Scotland Bill

Iain Stewart Excerpts

Tuesday 21st June 2011 Commons Chamber

I have been a long time speaking and others want to contribute. I commend our amendments to the House.

[Iain Stewart (Milton Keynes South) (Con)]

I shall speak first to my amendment 24 before making some broader comments about some of the other amendments and new clauses.

I tabled the amendment as a probing amendment, as I felt there was still some ambiguity about one aspect of the definition of a Scottish taxpayer when it was considered in Committee. My point of concern is to define whether under clause 26 a taxpayer is resident in Scotland at the end of the day if that person is embarking on a cross-border overnight journey—one that departs Scotland before midnight and arrives in England after midnight. I think primarily of my old friend on the Caledonian sleeper, whom I cited in Committee. If the train leaves Glasgow and has crossed the border before midnight, is he deemed to be in Scotland or England at the end of the tax day? The point may seem trivial, but for someone who makes that journey regularly it could be material in defining whether they were a Scottish or an English taxpayer. Obviously, it would also apply to other modes of transport, such as private or heavy goods vehicles and overnight coaches.

It is a probing amendment and it may not offer the most specific or elegant definition, but I tabled it to find clarity. I shall be happy not to press it if alternative wording can be found, or the Minister can give clarity in case the definition is ever challenged in court. I shall return to that point briefly at the end of my comments.

I shall speak briefly to new clause 8 and the related amendments tabled by the right hon. Member for Birkenhead (Mr Field) and others. I suspect that one of our show-stopping debates tonight may be on the Barnett formula and related matters. When I looked at the amendment paper, I thought I would be following the right hon. Gentleman and responding to his points, but I shall have to anticipate his arguments from the interventions and from the new clause itself.

They are a beguiling set of amendments. I agree that at some point we shall have to tackle the whole issue of the Barnett formula and the fiscal relationship between all parts of the United Kingdom. [Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) invites me to give a solution. If he bides his time—

[Mr MacNeil]

I said we have a solution.

[Iain Stewart]

I know, but I believe I have a better one and I shall turn to it in a moment.

The arguments are beguiling. The hon. Member for Vauxhall (Kate Hoey) said that she has correspondence from constituents asking why on the face of it Scottish residents have a much better deal from the UK public purse than people in England. I receive similar letters asking why prescriptions are free north of the border, but there is a charge in England. That issue has to be tackled.

[Mr MacNeil]

Among that raft of questions, has anyone ever asked the hon. Gentleman why the social security spend is higher per head in England than in Scotland?

[Iain Stewart]

I challenge the hon. Gentleman’s facts, because in preparing for the debate I read that often-thumbed document GERS—Government Expenditure and Revenue Scotland—and the Treasury’s public expenditure statistical analysis, which show, if my interpretation is correct, that social security payments are higher per head in Scotland than in England.

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

Could the hon. Gentleman rise to the challenge of explaining to his constituents why there may be different charges for services between one local authority area and another? If that can be explained, surely the choices made by the Scottish Parliament and Government can also be explained to his constituents.

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[Iain Stewart]

Indeed. If the hon. Lady will let me develop my argument, I shall address those points. There is a lot of misinformation swilling around and we need to arrive at hard evidence-based data so that we can make objective decisions about the future fiscal relationship between the different parts of the United Kingdom.

One of the misleading things is that we often talk about changing the Barnett formula as if that was the whole fiscal relationship between the different parts of the kingdom. In fact, it is a convergence formula; it was designed by Lord Barnett to diminish the difference between Scottish and English public spending over time. The reason why people complain about the formula is that so many elements of public spending are negotiated separately from the formula. Last week, there was an instructive debate about the formula in the other place and I remind Members of the comments of Lord Lang, a former Scotland Secretary. He said that between 2000 and 2002 the Barnett elements of the public expenditure rounds diminished the Scottish block by £17 million, but the total increased by £340 million because of separately negotiated arrangements.

[Mr MacNeil]

Was any mention made in that debate of the massive defence underspend in Scotland, which is a huge section of public spending where Scotland receives dramatically less than its per capita share compared with the rest of the UK? [Interruption.] I would say more if I was not being heckled by the hon. Member for Glasgow South West (Mr Davidson).

[Iain Stewart]

If the hon. Gentleman has a little patience, I shall come to what I believe is the solution.

I fear that new clause 8 and the related amendments are a little hasty in dealing with this matter.

[Mr Frank Field]

What about the Union?

[Iain Stewart]

The Barnett formula has not been in operation for the duration of the Union and only since 1978, so it is a comparatively new beast.

