Scotland: Smith Commission

Lord Hamilton of Epsom Excerpts

Thursday 27th November 2014 Lords Chamber

[Lord Wallace of Tankerness]

My noble friend makes an interesting point, which I am sure my colleagues in the Treasury will note. I recall considering APD during the Calman commission. First, there is no guarantee. My noble friend says that the current policy of the Scottish Government is to abolish it or change the rates, but if they reduce one tax, they have to find the money for some of their spending commitments, which are not small, somewhere else. Therefore, I do not think we can necessarily be sure how that power, when devolved, will be used. Many other factors will come into a passenger’s choice of airport other than APD. If one was travelling, let us say, from Hull, I am not sure that one would want to take on the extra journey to go to Edinburgh, bypassing Newcastle, to start a journey. APD is only one part of a passenger’s choice.

[Lord Hamilton of Epsom (Con)]

My Lords, if my noble friend Lord Maclennan is right and this is the first step towards devolution—I must say that I thought that we had had a few already and that there are more to come—are not those steps all a ratchet turning in one direction, which is towards the independence of Scotland? Secondly, if we are granting the right to raise income tax in Scotland and, incidentally, corporation tax in Northern Ireland, does that not completely undermine the single currency of the United Kingdom?

[Lord Wallace of Tankerness]

My Lords, I do not believe that this is a one-way street to independence—far from it. The majority of the Scottish people on 18 September clearly indicated that they wanted to be part of the United Kingdom. The terms of reference of the Smith commission were that these proposals should be consistent with the integrity of the United Kingdom. The principles agreed by members of the commission were that the proposals had to be in the context of a United Kingdom.

That leads into the second part of my noble friend’s question. With regard to Scotland’s fiscal framework and borrowing powers, the report states:

“Borrowing powers should be set within an overall Scottish fiscal framework and subject to fiscal rules agreed by the Scottish and UK Governments based on clear economic principles, supporting evidence and thorough assessment of the relevant economic situation”.

Therefore, considerable tax powers, including on income tax, the definition of a taxpayer, personal allowances, taxation of savings and investment income, will all still be the responsibility of the United Kingdom Parliament. The proposals have to be considered in the context of the remit that was given: to be consistent with maintaining our United Kingdom.