Scotland Bill

Ann McKechin Excerpts

Tuesday 21st June 2011 Commons Chamber

[Mr Gauke]

We are talking about preliminary numbers, which I have put forward on the basis of early estimates produced by the Treasury this week. We are keen to engage with the Scottish Government, just as we have with the Northern Ireland Executive. I am sure that there will be exchanges of correspondence, meetings, discussions and a full examination of both the numbers and the methodology used in producing them. We are more than willing to engage in that process, but we are also waiting for the Scottish Government to offer their analysis of the impact of devolving corporation tax, of what the costs would be, and of the economic advantages and disadvantages. We know that the Scottish Government take a great interest in this—they make this point on a regular basis—but we await their analysis.

[Ann McKechin (Glasgow North) (Lab)]

I think I am correct in saying that the Minister for Culture and External Affairs in the Scottish Government wrote to Members before the Easter recess suggesting clauses to be added to the Bill, including one on corporation tax. On that basis, is the Minister saying that the Scottish Government provided no information on their analysis of the impact of this tax? Since first requesting the information, how long has he waited for it?

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[Iain Stewart]

Forgive me, but I am going to finish now. Many other Members wish to speak, and I look forward to the Minister’s comments.

[Ann McKechin]

I welcome the very wise remarks of the hon. Member for Milton Keynes South (Iain Stewart). He always provides us with great expertise on Barnett formula issues, and on the point about having hard evidence, because one key component of our debate about the Bill has been the evidence for the various fiscal arguments that have been proffered over the past few months.

Borrowing powers were not in the original Calman recommendations, but we certainly welcome the inclusion of that tool for the Scottish Government. The Scottish Parliament’s Scotland Bill Committee, in its report, and the Select Committee on Scottish Affairs both recommended that the powers be brought forward from the proposed date of April 2013, and as the Minister will be aware, we have already called for their advancement to 2012. That proposal is in amendment 2.

The Government announced in last week’s written ministerial statement that they are to bring forward to 2011 pre-payments, in order to allow work on the Forth replacement crossing. That is not the same as bringing forward the capital borrowing powers in the Bill, and it would be helpful if the Minister in his winding-up speech were able to confirm that the full capital borrowing powers will be available from the next financial year, if the Bill is on the statute book by that point.

I also welcome the announcement in the statement that the Government are removing the requirement for Scottish Ministers to absorb the first £120 million of tax forecasting variation within their budget, giving them greater flexibility. A number of comments have been made about extending the borrowing limits, and that should be a matter of negotiation between the two Administrations. The Secretary of State says that he views the figure of £2.2 billion as a floor rather than as a maximum, and that is welcome.

My right hon. Friend the Member for Birkenhead (Mr Field)—

[Kate Hoey]

He’s gone to the loo.

[Ann McKechin]

My right hon. Friend and my hon. Friend the Member for Vauxhall (Kate Hoey), who I understand has reached a memorable birthday, spoke to new clauses on the Barnett formula, and the hon. Member for Milton Keynes South and others pertinently said that there is no easy solution. [Interruption.] I am pleased to see that my right hon. Friend has returned to his seat. In the financial year 2009-10, however, the average per capita expenditure in Scotland was £9,940, while in London the figure was £10,182. Indeed, it has been stated that the move to a needs-based system in countries such as Australia has resulted in the same amount of debate about what is required.

Barnett should not be confused with devolution. Devolution allows the Scottish Government to make their own decisions on a range of issues, such as prescription charges, which do not apply in England, but it is separate from Barnett formula issues. The Barnett formula is relatively simple and objective, and as the Calman commission stated, any changes to it would be difficult to determine and “a highly political process”.



On the new clauses on corporation tax, for the record the hon. Member for Dundee East (Stewart Hosie) spoke about fiscal autonomy for 42 minutes, not 14. However, we are not necessarily any clearer about what impact his proposals would have on the electorate in Scotland. The Calman report specifically rejected the devolution of corporation tax. Paragraph 3.113 of the final report says that

“we therefore reject the devolution of corporation tax. Nor, especially in view of its volatility…from one year to another, do we see it as a candidate for tax assignment.”

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[Mark Lazarowicz]

No doubt there is a theoretical argument that cutting corporation tax for smaller or new businesses would encourage them to grow and expand, but can my hon. Friend explain how cutting the corporation tax paid by Royal Bank of Scotland by 50% would encourage it to bring more jobs into the Scottish economy? Would it not just add to its already large profits?

[Ann McKechin]

My hon. Friend raises a good point. The Scottish Government are advocating a cut in taxes for banks but not for small businesses that do not pay corporation tax. Many employers in the private sector who employ many people do not pay corporation tax, but income tax. Substantially reducing corporation tax would lead to a large cut in public expenditure or increase the burden on income tax payers.

The Scottish Government already have a considerable number of economic levers. They have decided to cut funding to many Scottish colleges—for example, James Watt college in Greenock faces a cut of £5 million. They have cut regeneration funds in many of the most deprived areas, including a 71% cut in the Inverclyde regeneration fund. The test that the Scots will apply is not how many powers anybody has vis-à-vis someone else but how they use them for Scotland’s benefit. [Interruption.] SNP Members chunter on, but they do not have any intervention to make because these are decisions that they have made and they do not wish to take responsibility for them.

[Fiona O'Donnell]

Does my hon. Friend regret the macho element that has crept into this debate? Does she, like me, regret the fact that when Alex Salmond came to Downing street with his two friends and sat down with Government Ministers, there was not a single woman around that table?

[Ann McKechin]

My hon. Friend raises an interesting point about the issues that the Scottish Government have decided not to speak about. They did not come down here to speak to Ministers about the cuts in the welfare reform that will impact particularly heavily on women. They did not come down here to talk about the crisis in our care homes as a result of the imminent collapse of Southern Cross, which affects elderly people and their families right across the country. They did not come down to talk about the increase in the pension age, which will impact on women in particular. My hon. Friend is right that when it comes to issues that affect tens of thousands of people and women in particular, who make up the majority of the Scottish population, the SNP is sadly silent.

[Dr Whiteford]

The last time I looked, welfare reform and pensions were matters reserved to this House. I certainly contributed to the debates on those matters in this House, and the last time I looked I was a woman. It is sad that when we discussed the uprating proposals in the Pensions Bill, most Labour Members, with a few honourable exceptions, sat on their hands. It was left to just a few of us on the Opposition Benches to oppose the increases proposed by the Government.

[Ann McKechin]

I do not discredit the hon. Lady for making strong statements in this Chamber. However, I find it extraordinary that the First Minister, who feels that he can speak about any issue that impacts on Scotland and who has more powers, does not take the opportunity to speak about the issues that matter to ordinary people in Scotland every day of the week.

I will return to the Bill, as I am sure you would wish, Madam Deputy Speaker.

[Mr MacNeil]

Will the hon. Lady give way?

[Ann McKechin]

The hon. Gentleman is jumping up to speak.

[Mr MacNeil]

Will the hon. Lady clarify whether she is saying that she would welcome the First Minister coming to Downing street to talk about welfare reform and pensions?

[Ann McKechin]

If the First Minister had anything sensible to say, I would, but as yet, I have not heard it. It is a bit like the corporation tax issue—[Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) needs to calm himself and not get over-excited. The Scottish Government have had many weeks to produce detailed analysis. They have complained that things have been rushed and that we have not had figures from the UK Government on a variety of issues throughout the passage of this Bill, yet they cannot produce the detailed evidence and analysis that would allow people in Scotland to judge whether their calls have validity.

The hon. Member for Dundee East was given five opportunities this evening to explain what the impact would be on Scottish public expenditure if there was a cut in corporation tax. He said in Committee:

“I would like it cut over a number of years”.—[Official Report, 14 March 2011; Vol. 525, c. 70.]

Members may be interested to hear that that has not always been the Scottish National party’s policy on corporation tax. In 1988, a certain Alex Salmond was suspended as an MP from the House of Commons for attacking the Tory Government’s reduction in corporation tax.

[Pete Wishart (Perth and North Perthshire) (SNP)]

I am grateful to the hon. Lady for the history lesson. Is this what we are going to get from the Labour party for the next few years? I want to encourage her, because the negativity and can’t-do attitude that has permeated the Labour party is partly responsible for the overwhelming defeat that it suffered at the Scottish elections. Please carry on.

[Ann McKechin]

If that is the level of intellectual debate that we can anticipate from the Scottish Government and their colleagues at Westminster over the next five years, I think Scotland will be in a pretty poor state. Of course, we now have a hierarchy in the Scottish Government depending on whether one is a good Scot or a bad Scot. That is a level of debate that extends even up to judges in the Supreme Court.

If corporation tax was cut in Scotland, public spending would have to be cut in line with it, as we have heard today. The hon. Member for Dundee East suggested that the Scottish Government would take the power, but apply the same rate. That suggests that the power would not provide any benefit or disbenefit, except that they would have to administer the tax at a cost. At some point in the future, they would then apply the tax.

There are questions to which people in Scotland want answers. By how much would the Scottish Government cut corporation tax? The hon. Gentleman spent 42 minutes talking this evening and did not confirm that figure once. What would be the time scale for the cut in corporation tax? Would it be done over two years, three years or four years? We do not know. That is despite the fact that the Treasury, in its evidence to the Scotland Bill Committee in Holyrood in March, stated:

“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”

That is understandable given the maturity of the Scottish economy and, as the Exchequer Secretary mentioned tonight, the many large plcs that already have their registered offices in Scotland. Even Northern Ireland’s First Minister, Peter Robinson, believes that Northern Ireland is a special case and has warned Alex Salmond that Scotland could lose up to £1.5 billion if it follows through the bid to set its own corporation tax. Anyone would need answers to the questions I have asked if they are to decide that that is a good idea.

The SNP is reluctant to say whether it thinks Scotland should be a high-tax nation or a low-tax nation. Does it believe in high-quality, good value public services, or does it want a lower public expenditure base, which would mean fewer nurses, doctors and police? There are consequences to that. Does it want an increase in income tax? [Interruption.] The hon. Member for Na h-Eileanan an Iar chunters about scaremongering, but he has failed to answer any of those questions. He should feel free to educate us about the detail of the SNP proposals.

[Fiona O'Donnell]

May I issue a word of caution to my hon. Friend about encouraging SNP Members to talk for any longer? The hon. Member for Perth and North Perthshire (Pete Wishart) said in his opening remarks that he could talk for days and days about the Bill. Is that not exactly the problem? Every hour the SNP spend talking about these ideas in the House is an hour when we are not talking about the issues that the Scottish people really need us to address.

[Ann McKechin]

I can understand my hon. Friend’s frustration. It is disappointing that the SNP has not taken the opportunity this evening to provide an explanation and analysis of why they think the change would be helpful.

[Dr Whiteford]

Will the hon. Lady give way?

[Ann McKechin]

I would like to continue this point.

Does the SNP believe that a further tax cut for banks, which pay the majority of corporation tax in Scotland, is a progressive policy? Does it believe that there should be a shift from corporation tax to personal income taxation, as has been the case in Switzerland, for example?

[Mr MacNeil]

That’s a poor country, isn’t it?

[Ann McKechin]

Actually, there has been very little increase in growth in Switzerland. There is no direct correlation, and the evidence is weak.

