Scotland Bill

Fiona O'Donnell Excerpts

Thursday 27th January 2011 Commons Chamber

[Pete Wishart]

I am grateful to my hon. Friend, who knows about these issues and understands the difficulties that the Bill would create.

Why are we giving the Scottish Parliament new fiscal responsibilities that would damage it? That is one of the proposals that we will seek to correct during the Bill’s passage. We will be making suggestions about how it could be dealt with. We are prepared to work with the Government, because we want to improve and strengthen the Bill. We want to make it a powerhouse Bill that will serve our nation and be a credit to the communities that we serve.

As we have heard, the Bill has already been debated in the Scottish Parliament, and has been subject to what has been described as an independent Bill scrutiny Committee. I certainly hope that the proceedings in the House of Commons will be a bit more useful and relevant than what we have seen in the Scottish Bill Committee thus far. We have seen a Labour convener haranguing and harassing independent witnesses, as a result of which several have decided not to take part in the proceedings because of what they feel is an in-built bias. The Scottish Bill Committee seems to be more interested in considering options that are not even in the Bill than in examining the dangerous tax plans that it contains. I hope that we can do a bit better than that down here, Madam Deputy Speaker. As you know, and as we are already observing, Scottish debates in the House of Commons are always characterised by their good nature and conviviality.

[Fiona O'Donnell (East Lothian) (Lab)]

The hon. Gentleman cannot have it both ways. He cannot say that he wants rigorous scrutiny, and then say that we were too hard on people who provided false information in support of his case.

[Pete Wishart]

I do not know what the hon. Lady is referring to. I have never said anything about false information.

In a spirit of consensus and co-operation, let us start with the issues on which we all agree, for obviously there are such issues. We all agree with the Secretary of State and with our Labour colleagues that devolution is, in the words of Donald Dewar, a process and not a one-off event, and that is important. We may disagree on the conclusion of that process—we believe in independence, and my Labour colleagues believe in something else—but we all agree that devolution is a process, and that we will continue to see a transfer of powers from the House of Commons to the Scottish Parliament.

A point was made earlier about the reference to the Scottish Government in the amendment. When I first came to the House 10 years ago, Labour Members were appalled at the prospect of a Scottish Government. The Secretary of State probably remembers the debates in which they expressed their view. They helpfully said, “They can call themselves ‘The White Heather Club’ if they want, but they will never be a Government.” We are a Government now, thank goodness, and the Labour dinosaurs, some of whom I see in their places, will never go back to having an “Executive” running Scotland. That is a good thing too.

An important new development is that we all agree now that some financial powers—fiscal powers—should be devolved to the Scottish Parliament. We never had that important source of agreement before. We fundamentally disagree on the measures in the Bill, but we agree that financial responsibility should be a feature of the Scottish Parliament. I look forward to that, and that is another area of agreement. We will oppose measures in the Bill, but it is good that we now all agree that financial powers are required for the Scottish Parliament.

The most important thing that everyone in this House can agree on—this ran through everything to do with Calman—is that the Scottish Parliament has been an overwhelming success. The Secretary of State is of course right to say that there is no question—only people on the fringes of politics in this House would even suggest this—of ever going back to having no Scottish Parliament again. What typifies that more than anything is the fact that a Conservative-led Government are legislating for more powers and responsibilities to be given to the Scottish Parliament, because only 12 short years ago the Tories campaigned so energetically against the Scottish Parliament. That shows the progress that we have made, and there will be areas of agreement as we go through the Committee stage in this House.

Although we agree on many things in the Bill, there are many things with which we fundamentally disagree.

--- Later in debate ---

[Fiona O'Donnell (East Lothian) (Lab)]

I pay tribute to the right hon. Member for Gordon (Malcolm Bruce) for an illuminating and useful contribution to today’s debate. I am afraid that mine will not be as lengthy, but I humbly hope that it will also illuminate the debate.

