The Economic Implications for the United Kingdom of Scottish Independence

Lord Lyell Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Lyell]

My Lords, I shall not attempt to follow the noble Earl, whose family goes right back into Scottish history, even to the death of James I in Perth in 1437. We Lyells are mere pawns on this massive chessboard of Scottish history. I am a resident of Angus and declare such interests as are in the register. I have one other particular interest to declare and I was thrilled and happy to hear the wonderful comments and support of the noble Lord, Lord Shipley. I am a member of the Institute of Chartered Accountants of Scotland. I am proud of this and declare that interest. That is why I thank my noble friend Lord MacGregor. If I may take 10 seconds of your Lordships’ time I will say that his is an outstanding report, quite one of the best that I have had the pleasure of reading—and even understanding—in all my years in your Lordships’ House, because it sets out a number of problems and queries.

Originally in 1962 I thought the symbol of the Institute of Chartered Accountants of Scotland was a vulture with the word “vigilance” underneath. That cost me three extra weeks of working on a Saturday. In fact, the motto is “seek the truth”, which is exactly what my noble friend and his committee have done, and I as a Back-Bencher and possible Scottish taxpayer thank them very much for their work. With the amount of material it contains, the report is almost indigestible, but where it goes into detail it is perfectly relevant, enormously helpful and very clear.

With your Lordships’ permission, I shall concentrate on chapter 7, dealing with fiscal aspects and tax. I ducked low when I heard the comments of my noble friend Lord Forsyth about stamp duty and landfill, and this happy new institution known as Revenue Scotland. It sounds friendly, but I wonder how it will develop and grow. I was rather cynical and thought that I would add the comments of the famed Frenchman Jean-Baptiste Colbert, who said that the art of taxation was to pluck the feathers from the goose until it either does not squeal or you get away with it. Colbert, who lived from 1619 to 1683, was chief minister of Louis XIV. He finished that aspect of his life and, indeed, died in 1683. I hope it was not plucking geese that hammered him, but you never know.

Discussing personal tax in Scotland has been like a shuttlecock going between my noble and learned friend on the Front Bench and my noble friend Lord Forsyth. Who will and who will not be a Scottish taxpayer? My noble friend Lord Forsyth, my noble friend Lord Courtown, who, alas, is not here, and I have an annual ski race in Switzerland. Once a year we head down the ski run, terrified. There are 46 gates and an icy slope and I wonder what will be new this time. Will I survive or will I fall? It is exactly the same with the definitions of who will and who will not be a Scottish taxpayer. Perhaps my noble and learned friend will write to me in the course of the next week or two about any developments or any new concepts of the Scottish back-tax payer since his last comments when he spoke in a debate with my noble friend Lord Forsyth.

I refer your Lordships to paragraph 180 of the excellent report of my noble friend’s committee. It looks at the lack of data about who would be an identifiable Scottish taxpayer for the purpose of income tax and the Scottish variable rate. Paragraph 94 refers to the Institute of Chartered Accountants of Scotland which stated:

“Let no-one be misled, there are no official statistics for tax paid by those in Scotland”.

That was referred to by the noble Lord, Lord Shipley. It seems there is even now no definite basis on which to decide who is or is not a Scottish taxpayer and we have only two years to go before we have to start thinking about what to do.

The report states that in 2009-10 the top 1% of Scottish taxpayers paid £2.1 billion. Whether the individuals total 4,000 or 2,500 I could not be sure—it depends on the definition by Professor Bell—but the amount of income tax they paid was £2.1 billion. That seems a fair amount. Simple arithmetic shows what is being paid by these individuals. The Scottish variable rate has been mentioned and is part of the calculations referred to by my noble friend Lord Mar and Kellie. If this system is put into effect it will mean that each and every taxpayer in Scotland may well have to fill in not one, but two tax returns. The Scottish variable rate, as presented now, will have differing rates and allowances. This takes me back to my early studies of tax law in Scotland in 1962 and earned and unearned income. Earned income is spelled out in the Scottish variable rate in the Scotland Act and unearned income will be pensions and rents. I hope that I am not being unjust to my noble friend Lord Forsyth, but he indicated that one of the many thoughts he had was that every pensioner south of the border would scuttle north of the border because their pensions and other non-earned income would not be subject to the Scottish variable rate. I hope I am not maligning him. He may take it up later if I am.

Some chartered accountants sent me a wonderful briefing saying that they were not aware that the question of finance and tax was of paramount importance to all Scots. Indeed, they referred to the three “f”s of football, fishing and fashion as being of much more interest. I was not necessarily aware of that—certainly not looking at the fashion in Kirriemuir on a winter day. However, I am immensely grateful to my noble and learned friend, who has given so much help so far. Will he now confirm to me that pensions will be part of the Scottish variable rate? I glanced at an instructive programme over the weekend which said that 90% of the mortgage and pension products of the Scottish financial industry go to customers and clients with a non-Scottish postcode—I assume that is across the border in what might well be a separate country.

That is quite enough about the Scottish taxpayer, fiscal matters and chapter 7. However, I thank my noble friend for his excellent report. Even I can understand it and I hope that if these comments are reported in Scotland, chartered accountants will not kick my shins too hard because I hope that I have got it right.