As I have said previously, and as a report that came out this week clearly indicated, many different levers of economic growth are already in the hands of the Scottish Government, but they have either chosen not to use them at all, or when they have chosen to use them it has had a detrimental effect as well as sometimes having advantages.

[Dr Whiteford]

rose—

[Ann McKechin]

The Scottish Government have to make those choices, and like my hon. Friend the Member for East Lothian (Fiona O'Donnell), I would like to get on with the businesses of discussing how they are going to use their powers, what they intend to do with them and how they will benefit people. Instead, the SNP has obsessed over process for an indeterminate period. [Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Member for Banff and Buchan (Dr Whiteford) has to resume her seat when it is clear that the person who holds the floor, in this case Ann McKechin, is not giving way.

This is not a game, it is a debate, and it would be good if all Members in the Chamber behaved in a respectful way. The heckling is getting a little out of hand, and I am sure some Members would not like me to point out who is doing it at the moment. Perhaps we can return to the debate.

[Madam Deputy Speaker]

That is not within my gift, Mr Field, but let me say that I sincerely hope so.

[Ann McKechin]

I certainly hope that my right hon. Friend will have the time to do so, and I hope to conclude my remarks fairly shortly, but I wish to move on to the amendments on excise duty.

The issues relating to excise duty constitute a relatively new demand since the completion of proceedings in Committee. They were not part of the discussions of the first legislative consent memorandum Committee, but will doubtless be discussed in detail by the second LCM Committee. I would welcome further analysis of the proposal’s methodology.

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[Stewart Hosie]

Notwithstanding the hon. Lady’s questions, do I take it from her answers that she sees some potential to remove the obstacle that Labour in Scotland found to minimum pricing? The Labour party’s argument was that an increase in only the retail price went straight to the UK Exchequer and did not benefit the economy generally or the Government in tackling some of the consequences of drinking cheap alcohol.

[Ann McKechin]

The hon. Gentleman is right to raise the serious problem of alcohol consumption in Scotland. As the Labour group in Holyrood pointed out, simply raising the price and allowing supermarkets to retain the surplus—I think that that was the Scottish Government’s first plan—was neither popular nor logical.

However, it is important to note that excise duty is now subject to an escalator above inflation. The Labour Government introduced it before the general election so that excise duty increases above inflation. Although, following the recession, as might have been anticipated, consumption in England dropped, that has not happened in Scotland to the same extent. There is a significant difference between consumption in Scotland and average consumption in England, despite the identical price and range of products.

Price sensitivity does not seem to apply in Scotland to the same extent as it does in England. That suggests that cultural and social issues are predominantly behind the problem. I do not derive any satisfaction from that. It would be much easier if we could say that a simple price escalation would lead to a reduction in consumption. However, the evidence to date has not shown that that would happen. Indeed, the medical evidence shows that the unit cost would have to be considerably higher than that in the Scottish Government’s proposals to make any impact. Obviously, that would have an effect on the drinks industry, particularly given that much of it is located in Scotland.

The subject is serious. The Scottish Government already have a range of levers at their disposal. The one for excise duty is exceptionally complex and I do not think that the argument for it has been made. Certainly, more needs to be done, but it needs to be based on hard evidence. We also need to realise that some of the things that we would like to do and that we think could work might not be sufficiently strong to make an impact. We might have to reconsider our proposals.

I appreciate that the Scottish Government have begun re-examining the issue because I think that they recognise that providing money to supermarkets was not the way forward. However, the issue is much wider and requires several different measures. The power to ban drink discounting, which the Labour group supported, is already on the statute book in Holyrood. That has still to go ahead. I therefore hope that the Scottish Government will enforce the legislation that they already have on the statute book.

[Mr MacNeil]

First, I observe that on the minimum price of alcohol, the SNP minority Government were supported by a range of professional opinion. However, is not the hon. Lady’s point on the differences between alcohol consumption north and south of the border an argument for pricing within cultures, as opposed to uniform, blanket, one-size-fits-all pricing?

[Ann McKechin]

The hon. Gentleman must recognise that the cost of alcohol has increased by slightly more than inflation over the past 20 or 30 years, when, of course, the increase in incomes has been much greater. The Government’s ability to control that gap is limited.

The other problem is that the total price of alcohol is, to a large extent, made up of different forms of tax. When we increase taxation to more than a certain level, we find that there is an increase in black market sales, as we found when we increased taxation on cigarettes. I do not discount the fact that price can have a bearing on consumption, but the evidence to date in Scotland presents us with a much more complex problem, much of which is about cultural and social values. They are the only things that can explain the difference in consumption north and south of the border. The regimes of alcohol selling are more or less the same, but there is increased drinking at home rather than in public houses. The problem is complex, and a range of measures must be put in place to deal with it. My Labour colleagues certainly want to make changes that will make an impact, and they are prepared to have a serious debate.

[Stewart Hosie]

Finally on that point, and for the sake of completeness, I am sure the shadow Secretary of State would want to confirm that all 17 of Scotland’s public health directors supported minimum pricing, as did the four UK chief medical officers, the British Medical Association, the royal colleges, the Association of Chief Police Officers and many others, including Tennent’s, Molson Coors and Tesco. They saw minimum pricing as an important part of the solution to the problems in Scotland.

[Ann McKechin]

The supermarkets might well have supported minimum pricing because they would receive a good degree of financial benefit from it. However, some medical experts said that on the evidence, the price per unit would have to be a great deal higher than that proposed by the Scottish Government to have an impact. As I said, although the increase in the excise duty escalator, which the UK Labour Government introduced, has had an impact south of the border in reducing consumption, it has not had the same impact in Scotland. Price sensitivity seems to be different north and south of the border, and there are different patterns of consumption. The focus must be on cultural and social values as much as on simple economic values.

On that basis, there are considerable complexities in any such proposals. The Government’s proposals would have an adverse impact on the drinks industry, which has a substantial bearing on the Scottish economy, but the argument for them has not been made.

[Mr Frank Field]

I rise to move new clause 8 and the consequential amendment 23, which stand in my name and the names of my hon. Friends.

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[Ann McKechin]

As we made clear on Second Reading and in Committee, Labour welcomes the Scotland Bill because we believe that it will enhance the devolution settlement. As the Secretary of State mentioned, the Bill was the consequence of a lengthy, evidence-based, serious consultative process that sought cross-party consensus from the very beginning. It reflects many of the recommendations made by the Calman commission, which was established by the then Labour Government following the direct call from the Scottish Parliament for such a group to be set up. Important issues of constitutional change should not be marked by megaphone diplomacy and a never-ending series of demands. Constitutional change must always be based on hard evidence, consensus and consultation, and it should be clearly shown how it will improve the devolution settlement. It is not, for us, a marker on the route to separation.

Labour’s position is that it is not in Scotland’s best interests for the Scottish Government to play constitutional games and demand powers. It is time to start using those they already have, and to knuckle down to the hard task of getting the Scottish economy back on track, lowering record unemployment and generally making Scotland better. Although it is all too easy in the political game to focus on process rather than on policy, the important parts of the Bill are, first, to improve legitimacy and accountability to the Scottish electorate, and, secondly, to use these powers, along with the extensive range of powers granted in the Scotland Act 1998, for Scotland’s benefit.

I would like to spend a little time discussing the Supreme Court new clauses, which unfortunately we did not have time to discuss this evening, and which were not available in Committee. We welcome the fact that the Government did, as we requested, table the new clauses before the Commons stages were completed, and obviously we will want to discuss them in more detail when they reach the House of Lords, but I would like to put on the record what principles should be followed in referring cases to the Supreme Court. Labour fully agrees that the UK Supreme Court should retain a role in determining human rights and European law issues. The UK Supreme Court enables Scots to access justice without the expense and delay of having to go to Strasbourg, and without having to wait for years to have their cases heard. We believe that no one living in Scotland should have less access to the enforcement of their human rights than any other citizen living elsewhere in the UK.

Why would the Scottish Government want to make it more difficult for individuals in Scotland to access justice? Let us recall that it was a famous Scottish case to the Strasbourg Court in the 1980s that brought about the abolition of the belt in schools across the UK when the Court found in favour of two Scottish mothers, Grace Campbell and Jane Cosans. In those days, before the Human Rights Act 1998, cases took years to be heard, and in the meantime tens of thousands of children in Scotland and across the UK were belted right around the place in schools. The Human Rights Act is not about protecting bad people or about an easy escape route from jail; it is about protecting everyone from prejudice and harm.

[Pete Wishart]

I am grateful to the hon. Lady for her history lesson, but she will know, as the Secretary of State does, that the amendments concerning the Supreme Court are totally unacceptable to the Scottish Government, and will be unacceptable to the Scottish Parliament too. May I suggest to her and the Secretary of State that the expert group under Lord McCluskey should be allowed to do its work before anything further is done regarding the Supreme Court in this House?

[Ann McKechin]

What I would say to the hon. Gentleman is that we are aware that the McCluskey review is ongoing, and we will wish to consider its conclusions carefully when it reports. We will return to further analysis of the report in the Lords, which I hope will be available by the time this Bill reaches the other place.

We cannot continue this evening without mentioning the extraordinary attack that the First Minister and his Secretary for Justice made on both the Supreme Court and individual Scottish judges who sit in it, when they stated that the UK courts should have no jurisdiction in Scottish criminal cases. Let us be clear: no one is attacking the right for Scotland to retain its unique criminal legal system—I declare an interest, as a non-practising member of the Law Society of Scotland. However, on the other hand, those attacks smack of a political establishment that is too ready to attack anyone who dares to contradict its mantra, rather than one that is prepared robustly to tackle institutional complacency. It is entirely demeaning to Scotland’s international reputation when Scotland’s leading politician uses the language of the playground bully when describing the key relationship between the Executive and the judiciary. Mr MacAskill has referred to the UK Supreme Court as an “ambulance-chasing court”, despite it hearing on average only one Scottish case a year since devolution, and he has ignored the fact—or perhaps he was totally ignorant of it—that his own Scottish Crown Office is making referrals to the very same court.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend agree that the furore about the Supreme Court over the past few weeks smacks of opportunism, when what she describes has been the situation since the Scotland Act 1998 was passed by this House more than 12 years ago?

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[Ann McKechin]

My right hon. Friend is right to say that this row has emerged from absolutely nowhere, and has arisen simply for the sake of political expediency.

Mr MacAskill—that well-known expert on making sound judgements—also claimed that Supreme Court judges picked up their knowledge of Scots law during visits to the Edinburgh festival, and threatened to withdraw funding. He can now add to his list of achievements that he is the first Minister in any part of the UK who has threatened to close a court by stopping its cheques. Perhaps after such a long-maintained silence over the last two years, the pressure on him was too much to bear.

[Sir Menzies Campbell]

Of the two cases that have proved so controversial, the first dealt with the protection of a person once charged and taken into custody by the police. The second dealt with whether there is a continuing obligation on the prosecution to make available all evidence to the defence, including evidence that might have the effect of exculpating someone who has been accused. Are those two principles not right at the very heart of the Scottish legal system, to which the hon. Lady has just referred?