Yesterday, the right hon. Gentleman was speaking in the debate on the Pensions Bill where one of the arguments against the changes the Government are proposing is that the time scale to allow people to adjust their behaviour should not be less than 10 years. A similar approach should be taken to funding; there should be a process of evolution, not revolution. If we rush too hastily into the argument on the basis of misinformation, we risk splitting the Union asunder.

[David Mowat]

My hon. Friend is right. If a change is made to the block grant, as it must be at some point soon, there will be a long transition period, which may be as long as 10 years, but that is no reason not to do a review, put the matter on a needs basis and start that 10-year period. A transition of 10 years is reasonable.

[Iain Stewart]

I am grateful to my hon. Friend. I have a suggestion to make about how we can move forward. In this country we have never had a territorially based system of taxation or spending. From taxation receipts we do not know in detail which part of the United Kingdom contributes what in taxes. There are many estimates and forecasts, but there is little hard evidence.

[Mr MacNeil]

rose—

[Iain Stewart]

I will give way to the hon. Gentleman in a moment. His party, in calculating Scotland’s share of the United Kingdom’s tax receipts, has used very different formulae and assumptions over the years. I do not have the exact figures to hand, but in the space of a few months it came up with a figure for Scotland’s surplus, if that is what it was, which varied by several billion pounds because it used different assumptions in calculating Scottish tax receipts. That is the problem that we have in calculating the true relationship.

[Mr MacNeil]

Over and above tax receipts, disaggregated spending might be a lot easier. Does the hon. Gentleman believe that Departments such as the Ministry of Defence should provide full figures on how much they are spending in which parts of the United Kingdom? The Government have the power and authority to do that. We have many concerns about the shipyards in Glasgow and about defence spending. As a member of the governing party, does the hon. Gentleman feel that he should be encouraging his side to provide openness and clarity on these vital issues?

[Iain Stewart]

I am happy to come to some agreement with the hon. Gentleman. My solution is to provide a detailed breakdown on a territorial basis of actual spending and receipts—what is spent and received by each part of the United Kingdom.

[Mr Davidson]

I understand the point that the hon. Gentleman is making, but with reference to the different parts of the United Kingdom, does he accept that there are enormous divergences among different parts of England, and that that is fuelling much of the sense of grievance felt by many of our English colleagues? Much of this is a within-England problem of unfair distribution, particularly to the north-east and the north-west of England, which ought to be addressed by his Government.

[Iain Stewart]

The hon. Gentleman anticipates my next point exactly. It is too crude to look at the four constituent nations of the United Kingdom. In Scotland and in England we need to break that down further and look, as he says, at the different needs in the different parts of the kingdom. I will give a constituency example. My constituency, Milton Keynes South, is in the affluent south-east of England, yet I have very deprived wards in my constituency. Taking health spending as an example, what Milton Keynes is allocated as its formula share of health spending in England is capped because there is a transfer to other parts of England. I contend that that is not fair and it disregards some of the areas of need in my constituency, but it illustrates the problem that arises if the formula for analysing spending is too crude.

[Mark Lazarowicz]

As the hon. Gentleman knows, spending per head in London is almost 50% higher than in the south-east region of England. No one disputes that there are parts of London where there is great need, but other parts which do not fall into that category still benefit from Government spending which is 40% higher than in his constituency.

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[Iain Stewart]

The hon. Gentleman makes a good point. In calculating these figures, however, we should be careful about looking only at per capita spending. Again, I believe that is too crude. It is about the equality of service provision. In a rural area, the cost per head of providing a school place will inevitably be higher because the fixed costs of a building, for example, are divided by a comparatively smaller number of people.

[Mike Freer (Finchley and Golders Green) (Con)]

Does my hon. Friend accept that allocating funds simply on geography, particularly defence spending, is a misdirection? Defence spending must be based on the strategic needs of the armed forces, not on a geographic spread. Does he agree that that line of argument is completely false in the context of defence spending?

[Iain Stewart]

My hon. Friend makes a very good point. We also have to look at the equality of the benefits given by defence spending—the protection that accrues to the whole country. It does not matter so much where the defence equipment originates if we are looking at the overall protection that the armed forces provide.

[Mr Weir]

The hon. Member for Finchley and Golders Green (Mike Freer) makes a valid point as regards defence. The attack on the Barnett formula is based on the fact that Scotland gets more per head, but if we take into account all spending, that is not necessarily the case because of the imbalance in the way that defence spending is allocated—so the figures are important. Where the assets are, for the purposes of this argument, may not be quite so important, but the amount of spending is very important. The economic impact of where the assets are is vital to many communities.

[Iain Stewart]

I am grateful to the hon. Gentleman for his point. May I infer that he is happy to retain the Trident base in Faslane, given the economic benefits that accrue to Argyll and Bute and West Dunbartonshire?