I am sorry that the love of Scotland of the hon. Member for Epping Forest (Mrs Laing) could not hold her in the Chamber longer, because she expressed disappointment that today’s debate is not taking place on the birthday of Mr Robert Burns. However, I can confirm that it takes place on my birthday, and I can think of no better way to celebrate than to speak in support of the Scotland Bill.

[John Robertson]

How sad!

[Fiona O'Donnell]

I expect that it is a reflection of what has happened to my life since coming to this place.

I begin, rather unusually, by apologising to the hon. Member for Perth and North Perthshire (Pete Wishart) for my rather bad-tempered intervention. It makes me angry when I hear the SNP, given its record, complaining about the process that has brought us here today, and the Calman commission. It also makes me angry when the hon. Gentleman questions whether the Bill will receive due scrutiny. I hope that, now he has heard the comments of my hon. Friend the Member for Glasgow North (Ann McKechin), he realises that Labour will give the Bill due scrutiny, and that he will also welcome the inquiry by the Scottish Affairs Committee, on which the hon. Member for Banff and Buchan (Dr Whiteford) serves. That will give us further opportunities to examine the Bill.

I remind the hon. Member for Perth and North Perthshire that the Calman commission consulted the public, experts and interested groups at 12 local engagement events all over Scotland. It received 300 written submissions, and held 50 public and 27 private evidence sessions. That compares more than favourably with the national conversation. The hon. Gentleman asked my hon. Friend the Member for Glasgow North how much it had cost. A conversation among Unionists is a far bigger conversation than one just among nationalists.

I am particularly pleased to be speaking in today’s debate because I follow in the footsteps of John P. Mackintosh. His approach was one of integrity and commitment, and he wanted genuine constitutional reform and the flourishing of the democratic expression of the Scottish people. I should like to remind Members who have visited the Scottish Parliament, and to inform those who have not, that the Donald Dewar room at Holyrood carries this quote from John P. Mackintosh:

“People in Scotland want a degree of government for themselves. It is not beyond the wit of man to devise the institutions to meet these demands.”

Labour finally devised the institution to meet those demands and delivered on Keir Hardie’s original aim of home rule. Another of my predecessors, John Home Robertson, not only believed in home rule, but lived and breathed it as he served East Lothian in both the House of Commons and the Scottish Parliament.

Constitutional reform should rise above party politics. The SNP has shown throughout today’s debate not only that its politics are separatist, but that its approach to politics—the way it does politics—is separatist. The Labour way is to work with other parties to achieve consensus, which is what it has done through the Scottish Constitutional Convention and the Calman commission. SNP representatives were absent from both, which must make theirs the longest political huff in history. They are less outside the tent than squatting on a different campsite altogether. Indeed, they have not been happy campers, although there have been an unusual number of references to caravans.

We today take Scotland forward to a new era. It is right and it is time that the Scottish Parliament takes greater responsibility for its expenditure and matches that with accountability. Of course, the Bill goes further than that in giving substantial borrowing powers to Scotland. I hope that we can now move away from a time when the SNP Government used every capital building programme as an opportunity to fight at Westminster, rather than as an opportunity to fight for Scotland.

SNP Members have still to tell us whether they will vote for the Bill or seek to wreck it today. They have an opportunity to see Scotland move forward, but they appear to be unwilling even now to rise to give us clarity on that question—[Interruption.]

[Pete Wishart]

I just got bored listening to this. I’ve heard it all before.

[Fiona O'Donnell]

If the hon. Gentleman is bored, he could make the debate more interesting by intervening to answer that question, but he remains silent.

The SNP has argued for full fiscal autonomy for Scotland, but that is not what Scotland needs. Scotland needs the security that is offered by remaining part of the Union, which is what the Bill gives it.

What would the SNP have done with the banks in an independent Scotland? [Interruption.] Yes. I am afraid that it is all fantasy and Brigadoon on the SNP side. I urge SNP Members to think again—in the words of another Scottish poet—and to consider giving their support to the Bill. I also I urge them not to press to a Division an amendment that seeks to deprive Scotland of an opportunity to move forward.

I thank the House for the short time that it has indulged me, and urge hon. Members to support the Bill.