[Ann McKechin]

The right hon. and learned Gentleman speaks with considerable expertise on legal issues. I do not want to discuss the individual cases, but he is absolutely right that they involved important points of principle that everyone who is concerned about the integrity of Scottish law should take seriously into account.

Mr Salmond has attempted to climb down from the remarks that he made in a Holyrood Magazine interview, but has refused to apologise. “Better late than never” should be the new mantra, but the First Minister does not have a reverse gear. Instead, this whole sorry incident has typified a controlling approach that his spin doctors have tried hard to hide. In his view, there is a hierarchy in our national debate between those who are deemed “good Scots” and those classified as “bad Scots”, and anyone who speaks directly against his view will always be in the latter category, even if they are one of our country’s most eminent legal minds.

[Mrs Eleanor Laing (Epping Forest) (Con)]

I would never claim to be one of our country’s eminent legal minds, but, like the hon. Lady, I am a non-practising member of the Law Society of Scotland. I commend her for her defence of Scots law against the current actions of the Scottish Parliament.

[Ann McKechin]

I am grateful to the hon. Lady, a fellow lawyer. I do not want to turn this into a lawyers’ conference, however, lest anyone should suspect that we have vested interests. More seriously, this is about the tone of the debate and about the relationship between the Executive and the judiciary, which forms the foundation of our democracy.

I noted in this week’s Sunday Herald that some of the First Minister’s own Ministers and MSPs apparently refer to him in private as the “Dear Leader”. References to any similarity with North Korea might seem comical, but this display fits in better with a paranoid one-party state than with a modern, progressive, advanced 21st-century democracy. I certainly do not believe that everyone who supports the SNP or wishes for independence follows that creed—Jim Sillars is a good example of someone who believes in independence but also believes in listening to other people’s arguments—but it certainly has a home within the SNP “cybernat” sphere.

[Mr Cash]

Does the hon. Lady acknowledge that the real problem is that this dispute is not so much about the Supreme Court as about the application of the Human Rights Act 1998 to the Supreme Court? For practical purposes, the Scots are entitled to their criminal law, and that has been the case since the inception of the Union.

[Ann McKechin]

The hon. Gentleman has very particular views about European human rights legislation, but I support it 100%. I believe that the Human Rights Act enhances our legal system, and it is important that people in Scotland should receive the same level of protection as everyone else. The Act is a UK-wide piece of legislation, and it is important that judgments should be made consistently. Accordingly, it is right that there should be one ultimate Court of Appeal that makes important decisions on key points of principle. The Cadder decision, which the right hon. and learned Member for North East Fife (Sir Menzies Campbell) mentioned, was one such decision. It is important to have consistency of judgment, which is one of the parts of our judicial process.

Like most people in Scotland, my domicile arises from birth and not from choice, but I believe that I am exceptionally fortunate to have been born in Scotland at this time in history and I am proud to be a Scot. However, I totally renounce any attempt to mould the politics and culture of the country that I love into one that is marked by a constant placing of the “good Scot versus bad Scot” concept into the dialogue of our public life. That is both dangerous and destructive, and represents a threat to genuine debate. The tactics of the playground bully should form no part of a modern, open Scotland.

Scotland’s legal systems, like any other area of our public life, need to be open to ideas from the outside, and not just from its own legislature. In fact, many of our oldest precepts and concepts are borrowed from a wide combination of other European systems—French, Dutch and Roman as well as English. We have also learned from cases that have occurred in England. It was because we are part of the United Kingdom that one of the most famous cases of tort and delict in civil law, Donoghue v. Stevenson, which took place in my own home town of Paisley, spread across the world. When we genuinely look outwards, we perform at our best; when we revert to inward, defensive complacency, we let our nation down.

This has been an important debate on the future that we see for Scotland. As the Secretary of State has said, the debate will continue over the weeks and months to come, but I want to ensure that it takes place in the context of the hard, reasoned evidence that the Scots demand of us, and that it can be clearly shown to be for their benefit.

Scotland Bill

Ann McKechin Excerpts

Monday 14th March 2011 Commons Chamber

[Iain Stewart]

There will be huge consequences, some foreseen, but others unforeseen. We would need to undertake a huge amount of research to work out how to begin to disaggregate what has been a unitary UK tax system. I am not saying that it is impossible, or that it is something that we should not look at in future, but for the purposes of the Bill, I do not think that it is necessary, because clause 24 makes provision to look at devolving additional tax powers in future.

I am not going to say anything more at this point, because I want to deal in detail with other measures when we come on to the relevant clauses. Scottish National party Members have made a point about air passenger duty and landfill tax. I am perfectly content that measures are being negotiated at European level and elsewhere. Until they are resolved, it would be premature to include the devolution of those taxes in the Bill. I accept that the Calman view was that those matters should be devolved in the fullness of time, and I support that, but it is not necessary to include it at this point. I am therefore afraid that I cannot support the amendments if they are pressed to a vote.

[Ann McKechin (Glasgow North) (Lab)]

What a difference a week makes, as we continue our scrutiny of the Bill after our sitting last Monday. On Thursday, we witnessed a plenary debate in the Chamber at Holyrood on the recommendations in the report on the legislative consent motion. At the conclusion of the debate, there was a vote, and we witnessed a remarkable about-turn, as the Scottish National party supported the motion recommended in the majority report. After two years of sniping on the sidelines, it has joined the three other major parties in Scotland to support the Bill, and I genuinely welcome that.

Who is surprised at the pattern that has emerged yet again? This is a party that did not join the constitutional convention, but supported the devolution referendum. It came into power four years ago, promising that its top aim above all others was a referendum on independence, which was then dropped. The interesting allegations in Wikipedia about the First Minister’s comments on the party’s real aims, rather than all-out independence, add to the mix the overwhelming conclusion that it can talk about independence as much as it wants, but the SNP has never been on the true side of the people of Scotland, which is why it constantly has to play catch-up.

We have had an interesting debate about fiscal decentralisation.

[Stewart Hosie]

I am intrigued by the hon. Lady’s introductory remarks. They bear no relation to the amendments, but that should not surprise us.

There is indeed a very serious matter at stake. We have tabled an amendment to devolve the aggregates levy, which is a recommendation by the Select Committee on Scottish Affairs and by Calman, and will make the Bill better. If we can divide the Committees, will Labour join us?

[Ann McKechin]

We certainly support the principle of devolving the aggregates levy, but I wish to make sure that when we scrutinise the Bill we do so in the interests of the people of Scotland. There is genuine concern about court proceedings—interestingly, the hon. Gentleman failed to mention the comments by the British Aggregates Association in the report on the legislative consent motion, which said that it was sure that it was going to win the court case. Well, we will just have to see when that case comes to court. However, I would not want a Scottish Administration to be responsible for the risks that may result from a loss in that case, because that would not be in the interests of the Scottish taxpayer.

The report by the Holyrood Committee offers an exceptional exposition of the contentious remarks made over a number of years by the Scottish Government about why fiscal decentralisation would be to the benefit of the Scottish economy. We support the measures in the Bill, because we believe that they will make the Scottish Government and Scottish Parliament more accountable to the taxpayer. They already benefit from uniquely broad spending powers, and the Bill rightly makes that power more accountable to the electorate. However, as the Committee knows, the Scottish Government argued prior to the establishment of the Committee at Holyrood that full fiscal decentralisation would grow the Scottish economy by an extra 1% per year. I refer hon. Members to paragraph 37 of that report, which states that

“the First Minister’s claim—of an additional 1% growth per year—is an exaggerated version of what Professors Hughes Hallett and Scott have stated in their research.”

The Committee concluded that the evidential base for the statements made by Professors Hughes Hallett and Scott was, in its words, “remarkably weak” and that claims did not stand up to scrutiny. The Scottish Government did not provide any detail in the legislative consent motion.

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[Fiona O'Donnell]

Is my hon. Friend aware that when the Scottish Affairs Committee played good cop to the Holyrood Bill Committee’s bad cop, Professors Hughes Hallett and Scott went as far as to say that there was no real link between fiscal autonomy and economic growth, and that it is what is done with the powers that achieves growth?

[Ann McKechin]

My hon. Friend raises a pertinent point and one which even those who have argued for fiscal decentralisation admitted in Committee, including Ben Thomson from Reform Scotland, who had been a firm advocate of that policy. It was stated that all the evidence showed that it is the powers that are available and how they are used, and factors that are not purely fiscal, such as technological progress, investment in human capital and policies on education, that largely determine economic growth. Many of those powers are already with the Scottish Government.

[Stewart Hosie]

The hon. Lady asserted that no information had been provided. The Scottish Government provided an extraordinary amount of information, much of it at the request of the Scottish Affairs Committee, and all of which, I understand, is in the annex to the full report that it published, so that assertion was wrong.

[Ann McKechin]

The hon. Gentleman did not refer to any of that evidence in support of his amendments. He also did not refer—why would he; it would be too embarrassing—to the purpose of the national conversation, which the Scottish Government instructed, and the many position papers that civil servants were struggling to produce and make sense of, at considerable cost to the Scottish taxpayer at a time when the resources could have been much better used.

The hon. Gentleman provided us with no independent evidence or statistics showing how, if fuel duty is devolved to the Scottish Parliament, it will result in a benefit to the taxpayer. The matter is urgent and we require immediate action. That is why we have called on the Chancellor to reverse the Tory-led Government’s VAT rise immediately and to suspend the fuel duty rise due in April. That would provide immediate relief to taxpayers and to drivers right across Scotland. That is the best way we can help people with motoring costs now.

The Calman commission recommended that the power on aggregates be devolved. We support that principle. The Government have indicated their intention to devolve it, presumably on the assumption that the court case will be decided in the Government’s favour. I would welcome the Minister’s comments when he replies, to confirm that that is still the Government’s intention.

It would be helpful to the Committee to understand what progress has been made on the Government’s review of air passenger duty, when they think that review will be complete, when they expect to be able to devolve the tax and whether they still wish to maintain the scheduled date of 2015.

New clause 17 relates to corporation tax, which the Scottish Government have been talking about for a considerable time. The pertinent questions that we all must consider carefully are what exactly does the SNP wish to do with the proposed power, where does it see the revenue gain coming from, and on what evidence is that based. Do we follow the Irish example of having a super-low rate, or do we follow the view of the SNP in Edinburgh and have retail business levy proposals, which were very badly thought out and arbitrarily proposed without consultation? Are we a high-tax or low-tax nation? Do we believe in high-quality, good value public services, or do we want to have a lower public expenditure base?

Some people believe that Ireland is an exact example for Scotland, but I argue that it certainly is not. Sadly, we no longer have the arc of prosperity argument from the Scottish Government. Nevertheless, it is important to note that when Ireland introduced its policy it was in a very weak economic position and the loss of revenue was relatively small, but that would not be the case for Scotland, which has a well-developed economy. If corporation tax is devolved, EU state rules require that the devolved Administration must not be protected from the revenue consequences of their decision.

It is clear that cutting corporation tax rates will cut revenue, at a minimum for some years, as suggested in the Exchequer evidence to the Holyrood Committee:

“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”

The hon. Member for Dundee East (Stewart Hosie) has not specified what figure his party proposes for corporation tax, what loss to the Exchequer will result and when his party believes it will recoup the loss. No one in Scotland will want us to vote on the issue until we have the pertinent answers.

