean
My Lords, I am very disappointed that the noble Lord, Lord Foulkes, thinks that I have spent the past nine hours speaking but that my noble friends on the Front Bench have not listened to a word I have said.
Lord Foulkes of Cumnock
I am sure that they have been listening but they have not conceded anything. They have not moved to take account of the very sensible arguments that the noble Lord, Lord Forsyth, has brought forward from time to time.
Lord Forsyth of Drumlean
I was going to say that I was once given the advice, which I believe is part of the Whips’ Office mantra among all parties: namely, that whatever you do, you should not listen to the debate because it might make you inclined not to take the Whip. The great thing about this House is that that does not work in quite this way here, so one carries on in the hope that the arguments move Ministers a little. However, my complete failure to persuade the Minister that it is necessary to change speed limits to cover HGV vehicles as well as cars makes me think that perhaps one is trying to push water uphill. Nevertheless, I will have another go on this amendment, which I think is rather important.
The amendment would help Scottish Ministers in the Scottish Parliament to carry over expenditure which they have not spent in any financial year. I could keep going for about half an hour with stories of local authorities that rush out and buy street furniture in February and sleeping policemen in March. We are all familiar with that practice. It is an old saw. Anybody who has been a Member of Parliament can recount endless examples of constituents who have pointed out how ridiculous it is. I believe that this amendment would be welcomed by Ministers in the Scottish Parliament. The arguments are well understood so I will not dwell on them. I live in hope that my noble friend might be listening and might offer me some comfort that on this occasion he can see the sense in allowing surpluses to be carried forward from one financial year to the next. That seems to me to encourage good planning, good use of resources and proper stewardship of public money. I beg to move.
“The civil service in Scotland
(1) The 1998 Act is amended as follows.
(2) In section 51 (the civil service) after subsection (4) insert—
“(4A) The Constitutional Reform and Governance Act 2010 is amended as follows.
(4B) In section 5, after subsection (2), insert—
“(2A) Any code of conduct covering civil servants who serve the Devolved Scottish Government must make clear that advice given to Scottish Ministers by civil servants in Scotland should be limited to devolved matters and should not concern reserved matters.”””
Lord Foulkes of Cumnock
My Lords, this amendment deals with the Civil Service in Scotland. It says:
“Any code of conduct covering civil servants who serve the Devolved Scottish Government must make clear that advice given to Scottish Ministers by civil servants in Scotland should be limited to devolved matters and should not concern reserved matters”.
That might be a bit draconian, and obviously some account needs to be taken of where reserved and devolved matters overlap to enable civil servants to advise Ministers on that. However, the amendment arises—and I say this in particular to those who are not from Scotland—from a real controversy. A huge furore has arisen in Scotland over the way in which two successive senior civil servants—the Permanent Secretaries Sir John Elvidge and now Sir Peter Housden—have effectively gone native and are advising the SNP Government on how they can achieve their policy to break up Britain.
I do not see that it is any function of members of the British Civil Service—they remain members of the British Civil Service—to advise a devolved Government on how to achieve their political aim of breaking up Britain. They are there to advise and make sure that the education service is as efficient as possible, that social work is carried out effectively, that the NHS works as well as possible and that the legal system is properly administered. That is a huge responsibility for the head of the Scottish Civil Service. That is what he should be doing—getting on with that and advising Ministers responsible for education and Ministers for health on those responsibilities. Instead they seem to be accepting the SNP notion that the Scottish Government are not just a devolved Government but effectively already a quasi-independent Government. Just as the First Minister assumes a great deal about the Scottish Government and implies that they can and should operate like an independent Government, they have been advising them in relation to that.
To give a brief indication of the kind of furore that has arisen, and I shall be brief, I will quote from one or two of the Scottish newspapers. First, Sir John Elvidge retired last year as Permanent Secretary. The Scottish Express stated:
“The row over alleged political bias in the Scottish civil service deepened yesterday, after the country’s former top mandarin claimed that his work behind the scenes contributed to the SNP’s election win”.
He claims that as a result of his work as a supposedly unbiased civil servant—after all, that is supposed to be the ethos of the Civil Service—he helped the SNP to win the election.
Sir John Elvidge, who stood down as Permanent Secretary last year, wrote a glowing article in praise of the nationalists. Is that non-political? Is it carrying out a non-political role to suggest that he helped Alex Salmond to stay in power, contributing to his political success? Sir John Elvidge out of his own mouth condemns himself by claiming part of the SNP’s and Alex Salmond’s successes.
Lord Wallace of Tankerness
My Lords, my noble friend raises an important point which goes beyond Scotland. It is a fundamental one and I cannot give him the full response that a profound question such as that demands, but clearly he has put an issue on the table and I am sure he may wish to raise it further.
Lord Foulkes of Cumnock
My Lords, I am grateful to everyone who has participated in this very good debate. It underlines what a number of us have said increasingly, as time goes on: it is a pity that we are debating things of such importance so late on a Thursday night. If we had had it at some other, more appropriate time people such as former heads of the Civil Service could have participated and advised us.
Lord Forsyth of Drumlean
If the noble Lord does not divide the Committee, he could put an amendment down and we could talk about it again at a decent hour at a later stage of considering the Bill.
Lord Foulkes of Cumnock
My Lords, what a very helpful suggestion indeed. I will immediately investigate it. I agree with the noble Lord, Lord Forsyth, absolutely: when I was a Minister in both DfID and the Scotland Office, he will not be surprised that from time to time my civil servants came to me and said, “Minister, I think you are being a little political in what you are suggesting here. I cannot put out a statement on your behalf saying this. You will have to get your party to put it out”. They are absolutely right to do that and we all respected it. That is why it is deeply disappointing that that is not what seems to be happening in the Scottish Government.