--- Later in debate ---

[Mrs McGuire]

I do not wish to interpret the SNP’s tactics, but it is certainly bizarre that their amendment says that the “Bill as a whole” is “unacceptable”, given that the mover of the amendment, the hon. Member for Perth and North Perthshire (Pete Wishart), tried to appear consensual on some of the areas on which there is agreement. I do not know which part of the brain was not working when the amendment was tabled, but it definitely calls on the House to vote against something that SNP Members agree with in some way. That is a question for them to answer, but I am delighted that my hon. Friend the Member for Glasgow Central (Anas Sarwar) has raised it.

The Bill, like the Scotland Act 1998, was developed as a result of consensus, as the right hon. Member for Gordon (Malcolm Bruce) has highlighted. The engagement of civic society, communities and individuals, as well as of political parties, is the hallmark of the legislation—as it was of its 1998 predecessor. In terms of political party consensus, there have been positive developments over the years. As the hon. Member for Epping Forest has clearly shown, the Conservative party in Scotland and across the UK boycotted the Scottish Constitutional Convention in the early 1990s, campaigned for a no vote in the 1997 referendum and voted against the first Bill when it came through Parliament. However, it is now working in partnership with other political parties that see the strength of the Union as key to the future of our country. I always welcome the sinner that repenteth.

Some things never change, though. The SNP stood apart from the consensus building up to 1998 and boycotted the Calman commission for reasons that I cannot understand and have not heard properly explained. I think the SNP amendment is somewhat churlish and flies in the face of all the views that have been expressed by the Scottish people through elections and consensus. If the SNP wants an independent Scotland, its first aim must be to prove its case to the Scottish people.

[Fiona O'Donnell]

As the SNP has fallen silent, will my right hon. Friend tell us why she thinks the party bottled it when offered the chance of a referendum by Labour in Holyrood?

[Mrs McGuire]

I gave up many years ago trying to get into the political mind of the SNP and I do not know if I want to revisit some of those early nightmares I had in trying to understand it.

I want to concentrate on the additional fiscal powers. Some of us in the House are old enough to remember the 1978 proposals of the then Labour Government, one weakness of which was that they contained no taxation powers—no variation to what was then called the Scottish Assembly was to be allowed. To an extent, that lesson was learned when the 1998 legislation was introduced. The plus or minus 3% provision was intended to deal with the flaw in the earlier legislation, which of course failed the somewhat artificial 40% referendum test. The discussion around Calman recognised that the time was right to build on the 1998 Act and devolve more responsibility for revenue raising to the Scottish Parliament.

In addition, the Bill gives us a package of other changes that will enhance the Scottish Parliament’s fiscal responsibility, including new borrowing powers, a stamp duty land tax, a landfill tax and, of course, the power to create new taxes, subject to the approval of both the Scottish and UK Parliaments, which I think is a responsible way forward. The assessment of those new taxes, however, must be open and transparent so that it does not feed into the arguments of the conspiracy theorists who will interpret anything less as an attempt to undermine Scotland. However, the Scottish Parliament should recognise, as I am sure it will, that any proposed new tax must be assessed according to its potential impact on economic incentives in Scotland.

I want to raise one area of concern on the new Scottish rate proposals. The implementation and impact of that power must be thoroughly tested and developed, and not only with Her Majesty’s Revenue and Customs, important though that is. I know that the qualification for liability for the Scottish rate will be the same as or similar to those already set out in the Scotland Act 1998. Although we can easily see the implications for the basic and higher rate taxes, people in Scotland must also have clear information on the impact on their tax liability of pension contributions, to which the hon. Member for Milton Keynes South referred, and any unearned income, such as dividend receipts and bank interest. That sounds as though it concerns only a small group of people, but many people in Scotland earn interest through bank accounts and from dividends. I ask the Minister, both today and throughout the Bill’s scrutiny, to consider how the current regime of tax credits on dividends, for example, will be managed if there are different tax rates in different parts of the UK.

