Public Sector Pensions

Debate between Brian H. Donohoe and Stewart Hosie

Thursday 8th December 2011 Commons Chamber

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Does the hon. Gentleman not accept that the Labour-run Scottish Executive also had to make choices? When they undertook to introduce free travel for the elderly, they had to do so on the basis of the block grant, and the SNP would have to take a similar hit if they did what the motion suggests.

[Stewart Hosie]

The budget was going up at that time.

Scotland Bill

Debate between Brian H. Donohoe and Stewart Hosie

Tuesday 21st June 2011 Commons Chamber

[Stewart Hosie]

It has to be initially to get this kicked in. At that point, the Scottish Government are rightly responsible for their revenue raising and their tax spending within it. That is normal, grown up and quite appropriate.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I ask a simple question: what does the hon. Gentleman mean by “initially”?

[Stewart Hosie]

A permanent reduction for corporation tax to be devolved and taking responsibility for the income we raise to pay for the services we have.

--- Later in debate ---

[Stewart Hosie]

It will not be a reduction because we will have the corporation tax yield, which is comparable to the reduction in the block. It is the same amount of money initially and we take responsibility thereafter.

[Mr Donohoe]

rose—

--- Later in debate ---

[Stewart Hosie]

I suspect that any MP trying to take a carry-out through airport security would immediately be stopped.

The devolution of alcohol excise duties would also enable the Scottish Government to implement a revised alcohol duty structure to offer greater protection to the competitive position of Scotch whisky, something we have tried to do on several occasions in a number of past Finance Bills. On 12 May 2009, the vote on alcohol duty took place at half-past midnight. We were trying to implement a fair rate of duty—which we can achieve through the devolution of excise duties—so that alcoholic beverages were taxed on their alcohol content, and on no other spurious measures. Interestingly, five Conservatives managed to vote with us, yet 268 Labour Members voted against, thereby maintaining the unfair level of duty on Scotch whisky. I am sure the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) is sincere in his view, but it does not stand the scrutiny of the recent voting record.

The devolution of excise duties ought to be handled through the devolution of additional powers as described in the amendment, because alcohol duty is levied on all products consumed in the UK irrespective of their country of origin. As a result, the UK Exchequer collects duty on Scotch whisky only if it is consumed in the UK, as exported whisky is not liable for excise duty. Similarly, imported products such as spirits produced overseas are liable for duty when entering the country to be sold in the UK market. We seek to devolve this power, and the Scottish Government seek the responsibility to vary the rate of duty levied on products in Scotland and to implement a more streamlined and efficient system of alcohol taxation that better targets rates of duty to combat binge drinking and excessive consumption of cheap alcoholic products, and that supports a fairer and less discriminatory system for premium products such as Scotch whisky.

[Mr Donohoe]

Will the hon. Gentleman at least give credence to the fact that over a great number of years previous Governments held back from imposing higher taxes on Scotch whisky, along with all other spirits, and that as a consequence the level playing field he seeks is close to being achieved?

[Stewart Hosie]

I am prepared to recognise that duty did not rise for a number of years, but that is not the point I am making. My point is that alcohol taxation is unfair because it is based on different types of alcoholic drink, and not entirely on alcoholic strength.

[Mr Donohoe]

But it is getting to that point.

[Stewart Hosie]

It is no such thing, as I am sure the hon. Gentleman’s contacts in the Scotch whisky industry will confirm.

There is a strong social case for the devolution of alcohol duty, not least because there is clear evidence that, for alcohol, price is a driver of consumption. There is strong evidence from numerous surveys in Europe, America, Canada, New Zealand and elsewhere that levels of alcohol consumption in the population are closely linked to the retail price of alcohol. As it becomes more affordable, consumption increases, and as the relative price increases, consumption falls.

We, and the Scottish Government, are committed to introducing a minimum price for alcohol, and gaining control over the excise duties would provide an additional mechanism to address excessive alcohol consumption. That would help to reduce the annual cost of alcohol misuse in Scotland. Devolving excise duty would enable a future minimum price per unit to be established within the excise system. Under the current system, the introduction of a minimum price is estimated to generate additional revenue for retailers, not the UK or Scottish Government. That was the argument the Labour party made in the Scottish Parliament. Devolving excise duty for alcohol would therefore result in all the additional revenue from increasing the price of low-cost alcohol products accruing to the Scottish Government, and those revenues could then be reinvested in public services in Scotland. The case for devolving alcohol duties is very strong indeed.

Scotland Bill

Debate between Brian H. Donohoe and Stewart Hosie

Tuesday 15th March 2011 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I am sorry that I was not in my place for the start of the hon. Gentleman’s contribution, but I have been following most of it. I am unhappy about Members of the Scottish Parliament being named when they are not here to defend themselves. As for the three people mentioned by the hon. Member for East Lothian (Fiona O'Donnell), will the hon. Gentleman tell us whether one, two or all three of them as list members also intend to stand in the first-past-the-post election? If so, that would pose a very interesting question.