I say to my noble friend Lord O’Neill that I did not want to hang civil servants out to dry. In fact, both of the civil servants who I mentioned had really hung themselves out to dry in what they said and put on record. Although I do not normally quote the Daily Mail, the Telegraph and the Daily Express—I take everything I read in those newspapers with a pinch of salt—they were quoting directly from some of the things that Sir Peter Housden had said and put into his blog, so it was something that you could believe.
I take again the advice of my noble friend Lord Browne of Ladyton in relation to this, as I did with my noble and learned friend Lord Boyd on a previous amendment. The wording of the amendment is defective, as the Minister pointed out.
Lord Foulkes of Cumnock
It is an order, and I accept the fact that it should be looked at again. The noble Lord, Lord Forsyth, suggested that we might take another look at it, and it might be that we could think about what the noble Lord Maclennan said. If some kind of objective look at serious complaints about the Civil Service’s lack of impartiality could be undertaken, Scotland might be a good place to start. That was a very good suggestion.
The only thing in the Minister’s reply that I was a little worried about—most of what he said was very good—was when he said, referring to the head of the Civil Service in Scotland, that it was okay for civil servants in Scotland to advise the devolved Government on different policy areas where the two Governments have different objectives. That needs to be looked at more carefully. In a reserved area such as the constitution, it raises some very serious issues if there are policy objectives that are not just different but totally contradictory and conflicting.
Before I withdraw the amendment, which I will, I just ask the Minister to consider taking the initiative to draw this debate directly to the attention of Sir Jeremy Heywood, who is now the Cabinet Secretary. I have the highest regard for him and think he might carefully consider some of the points that have been made and what action might be appropriate. I beg leave to withdraw the amendment.
Scotland Bill
Lord Foulkes of Cumnock Excerpts(12 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
As your Lordships will see from the Marshalled List, I gave notice of my attention to oppose the Question that Clause 29 stand part of the Bill. When I gave that notice, there was at least one good reason for doing so. There are now at least three good reasons for doing so—perhaps more. I shall refer to only two.
The first has emerged from the debate that we just had. Is the noble and learned Lord, Lord Wallace, going to reply to this? Oh no, it is the poor noble Lord, Lord Sassoon. The noble and learned Lord, Lord Wallace, will recall that many weeks ago I raised a question about the wisdom of proceeding not just with Clause 29 but with every clause, given what was happening elsewhere—given that the Bill and Calman had been overtaken by events. As I said in an intervention on the noble Lord, Lord Sassoon, earlier, we now know that the Scottish Parliament will not be discussing either the majority or minority report from its committee until we have decided. The indication from the majority of the committee—contrary to what was said from the Front Bench opposite earlier—is that it did not support the provisions of the Bill but wanted it to go further. The minority supported it, but the majority wanted it to go further. It seems daft to press ahead with the Bill, including Clause 29, until we have some indication that, if we pass it, the Scottish Parliament and the Scottish Government will accept all its provisions. I hope that that point can be dealt with.
My second point is one of which I gave the noble Lord, Lord Sassoon, some intimation. The clause mentions,
“amendments relating to the Commissioners for Revenue and Customs”.
The noble Lord will be aware of the unfortunate situation regarding Rangers Football Club, which is in administration in Scotland, where Her Majesty’s Revenue and Customs is owed a substantial amount because of an arrangement that Rangers Football Club entered into to avoid paying tax. It set up a scheme so that when its players received payment, it was paid not to them as salary but to a company set up for their advantage. As the noble Lord will be aware, as a result, there is a major dispute between Rangers Football Club and the Revenue and Customs about whether that money is due to the Revenue.
There have also been suggestions that the Scottish Government might help Rangers Football Club in its difficulties. I make no comment about why that has arisen, who is to blame or whether the Scottish Government would be wise under any circumstances to make any payments to help the club. All I am asking is: do any of the provisions in Clause 29 or elsewhere in the Bill change the arrangements in which Rangers currently finds itself, or would the circumstances be exactly the same after the Bill’s passage? Those are the only two points that I want to raise. Foolishly, we are pressing ahead with the Bill, but I take this opportunity to ask that question and, I hope, to get an answer in relation to Rangers Football Club.
Lord Sassoon
I think that probably deals with all the football questions, and with probably just about everything else that was directly relevant to this clause. I will try to deal with some of the other things.
We came back to the big picture question of the legislative consent Motion. It is of course for the Scottish Parliament to choose to bring forward the Motion at any time; it is in its discretion. It must be in the Scottish Parliament’s interest to bring forward an LCM before the last amending stage in this House to allow the House and the Government to reflect on the LCM, and if it wanted to it could choose to pass the legislative consent Motion tomorrow.
Lord Foulkes of Cumnock
Would the Minister like to speculate on why it is not doing that? Why is it deliberately delaying it? My speculation would be that it is playing a cat and mouse game with us, and that it wants to see us move ahead without having to reveal its hand fully. Maybe a better analogy would be a game of poker. This is not something that should be the subject of a gamble. It is a very serious matter. Would he not join me in encouraging the Scottish Parliament to consider the legislative consent Motion at a very early opportunity?
Lord Sassoon
My Lords, I will certainly not be drawn into speculation. I have already said that it must be in the Scottish Parliament’s interest to pass the legislative consent Motion in time for the Government and this House to consider possible amendments in response to anything it comes forward with, and, as I said, it could pass the Motion any day. However, beyond that there is nothing more useful that I can add.
