Scotland Bill

Lord Lang of Monkton Excerpts

Tuesday 28th February 2012 Lords Chamber

[Lord Foulkes of Cumnock]

I wish I had not given way; that intervention was not all that helpful to my argument. If the noble Lord, Lord Steel, David Cameron and I can agree on a way forward, there must be some hope that this rainbow coalition will find out what is best for Scotland and for Britain, and will avoid the dangers of separation and of breaking up the United Kingdom. That is the way forward. I have spoken for quite long enough now.

[Lord Lang of Monkton]

My Lords, I had not intended to take part in this debate because I have not had the opportunity to do the groundwork in order to understand what my noble friend Lord Forsyth’s amendments are all about. The House is greatly in his debt for bringing to our attention the most extraordinary proposal contained in the Bill. Listening to the noble Lord, Lord Steel, I got the impression that he was arguing that we should support the Bill because we know that it is a bad Bill and that the financial provisions will not be adequate for Scottish needs. I am happy to let him intervene and correct that if I am wrong, but if he does so I know that several other people have now argued almost exactly the same point. Personally, I believe that if a Bill is bad you should not pass it, which is why in my Second Reading speech I called for it to be withdrawn. To pass a Bill because you know it is bad seems to be fundamentally wrong.

We know that the Bill will not meet the needs of the Scottish finances because in order to do so it would have to ensure that as the Barnett formula was withdrawn over time, Scottish incomes rose at the same level at least as UK public expenditure has done over the years. Research done by a couple of academics, Professor Hughes Hallett and Professor Scott, discovered that in the eight years to 2008 there was a differential between those two measurements of 0.21 per cent per annum. Over a period of time, Scottish incomes were not rising as fast as UK revenue.

There are countless arguments which could explain why the Bill cannot work and that the finances provided by this 10 per cent tax discretion will be inadequate, but that alone seemed to be a telling one. I noticed that the answer given by the Treasury in previous discussions in another place—I would be grateful if my noble friend Lord Sassoon addressed this matter in his wind-up—was that that had been true over the past eight years but would not be true over the next five years because public expenditure has been heavily reined in. I suspect that incomes in Scotland are also being pretty heavily reined in, particularly because there is a higher preponderance of public servants whose numbers are likely to be reduced and whose incomes are being controlled, and partly because the Scottish economy is in a very much poorer state than the rest of the United Kingdom’s.

One could dilate on a whole load of other reasons why the finances will not work, but the provision in the Bill to create a new tax seems to have been inserted subtly and quietly by the Government because they, too, know that the provision will be inadequate. With the Bill we are not talking about a provision to help Scotland take control of its finances and create a new accountability; in fact it is to demonstrate the complete inadequacy of provisions of this kind for Scottish accountability. That means that it is not a Bill at all but a Trojan horse.

Many noble Lords seem keen to use the failures of the Bill, which they all discern, as a springboard to bring in another Bill to create devo-max, if you like to call it that, more high taxation and other measures. Almost every measure that the Scottish Government might like to control in due course, like pensions responsibility and social welfare, will reveal further inadequacies in the Scottish capacity to provide for them once they are transferred out of the United Kingdom. Noble Lords are creating this springboard towards separation where, under what they call devolution, we shall be independent in Scotland in all but name, and possibly ultimately in name as well. That would create a situation that is not what we are supposed to be debating, so the whole debate is being conducted under a cloud of self-deception in the hope that no one will notice that failure is built into the provisions of the Bill.

My noble friend Lord Forsyth has put his finger on this point extraordinarily effectively, and I am ashamed that I had not noticed it myself when reading the Bill. I ask my noble friend on the Front Bench to address this issue and explain why the provision is there and how he thinks it will be used in future.

[Lord Browne of Ladyton]

My Lords, I agree with the noble Lord, Lord Lang of Monkton, that we owe a debt of gratitude to both my noble friend and the noble Lord, Lord Forsyth of Drumlean, for the amendments that they have brought forward to this part of the Bill and for the way in which they have put forward the arguments that have opened this debate.