[Mr Weir]

There is little or no economic benefit from the Trident base, and there is an extremely disproportionate —[Interruption.] The point is that bases such as the RAF bases in Morayshire are important not only from a defence point of view but economically, and bases such as the Condor base in my constituency are important economically and also from a defence point of view.

[Iain Stewart]

I challenge the hon. Gentleman’s assumption about the lack, as he sees it, of economic benefits. I also contend that he is making a good case for Scotland's remaining part of the Union, so that the lion’s share of UK defence assets can be based north of the border.

[Mr MacNeil]

As part of the Union, Scotland currently has a manifest defence underspend. There is no defence advantage for Scotland of being in the Union at all; we are actually losing money by being part of the Union. Far more would be spent on defence in Scotland as an independent country than the Union is spending there, and the shipyards in Glasgow would be in a far better state with an independent Scotland than with a dependent Scotland represented by Labour.

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[Iain Stewart]

I have great respect for the hon. Gentleman in many matters, but this is not one of them. The argument that defence spending in Scotland would somehow be enhanced through independence is not one I agree with. I am not sure whether the Scottish National party’s policy is still to withdraw from NATO, but it used to be many years ago. I see Scottish defence assets only being decimated in the event of independence, so I agree to disagree with him on that point.

I will return to what I propose as a solution. Before we start recalibrating the Barnett formula or developing some other formula or mechanism, we need hard facts on the fiscal relationship between each part of the kingdom. Once we have that, we can move forward on a sensible basis towards having a stable and fair system in the UK. However, I will end on a note of caution. In a previous exercise I looked at other countries that operate some form of fiscal transfers between different parts of the country, such as Australia, Canada and Germany. There are different models in each country, but in all of them the spending relationship between the constituent parts is still a big political issue. I fear that we will never get to a point where everyone is completely happy with the relationship, but I believe that we can arrive at a stable solution.

[Mr Davidson]

It is important to put on the record that even under devolution Glasgow clearly gets far less than its fair share from a Scottish Government based in Edinburgh. I have just been to the Shetlands with the Scottish Affairs Committee, and people there feel that they are equally badly treated by Edinburgh. We also need a needs-based assessment within Scotland to stop money disappearing and being sucked down into the black hole that is Edinburgh.

[Iain Stewart]

Having been born and brought up in Hamilton, which is between Glasgow and Edinburgh, I am in something of a no man’s land on that point and wary of intruding on private grief. The hon. Gentleman’s point is an important one. The analysis should be not only among Scotland, England, Wales and Northern Ireland, but among the regions and cities in each nation. I do not intend to press my amendment to a vote, but I would be grateful if the Minister could suggest some alternative working or make some statement.

[Mr Russell Brown]

Will the hon. Gentleman give way?

[Iain Stewart]

One very last time.

[Mr Brown]

I thank the hon. Gentleman for giving way. My intervening on him is causing disruption behind me. Will he look again at his amendment and explain exactly what it means? I am a little perturbed, and I know that he has mentioned sleeper trains and everything, but will he explain again exactly what it means?

[Iain Stewart]

My amendment is very simple and would remove any ambiguity. If a passenger were on a cross-border overnight journey, irrespective of when the border was crossed, they would be deemed to be in Scotland at the end of the day when that service departed. It may not be the most elegant or precise of solutions, but I felt that in the debate in Committee there was some ambiguity about the position, so the amendment is my attempt to clarify it.

[Mr MacNeil]

Will the hon. Gentleman give way?

[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)—

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[Iain Stewart]

Thank you, Mr Speaker, I shall make a very brief contribution. I just want to congratulate the Government on introducing this Bill, as its provisions are a sensible evolution of the devolution settlement.

From an English perspective, I think the Bill will go some way towards allaying the concerns felt by many of my constituents about a perception of unfairness in the spending arrangements. I agree that the Scottish Parliament should be responsible for raising a significant chunk of the revenue it wants to spend on services, and this presents a sensible way forward. It will not be the end of the matter, however. There will be further debates on the arrangements between Scotland, England and the rest of the United Kingdom.

I am an unashamed Unionist. I believe that the strength of the United Kingdom is greater than that of the sum of its parts, and I want it to continue always. Others on both sides of the border disagree with that, but I make this plea: whatever further changes are suggested, let them be based on evidence, be sensible, be practical and not be part of some silly constitutional game-playing. The economy of Scotland, and indeed of the whole United Kingdom, is still fragile, and the last thing we need is years and years of constitutional uncertainty. As we send this Bill to the Lords for further consideration, I congratulate the Government again and make that plea for a sensible, evidence-based, common-sense solution.