What discussions have there been about the implications of variable tax? What will happen if someone uses an address for their unearned income, such as a bank based in London, Cardiff, Halifax or wherever, that is different from that used for their individual taxation north of the border? I know that those problems are not insurmountable. There might be issues of detail, but frankly, we want the system to be robust and watertight from the beginning, otherwise the Bill will be nothing other than a job creation scheme for accountants—having been married to an accountant for 39 years, I have no problem with that in principle. The Secretary of State, given his previous career as an accountant, will have some knowledge of how accountants can take a piece of legislation, dissect it and then work their way around it. I hope that those issues can be solved properly so that we can ensure a robust system.

The Bill certainly makes some common-sense adjustments to the devolution settlement, such as the licensing of controlled substances and appointments to the BBC Trust, and there are other changes that are welcome in principle. However, greater discussion and clarification will be needed as the Bill goes through the House. For example, the power to set drink-driving limits, which has been mentioned by several hon. Members, should be considered. Different limits north and south of the border could cause confusion. Again, that is an issue not of principle, but of clarity. If we are to devolve power on the licensing system for air weapons, we will undoubtedly need a clearer definition of what constitutes an air weapon than that currently specified in the Firearms Act 1968. I assume that the Secretary of State will be having discussions with ministerial colleagues in the Home Office to ensure that the power that is being handed over will take account of how technology has changed in the intervening years in the manufacture of air weapons.

Let me deal briefly with some of the attacks that have been made on the Bill, which are crystallised in the SNP amendment. It has been criticised for not giving meaningful economic powers, and yet the Scottish Parliament will now be able to raise significantly more income as a result. In addition, there will be additional borrowing powers of up to £3 billion. When there is a cyclical fall in tax receipts, which we might see during a recession, there are powers to manage that problem.

I know that the hon. Member for Dundee East (Stewart Hosie) is, or appears to be, an expert on all things fiscal, but, although he might be able to identify some of the problems, his analysis and conclusions are sometimes questionable. I advise him that not all of us agree with his suggested outcomes. Of course, we know that all that is code for fiscal autonomy, which in turn is camouflage for independence. I have no problem engaging with that argument, but we have to be realistic and admit that that is what the debate is all about: it is a debate for those who want to see the United Kingdom broken up and those of us who want to see it strengthened through the greater devolution of powers.

I am delighted to support the Bill, and I resent what almost amounts to rivialisation of some of its elements. The Scotland Act 1998 was one of the most complicated pieces of legislation ever to go through this House. It had to unpick legislation dating back over 300 years, since the union of Parliaments, so it was not straightforward. Stage hypnotists might not have been at the top of the political agenda, but legislation on stage hypnotists had to be dealt with as part of the Act. Indeed, given the number of hours we spent on it, I wonder how we did not realise that we had given Scotland power over Antarctica. I do not quite know how that slipped through in all those hours, but we should not trivialise the detailed work that had to be done to present that Act and to deliver a Scottish Parliament, or suggest that it somehow undermines the Scottish people’s right to autonomy through devolution.

Issues of detail and clarification will undoubtedly need to be debated in the Chamber over the next few weeks, but the Bill is a natural progression along the road that we set down in 1998, and if Donald is up there on his cloud, he will definitely see that it is part of the process, and that 1998 was not just an event.

--- Later in debate ---

[Stewart Hosie]

That is what the Command Paper says, but because the Barnett rules have the effect of squeezing income, we will have to see precisely how the no-detriment clause works. Will it be an up-front no-detriment clause that pays against forecasts, or will it be retrospective and pay only if the estimate be lower than the forecast? None of that is at all clear yet. That is precisely the kind of issue that we want to probe with more detailed amendments in Committee.

The limited borrowing powers are slightly poorly designed and would constrain the Scottish Government, rather than assist them. Fundamentally, the borrowings can be made not against forecast reductions in revenue, but against reconciled outturn receipts 12 months after the end of the financial year. That means that revenue borrowing cannot even act as an automatic stabiliser to fill the tax gap during a downturn—something that every party accepts is necessary and supports. In short, the powers will expose the Scottish Government to the full negative impact of the economic cycle, rather than present them with the ability to mitigate those problems.