This is the heart of the Bill. It is an important constitutional Bill, as I said in my opening remarks today when the Committee convened. I also said that noble Lords could be forgiven for thinking otherwise, given the management of its passage through the Houses of Parliament. I regret that. To the extent that I have agreed on occasion to days and dates for the management of the Bill, on reflection I now regret doing that because it is such an important constitutional Bill. No Members of the Committee should be mistaken that this is not a Bill of constitutional significance and of potential practical significance for the people of Scotland. However, without the provision that noble Lords seek to delete with their respective amendments, I do not believe that the Bill could be described in these terms at all. What was left of the Bill would be far less significant. Indeed, the Secretary of State for Scotland, Michael Moore, said in his evidence to the Scottish Affairs Select Committee that without this provision, this would be,

“a smaller, less impressive Bill”.

Those are the words that he used and they are recorded not only in the evidence that he has given but quite clearly in volume I of the fourth report of Session 2010-12 of the Commons Scottish Affairs Committee, to which I shall refer later on because it raises a number of other important and serious issues that need to be addressed before we conclude our deliberations on the Bill. He said that it would be a smaller and less impressive Bill, and that view is reflected in the Select Committee’s report.

--- Later in debate ---

[Lord Sassoon]

No; the point I made was that it went through this House, as would an order as envisaged here. Any number of points can be made. The principal point I addressed was the question of whether this House would be circumvented in some way by the introduction of a proposal for new taxes for Scotland. The answer is: unequivocally not, whether by an order or by primary legislation.

I would like to move on, because I have now laid out the full process here. It is important to register again the question of accountability, and the importance of the new accountability for the Scottish Government that is given here in the proposal that, for the first time, the Scottish Parliament will have the facility—with the approval of this Parliament—to set new taxes. It means that the Scottish Government will be able to find ways to deliver their desired policy outcomes and potentially raise additional revenue. As well as assisting policy-making in Scotland, the ability to propose tax solutions will itself increase the accountability of the Scottish Government and the Scottish Parliament, which is of course the main purpose of the Bill.

The measures in Clause 28 will correct an anomalous situation whereby the Scottish Parliament can implement tax policy changes through only what Calman described as the backdoor of local authority taxation. At the moment, only local taxation is devolved to Scotland. Calman noted that the current situation incentivises the Scottish Parliament to achieve its policy aims through local taxes even though they might be more effectively achieved through devolving taxes which are reserved. Again, it is important that we reflect on that point.

Not only that, but introducing makeshift local taxes in lieu of the power to raise them nationally would mean that the UK Government and this Parliament would have no power to intervene even if there were implications for the wider UK tax system. The powers granted here would at least allow for a discussion of new taxes between Holyrood and Westminster that in many cases could result in better outcomes for both Scotland and the wider United Kingdom.

Although I suspect that we may come back to this matter in more detail in later clauses, I want to address in headline terms the question of my noble friend Lord Lang of Monkton on whether Scotland will be better off or not. I know that there are questions about what the evidence from the past shows and how much credence should be given to that past analysis. But in simple terms, Scotland will be better off under the proposed arrangement if tax receipts grow faster than public spending than they would under the current block grant system and vice versa. It is not possible to say exactly what the impact will be but the key point is that this Bill delivers accountability to the Scottish Parliament and not a guaranteed financial settlement.

[Lord Lang of Monkton]

I believe that the prediction my noble friend just quoted is for the five years from 2010 to 2015. I do not believe that but I accept that that is a Treasury view. However, the powers under this Bill will not come into force until about 2015. If my noble friend believes that the Scottish National Party, the Scottish Executive, are keen to have these tax powers, which we have been debating extensively this evening, simply in order to cut them, I cannot agree with him on that either. The fact is that they have vast ambitions for increased public expenditure. My argument is that they will have to increase taxation not just to increase expenditure but to keep the standard of living and government expenditure in the same place.

[Lord Sassoon]

My Lords, the directional effect that I have set out for the effect of what is proposed in this Bill compared to the current arrangements is clear. The question that people have is, on particular projections of growth and spending, what the effect would be. Of course, it is possible to give only the worked example of growth and spending based on the current spending settlement round and the current projections of the Office for Budget Responsibility. There is no question that you can forecast for one period or any other period. It entirely depends on the assumptions you want to make about the performance of the Scottish economy and the policy decisions made by the Scottish Government about expenditure.

The key point I come back to is that it transfers a significant amount of responsibility and accountability for this balance to the Scottish Parliament, which of course is fully accountable to its electors. That really goes to the absolute heart of what we are talking about and it is why I am grateful to my noble friend for drawing attention to the point.

I think that I should bring this discussion to a conclusion—