Lord Foulkes of Cumnock
As I explained about six hours ago, I have put down a series of amendments to put “devolved” in front of Government. That is in no way to denigrate the functions of the devolved Government, or to devalue them or say that they are in any way less important by putting that word in front. It is meant to indicate that we are talking about devolution and not independence. As I said previously, Alex Salmond and his Ministers and colleagues in the Scottish Parliament, all of them in the SNP group, are going around in this great big pretence that they are already independent and acting as if they are an independent Government. They are doing things that they think they have the right to do. As we will come to in other debates, the chief civil servant in Scotland has made some amazing and unbelievable outpourings. In some of the statements made by Ministers, they clearly do not comprehend what is meant by devolution.
Devolution means that they remain part of the United Kingdom and that the United Kingdom Government and Parliament are sovereign. Ultimately, the UK institutions can make decisions affecting Scotland on a whole range of things, although by convention and out of courtesy we do not do that. The word is put in there just to remind people that we are talking about devolution; a very important concept that, as noble friends know, I have fought for since I was a young man—and that was not yesterday. I spent a long time helping to persuade the Labour Party—along with John Mackintosh, Donald Dewar and a lot of noble Lords here—to come round in favour of devolution. One or two of my colleagues were not so enthusiastic about it, but we managed to persuade the party to do it. Devolution is very important. We should be proud of it and say how important it is, and how Scotland, by having a devolved Administration, can get the benefits of both worlds. There is the benefit of being part of a strong, powerful United Kingdom—one of the most important powers in the world, with a permanent seat on the Security Council, and membership of the European Union and NATO—but also that of having a Scottish Government, with power over their own affairs in a whole range of important matters such as education, social work, law and order, health and all these areas. This is not to minimise those in any way, but to make sure that that is clearly understood.
Baroness Liddell of Coatdyke
The noble Lord, Lord Foulkes, makes a very important point. We have spent a lot of time in the debate today talking about the problems that surround devolution, but devolution in itself has been a very considerable achievement. It may not have gone as far as my noble friend Lord Robertson of Port Ellen suggested, to kill nationalism stone dead, but it has put in place a system of government that has rectified some of the inequities that have existed for something like 300 years. Because of the nature of the debate that we have had as part of this legislation, we are missing out on making the case that devolution was a very considerable achievement. I do not think that anyone—and I am looking at the noble Lord, Lord Forsyth—would try to put the genie back in the bottle and go back to the previous status quo. Although what the noble Lord, Lord Foulkes, is talking about is in essence a gesture, it is an opportunity for us to celebrate the fact that a transfer of powers was made very peacefully to the Scottish Parliament after the election of the Labour Government in 1997.
Many people misunderstand devolution, which has existed in Scotland for 300 years because of the nature of the Act of Union. The Scotland Act merely transferred that legislation, which often took place in this House in the middle of the night, and put it into a proper parliamentary context. By the time I became Secretary of State for Scotland, the Scotland Office was one department. When the noble Lord, Lord Forsyth, was Secretary of State for Scotland, he oversaw an empire of something like 13 different government departments. The model that we have now is the right one, and I support the noble Lord, Lord Foulkes, in his argument for celebrating the cause of devolution rather than trying to hide it.
Lord Maxton
It was partially self-inflicted, as my noble friend beside me says. However, that damage is also a short-term phenomenon and we will recover.
Certainly, we will recover once we have had the referendum on independence. I do not understand why Mr Alex Salmond does not want that referendum immediately, because this is his best chance of winning it. The longer he leaves it, in my view, the less chance he has of winning it. The arguments will no longer be about the way in which, or whether, we have the right to hold the referendum. It will be about the issues of what being an independent country, outside the United Kingdom, actually means: whether it will be part of Europe; whether it will have to apply to be part of Europe; and whether the rest of the United Kingdom will be part of Europe. Mr Alex Salmond seems to think that the rest of the United Kingdom would not necessarily be part of Europe, but it must be in his best interests to hope that it will be part of it. Can your Lordships imagine a Tory-dominated England, led by people such as the noble Lord, Lord Forsyth, who would probably say: “Now we can get out of Europe—we don't have to be in it any longer. We can get out altogether and leave the European Union.”?
I always supported devolution on the basis of democracy. It was the right thing to do and it still is. I wish, however, that we could settle the issue of independence once and for all. If we get it out of the way, we could then deal with whether we apply, change or alter devolution. I am not necessarily convinced that we have to give enormous extra powers to the Scottish Parliament. In fact, there are some parts of the devolution settlement where we ought to be taking powers back from Scotland. For instance, broadcasting is one area over which they demand power, but powers like that should certainly be with this Parliament because they are now international rather than national. We should not therefore necessarily always be looking at giving powers to Scotland, and never taking them back.
We also have to look at what to my mind my late and very good friend Donald Dewar meant when he said that devolution is a process and not an end. The process was about extending democracy from the Scottish Parliament down to local government and local areas, so that you were giving powers to the people in the areas and the communities in which they lived. That to me is what Donald Dewar meant when he said that, not that it was the first step towards an independent Scotland.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, can I perhaps be somewhat boring and brief at this time of night by focusing on the amendment? It would insert the word “Devolved” into Clause 30, Clause 37 and Schedule 4, where the reference would become to the devolved Scottish Government. Clause 15 changes the formal name to the Scottish Government from the Scottish Executive. It was felt that the Executive were increasingly widely known as the Scottish Government and that it made sense to amend the Act to reflect public perception and to avoid confusion. However, the fact that the Scotland Act refers to “Scottish Executive” prevents the use of “Scottish Government” in legislation, contracts and other legal matters. Therefore, Clause 15 is designed to prevent inconsistencies in what the Scottish Executive are called by the public and in the legal name.