The CBI and other business organisations have firmly stated that they are against differential rates within the UK. Many of the experts who gave evidence to the Committee in Holyrood noted that it would create economic distortions—the brass-plating of booking profits through Scotland by manipulating transfer pricing. I refer Members to paragraph 54 of the Holyrood Committee’s report, which states:

“The Committee does not believe that Scotland should seek to maximise its tax income by becoming a tax haven for companies operating elsewhere in the UK.”

I entirely agree with that approach.

Some evidence was given regarding the example of Switzerland, which has a highly federalised and separate tax system in its various cantons, but the Swiss example points out that that would tend to lead to lower public expenditure. Is this what the SNP proposes for Scotland? The people of Scotland need to know whether the answer is yes or no. Paragraph 494 of the Committee’s report states that Professor Anton Muscatelli noted that the Swiss example is one where there has been

“a shift from corporate taxation to personal income taxation.”

He also pointed out that that is a volatile tax.

Hon. Members will be aware of that volatility, which occurred after the 2007 fiscal crisis. The major payers of corporation tax in this country are our banks and financial institutions. They took a huge hit in 2007-08 and onwards. The cost for the Scottish public amounted to £10,000 for every man, women and child in Scotland. Where would those funds have come from if the Scottish Government had had to bear the entire cost? Is the SNP willing to allow Scottish public finances to take that level of risk? Is it saying that it wishes to see a cut in taxes on banks? Yes or no? We have had no answer to that either. Labour has argued that the banks are not paying an appropriate share towards deficit reduction in this country and has again called today for the bank levy to be increased in the Budget.

In paragraph 505 of the Holyrood report, Professor Iain McLean, whom the hon. Member for Dundee East quoted, points out that the Northern Ireland experience between 1920 and 1972, when corporation tax was devolved, was marked by widespread tax avoidance.

Many similar questions need to be asked, but at the end of the day the SNP has failed to say what it wants to do with the tax, what kind of tax regime it wants in Scotland and what it proposes in relation to bank taxes: is it for lower or higher taxes? Today, there has been the sound of deafening silence.

I have a number of questions to ask the Government about clause 24 itself. They have still to respond in detail to the Holyrood Committee’s report, and given the timing of next week’s Budget I am sure the Exchequer Secretary has many other things in his basket. Does he not agree that, given the considerable number of points that the report raises, we can anticipate at least some substantive amendments from the Government? If so, does he agree that, to ensure the maximum amount of democratic scrutiny, they should be tabled prior to Report, not simply left until the Bill arrives in the House of Lords?

Last week, the Government announced a consultation on the so-called Cadder clauses, which, as the Exchequer Secretary is aware, were not part of the original Calman commission. That consultation will continue until mid-May. Does he not agree again that it would be better to postpone Report until it is complete in order to allow us properly to scrutinise in the Commons this important legislative and constitutional reform?

[The Secretary of State for Scotland (Michael Moore)]

On the issue of section 57(2) of the 1998 Act and the new clause or amendment that we will table to it, the hon. Lady is aware and has rightly highlighted that we are undertaking a consultation. I am happy to say to her in public what I have said privately: she and members of other parties are very welcome to have discussions with officials to ensure that Members are aware of how that thinking is developed. Just to reassure her, anything that is introduced in another place will come back here for proper and thorough scrutiny in due course.

[Ann McKechin]

I am grateful to the Secretary of State for his remarks, but I would prefer to have the earliest possible scrutiny in the House of Commons, and I certainly hope that the House will be allowed at the very minimum a proper period in which to scrutinise properly any amendments or new clauses that are introduced in the House of Lords, because this is an important constitutional issue. It is technical, but it is important that this House has the time to debate and scrutinise it properly, and that the public and the electorate know that we have scrutinised it appropriately.

Do the Government agree with the Chartered Institute of Taxation that a mechanism might be required to ensure that any future Scottish provisions do not conflict, and to consider how future UK treaties and EU rules might affect the powers that we provide to Scotland in the Bill?

Proposed new section 80B of the 1998 Act appears to include the possibility of devolving aggregates levy and air passenger duty in future. Will the Government confirm that the Scottish Parliament has a formal standing in consenting to the Orders in Council referred to in that section? Air passenger duty might be considerably altered by the time the review is complete, and that could be of significance to the revenue that can be anticipated from Scotland. Air travel in Scotland has its own distinct features, particularly within Scotland itself and to the north and isles areas, so it is important that there is a full and proper discussion not only here in the Houses of Parliament, but in the Scottish Parliament, should there be any difference in the levy’s impact on the Exchequer.

On the calculation of the block grant, will the Government consider the Holyrood Committee’s proposals that the reduction in grant might be indexed to changes in the income tax base for the rest of the UK? Will they consider also the principle of a formal review of the grant reduction mechanism after 10 years, as the report recommends? If Ministers were able to give us an indication of the Government’s view, that would be helpful. What consideration have the Government given to the Holyrood Committee’s recommendation that the transition period for the income tax powers and the calculation of the block grant reduction be reduced or done away with in its entirety if, for example, the measures on the tax base are implemented? Finally, what consideration have the Government given to the recommendation that while a flat-rate structure should be adopted initially, this decision must be carefully evaluated as experience is gained of operating it? That simply follows from the experience of other devolved Administrations in dealing with income tax.

I would welcome the Minister’s comments. We will vote against any move by the SNP on fuel duty or corporation tax. Apart from that, we will support the Government’s clause.

--- Later in debate ---

[Stewart Hosie]

Let me respond briefly to some of the key points raised. The hon. Member for Dumfries and Galloway (Mr Brown) talked about a fuel duty regulator, as he has done on a number of occasions. He knows very well the difficulties faced by hauliers and others in the south-west of Scotland. He asked whether I would give up on the proposal in this place if it were delivered in Scotland. I said in my speech that if the UK Government would not deliver it, the powers should be devolved, so that the Scottish Government could act. I simply want fair play on fuel. It is important that the power should be devolved, so that the Scottish Government can act if the UK Government will not.

The hon. Member for East Lothian (Fiona O'Donnell) made an interesting speech, as she always does. She valiantly tried to defend the lack of Labour attempts to strengthen the Bill. She spoke in favour of Calman, but rejected one of the key Calman recommendations, which was the aggregates levy proposal. The hon. Member for Glasgow North (Ann McKechin) also made an interesting speech. She raised the notion of—I think—a £600 million loss every year if there was a 10p cut in corporation tax. No one has ever suggested an immediate 10p cut in corporation tax. That was a straw man, set up to be knocked down, and bears no relation to the policy of any party in this House.

[Ann McKechin]

Perhaps the hon. Gentleman could clarify what rate of corporation tax he would propose if the power was devolved.

[Stewart Hosie]

I would like it cut over a number of years, taking the benefit of the announcement effect and taking advantage of the experience of other countries, where, with modest changes on a downward spiral in corporation tax, the business tax yield has increased. That is very sensible and is, I think, what the current Government have in mind.

Let me turn briefly to what the Minister said. He said that the proposal would provide around one third of Scotland’s budget. That is similar to the figure of 35% proposed by the Calman commission, but that included all the revenue proposed by Calman, much of which is not in the Scotland Bill. That figure was also calculated on a baseline that excluded capital expenditure from the Scottish budget. The Minister will find that the actual percentage share is considerably lower. He said that the Government would never seek to devolve taxes on a whim. Let me assure him that we would certainly not want to do that either. We would want to devolve taxes only to provide balance and a basket of taxes to mitigate any volatility, which may well arise when the bulk of our assigned revenue comes from a single, personal tax.

I am not convinced by many of the arguments I have heard. There is a very strong case indeed for trying to push forward with the Calman proposals, particularly on the aggregates levy, so I intend to divide the Committee on amendment 58, but for now I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 58, page 16, line 17, at end insert—

‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on quarrying or mining,’.—(Stewart Hosie.)

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Ann McKechin]

I should like to ask the Minister a couple of questions about this clause, which is technical in nature and will enable HMRC to disclose information to the Scottish Ministers. Given the terms of the Holyrood Committee’s report on the appointment of an additional accounting officer responsible for Scottish income tax, and the duties and accountabilities of HMRC, should that proposal be put on a statutory footing? That question was raised by the Committee, and I should be grateful for the Minister’s response.

Will the Government also consider the Committee’s recommendations that the work of Her Majesty’s Revenue and Customs and the Office for Budget Responsibility be subjected to audit in respect of aspects of devolved taxes? If it is subject to audit and the Government have thought about it, I should be grateful to find out whether, in order to facilitate proper accountability to the UK Parliament and the Scottish Parliament, it should be carried out by the National Audit Office or the Auditor General for Scotland, or both. It is important to clarify these points at an early stage. In debating the previous group of amendments, the Minister spoke about the new Treasury committee between the UK Government and the Scottish Government, but I am sure that Select Committees in this House and those in the Scottish Parliament will want to have an opportunity to look into this work and, where necessary and when the clauses are implemented, to review the work of HMRC. At this stage, I would be grateful for any further clarification from the Minister.

[Mr Gauke]

I thank the hon. Member for Glasgow North (Ann McKechin) for her questions. We do not believe it is necessary to put the additional accounting officer on a statutory footing, but let me repeat our assurances, which I hope will satisfy the hon. Lady. She asked detailed questions arising from the Holyrood Committee report published last week and she will not be surprised to hear that I believe we can look at this matter within the bilateral Exchequer committee. I understand her desire to have greater clarity as soon as possible, but it is important to get the matter right. The committee will have an opportunity to meet shortly after the formation of the Scottish Government, and I hope we will be able to make some progress on some of those detailed points.

Clause 25 is a technical provision. It enables HMRC to share with the Scottish Government information about the collection and management of devolved taxes, while ensuring the confidentiality of that information. I thus believe that the clause should stand part of the Bill.

Question put and agreed to.

Clause 25 ordered to stand part of the Bill.

Clause 26

Scottish rate of income tax

[Ann McKechin]

I beg to move amendment 68, page 18, line 11, after ‘may’, insert

‘after consultation with such persons as Scottish Ministers consider appropriate’.

[The Temporary Chair (Mr Charles Walker)]

With this it will be convenient to discuss the following:

Amendment 69, page 20, line 5, after ‘may’, insert

‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.

Amendment 70, page 20, line 21, leave out subsection (4).

Government amendments 61 and 62

Amendment 43, page 20, line 35, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 44, line 38, at end insert—

‘(6A) For the purposes of subsections (4) and (5)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 63

Amendment 47, clause 29, page 23, line 12, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 48, line 28, at end add—

‘(7) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendment 64

Amendment 49, clause 31, page 24, line 8, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.

Amendment 50, line 8, at end add—

‘(5) For the purposes of subsection (4)—

(a) reference to the consent of the Scottish Parliament means consent by resolution, and

(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.

Government amendments 65 and 66

Government new clause 18—Orders

[Ann McKechin]

I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.

On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.

On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.

Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section

“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.

We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.

The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.

Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.

Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c)? Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.

How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?

--- Later in debate ---

[John Stevenson]

The hon. Lady has raised many issues connected with income tax. I may be demonstrating my ignorance of the Scotland Act 1998, but under that legislation the Scottish Parliament could have increased or decreased the basic rate by 3p. Why were these issues not addressed then?