Secondly, revenue borrowing will be capped at £200 million in a single year and at £500 million in total. Therefore, even if the timing of the borrowings could have been sorted out, the limits would have been inadequate to close the revenue gaps in 2008-09 and 2009-10, when the calculated budget shortfalls were £400 million and £800 million respectively. That might be what the hon. Member for Kilmarnock and Loudoun meant when she referred to the economic parts of the Bill.

Thirdly, the repayment of borrowings within four years almost certainly means that repayments will have to be made at precisely the wrong point in the economic cycle. To make that point more solid, I should explain that the proposals would have required the revenue borrowing needed to cover the shortfalls between 2008-09 and 2009-10 to be repaid in the current comprehensive spending review period, when the Scottish block grant is already under pressure from proposed cuts of more than £3 billion. Borrowing and repayment should be possible over the entire economic cycle and should not have arbitrary timelines attached to them. Cyclical borrowing can mitigate volatility, but the proposals will generate additional volatility in future budgets.

The highly limited revenue borrowing powers that are proposed will be further constrained because the first 0.5% of any shortfall—about £127 million in 2014-15—will have to be found from cuts in the cash reserve before retrospective revenue borrowings can even be found.

The second borrowing power in the Bill is for capital expenditure. It is welcome, but could be improved. The cumulative borrowing total that is set out is £2.2 billion. That is quite low compared with recent Scottish Government investment of more than £3 billion a year. Borrowing in any year will be limited to 10% of the capital DEL—approximately £230 million by 2014-15—not the total budget. For example, a replacement Forth crossing costing between £1.7 billion and £2.2 billion would use up the entire additional capital borrowing, if we were able to secure it under the constrained limits set out by the Treasury. The only way to increase the limit to allow additional borrowing would be for the UK Parliament to agree to a legislative amendment. I am not sure that that is the best approach for securing long-term sustainable capital investment.

The borrowing powers in the Bill will limit the Scottish Government to certain types of borrowing. They will be able to use loans, rather than bonds or other instruments that would provide greater flexibility. Transport for London, which is a local authority in respect of its borrowing powers, is currently issuing commercial paper worth £7 billion for Crossrail and other projects. Birmingham city council issued paper to the tune of £250 million in 2006, and it seems passing strange that what should be seriously enhanced powers for the Scottish Parliament would not even put it on a par with TFL or Birmingham city council in its ability to raise cash through commercial paper for important national infrastructure works.

We are also concerned, like the hon. Member for Kilmarnock and Loudoun, that the Bill might not provide access to capital quickly enough to meet Scotland’s needs. The proposal is that access will commence from 2013, subject, as we heard earlier, to Treasury approval on a per-project basis. In the face of the budget cuts and the urgent need to invest in infrastructure, that is not soon enough.

The remaining tax proposals in the Bill are limited, although welcome. I have to say, however, that the Conservatives appear to have U-turned on some of the taxes that Calman said should be devolved. As I said, this is not a dry, academic exercise, and we would like stamp duty to be incremental, so that people do not pay the full whack for hitting the threshold. I am glad that responsibility for that is being devolved. It was worth £593 million in Scotland in 2008-09, but that was only 1.4% of all the non-North sea revenue raised in Scotland.

[Fiona O'Donnell]

The hon. Gentleman has been very reasonable in acknowledging the parts of the Bill of which he approves. Would his amendment not therefore have been more reasonable if it had said “on the whole” rather than “as a whole”?

[Stewart Hosie]

There are forms of words that can be accepted, tabled and selected and forms of words that cannot. I stand by the amendment, because it is important to challenge the Bill in areas in which we do not believe it comes up to scratch, and it would appear that many of our concerns are shared among the parties. To have a dry, sterile debate about the words in the amendment rather than its substantive nature does the Labour party no good. That is the only time I have been partisan in my entire speech, and I will stick to that.