The noble Lord, Lord Foulkes, wishes to insert “devolved” in front of “Scottish Government”. That is unnecessary and may even lead to further confusion. Altering the name of the Scottish Government to “the devolved Scottish Government” would in no way strengthen the position of devolution. Indeed, it is important to note that no such prefix attaches to the devolved Administrations in Wales and Northern Ireland. It would look very odd and lopsided if it happened just in Scotland.
That said, this has been a useful debate on devolution. I will not go into all the highways and byways but some important points were made. Some of us who very much support what has happened over the past 12 years sometimes miss a trick because so often, ahead of the debates in 1997 and the referendum leading up to that, we talked about devolution in terms of the Scottish Parliament dealing with matters related to the domestic agenda of the people of Scotland and the United Kingdom Parliament being responsible for macroeconomic policies, defence, foreign policy, social security and pensions. Although we will undoubtedly debate where the boundaries should be—the Bill seeks to address some of these issues—I nevertheless believe that the idea of a Scottish Parliament within a United Kingdom still commands the support of the vast majority of the people in Scotland. I hope that the noble Lord will withdraw the amendment.
Lord Foulkes of Cumnock
I am convinced by the eloquence and brevity of both Front Benches. I beg leave to withdraw the amendment.
Sovereign Credit Ratings: EUC Report
Lord Foulkes of Cumnock Excerpts(13 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
My Lords, I join in the warm congratulations to my noble friend Lord Harrison on securing the debate. I am a member of the European Union Select Committee, which is very ably chaired by my noble friend Lord Roper.
I joined the committee just as this report was being concluded, and although I welcome the report, I feel it does not go far enough. I disagree with much of the essence or strength of what has been said up to now. Some of the action of the credit rating agencies has, frankly, been scandalous and it needs more urgent action. As the Minister knows, I have raised it two or three times at Question Time, and although the Minister has been reasonably helpful and wrote to me recently about it, I am not sure that he or the Government are really seized of the concern that is widely held about the action of credit rating agencies and the urgency of action that is necessary.
It is quite ridiculous that three US-based agencies have 95 per cent of the global credit rating agency work. They are private companies, with their own shareholders, their own owners, who often benefit from the decisions made by those agencies. Whether my noble friend Lord Myners—who has disappeared suddenly—thinks they should get any credence or not, they are given great credence, not just by the media, but by a whole range of other people. Yet look at their record. Joseph Stiglitz, the Nobel prize winner, said that the subprime crisis would simply not have happened without the CRAs’ contribution. He says:
“They were the party that performed the alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the rating agencies”.
It was that subprime crisis which started the global financial crisis that we are currently in. Look at the accuracy of their forecasts. They gave positive ratings to AIG and to Lehman Brothers right up until the very moment of their collapse. What an astonishingly poor record that was.
I disagree with the report when it says, “Do not shoot the messenger—they did not exacerbate this situation”. The inherently pro-cyclical way of functioning aggravated the European sovereign debt crisis and pushed several European countries to the brink of bankruptcy. For example, explaining the reasons for Italy’s downgrade on 17 September this year, Standard & Poor’s put forward that,
“market interest rates are anticipated to rise”.
Of course, interest rates would only rise even further as a result of the downgrade by S&P, so it exacerbates the problem and you get this vicious cycle downwards. Of course the creditors are happy, and some of the people behind Standard & Poor’s might be making quite a bit of money out of it.
In the current European context, it is questionable where the true responsibility lies for the austerity and the dire economic consequences we see in nearly all of the European countries in the eurozone, and the social consequences resulting from that. Are democratically elected Governments really able to decide their fiscal and economic policies in full sovereignty and independence, or do Moody’s, S&P’s, and Fitch effectively assume true economic power in the European Union? I think that is a question that needs answering, and I hope we will get a response from the Government in relation to that.
Let us then go to the conflict of interest of credit rating agencies. As I said earlier, they are private companies, and as such their primary purpose is to seek profit and to enhance their market position. The experience of the recent crisis, as well as testimony of former employees of the CRAs, has shown that managerial pressure on analytical units is used in order to modify outcomes and to decide on ratings models which are more likely to enlarge the CRA’s market share in this respect. Accuracy would not seem to be the prime objective of the credit rating agencies.
I think the answer—I disagree with the noble Baroness, Lady Noakes, on this—is that we need to look to the European Union. If this Government were prepared to consider regulation and to deal with this as far as the United Kingdom was concerned, I would welcome that and look at it, but they have ruled that out. The noble Baroness said that she wants less regulation; that is why we need to look to Europe to see some ways of protecting ourselves. I favour the establishment of a European independent credit rating agency. First, such an agency would ensure that we become less dependent on the CRAs’ opinions and would use alternatives to risk assessment in legislation and regulation. Secondly, I would argue that competition between CRAs should be promoted, as some have said already, by lowering the barriers to entry to the market and by increasing transparency. Thirdly, the inherent conflict of interest which I have described in the predominant current business model would be bypassed through sound measures to combine different business models. Rating states and companies needs different criteria; using the same criteria for them does not work.
I would argue that the European Union has the power. I get concerned at this growing Euroscepticism that seems to be infecting both Houses of this Parliament. We saw it with the noble Baroness, Lady Noakes, and, I am afraid, with my noble friend Lord Myners. I am glad that my very good and noble friend Lord Roper is here. He is a long-standing supporter of the European Union and we should be enthusiastic still about what can be achieved collectively. Just a few days after Remembrance Day, we ought to remember why the European Union was set up in the first place. The European Union has an unequivocal mandate in anti-trust matters, determined by the treaty and by directive 2003/6/EC on insider dealing and market manipulation and its amendments, so it has the power to take action in relation to this. I would argue that it should take action.