[Mr Donohoe]

The hon. Gentleman raises a pertinent point—one that my individual constituency voted on and came to a unanimous decision. I stress that this is on the basis of a vote only in my own constituency, but not a single person in the constituency party was in support of any added list members also standing for a particular constituency. I mentioned that earlier when I spoke about a person who came fourth in the first-past-the post election in my constituency finding herself in Parliament. That does not make sense, and I doubt whether the hon. Gentleman would say that it made sense.

Let me conclude. This is an important subject for the chattering classes, but it is not very important to the great bulk of people in Scotland—or, for that matter, anywhere in the United Kingdom. One thing is certain: electoral systems do not put food in bairns’ stomachs or jobs into the homes of people who most need them in order to put that food in bairns’ stomachs. I suggest that it is therefore more important for us to argue against and probe Ministers daily on the state of the economy. However, we are where we are; and we are debating what we are. That is why I thought it right to table these two new clauses for debate.

I want fairness: it is something I came into politics for. I have always believed in fairness and I believe there is no doubt, as conceded in this debate, that there is no accountability for these list members. My two new clauses thus have considerable merit, but I shall listen carefully to how the debate continues.

Scotland Bill

Debate between Brian H. Donohoe and Stewart Hosie

Monday 14th March 2011 Commons Chamber

[Stewart Hosie]

It is a pleasure to serve under your chairmanship on this second Committee day, Mr Evans. I look forward to what I hope will be a detailed and constructive debate. Given that a Treasury Minister is present, we may receive some intelligent, enlightening and instructive answers from the Government. I am intrigued to see the Exchequer Secretary to the Treasury, along with the Secretary of State and a junior Minister, the Under-Secretary of State for Scotland. Obviously the Government decided to bring in the big guns to do the difficult stuff. I am sure that that will help over the next two days.

There are four taxes that we wish to be devolved: corporation tax, fuel duty, the aggregates levy and air passenger duty. I shall touch on the first two briefly, and say a little more about the aggregates levy and air passenger duty later.

The Bill has been considered by the Committee in the Scottish Parliament. As Ministers know, there was much agreement on many matters, but there was disagreement on a number of others, including corporation tax. I think it useful for this Committee to understand the minority view of the Scottish Committee, which said:

“A major failing of the Scotland Bill is that it does not devolve control over corporation tax, one of the most important economic levers available to a Government pursuing economic growth. In many countries corporation tax has been the key component of a strategy to increase competitiveness and improve growth. Without this power, however, Scotland is missing out on the opportunity to give itself a competitive edge… This situation could soon be worsened by the UK Treasury's consideration of devolving corporation tax to Northern Ireland. The CBI Northern Ireland has stated that cutting corporation tax in Northern Ireland would have a ‘transformational’ impact on the Northern Irish economy—giving an immediate boost to the profits of businesses and generating 90,000 jobs. With control over corporation tax Scotland would be in a position”

to do much the same. The very fact that the United Kingdom Government were taking a similar approach to corporation tax would justify that position, the Committee said.

As Scottish and other Members will know, a significant body of business opinion backs the devolution of corporation tax—

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Name him.

[Stewart Hosie]

I did not want to take up too much time by listing all the business people in annexe A of the Committee’s minority report, but I shall be happy to do so if the hon. Gentleman wishes.

It is not simply the business community that has backed the devolution of corporation tax. A man who is hugely respected across the political divide in Scotland is Campbell Christie, the former leader of the Scottish Trades Union Congress. He has said:

“Higher growth will create jobs and generate more tax revenues to protect frontline public services, as well as repaying the high level of debt. To achieve this, Scotland's government need greater economic powers. But the Calman legislation does not meet this need.”

[Stewart Hosie]

I did say that there was significant support in the business community, and I stand by that. The one thing I will not do in the next two days is engage in the politics of the Committee report. I want to consider its recommendations, and indeed identify proposals to which there was opposition. There is certainly significant business support for the devolution of corporation tax, which will enable the right decisions to be made to engender economic growth.

[Mr Donohoe]

Will the hon. Gentleman give way?

[Stewart Hosie]

Not at the moment.

Campbell Christie also said:

“I firmly believe a Scottish government equipped to vary all taxes—including corporation tax… would be able to tackle the serious difficulties we face.

I do not want a tax regime to be imposed on Scotland that is utterly unfair and inadequate to meet the challenges we face. I hope Scotland’s politicians will join me in opposing these unfair proposals.”

I hope that Members throughout the House will note carefully what Campbell Christie said about the devolution of that tax.

[Stewart Hosie]

No, it is not, and if the hon. Lady looks at later amendments she will find that an entire series of them is related to the commencement powers, precisely to ensure that the right things are done at the right time, with the agreement of everybody involved. We will consider that, and I hope the hon. Lady is still present in the Chamber when we do so.