[Ann McKechin]

I was not a Member of Parliament at that time, unlike some of my colleagues who were in the House when the legislation was discussed in detail. I think it fair to say, however, that a great deal was left to the potential for secondary legislation. As the hon. Gentleman knows, those provisions have never yet been used. That is one of the reasons that the Calman commission specifically addressed the issue of fiscal accountability.

The hon. Gentleman may also be aware of recent debates in the Scottish Parliament following the decision of the Finance Secretary—without informing the Parliament—to advise HMRC that it would not be required to implement the rules for a few years. I do not wish to discuss that controversy, but I will say that the establishment of the Calman commission was partly due to the fact that the rules had never been implemented. Much of the detailed work that we are now considering had been put on the shelf without being properly examined. I take the hon. Gentleman’s point, but I think it necessary for me to ask the Minister a number of detailed questions in order to ensure that the Government’s intentions are on record.

[Rory Stewart (Penrith and The Border) (Con)]

Given that income tax issues such as this are addressed throughout the world where jurisdictions—for example, American states—abut each other, does the hon. Lady consider them to be reasons for fundamentally objecting to the Bill, or simply matters of minor detail that could be resolved by means of secondary legislation?

[Ann McKechin]

As I have made clear, on Second Reading and throughout this debate, Labour fully supports the principles behind the Bill and the additional fiscal powers given to the Scottish Parliament. Before the election, the Labour Government supported the Calman commission, as we made clear in a White Paper published in the summer of 2009. I think that all these issues can be dealt with, but, as I am sure accountants and lawyers will confirm, the devil is in the detail at times. It is important for the House of Commons and, no doubt, the House of Lords to give the Bill proper scrutiny, because ultimately individual taxpayers, businesses and employers will have to live with the consequences of its implementation.

[Mr Frank Roy (Motherwell and Wishaw) (Lab)]

Is it not worth reminding the Committee that, no matter what was said in 1997, the Opposition voted against it?

[Ann McKechin]

Indeed, and the fact that we now have converts to the cause shows what a difference the passage of time makes. As I said earlier, I am pleased that even the SNP has agreed to the LCM motion.

Our present approach is consistent with the approach that the Labour party has always taken to constitutional reform, which is to seek political consensus before introducing legislation in the House of Commons. The reason we have such a degree of consensus this evening is that we have spent a good deal of time examining details of the legislation. I congratulate the Holyrood Committee, which has done an excellent and thorough job in examining many of the issues in great detail. We all benefit from its work and from last week’s debate in the Scottish Parliament, which showed that the Scottish Parliament and its Committees are more than capable of doing a thorough job in scrutinising legislation.

I should be interested to know whether the Government agree that the retrospective application of an order could adversely affect the budget of the Scottish Parliament. For example, if the Budget is set in March and the Treasury lays an order in October to apply a relief clause retrospectively, that could have grave implications for the Scottish Government’s budget. That is another reason why I seek some reassurance about the Government’s intentions for the use of this clause.

How do the Government propose to deal with avoidance of the Scottish tax rate? Unlike other jurisdictions that have devolved taxes, and where there are different forms of collection and reporting, many people self-assess or are in pay-as-you-earn schemes, and they are not currently specifically called on to declare their residence to the tax authorities in the way required by the Bill. The Bill’s provisions only apply to income; they do not apply to dividends or to interest on savings, and we would want appropriate measures to be taken to ensure that people do not end up transferring income into another route, to try to avoid the income tax provisions made by the Scottish Parliament.

What provisions have the Government put in place for the self-employed? Will, as anticipated, the self-assessment tax return have to be altered, with additional questions on residency for example, particularly for those who work in a different part of the UK? I realise there are specific measures dealing with Members of Parliament and we are automatically included, but it has been pointed out that Scottish judges serving at the Supreme Court are not covered by the Bill’s provisions. Similarly, other senior Government officials travel from different parts of the country for their work. It is important that they are aware of what may be expected of them in terms of self-assessment claims.

[David Mowat (Warrington South) (Con)]

Many of the hon. Lady’s comments imply that she is unhappy with residency being the method for working out where people pay tax, but it seems to me that there is no alternative. Is her position that she would like everybody to fill out a tax return?

[Ann McKechin]

No, I can assure the hon. Gentleman that I do not want to burden the taxpayer unnecessarily with additional questions and pieces of paper and that I think the residency basis is the simplest way to deal with this issue. The problem is that we have a floating definition of a UK resident taxpayer, and from that we are trying to define in very exact terms a Scottish resident taxpayer. That is the point at which there could be challenges, and sometimes mischief in that people might try to change their declaration of where they believe they are resident.

This situation is unlikely to arise for the vast majority of taxpayers in Scotland; most of them will be faced with a very simple exercise. Nevertheless, as I have pointed out, in other jurisdictions with devolved income tax there are ways in which people have to declare where their residence is that we currently do not have in the UK. I want the Minister to say whether the Government are aware of any potential problems, and what measures they intend to put in place to avoid them, so that the maximum level of tax that is due is collected and returned to the Scottish Government, and so that administration is kept to a minimum. All hon. Members will be concerned about the cost to the Exchequer, and also about the costs to individual businesses. That is why I am asking these questions, but I agree that residency is the easiest way to define who should be liable to tax.

I also appreciate that a decision has been taken not to include interest on dividends and on savings. People will comment that that perhaps creates a degree of unfairness because some individuals get the majority of their income from those sources, but I acknowledge that there are complex and expensive practical difficulties in applying a residency test for those types of revenue, and that ultimately the benefit may not be great. We therefore understand why the Government have phrased the clauses in this way, but the devil is in the detail of defining exactly what they will mean in practice.

[Stewart Hosie]

The hon. Lady will understand that there is a very close relationship, particularly at the lower levels of income, between dividends and savings income, income tax and, as importantly, income tax allowances and thresholds. We have not tabled amendments on this topic, and it is extremely complicated, but if it were proved that there is an inherent logic in bringing together income tax, the tax on savings and dividend income, and how that relates to thresholds, allowances and the Scottish rate, might the hon. Lady and her colleagues be prepared to listen to that argument in future?

[Ann McKechin]

The Holyrood Committee did not consider that in detail, and the Calman commission did not make any specific recommendations that would lead us to legislate tonight. We have to reach a compromise in respect of striking a balance between fairness to Scottish taxpayers and having a system that is as simple and easy to understand as possible, and that reduces the administration costs to the Scottish Government as far as possible.

On thresholds, given that the Welfare Reform Bill has just been introduced with proposals on universal credit at the same time as this Bill is passing through the House, I ask the Government to say what consideration has been given to the impact on welfare benefits. Those on low incomes often have the most complicated tax affairs. Most benefits are calculated on after-tax income. If the Scottish rate income tax is higher than the basic rate, Scottish taxpayers on benefits will be entitled to claim more benefit. Will the Government ensure that the extra benefit is paid automatically, or will they issue public information on how full entitlement can be claimed? How will the new proposals on universal credit be implemented in respect of these tax changes? The Government have stated that their general rule on the tax base is one of no detriment, but I ask the Minister to reflect and give any assurance he can about whether there might be a possible conflict.

Conversely, if the Scottish tax rate is lower than that of the rest of the UK, Scottish taxpayers on benefits will be entitled to fewer benefits in some cases. What mechanism will the Government put in place to ensure that adjustments are made to their payments? We would be concerned if those on the very lowest incomes were adversely affected in their entitlement to the welfare benefits system. That is largely based on the national insurance system of course, which is separate from the tax system, but, as the Minister will be aware, the interaction between benefits and taxes is complex, and I am sure none of us would want to do this in a way that adversely impacts on pensioners, people on lower incomes, single parents, the disabled and others who may already have many concerns about what is being proposed in the Welfare Reform Bill. I hope the Minister can reassure us that he will not be adding to that burden.

Are the costs of implementation still as estimated in the Command Paper? How do the Government intend to control those costs? There is a long period of implementation, and hon. Members may be concerned about that, as some implementation schemes have taken longer, and been much more expensive, than originally estimated. Will the Minister tonight undertake to produce an annual report to the House of Commons until the full-scale implementation of the scheme, so that we may better scrutinise it, and ensure that value for money to the taxpayer is maintained and that the burden—which, of course, is ultimately to be met by the Scottish Government—is kept to a minimum?

[Iain Stewart]

I support the clause, but I wish to raise a couple of specific examples just to test that the definition of a Scottish taxpayer as set out in the Bill is robust and covers all eventualities. I appreciate that the examples I am about to give are technical, and if the Minister is unable to give me a definitive response tonight, I hope he will be able to do so on Report.

My first example is based on the situation my father was in for a number of years. It relates to proposed new section 80E(3)(c) on the definition of Scottish residence, as opposed to residence of another part of the UK. My father’s home was, and is, in Hamilton, just outside Glasgow. By any reasonable test, that is his main residence: it has been the family home for generations; my mother lives there; and it is what my father would call home. However, for a number of years he worked for the Civil Aviation Authority and although he was mainly based at Prestwick, the nature of his job required him to spend a considerable amount of time at its headquarters in London. He rented a flat in central London, where he was registered on the electoral roll for council tax, for utility payments and for all the other aspects of living in a dwelling. For a number of tax years he spent a majority of nights in London, as opposed to spending them at the family home in Scotland. Therefore, if I have read proposed new section 80E(3)(c) correctly, he would not be deemed to be a Scottish taxpayer. I would be grateful if the Minister would confirm whether that is the case. If so, is this not an anomalous situation and will the Government re-examine what the definition of “a Scottish taxpayer” should be?

Secondly, I wish to discuss the “Caledonian sleeper” question, which relates to proposed new section 80F(1)(a) and the number of days spent in Scotland

“at the end of the day.”

I do not have a detailed knowledge of the railway timetable, but let us suppose that the sleeper train left Glasgow at 10.30 pm or 10.45 pm and so was clearly in Scotland at the end of the day. If it traversed the border before midnight and so was actually in England on the stroke of midnight, would that day be counted as Scottish or English for the purposes of this calculation? I hope hon. Members will forgive me for raising this very detailed point, which will affect only a small number of people, as it is the job of this Committee to tease out these practical matters. I do not expect the Minister to give me a definitive reply right now, but I would be grateful if he undertakes to examine the matter and give an answer at a later stage in our proceedings.

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[Mr Gauke]

I will come to condition C in a moment, which I hope will provide the hon. Gentleman with the answer that he and others are looking for.

Having dealt with condition A, it would be remiss of me not to address condition B. It is possible for some people with two or more places of residence in the UK to be unable decide which is their main place of residence. I do not think that that applies to Mr Stewart senior, but it might apply in some cases. It is for such people that condition B has been designed. Someone who cannot determine under condition A which part of the UK they have a close connection with will need to count the number of days they spend in Scotland, compared with the number of days they spend elsewhere in the UK—in other words, a straightforward day count test. If they spend more days in Scotland than they do elsewhere in the UK, they will be a Scottish taxpayer. If they spend more days elsewhere in the UK than they do in Scotland, they will not be a Scottish taxpayer. We recognise that it might be onerous in some cases to have to keep a day count record, but the number of people within that category should be relatively few.