In summary, the subprime crisis would simply not have happened without credit rating agencies. In the 10 years up to 2007, the revenues of credit rating agencies rose by 900 per cent. That is what they are in it for—to make money. The ratings delivered by credit rating agencies constrain decisions taken by Governments, by pension funds, by banks and by the ECB, because of the credibility given to them. As I said earlier, the three US-based credit rating agencies share 95 per cent of the market. Their business model is riddled with conflicts of interest, and I would argue that fixing credit rating requires tighter regulation of existing private agencies, as well as the establishment of a European independent credit rating agency.
I am not anticipating that the Minister will agree with what I have suggested, but I certainly hope that it will get a positive response from my colleague and noble friend Lord Eatwell, the shadow Minister.
EU: Credit Rating Agencies
Lord Foulkes of Cumnock Excerpts(13 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
To ask Her Majesty’s Government what discussions they have had with other European Union Governments about the role of private credit rating agencies.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Government have discussed the role of private credit rating agencies with other European Union Governments in numerous meetings. These include the Financial Services Committee, the Economic and Financial Committee and ECOFIN, attended by Economics and Finance Ministers. The Government have also discussed this issue in depth with your Lordships’ EU Sub-Committee on Economic and Financial Affairs, and International Trade during its recent inquiry on sovereign ratings.
Lord Foulkes of Cumnock
My Lords, I am grateful to the Minister for a full reply, but does he recall that these credit rating agencies actually promoted the sub-prime mortgages which precipitated the crisis? They have been accused of a conflict of interest as they vary the ratings of both banks and countries, which exacerbates the crisis and can advantage the owners of these agencies? I asked in a previous Question whether the Minister would consider promoting an intergovernmental agency to take on this role. If he is not prepared to do that for ideological reasons, will he, with his EU colleagues, at least ask the competition authorities within the European Union to see what they can do to curb the excesses of this cartel and break up what has become an insidious oligopoly?
Global Economy
Lord Foulkes of Cumnock Excerpts(13 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Oakeshott of Seagrove Bay
My Lords, I thank my noble friend Lord McNally for that and for this invitation back to the Front Bench for one day only.
I declare my interest as a pension fund manager for the past 35 years and an active investor in British shares and property. The noble Lord, Lord Eatwell, mentioned rating agencies. I have never taken a blind bit of notice of them in my life, which is probably why I still have a job. I well remember how wrong they were when I was warning about the dangers of Iceland.
We on these Benches believe that the Chancellor is right to stress the need for Britain to stick to a determined deficit-reduction plan and keep interest rates low while we have to keep borrowing so much because of—let us be frank about this—Labour’s legacy. However, I agree with the noble Lord, Lord Eatwell, that low government bond yields are not a guarantee of a strong economy. They can be a sign of weakness, as they were in Japan. I would be interested if the noble Lord, Lord Sassoon, could comment on that. Are we not now in danger of keeping the confidence of foreign investors but losing the confidence of British consumers? Some noble Lords will, like me, be old enough to remember Harold Wilson complaining that his economic recovery plan had been blown off course. That has clearly been happening in this country since the Budget. Even looking through—I am bound to say—the Minister’s rather rose-tinted spectacles at the GDP forecast, does he agree with the Governor of the Bank of England, who said:
“Headwinds to world and domestic growth … are becoming stronger by the day”?
I thought that was a striking comment from him yesterday. I agree with it; does the noble Lord?
Does the Minister also agree with the Business Secretary, the Chief Secretary to the Treasury and all Liberal Democrats that the priority, if and when there is room for tax cuts, is not to help the 1 per cent of taxpayers who pay the 50p top rate, but the millions of ordinary people who will spend any tax cut they get—and desperately need—to boost demand and jobs? Does he also agree with our calls, from Vince Cable and others, for more quantitative easing from the Bank of England to boost growth, so that we do not risk slipping into the Japanese morass, and much more bank lending to small businesses? Royal Bank of Scotland, the bank that we own, has just missed even its own soft Project Merlin target for gross lending to small and medium-sized enterprises by £1.5 million over the first six months. Is it not now time that we seriously considered imposing a net lending target on the nationalised banks, as was flagged up in the coalition agreement, so that they take their foot off the throat of small business?
Lord Foulkes of Cumnock
My Lords, the Minister and the Chancellor have prayed in aid of their argument the credit rating agencies. Is it not strange that these credit rating agencies, which downgraded the economy of the United States of America, are private companies—private sector institutions such as Standard and Poor, Fitch, Moody and all the other credit rating agencies. Does the Minister not agree that they have, by their actions, exacerbated the economic crisis and that, as a result, some of their friends and interests have benefited? Would it not be better if our Government and those of other countries, particularly members of the European Union, were to get together and look at ways in which credit rating can be done on a public sector basis in the public interest, and not on a private sector basis in the private interest?
Baroness O'Cathain
My Lords, I thank my noble friend for repeating the Chancellor’s Statement. I have a copy of it here. One of the things that stands out is:
“We need an international framework that allows creditor countries like China to increase demand and debtor countries to make the difficult adjustments necessary to repay them”.
