Scotland Bill

Earl of Caithness Excerpts

Tuesday 6th September 2011 Lords Chamber

[The Earl of Caithness]

My Lords, this Bill was introduced in the other place on 30 November last year, St Andrew’s Day; 21 June is not quite such an auspicious day in Scotland but I guess that until today my noble and learned friend Lord Wallace will have remembered 21 June as the anniversary of the scuttling of the German fleet in Scapa Flow in 1919. From now on, I guess he will remember 21 June for the Scotland Bill.

Ironically, we might all be wasting our time in this debate if there is a referendum. Most of the provisions will not come into force until after the referendum might take place. Therefore, I support the cause that we ought to assert the constitutional duty of this Parliament to determine the timing and composition of the referendum.

This is a groundbreaking Bill, particularly on finance matters. As such, I welcome it. In the early and mid-18th century, the well used phrase in Ireland and the future USA was, “No taxation without representation”. Three hundred years later, the call is for no representation without taxation. The UK has the most centralised tax system of any major economy, with just over 4 per cent of tax revenues being set and collected locally. That is basically council tax. Despite this, the current law gives the Scottish Executive and Parliament decision-making powers on 60 per cent of the spending that is identifiably Scottish. That is unjust and bad for democracy. The Scottish Executive has always been able to spend and ask for more money, without having to justify that to its electorate. That is an incentive to spend more, rather than spend effectively. The Scottish Executive has been rather good at that.

Things will be different for the future Scottish Government. Rather than the paltry 4 per cent of local revenue, they will be responsible for raising approximately 35 per cent of their revenue, with the remaining 65 per cent still coming from the UK block grant. That takes the ability to raise local taxes to a percentage level comparable to that of the USA, but still less than that of Canada. I should like to see that expected 35 per cent be even higher but I appreciate that there are many difficulties. Any transfer of taxation powers must not increase costs of administration to the point where the transfer is uneconomic and detrimental to business. I therefore ask my noble and learned friend Lord Wallace whether he can tell the House what further taxes are now being considered for transfer. What is the justification for the deduction of 10 percentage points of income tax? Why should it not be 15 per cent, which would give more accountability to the electorate in Scotland? Can there be a different basket of taxes that the Government can transfer to Scotland to give the accountability, but without causing some of the concerns that I will come to later?

Moreover, does my noble and learned friend agree that there is still a fundamental flaw to this Bill? The flaw is that it is based on the outdated existing financial settlement. Through the block grant, over the past 24 years Scotland has received approximately its share of North Sea oil revenues. Thus it has been financed as if it was independent but—this is the crucial point—it has not had to cope with the huge fluctuations in the price of oil. The Executive’s spending programme has been cushioned from the marketplace and in times of low oil prices has been subsidised by the rest of the United Kingdom. Is it not time for the whole basis of the block grant to be changed to one of need and linked to the price of oil? That would encourage a future Scottish Government to be much more prudent than the ones that we have had to date and to spend more effectively. It would expose the country and the electorate to the realities of the real world and to the benefits that the union has brought to Scotland.

I listened carefully to the concerns raised by my noble friends Lord Forsyth, Lord Lang and Lord Sanderson. One of the concerns was population. How can one say that Scotland cannot raise 35 per cent of its revenue from its population? If one talked about that to people in Denmark, Finland or even outside the EU in New Zealand, they would be amazed, and the response would be a surprise to my noble friends.

[Lord Forsyth of Drumlean]

Will my noble friend give way?

--- Later in debate ---

[The Earl of Caithness]

No. I did not interrupt my noble friend. The time is late and I want to get on. I have almost come to an end.

The present system of funding Scotland is broken. It is doing Scotland no good. The principle that a Government who spend money must be accountable for raising some or all of it is right. We must not flinch from that, but this Bill is surely one that should make it work.