To deal with one question that my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised, for the purposes of the day count, an individual has spent a day in Scotland or in any part of the UK when they are present at the end of the day—in other words, at the stroke of midnight. That is consistent with the existing and long-standing rules that determine presence in the UK for the purposes of tax residence.

Condition C, which I suspect is of particular interest to a number of hon. Members, is set out in proposed new section 80D of the 1998 Act and is very straightforward. If someone represents a Scottish constituency in the Scottish, UK or European Parliaments for any part of the year, they will be a Scottish taxpayer for that tax year, provided of course they are UK resident, which I assume will generally be the case. The definition has also been designed in such a way that an individual will be a Scottish taxpayer for a full year. They cannot be a Scottish taxpayer for part of the year and not a Scottish taxpayer for the rest of the year. That again helps to reduce unnecessary complexity in applying the definition and understanding of whether or not an individual is a Scottish taxpayer.

It is envisaged that the new Scottish rate of income tax will first be applied from 6 April 2016, as we have already heard. There are more than five years before the provisions take effect, and during that time we will continue to discuss with businesses, employers, taxpayer representatives, charities and software providers the necessary practical steps to achieve a successful implementation. The measure will need to work successfully throughout the UK tax system, as it will not impact on Scottish taxpayers or on Scottish employers alone.

HMRC has therefore established three technical groups with representatives throughout the UK, including a pensions group, charities group and an income tax group. Those groups are reporting to the high-level implementation group, which the Secretary of State and I established last summer. We are discussing with the technical groups the implementation issues—for example, the application of differing rates throughout the UK on tax relief for contributions to pension schemes and on gift aid. It is also conceivable, given the lead time to implementation, that there might be changes in the business or tax environment or to processes.

As we discussed when considering the earlier amendments, the clause includes a number of supplementary powers to allow certain modifications to be made at a later date—for example, enabling certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to respond to stakeholder input and to the changing environment.

I shall pick up on some of the questions that I have not dealt with in my explanation, which I hope the Committee has found helpful. A worker who spends significant amounts of time on an offshore oil rig or another place of work off the UK coastline will not usually need to count the number of days they spend there to determine whether they are a Scottish taxpayer. The oil rig is not likely to be their sole or main place of residence in the UK, so any time spent on it can be disregarded when deciding whether they are a Scottish taxpayer. The only exception is if the location of the individual’s main place of residence is genuinely unclear. In such cases, whether someone is a Scottish taxpayer will be determined by the day count. If the oil rig is in Scotland, those days will need to be included for the Scottish count.

We continue to look, with the Ministry of Defence, at the issues surrounding our armed services, and we will come to a firm conclusion on that in the near future.

The question was raised of whether a personal representative of a deceased person will be a Scottish taxpayer, and the answer is no. A Scottish taxpayer will be an individual, and after their death that will not extend to the personal representative. It follows that any income arising during the administration of the deceased’s estate will not be subject to the Scottish rate of income tax.

I was asked whether it was fair that people will not receive split-year treatment when they move between Scotland and the rest of the UK, and I touched on that briefly a moment ago. No split-year treatment applies to those leaving or arriving in Scotland: an individual will be a Scottish taxpayer for a full tax year or not at all. There is no prospect of double taxation when someone lives part of the year in Scotland and the rest of the time in another part of the UK. It would be administratively much more complex were we to try to split the year.

On whether proposed new section 80G is too broad, that goes back to my earlier discussion of the amendments in this group. The power in the new section is needed to deal with mainly technical changes and to decide which reliefs should be taxed at the variable or UK rates. That is almost a mirror image of the power to deal with the consequences of setting the Scottish variable rate, which is already in section 79 of the 1998 Act. It is worth pointing out, as I said earlier, that we have set up three technical committees, on charities, pensions and income tax, to discuss the impact that the Scottish rate of income tax will have on the wider tax system, and to consider where modifications might be required. Therefore, we need the power to deal with that situation.

I reassure the Committee that the Treasury does not seek a general power to impose retrospective legislation; the measure set out in proposed new section 80G is limited to the start of the tax year. If we need to make a consequential change, we will ensure it takes effect at the same time as the provision to which it is consequential. We think that that will be helpful.

A point was made about what HMRC and the Government will do to support employers, and about the concern that the measure might be administratively difficult for employers when identifying who is and is not a Scottish taxpayer. Let me assure the Committee that it will be HMRC’s responsibility to identify who is and is not a Scottish taxpayer. Scottish taxpayers will then be given a Scottish tax code by HMRC, and employers will use it in the PAYE system, just as they do with other employees. It is also worth mentioning that there will be an awareness campaign in Scotland and in the rest of the UK ahead of the system’s introduction.

The rights of appeal will be based on existing mechanisms, but they might need to be adapted, and HMRC will discuss that with the professional associations in due course through the technical groups that it has established. The self-assessment form for the self-employed will need to be altered to reflect the existence of Scottish taxpayers.

On condition C, which applies to Members of Parliament and of other elected bodies, the question was asked, “Why not Scottish judges, other senior members of the Scottish civil service and so on?” We have singled out only elected representatives; others will be subject to the same rules as other Scottish taxpayers. We think it appropriate that there is no ambiguity in the case of elected representatives, and those representing Scottish constituencies at whatever level should be Scottish taxpayers.

That is a rather lengthier speech than I had hoped to make, but a number of questions were raised and I wanted to provide as many answers as possible to what is one of the most technically challenging aspects of the Bill. The solutions that we have reached are those that improve what we are building on, and they should provide as much clarity as possible.

[Ann McKechin]

May I welcome you to the Chair again on this Bill, Ms Primarolo? I also thank the Minister for a full explanation of the various technical measures, and for his response to the questions that have been raised in the debate. I appreciate that it might not have been the most exciting debate; indeed, it might have rendered some Members closer to sleep than the Caledonian sleeper could have done. Nevertheless, it is important that we have on the record the Government’s response to a number of key questions that, when we come to implementation, will impact on many hundreds of thousands of people. It is important that we have as full a picture as possible in our debate this evening.

I accept the Minister’s comments about amendment 68 requiring the Scottish Government to consult such persons as they consider appropriate. The taxpayer would anticipate and expect the various business organisations and tax specialists who are generally consulted by the UK Treasury as a matter of routine and good practice to receive the same approach and level of consultation from the Scottish Government. I am sure that the Scottish Government, of whichever political hue, will want a full consultative process. The Minister noted that the Scottish Parliament has a specific power to lay this down in Standing Orders, and I hope that it will give recognition to what has been said in this debate.

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[Mrs McGuire]

Does my hon. Friend recognise that the situation can be further complicated if one asks where they come from?

[Ann McKechin]

Yes, indeed.

That brings us to how the questions are phrased on any self-assessment form and the guidance that is provided to individual taxpayers and to their employers. Obviously, employers will have a high level of responsibility in advising their staff about whether they will be covered. The Minister cited the example of a travelling salesman, but there are many other examples of staff who travel the country from time to time. Some people’s lives are entirely peripatetic—entertainers, for instance. I remember many years ago, when I was a lawyer, acting for entertainers who spent the summer season living down in Blackpool and then came back up to Scotland for the winter season.

[Mrs Eleanor Laing (Epping Forest) (Con)]

Does the hon. Lady recall the leading case on residence in Scots law—Udny vs. Udny—in which the fact that the person in question, despite having a house in England, continued to take The Sunday Post every week proved that he was still domiciled in Scotland?

[Ann McKechin]

Indeed. The hon. Lady attracts me into an interesting debate on the difference between residency and domicile, but I am not going to bore the Committee—I can see that the Under-Secretary is getting a bit concerned—about the distinction between the two. That sort of thing keeps tax lawyers very busy.

[Jim McGovern]

Surely my hon. Friend would agree that going to Blackpool in the summer guarantees that one is Scottish.

[Ann McKechin]

Indeed. Travelling down there on the train to the Labour party conference on a Glasgow holiday weekend was an interesting experience. One could easily distinguish between those who were delegates and those who were on their holidays. I remember one occasion when people had brought along half a band, which was playing on the train.

The hon. Member for Milton Keynes South (Iain Stewart) and others commented on the Caledonian sleeper. Let me say that the Caledonian sleeper provides an essential travel service for many of us, and long may it remain so, because otherwise our travel plans would be even more difficult than they are given that certain flights will be withdrawn at the end of this month. That brings to mind a story that I recall being told about a colleague who represented the city of Glasgow many years ago, and who was a member of the railwaymen’s union. He regularly managed to sleep on the train. One night, he asked the guard to make sure that he was taken off the train at Motherwell, not Glasgow, because he had to address a union meeting just before the workers went on shift. There would be several hundred people there, and it was absolutely essential that he got off. He duly woke up in the morning and found himself at Glasgow Central station. The guard opened the door and said, “I know you’re really angry, but you’re not as angry as the man we shoved off the train at Motherwell.” I am sure that there are many such stories about Members of Parliament.

I note the Minister’s comments regarding residency of Members of Parliament. Some people might think we are getting special preferential treatment so that we can easily distinguish whether we are UK tax residents who are not living in Scotland or vice versa. However, I do not object to the definition. Perhaps it makes things a little easier if, when the Bill becomes law, we are asked awkward questions about our own position. I am sure that some of the points raised today will be considered by implementation committees.

On the Minister’s comments about armed forces personnel, we need to be able to define this at a fairly early point. It would be preferable if at some point during the passage of the Bill—certainly before it comes back from the Lords—we knew about the position of the armed forces. Will the Minister ask his colleagues to ensure that we have a definitive response before we reach our final conclusions on the Bill?

The Minister’s comments on amendment 70 were helpful in defining the circumstances in which retrospective amendments may be made. I acknowledge that there will be limited circumstances where that is appropriate. Given the timing of the Budget, it is almost inevitable that this may occur from time to time. His clarification helped to show that he regards this as a de minimis clause rather than one that will be used to the maximum extent. However, I hope that he can assure us that Scottish Ministers and the Scottish Government will be provided, at the earliest opportunity, with information about how this is likely to impact on them. Perhaps it is part of the Exchequer’s standard consultation process and pre-Budget report that it is fully engaged with the Scottish Government so that they are able to make appropriate contingency plans should a clause in the Finance Bill then be passed by this House and by the House of Lords.

I believe that we have had a reasonable level of reassurance from the Minister on those questions. These are primarily probing amendments. Accordingly, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26

Scottish rate of income tax

Amendment made: 61, page 20, line 31, after ‘Treasury’, insert ‘by order’.—(Mr Gauke.)

Amendment proposed: 42, page 20, line 31, after ‘Treasury’, insert

‘, with the consent of the Scottish Parliament,’.—(Stewart Hosie.)

Question put, That the amendment be made.

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Question proposed, That the clause stand part of the Bill.

[Ann McKechin]

I wish to ask the Exchequer Secretary a couple of questions about this technical clause. Can he confirm how deductions for pension contributions and gift aid will be made? Will the taxpayer be able to choose the order of deductions against various sources of income?

The Scottish Parliament will need to know the size of the tax base before setting the rate. Will the Government undertake to ensure that they give the Scottish Parliament, as well as the Scottish Government, early notice of changes in the level of income tax personal allowance and thresholds? I asked that question in relation to clause 26, but it is important to have the earliest possible consultation and information given not only to the Scottish Government but to the Scottish Parliament.