I should like to ask: what are the chances of this happening? What is the mechanism? Is it the autumn meeting of the IMF and the G20? I come back to my point about what the chances are. There is no question that if we could stimulate China to increase its demand for products from our country and Europe, we would be well on the way to restoring the confidence of our small and medium-sized enterprises to get more involved in that market. Leading directly on from that, my noble friend said that more supporting measures will be produced in the autumn. Can I make a plea on behalf of small and medium-sized enterprises for something to be done to limit the huge burden of regulation, which disproportionately falls on small and medium-sized enterprises? They wish to carry on but find international trade really difficult.
Lord Lea of Crondall
My Lords, perhaps I may make two comments and ask two questions. First, it has already been remarked on that the Faustian pact between China and the United States over the past 10 years has been an ultimate, if not the principal, reason for slow world growth. Secondly, although the Minister dismisses so perfunctorily what my noble friend Lord Eatwell said, I suggest that he reads Hansard tomorrow, because my noble friend made a very carefully considered analysis of the world and European situation. I suspect that in terms of economic analysis my noble friend would probably get a higher mark than the Minister on the current situation.
Six months ago, I and many of us were on record as saying that all this would lead to a double dip. It is a quite different scenario from the Thatcher period when there was a reasonably good international position. The prediction of the IFS and others was that if you are going to cut £200 million-worth of output through the crash, the deficit would actually rise from 3.5 per cent in 2008 to something like 11 per cent now. That was without adding to it through austerity measures. We are talking as if austerity measures apply to all circumstances.
My first question is: will the Minister, the noble Lord, Lord Sassoon, consider inviting Chancellor Merkel over here to give her a personal tour of Britain to show her how a modern economy can best succeed—an economy where manufacturing all around works at the rate of Siemens and BMW?
Lord Lea of Crondall
I had better spell it out as sometimes it does not get across.
That tour could demonstrate that the higher economic growth rate in Britain than in Germany could help solve the German problem. I have a second question arising from that. My noble friends will not be aware of this but I asked a Written Question about the relative position of German multinationals and Britain’s multinationals and the proportion of value added in Germany and Britain, the home country. It is pretty obvious from the FT Global 500 employment figures that Germany, which has only about half the number of multinationals as Britain, is miles more successful. Employment in Germany—that is the value added as a proportion of the German economy—is far, far higher than in British multinationals.
My question, which I shall repeat, asked the Government to give me the statistics. I had the most perfunctory reply in one sentence from the noble Lord, Lord Sassoon, that the Government are not interested in such statistics and that it was not their job to collect them. The Department for Business knows what the figures are, and the relative value added of our multinationals in Britain and the relative value added of multinationals in Germany. Will the Minister today say that he will look at the matter more carefully and give me, the House and the Library a less perfunctory answer?
Lord Sassoon
I will take away the noble Lord’s question. Forgive me, but I cannot now remember when we are committed to making regular updates, and it may be that we should wait until the next regular update. I will see whether any more can be said, but maybe we should be patient. I understand that he would like a quiet bilateral discussion, but I cannot promise him early information. The important point that he and other noble Lords make is that we have to work very hard to ensure a suitable range of channels for access to both debt and equity finance.
Incidentally, on the other point made by the noble Lord, Lord Harrison, I was taken away from some European-related reading yesterday. I had just got to the chapter in Edward Heath’s biography on the first negotiations for our European entry, so I have a few years to go before I get to the latest report from your Lordships’ committee. If I am allowed to go back on holiday, I will get there as quickly as I can.
The most reverend Primate the Archbishop of York raised another critically important point, which was about inflation. Clearly, inflation makes an enormous difference to the spending ability of individuals and has a significant effect on the costs for businesses. As we have discussed in this House on many occasions recently, it is critical that the Monetary Policy Committee continues to have free rein and is not constrained by the Government in any way in meeting its mandate. I commend to the most reverend Primate the words of the Governor of the Bank of England in his latest report, issued this week, in which he acknowledges that inflation may go over 5 per cent in the short term but says that he expects inflation to moderate in the medium term and to come down to slightly below the target that the Chancellor has set of 2 per cent. As my noble friend Lord Oakeshott will know, in the context of that discussion the governor made some interesting remarks about the possibility of quantitative easing. No doubt when the MPC’s minutes next come out we will look to see what was discussed at its last meeting, but clearly this is a live topic.
My noble friend Lord Flight gave a perceptive analysis of the markets. I do not think that he asked me a question in that, but I agree with a lot of his analysis.
The noble Lord, Lord Lea of Crondall, raised questions about the UK and Germany and made reference to BMW. All that I would ask him is why BMW has announced in recent months a further massive investment, of hundreds of millions of pounds, in its car manufacturing in this country. I suggest that that is because the best of our manufacturing is at least as good as and in some cases significantly better than the best of manufacturing in Germany, fine manufacturing economy though it is. We have in this country—Mini exemplifies this absolutely—design skills that are second to none. If the noble Lord would like to fire off at me another Written Question or three, I will be happy to try to answer better next time his points on relative added value, but I do not think that we have anything to be ashamed of—far from it—in a comparison between the best of our industry and the best of German industry.
Lord Foulkes of Cumnock
My Lords, will the Minister try to answer the question—I know that it is a difficult one—that I asked about credit rating agencies, which was also raised by the noble Lord, Lord Oakeshott, and by my noble friend Lord Harrison? I know that the Minister has travelled a long way to answer the debate, but I have travelled a long way to ask just the one question, so I would appreciate an answer.
Lord Sassoon
I am happy to answer the question that the noble Lord, Lord Foulkes, asks. I do not believe that nationalised institutions of any kind, including nationalised credit rating agencies, are the best way to go. Europe and the international organisations are looking at the appropriate form of regulation for credit rating agencies. That is ongoing business and it is quite proper that it should be done. Others question whether the whole rating system should be completely liberalised and say that one should not have a small number of institutions running the show. I recognise that that is an important debate and both Europe and the G20 continue to look at the issue.
