Scotland Bill

Debate between Lord Kerr of Kinlochard and Lord Sassoon

Wednesday 28th March 2012 Lords Chamber

[Lord Sassoon]

No, I am not specifically worried about judicial challenge. I just think that it is reminiscent of debates I am becoming increasingly used to in your Lordships’ House. I am sure many noble Lords are much more familiar than I am with these arguments that regularly come up: if it is so obvious, we do not need to put it in because everybody understands it; or, if it is so clear and everybody accepts it, let us put it in. I have suggested to your Lordships that the criteria, based on the limited discussion that we have had here, are widely accepted. They should be debated if your Lordships want to debate them properly.

We do not have the opportunity here, and have not had it in Committee, to debate the criteria in detail because we have a “take it or leave it” provision to put them in. I believe that the proportionate, appropriate and sensible way forward is to set them out in the first report that we will require, if the House agrees, under Amendment 29. At that point, if your Lordships want it, there could be a specific debate on the criteria.

[Lord Kerr of Kinlochard]

The trouble with that is that it is retrospective. It is about things that have happened and the use that has been made of powers. That is what reports are about. The safeguards in the amendment tabled by the noble Lord, Lord Browne, and in the Command Paper are about affecting the procedure prospectively when the Parliament in Scotland wishes to introduce a new tax and the Government in London are considering an Order in Council. I see a huge difference there, and it would be very good to have these in the Bill. I have not heard a convincing argument against that from the Minister.

[Lord Sassoon]

I believe that the noble Lord, Lord Kerr of Kinlochard, has not quite got the construction right. The report proposed under Amendment 29 will be on the implementation of the Bill. The first report will come forward 12 months after the Bill is passed and will be about implementation matters. One of those implementation matters, which I am making a commitment to include in that report, is around the Command Paper criteria. It will be a report on implementation and will include things that have been done in the period since Royal Assent, which will include confirmation of the criteria. They will then be debated. It will have prospective effect in the sense that it is most unlikely that in that time any new proposals will have come forward for the devolution of further tax powers. Therefore, the debate on the criteria will happen before they take effect when any further proposals for devolved taxes come forward. The noble Lord shakes his head, but in that sense it is looking forward and is entirely consistent with the nature of the report that we envisage. I hope that reassures him on that point.

The second commitment around this issue, which it is important to get on the record, is that the Government are happy to commit to publishing an assessment on any occasion that the power is used. That report will confirm how any order brought forward under the new tax provision meets the criteria. Again, this information will not just be used by the Government in their assessment of the criteria coming forward, but will be wholly transparent to your Lordships’ House and be part of what your Lordships will have available to them to satisfy themselves that the Government are properly considering the criteria when they come to exercise this power and put an order forward.

The information will clearly need to cover all the relevant criteria included in the Command Paper. It will do so in a proportionate level of detail. I repeat for the avoidance of any doubt, by my noble friend in particular, that the Government have already been clear—I have said it this afternoon—that a number of tax proposals from the Scottish Government have already been made without the provision of sufficient evidence and requests have been declined a result.

On Amendment 16, I hope that I have responded to the specific request of the noble Lord, Lord Browne of Ladyton, to come forward with a new and positive proposal, which I hope addresses the substance of his amendment. I respectfully ask him to withdraw it.

Scotland Bill

Debate between Lord Kerr of Kinlochard and Lord Sassoon

Thursday 15th March 2012 Lords Chamber

[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 Kerr of Kinlochard]

I am lost. I fear that I do not understand this no-detriment principle. I may be showing my ignorance coming late to this subject. I thought that I understood the rationale for the Scottish rate: the UK system would remain the same but there would be this variable—take 10 per cent off and top it up. I assume that the allowances, thresholds and system would be the same over the UK. If, for example, a Government believed that more growth could be obtained by going for a lower rate of tax, or higher allowances, and thus lower revenue, that would be the case across the United Kingdom, including in Scotland. The only thing that would move would be the variable rate if the Scots chose to move it. What is this detriment? Are we saying that the Scots could enjoy the advantages of the greater growth in the United Kingdom but that the detriment to their revenue would be compensated through a block grant system? That would be winning twice. That cannot be what is intended. Will the Minister explain how the no-detriment principle works?

[Lord Sassoon]

The noble Lord has explained the construct absolutely correctly, so I have no problem with that at all. However, if the UK Government decide to raise personal allowances to take more people out of tax, that will flow through to a reduction in the receipts to the Scottish Government under the construct that he has described. The UK will compensate the Scottish budget through the block grant for such a reduction of the tax base for Scotland, based on forecasts by the independent Office for Budget Responsibility.

--- Later in debate ---

[Lord Kerr of Kinlochard]

That is marvellous news. I do not have a house in Scotland now but I need to get up there fast and get a close connection. If, on the Minister’s example, the allowances improve, that will suit me personally, but the Scottish Government and the First Minister will have more cash through compensation to make sure that the services I draw on in Scotland are in no way diminished.

[Lord Sassoon]

I would not want to get the hopes of the noble Lord or anyone else up too high. It will just bring Scotland back to where it was before we started this. It is not that Scotland will gain; it will just make sure that Scotland is brought back to where it was going to be before the change.

[Lord Kerr of Kinlochard]

May I ask the noble Lord about the economic benefits of the change and the reduction in the tax take, and to confirm that it would not suffer a reduction in its tax take?

[Lord Sassoon]

That is correct, and so it should be. If the UK Government decided to rebalance the taxes in some fundamental way, of course it would be wrong to take away the expected income tax take for Scotland that itself is reflected in all the calculations of the block grant. Again, I can attempt to see whether I can put down a worked example to show how the money flows will go, but this is not intended to give Scotland some great bonanza. It is a two-way balancing mechanism to make sure that neither Scotland nor the rest of the UK is disadvantaged by the way in which the effect of personal allowance changes will flow through the system.

--- Later in debate ---

[Lord Kerr of Kinlochard]

My Lords, I thank the noble Lord for trying to cast light into my ignorance, but it is getting worse; the fog is getting thicker. Does the no-detriment principle have a reciprocal? If not, why not? Should there not be a reciprocal? Let us suppose there was a tax change that widened the tax base. Would that be no detriment just to the Scots, or no detriment to the UK? Before the Minister responds, perhaps I may make a second point. I see two little gleams of light from the lighthouse in the fog. One was the suggestion made by the noble Lord, Lord Browne, that it might be good if one could set out on paper how this is to work. I should have got there long ago, but I had not realised it. That is central to the issue of accountability, but I had not quite got it. I turn now to the noble Lord, Lord Stewartby, for the second light. Since it is so central to the issue of accountability, should it not be on the face of the Bill?

[Lord Sassoon]

First, I shall repeat what I believe I said earlier. This adjustment would go two ways. We have talked about so many things as being a form of one-way traffic this afternoon, but that is not the case. However, we want to make sure that the Scottish Government are accountable for what they are responsible for under the construct in this Bill, which is the effects of their powers to set a Scottish rate of income tax. They are not accountable either for a windfall gain or a windfall loss—if you can have a windfall loss—resulting from things that are done by the UK Government subsequent to the setting of the block grant adjustment. If we set out a worked example of how this will operate, I would like to think that it will be made clearer.