[Mr Gauke]

I thank the hon. Lady for her questions. If somebody is classed as a Scottish taxpayer, they will be liable for income tax at Scottish rates on the income that they receive from their pension. We recognise that the treatment of reliefs associated with pension contributions is complex, and our approach will be set out in implementing legislation. Her Majesty’s Revenue and Customs has set up a pensions technical group to consider those very issues, and it is examining the practical questions surrounding the new Scottish rate and will make its recommendations in due course. Those recommendations will inform the implementing legislation. There are some potentially difficult administration issues to consider, and HMRC is working with the sector to keep the administrative burdens to a minimum.

Question put and agreed to.

Clause 27 accordingly ordered to stand part of the Bill.

Clause 28

Scottish tax on transactions involving interests in land

Question proposed, That the clause stand part of the Bill.

[Ann McKechin]

Again, I should like to ask the Exchequer Secretary a couple of technical questions about the implementation of the clause. He has defined in proposed new section 80J(2) the people who will not be liable to pay the tax in question. Perhaps he could clarify for the record that that relates to people acting in their official capacity, and that if they happen to have property in Scotland on a personal basis, they will still be liable for the tax.

Will the Government undertake that they will not appoint the day on which the tax powers will come into effect until the Scottish Government confirm that they have satisfactory legislation in effect? I realise that the proposed implementation date is 2015, and perhaps the Exchequer Secretary could confirm that that is still the Government’s intention. It is important that people with an interest in property have an early indication of when they can expect the tax to be changed.

[Mark Lazarowicz]

I, too, have a couple of questions, and I would be most grateful if the Exchequer Secretary could deal with them. Does he believe that the provisions of the clause mean that the tax will be applied at the same rate throughout Scotland, or will it be possible for different rates to apply to different parts of Scotland? At the moment, for example, there are times when stamp duty land tax is waived for certain areas that require special assistance. Could that still apply?

Will the Scottish Parliament have the ability to delegate the power in clause 28 to local authorities, for example, so that varied rates could be offered? I am aware that that would not normally be permissible, but the Exchequer Secretary will certainly remember the debate about the possibility of a local income tax in Scotland a couple of years ago. There was a suggestion that if the Scottish Parliament introduced such a tax, it would be ultra vires. That was never tested, because of course the legislation never went through. The suggestion was that a local income tax could give local authorities the power to levy income tax through the back door. Similarly, it could be suggested that they be given the power to vary stamp duty land tax if the Scottish Parliament allowed them to do so. I would very much appreciate some guidance on those points.

I do not want to skip ahead to clause 30, but the same question applies to tax on disposals to landfill—will there be a Scottish rate, or could it be varied? Perhaps the Minister could give me the same reply to deal with both clauses.

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Given the considerable support for these proposals and the deep concern throughout the Committee about some of the Bill’s provisions, I should like to know whether the Government intend to table the necessary amendments for debate on Report on 22 March, or to table them in another place after that point. The Scottish people are entitled to know about the shape of revenue and capital borrowing, and Members representing constituencies in Scotland—and, indeed, elsewhere—are entitled to be able to scrutinise properly whatever proposals may be presented. I hope that the Minister will be able to give us definite information about when amendments will be tabled, and whether they will accord with the recommendations of the Scottish Committee.

[Ann McKechin]

I welcome the clauses relating to borrowing powers. We agree that they make sense in terms of both short-term revenue and capital.

In paragraph 597 of its report, the Holyrood Committee accepted that

“Given its responsibility for macroeconomic management”,

the United Kingdom Government

“has a proper interest in the flow of borrowing”.

We agree with that. However, there is a worthwhile discussion in the report about evidence from the Government and other experts relating to the overall level of borrowing, both short-term and on the capital account, and we think that the Government should consider the Committee’s arguments. It did not identify an alternative figure, but made some suggestions that we think worthy of consideration. I ask the Government to confirm that they will examine the report in detail, and will take the earliest opportunity to present their assessment to the House of Commons or the House of Lords. I note that the Scottish Government will be able to borrow from commercial lenders as well as from the National Loans Fund, and I welcome that as well.

The hon. Member for Dundee East (Stewart Hosie) should be careful. I assume that his are primarily probing amendments, and I think it right to test some of the issues discussed in the Holyrood Committee, but as well as looking for the benefits, he must accept the responsibilities of the Scottish Government for overall public sector borrowing limits. Although we may disagree with the Government on what those limits should be and on the scale of the deficit reduction, we accept that as an important criterion in the debate.

[Stewart Hosie]

I am sure that the hon. Lady will want to be generous and accept that I made it clear on two occasions that affordability and sustainability must be taken into consideration. No one wants to do anything silly with the public finances.

[Ann McKechin]

That marks a first. I cannot recall the Scottish Government asking for less money. I seem to remember that when Labour was in government, they kept asking for more money and saying that they did not have enough.

The hon. Gentleman made a comment about the deficit. Before 2007 it was about 2%, which was perfectly manageable within the fiscal settlement. The increase in the deficit was primarily caused by the banking crisis, which was an international crisis as the hon. Gentleman accepts, and by the fact that we stimulated the economy, which he also accepts, although he said we should have stimulated it even more. He cannot have his Dundee cake and eat it, however. He either accepts one interpretation of what happened, or he accepts the interpretation of the coalition Government, which we believe to be false.

The hon. Gentleman raised a number of queries about the Holyrood Committee recommendations, particularly in respect of the requirement that the first £120 million of any tax shortfall must be met by spending reductions in the year in question. It would be helpful if the Minister could explain the rationale for imposing that. I think that measure is in the Command Paper—it is not in the Bill itself, of course. This issue is of particular concern in the light of the Government’s decision to abolish the end-of-year flexibility scheme at very short notice this year, which will cost the Scottish budget an estimated £23 million.

When the Minister gave evidence to the LCM Committee, he drew a distinction in respect of end-of-year finance arrangements, but at no point did he intimate that the Government or Chief Secretary to the Treasury had decided that they would be gobbling up the £23 million as part of the deficit reduction plan. That raises concerns about the nature of the relationship between the UK Government and the Scottish Government in the so-called respect agenda. Will the Minister confirm at what point this issue was raised with the Joint Ministerial Committee and the Scottish Government? Why was no mention made of this when he and the Chief Secretary were giving evidence to the LCM Committee? Again, this is about trust and the maintaining of good governmental relationships. As I have mentioned before, it is key that that is maintained to the highest degree in these clauses.

There have been issues to do with the Government’s criterion of setting a limit of £2.2 billion for capital expenditure. There are some very good suggestions in the Committee’s report about increasing borrowing capacity, which we think are worthy of consideration.

Finally, as the Minister will be aware, my colleagues in the Scottish Parliament have called for the borrowing powers to be brought forward from the proposed implementation date of April 2013 to April 2012. Given that we anticipate that this legislation will be on the statute book by the end of this year and before the next financial year, I can see no good reason why the power cannot be advanced to April 2012, which, as the Minister will be aware, is within the current comprehensive spending review period. That would assist the Scottish Government —of whatever political hue—in making appropriate planning decisions after the election. If the Minister could give an early indication that the Government are minded to bring forward the introduction of this power to 2012, that would be widely welcomed. I therefore hope he can give the Committee one positive piece of news tonight.

[Mr Gauke]

I propose to deal with amendments 51 to 57 first, and I recognise that, as has been said, they partly overlap with the report from the Scotland Bill Committee in the Scottish Parliament. As my right hon. Friend the Secretary of State for Scotland set out last week, the UK Government will consider the recommendations in the Committee’s report thoroughly, alongside an assessment of the impact on the UK fiscal position.

The purpose of amendment 51 is twofold. First, it would remove the requirement for Scottish Ministers to access revenue borrowing to meet current expenditure only in accordance with rules determined by the Treasury. Secondly, it would allow such borrowing to be accessed due to a shortfall in outturn receipts against forecast receipts from devolved taxes and the Scottish rate of income tax. I will deal with each of those in turn.

On the need for borrowing by Scottish Ministers to comply with rules determined by the Treasury, I note that the report from the Scotland Bill Committee in the Scottish Parliament—where the Scottish Government voted with the motion—recognised the need for the UK Government to constrain the borrowing powers. I am delighted that there appears to be a consensus in the Committee that nobody wants to do anything silly with the public finances, as one could have been forgiven for thinking that that has not been the case over recent years.

There are important reasons for Scottish Ministers to comply with Treasury rules on borrowing. The Bill’s new borrowing powers will sit within the UK fiscal framework as a whole; interest on Scottish borrowing will be included in the total UK public sector borrowing aggregates. As overall macro-economic policy will continue to be a reserved matter, it is necessary for the UK Government to set controls and limits on the borrowing powers in order to retain overall control of UK borrowing, protect overall economic stability and minimise fiscal risks to the UK Exchequer. This Government believe that the specific terms and conditions set out in the Bill and the Command Paper strike the right balance between protecting overall levels of UK debt and increasing the financial accountability of the Scottish Parliament.

On the second point, I wish to thank hon. Members for bringing an important discrepancy to the attention of the Committee. Although the Command Paper was clear that revenue borrowing would be used to meet current expenditure because of a shortfall in receipts compared with forecast in devolved taxes and the Scottish rate of income tax, the Bill was not so clear. The Government will therefore introduce their own minor and technical amendment on Report to include the Scottish rate of income tax alongside devolved taxes. In conclusion, given the continued control by the Government over the UK fiscal mandate and the fact the Government will be introducing their own amendment in respect of the second issue, I ask the hon. Member for Dundee East (Stewart Hosie) to withdraw the amendment.

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[Mr Gauke]

The hon. Gentleman sets the position out well, and I do not disagree with him. The Bill essentially sets out a base for current and capital borrowing. It can be increased, and there is a mechanism in the Bill to do so. We would need to look at the circumstances in future to see whether we could increase flexibility in that area. We have to bear in mind the state of the public finances and the importance of maintaining credibility.

[Ann McKechin]

I asked a question about the transitional borrowing powers that require Treasury consent, and whether the Treasury would be minded to bring them forward to 2012. The Minister has given conditions, which we accept would have to apply in the transitional period, but nevertheless that flexibility would be welcomed by everyone.

[Mr Gauke]

I note the hon. Lady’s comments. We are looking carefully at the recommendations by the Committee in the Scottish Parliament. We note her representations, and we will respond in due course. I wish to underline the fact that it is of absolute importance that we manage to maintain credibility, which is perhaps why there is less flexibility now than there may be in future. The hon. Member for Glasgow South West (Mr Davidson) suggested that there might be greater flexibility in future, but we would need to assess that nearer the time. However, I note the hon. Lady’s remarks on the transitional period for borrowing.

Amendment 57 is consequential on amendment 56. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those limits with the approval of the House, clause 32 (10) would no longer by necessary as there would be no such secondary legislation. The hon. Member for Glasgow North (Ann McKechin) raised the issue of end-of-year funds across all the devolved Administrations and Departments amounting to some £20 billion. Such large sums of accrued EYF present a fiscal risk to the UK Government, which is why new arrangements will be detailed in the forthcoming Budget. I hope that that clarification is helpful.