I am conscious that I should wind up. I just go back to some of the fundamental points that underlie the interesting debate that we have had this afternoon. Noble Lords are well aware that when the coalition Government came into office we inherited the UK’s largest ever peacetime deficit. Tackling that deficit has been and continues to be our number one priority. The recent events that we have been discussing this afternoon vindicate that approach. It is by securing Britain’s AAA rating and the very low bond yields that we now have that we underpin the prospects of recovery. As the Governor of the Bank of England highlighted yesterday, 500,000 UK jobs have been created by the private sector over the last year. We should not forget that.
We have always said that recovery will be choppy but both the bank and the Office for Budget Responsibility forecast growth to continue through this year and the next. The decisive action taken by the Government to deal with the nation’s debts and restore private sector growth has meant that the UK has been in a better position to withstand the very considerable global uncertainties. Abandoning our plans would be disastrous, resulting in rising interest rates, falling international confidence and undermining the recovery.
Egypt: Mubarak Family Assets
Lord Foulkes of Cumnock Excerpts(13 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
My Lords, will the welcome action that the Minister describes be extended to cover our home and overseas dependent territories?
Lord Sassoon
It is important that the overseas territories recognise, as they do, and have a desire to be fully compliant with, international best practice in these areas. We encourage them to take any action in parallel with that taken domestically.
Banking: Royal Bank of Scotland
Lord Foulkes of Cumnock Excerpts(13 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sassoon
My Lords, the tax rules around deferred compensation are complex and depend on the sort of instrument being paid. Some tax on certain instruments is levied up front and some is levied later, so it depends very much on the circumstances of the individual instrument and the taxpayer. But, of course, some tax might indeed be levied later on.
Lord Foulkes of Cumnock
My Lords, will the Minister confirm that some of these millionaire and billionaire bankers, and indeed other millionaires and billionaires, use tax havens to salt away their money so that they do not actually have to pay tax to the United Kingdom Treasury? What are the Government doing to clamp down on these tax havens?
Lord Sassoon
My Lords, we are doing a lot more than the previous Government ever did. We have set aside an additional £900 million of expenditure for HMRC over the next spending round—the noble Lord may shake his head but that is a fact—and that will result in millions-worth of additional revenue each year being collected compared with what the previous Government did.
Comprehensive Spending Review
Lord Foulkes of Cumnock Excerpts(14 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Foulkes of Cumnock
My Lords, it is a great pleasure to follow my noble friend Lady Hollis, who is probably the greatest expert on welfare in this House. I hope that the Government will take some account of her very carefully argued contribution today—they would be well advised to do so. When we eventually get to the end of this debate, I shall go outside and look at the colour of the moon because today is an interesting day, for I agreed with almost everything that the noble Baroness, Lady Kennedy of The Shaws, said. That is most unusual. Given such a coalition, we must be arguing in the right direction.
Speaking very much as a layman and not as an economist—we have heard contributions from some very eminent economists on our side—I want to make only three points. The first is a detailed but vital matter relating to the budget of the Department for International Development, in which I used to work. That budget is rightly protected in the CSR, but it is protected because of the pressure that we put on the Government when they were in opposition. We got assurances that they would protect that budget. However, it is vital that DfID’s budget is not raided for funds by other departments, especially the FCO, which has its beady eyes on some aspects of DfID’s budget, and the Ministry of Defence. The latter’s expenditure in Afghanistan needs to come under the defence budget and the work being done by DfID needs to be clearly humanitarian. Great pressure will be exerted by the FCO and the Ministry of Defence, but it must be resisted.
My second point relates to the manifestly false claim of fairness in the CSR, which all my colleagues have commented on. The cuts to welfare have been swift and severe—as we heard from my noble friend Lady Hollis and from the noble Baroness, Lady Campbell of Surbiton, in a powerful and moving contribution—but there has been almost nothing at all relating to tax dodgers, who could contribute a huge amount more to our revenues. There has been some indication that HMRC will get some more money to deal with illegal tax evasion, but there has been nothing at all about tax avoidance, which has been described by the Deputy Prime Minister, who I remind some Members opposite is still a Liberal Democrat, as immoral. It is immoral at the best of times, but particularly at present. Nothing has been done to start closing the loopholes offered by the tax havens of our own overseas territories. There is no international co-operation with other countries to deal with tax avoidance. The noble Lord, Lord Oakeshott, made a powerful argument in that direction, but the power of his argument is perhaps detracted from by the fact that he is in the strange limbo of being a Liberal Democrat spokesperson rather than a Minister. If he was a Minister who was incorporated into the Government, we might have greater confidence that some work would be done on tax havens and tax dodgers.
Reference has also been made to the bankers. I find it appalling that some of those who caused this crisis in the first place are still in charge of the banks and stuffing their pockets with huge amounts of money.
One lighter moment came in a delightful spat over the cap on housing benefit, when our well beloved Mayor of London described the effect as being like that of ethnic cleansing in Kosovo. He was then forced to withdraw the remark, no doubt due to some public school loyalty. However, what was missing from that argument was the reality. Housing benefit payments are so high in the centre of London because rents are so high, and they are pushed up by people who are rich. Ordinary workers can no longer afford to stay and live in London, whether in rented or in any other kind of accommodation, without some support.