Two specific corporation tax issues relate directly to the Bill’s provisions. Existing provisions allow assigned revenue from a share of income tax—one large tax and a chunk from that, and lots of small measures. It would be much better if there was a balanced basket of taxes, so there was not an over-dependence on, and therefore a potential volatility from, having such a large amount of assigned revenue from a single tax. It would also be preferable if there was a personal tax and business taxes, so that they could be offset. It would also, of course, be preferable to remove the perverse disincentive under the Bill in respect of any future Scottish Government reducing income tax. Let us imagine that a Government decided that, for whatever reason, such a measure might be sensible to stimulate growth, but the Scottish Government took the hit in reduced revenue yield from income tax while the UK Government took the benefit of increased corporation tax. The effect of having only a large personal tax, and not a significant business tax, is that it unfairly and unnecessarily removes the number of economic or fiscal levers open to the Scottish Government. That is an important point.

[Mr Donohoe]

I had experience of the shipyards in the ’60s and ’70s, and we came upon something called transfer price fixing, whereby companies in Scotland—and elsewhere—would fiddle with the prices, such as those charged for gear boxes at Linwood. How would we overcome that in practice, because I can foresee exactly the same dangers arising under corporation tax?

[Stewart Hosie]

The hon. Gentleman makes a very interesting point, which relates to what the Government say. They believe in tax competition, as do I, but we must avoid unnecessary tax or regulatory arbitrage not just within the UK but between the UK and other countries. There is a balance to be struck between proper tax competition, which is legitimate and fair and proper to stimulate growth, and unnecessary changes simply to get a quick short-term fix in terms of the arbitrage, which would be unhelpful. That highlights the analogy with price fixing that the hon. Gentleman drew, and he is right to be conscious of that.

We rehearsed the arguments about fuel duty at some length in our debate on the Supply day motion a few weeks ago, so I do not intend to go into that in considerable detail, but I will go into it in some detail.

--- Later in debate ---

[Stewart Hosie]

Not at the moment.

Before I get too distracted, let me return to the Bill. The whole point about this amendment and our seeking the devolution of fuel duty powers is that we are not doing this for its own sake. Everyone understands the difficulty, as we have raised it many times, so this is about action. If the UK Government will not act, it is perfectly reasonable for the powers to be devolved so that a Scottish Government can act.

The two significant taxes dealt with in this first group are the aggregates levy and air passenger duty. In written evidence to the Scottish Affairs Committee, Professor Iain McLean said:

“I am not persuaded by the UK Government’s reasons for rejecting Calman’s other two tax devolution proposals, namely Aggregates Levy and Air Passenger Duty. As Scottish Ministers have correctly pointed out, the litigation which is given as a reason for rejecting the transfer of Aggregates Levy was already in progress when Calman reported. If Scotland is willing to take any revenue risk arising from that litigation, it should be allowed to.”

Likewise, the fact that the UK government intends to convert air passenger duty into a ‘per plane’ duty argues for, not against, devolving it. The principle of subsidiarity implies that the Scottish Government, not the UK Government, should decide how to tax flights originating at small Highland or island airports. Airports don’t move. They are a very suitable devolved tax base.”

On aggregates duty, Professor McLean said:

“The shape of landfill tax is obviously complementary to that of (any successor to) Aggregates Levy.”

Landfill tax is being devolved, so the approach being taken here is rather illogical. It is also a key recommendation of the Scottish Parliament’s Committee that aggregates tax is devolved. The final Calman commission report said:

“The Commission has recommended that a number of “green taxes” (Air Passenger Duty, Landfill Tax and the Aggregates Levy) be devolved. As well as helping to increase the financial accountability of the Scottish Parliament, control of these taxes will provide important policy levers in relation to environmental issues, allowing the Scottish Parliament and Government further options in determining policy.”

That makes perfect sense. Excluding two of the three taxes in that “green taxes” category not only makes a mockery of the Calman report, but, more importantly, decreases financial accountability and removes what Calman called “important policy levers”.

[Mr Donohoe]

I have campaigned on this issue for some time, as has the aviation group within the House. We have asked for this tax to be looked at because it is just ridiculous, given what is happening in Europe. If the tax were to have been devolved, the Government’s position was that it should be devolved, and there was to be a variant—one would presume that that is why the hon. Gentleman is asking for the tax—where would the money come from for any downward variation?

[Stewart Hosie]

I shall answer that when I come to air passenger duty, because it is a perfectly valid question. In general terms, if any Government chose to increase a tax they would see an increase in yield or behavioural change. Likewise, if they chose to decrease a tax they would either see a reduction in yield or behavioural change. In the case of corporation tax, all the evidence in country after country shows that when business taxes have come down, business tax yield has increased. Those judgments would need to be made depending on the tax, the decision and the part of the economic cycle.