I thank the hon. Members for the opportunity to set out the Government’s position on the important borrowing powers provided by the Bill. This has been a helpful and perhaps probing debate—we shall see. However, we do not accept any of the amendments, so I invite the hon. Member for Dundee East to withdraw amendment 51. For the reasons that I have set out, I hope that hon. Members agree that that clause 32 should stand part of the Bill.

Economic Regeneration (Glasgow)

Ann McKechin Excerpts

Wednesday 16th February 2011 Westminster Hall

[Mr William Bain (Glasgow North East) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Gale, in this important debate on the Glasgow economy. I congratulate my hon. Friend the Member for Glasgow East (Margaret Curran) on securing the debate and on speaking with the experience of 12 years as a parliamentarian serving Glasgow, both in this House and the Scottish Parliament. She was also a champion for social justice when she was a Minister in a previous Scottish Executive.

It is clear that, prior to the global economic downturn in 2008, Glasgow was on the cusp of a real economic renaissance. Between 1998 and 2008, there were more Glaswegians in work than ever before, while 30,000 jobs were created in business services—a 60% increase—and more than 4,000 new jobs in the financial services sector. Glasgow experienced strong retail growth in that period, with 1,500 shops in the city centre, which even now generate £2.4 billion per year in retail sales turnover. Glasgow also extracts real economic benefit from tourism, as the hon. Member for East Dunbartonshire (Jo Swinson) has said. The current expansion in hotel capacity is key to attracting new events and to the hosting of a successful Commonwealth games in 2014.

Even in recent times, major companies have continued to invest in Glasgow’s biggest asset, its people, by announcing major recruitment programmes. In autumn 2010, Vertex, a provider of customer management outsourcing, announced plans to create 368 jobs, while 1,500 new jobs have been announced in the financial sector by Barclays, Santander, esure, Morgan Stanley and Odyssey Financial Technologies. There has also been a 75% increase in the leasing of office space in the city.

I would like to emphasise three points. First, investment in infrastructure is needed if Glasgow is to remain competitive in increasing its output in retail and business services. The particular priorities are upgrading Glasgow’s drainage and water catchment system to mitigate flood risks, and improving transport networks. There is an overwhelming case for constructing a high-speed rail network from London through the major English cities to Glasgow and Edinburgh at the earliest opportunity. That is worth £20 billion in economic benefits to both cities. The city council, the business community, the Scottish Council for Development and Industry, and Labour Members are concerned about the lack of momentum by the Department for Transport in initiating the necessary discussions with the Scottish Government on the planning and financial issues involved in the construction of high-speed track in Scotland. I hope that the Financial Secretary and the Secretary of State for Scotland will encourage the Secretary of State for Transport not to leave that essential work in the slow lane. The Scottish Government also need to play a central role in increasing capacity, principally between Glasgow airport and the city centre, through the reinstatement of capital funding for the Glasgow airport rail link, which has—as my hon. Friend pointed out—the potential to create 1,300 jobs in the west of Scotland. A further priority is the upgrade of major roads, such as the completion of the M74, because half of those who work in Glasgow live in constituencies outside the city’s boundaries—for example, that of the hon. Member for East Dunbartonshire.

Secondly, more has to be done to tackle Glasgow’s historic underperformance in labour productivity, particularly in the service sector. BAK Basel Economics benchmarked Glasgow against a group of 35 European cities, and Glasgow averaged an annual growth rate of 2.3% in productivity from 2000 to 2005, which puts it in the top 10 cities. However, Glasgow lay in 33rd place in relation to measures of labour productivity in 2005, which is relatively low in comparison with other major EU cities. Thirdly, Glasgow’s economy needs to diversify in order to take advantage of the expansion in the renewables sector, of our universities as centres of scientific and other research excellence, and of high-value-added manufacturing.

The life science community within the west of Scotland is home to 180 companies, including those in Nova park, Robroyston in my constituency. Those companies range from major pharmaceuticals, to diagnostics, therapeutics, medical devices, contract researchers and manufacturers, all of which jointly employ more than 80,000 people. However, continued business support from the Government is required to ensure that they flourish in the coming decade.

Glasgow is home to a quarter of the west of Scotland’s core energy sector businesses and many other energy sector supporting businesses. Research undertaken by the sustainable Glasgow initiative found that Glasgow currently emits around 4 million tonnes of CO₂ per annum, which is linked to its energy use. The initiative proposes a series of measures to reduce those carbon emissions, such as renewable energy systems, fuel switching and energy management systems.

[Ann McKechin (Glasgow North) (Lab)]

I am speaking as a Glasgow constituency Member rather than as an Opposition Front Bencher. I very much welcome what my hon. Friend has said. Does he agree that Glasgow is a perfect location for the new green investment bank proposed by the Government, given its track record not only in financial services, but in innovation and in having a connection with the renewable energy sector?

[Mr Bain]

I am most grateful for that intervention. As on so many other matters, my hon. Friend anticipates the argument I was about to advance. She has pointed out why it is particularly regrettable that the creation of the green investment bank, which could kick-start many renewable energy projects in Glasgow, has been caught up in a game of Whitehall pass the parcel. As the Secretary of State for Business, Innovation and Skills revealed last week, plans for capitalisation are unlikely to be published before May at the earliest. It is still uncertain whether the green investment bank will have sufficient operational independence from the Treasury, and there is a wider need for capital for new innovatory business start-ups. In addition, there is a strong argument for investigating the case for a wider British investment bank.

The city council has identified low pay as an area requiring urgent attention. In 2006, the average Glaswegian earned 2% less than the UK average, but thanks to the adoption of a living wage policy—first of £7 an hour, but rising to £7.15 an hour this year—by 150 businesses that employ 50,000 people in Glasgow, average earnings are now 3% above the UK average.

It would not be fair to leave out the records of the Scottish and UK Governments in recent months on assisting Glasgow in developing a strategy for growth. I regret to say that Glasgow has not been particularly well served by either Government. The city council experienced a cut in funding of 3.6% from the Scottish Government, which was 1% more than previously indicated and is the worst financial settlement since 2007. Despite that, the city council has made job creation, particularly for young people, a priority. It has invested in the Commonwealth apprenticeship initiative, through which 241 companies took on 600 apprentices last year, and the Commonwealth jobs fund, which aims to create 1,000 jobs for young unemployed people across Glasgow through a £6,500 subsidy per job. That is open to every private and third-sector employer in the city.

However, it is clear that, at a UK level, the cut in capital and investment allowances is affecting manufacturing exporters and harming Glasgow business. The UK Government’s failure to continue the future jobs fund beyond the spring and the revelations this morning that fewer people will proceed through the Government’s work programme than under the initiatives of the previous Government add to concerns that the hard-earned progress on employment levels of the past 13 years will slip backwards. As my hon. Friend the Member for Glasgow East intimated in her remarks, incomes will also be damaged by the Government’s proposals on housing benefit, which it has been estimated will cost £10 million to £12 million a year in lost spending capacity by the poorest families and individuals in the city.

The Glasgow economy has the potential for continued growth in existing and new areas in the next decade, but it will require Government at all levels to exhibit a sustained and credible strategy for growth, rather than simply a plan for an over-hasty fiscal retrenchment that may cost jobs and damage Glasgow’s competitiveness.

Finance Bill

Ann McKechin Excerpts

Tuesday 6th July 2010 Commons Chamber

[Barry Gardiner (Brent North) (Lab)]

Albus Dumbledore in “Harry Potter and the Chamber of Secrets” said:

“You see, Harry, it is not our abilities in life, but our choices that tell us who we really are.”

When my right hon. Friend the Member for Edinburgh South West (Mr Darling) rose in this Chamber as Chancellor at 12.32 pm on Wednesday 24 March, he could look back on a year in which global recession had not turned into depression, in which unemployment, although too high, was less than had been predicated a year earlier when the recession began, and in which the United Kingdom was now infinitesimally but incrementally moving from recession to GDP growth. He faced tough choices: how to bring borrowing down without strangling growth, and how to reduce the deficit without crippling front-line public services and punishing the most vulnerable people in our country. Those choices were not easy, but they were necessary.

When the current Chancellor, the right hon. Member for Tatton (Mr Osborne), rose in this Chamber at 12.33 pm on Tuesday 22 June, he did so against the background of a further quarter of small but positive growth and a report from the Office for Budget Responsibility that predicated £30 billion less public sector borrowing. Despite that improved situation, however, he said that he did not face any choice. He said:

“This is the unavoidable Budget.”—[Official Report, 22 June 2010; Vol. 512, c. 166.]

No; this is the Budget of Tory masochistic fantasy. Right-wingers are delighted with what they see, in this Finance Bill, as the arms of the state being rolled back. They are delighted by the thought of 600,000 jobs being cut from the public sector. They are salivating at the thought of spending less on welfare at the very time when they cast 600,000 more people into the welfare net. Where is the sense in that? Oh yes, this is a Finance Bill of choice for the Tories, and in life it is

“our choices that tell us who we really are.”

[Ann McKechin (Glasgow North) (Lab)]

Is it not ironic that one of the main beneficiaries of this particular Budget will be our banks, which are among the biggest payers of corporation tax in the country? The Government have chosen not to tax bankers’ bonuses this year, despite clear public outrage at the level of bonuses that are still being paid.

[Barry Gardiner]

Not only has my hon. Friend made a perfectly apposite point, but she has made it better than I could ever possibly do. I can only agree with her.

Oral Answers to Questions

Ann McKechin Excerpts

Tuesday 8th June 2010 Commons Chamber

[Mr Gauke]

I do not want to be pedantic, but all of them are getting older. The hon. Gentleman rightly says that there is a need to move quickly. I think that we all feel that. I am pleased that the Government have already announced in the Queen’s Speech that there will be a Bill on this subject. We have already announced a date for the establishment of the scheme. We are making progress. That is a very welcome change from what we have seen in the previous 10 years.

[Ann McKechin (Glasgow North) (Lab)]

8. What recent discussions he has had with the Secretary of State for Work and Pensions on the future of Government targets to eradicate child poverty; and if he will make a statement.

[The Economic Secretary to the Treasury (Justine Greening)]

The coalition Government have announced that they want to see an end to child poverty in the UK by 2020. We now have 1.9 million children living in workless households in the UK. The OECD says that we have the highest proportion of children living in workless households of any OECD country—nearly 18%. That is one of the reasons why my right hon. Friends the Chancellor and the Secretary of State for Work and Pensions have been discussing that matter. One of the early outcomes of those discussions, as I am sure Members will be aware, is the announcement of the review by the right hon. Member for Birkenhead (Mr Field) of child poverty and life chances. We think that that will be an informative way of engaging people in the debate, and of coming up with some policy options, which we can then feed into our consideration of child poverty.

[Ann McKechin]

The hon. Lady will be aware that disabled children are much more likely to live in poverty and have much reduced life chances. Given that, and given her Government’s decision to abolish the child trust fund, can she tell me how many disability organisations they consulted prior to that decision, and what assessment they have made of the impact that that decision will have on thousands of disabled children throughout the country?

[Justine Greening]

We are providing support for disabled children and their families. In fact, regarding the child trust fund, part of the package was the funding of 8,000 extra week-long breaks for the parents of disabled children—breaks that we know are well valued.