My third and main point is that, although I agree with everyone who has said that we must cut down waste and increase efficiency in the public sector—indeed, that is what the Labour Government wanted to do—I cannot accept, having thought about the matter again and again, that the pressure on government to cut the deficit is as strong, compelling and powerful as Ministers pretend. I just do not believe it. To whom do we owe this money? Who are the debtors? We have not had any mention of them so far. Do we owe the money to some celestial pawnbroker or some global loan sharks, who will come and do us in if we do not repay?
If the Chancellor and the Government’s spokesman today in the Lords are to be believed, the money is owed to foreign Governments and to foreigners, who are prospering at our expense. I wondered whether that was right, so I tabled a parliamentary Question, which the noble Lord answered. In fact, the debts to all the foreign countries and foreign private bodies taken together represent less than 30 per cent of our total indebtedness. Of the rest, which is more than 70 per cent, 30 per cent is owed to UK insurance corporations and to pension funds—no doubt some of our pension funds here—and 27 per cent is owed to the Bank of England, 10 per cent to other financial institutions, 7 per cent to banks and the rest to households, local government and public corporations.
In his introduction, the Minister claimed that the coalition Government’s actions are responding to the demands of our debtors. Perhaps in his reply he could say where those demands are coming from. Which of our debtors are demanding that we take this action? I certainly do not see it. Perhaps the credit rating agencies were demanding it, but I sometimes wonder whether too much attention is paid to them, given that they are private organisations based in the United States, Canada and Japan. Surely we as a country can join together with other countries and take some responsibility, and some control and authority, over what the credit rating agencies say.
I believe that the CSR is not only unfair but unnecessary. The Tories are using it as a totally false pretence to justify what they have wanted to do for a long time for ideological reasons. The Liberal Democrats are their hapless human shields. They deserve the greatest blame for these cruel and unfair cuts, because of what they said before the election and what they are now doing, which is entirely the opposite.
Lord Foulkes of Cumnock
We have sat through nearly eight hours of debate to which a large number of Members have contributed. Would it not be courteous to this House if the Minister actually replied to the debate instead of repeating the speech he gave earlier?
Lord Sassoon
I am struck by the contrast of the optimism that we have heard today from businessmen in this House and those who are not businessmen but have clearly been talking to business people on the one hand, and the pessimism on the other hand of the academic economists and others who, even though we have had three quarters of strong growth, want to see disaster coming round every corner. I do not make any judgment about who is responsible for the growth, but I think we can agree that we have had three quarters of strong growth. Yes, the recovery will be choppy, but we have heard from my noble friend Lord Bates just how business in the north-east of England is looking forward and generating jobs for the future. We have heard similarly from my noble friend Lord Plumb about how agriculture will play its part. My noble friend Lord Allan of Hallam has explained how the use of data and technology will assist the recovery. These are the pointers that show us how the economy is going to generate sustained growth. The noble Lord, Lord Eatwell, keeps saying that nobody knows. It is the businessmen of this country who write letters to the papers, urging us on with the deficit reduction we are set on, who know how the recovery is going to be sustained for the future.
While I do not agree with the doubts of noble Lords opposite about the overall judgments made by the Government, I do agree with some of the noble Lords opposite in a lot of what they said—the noble Lords, Lord Myners and Lord Haskel, for example, on the need for better infrastructure. That is precisely why we added nearly £9 billion of expenditure on infrastructure in this spending review. I agree with them on the need for investment in innovation, which is why we are investing £220 million in innovation centres and why we are investing £1 billion in the critical new technology of carbon capture and storage. Similarly, my noble friend Lord Newby identified science and apprenticeships as critical to growth. That is why we are protecting science spending in cash terms and why we are significantly gearing up on the number of apprenticeships compared with the plans of the previous Government.
Overall on growth, I was particularly struck by the contributions of my noble friends Lord Lamont of Lerwick and Lord Stewartby. They remind us that Conservative Governments have been here before, that Conservative Governments have taken us out of recession and rebalanced the economy, and we will do it again. For example, in the early 1990s, the public sector was reduced not by 490,000 but by 690,000 employees. At the same time, in the 1992 to 1996-7 period, the private sector generated 1.7 million jobs. I have every expectation—Members opposite may not—that the private sector again will rise to the challenge.
The second principle that I set out at the beginning is that our choices should be fair. We have heard some powerful speeches today, particularly from the noble Baronesses, Lady Hollis of Heigham and Lady Campbell of Surbiton, reminding us just how difficult it is to reshape the welfare system in the radical way that we intend at a time of considerable retrenchment in the public finances. I shall take away the points that they and others have made. In particular, I note carefully the concerns of the noble Baroness, Lady Campbell, about the mobility component of disability living allowance.
The spending review focuses support on those who need it most. It shifts the focus from welfare payments to services that improve social mobility in the longer term and to work incentives. The Government have sought to protect the most vulnerable. Working-age women, for example, tend to benefit disproportionately from health spending, which we have protected, and older women also benefit from additional resources for social care.
The universal credit will clarify and increase work incentives. Work will pay and will be seen to pay, but we must not rush the universal credit. As the noble Baroness said, it will take us two Parliaments to do that, because it is a difficult project and we must get it right.
We have also heard a lot on how young people will progress from care to university—points were made in different ways by the noble Earl, Lord Listowel, and the noble Baroness, Lady Nye. The Government are concerned to make sure that young people from the most disadvantaged homes get every opportunity. We are encouraging social mobility through maintaining Sure Start and extending early-years care. From 2012-13, we will introduce for all disadvantaged two year-olds substantial school premiums. The Government are also protecting the ability of those on lower incomes to go into higher education, including through a scholarship fund of £150 million by 2014-15.