Public Finances: Scotland

Debate between Ian Murray and Stewart Hosie

Wednesday 3rd February 2016 Commons Chamber

[Stewart Hosie]

For the hon. Gentleman’s benefit, I will come on to the specific issue of raising tax in a just a moment.

Before I leave the context of the UK fiscal charter, let me say that we all recall the vote on 13 January 2015 on the implied £30 billion of cuts, when we made many of the same points we are making today. The great tragedy then and now is that the Labour party supported £30 billion of extra Tory pain and austerity.

[Ian Murray]

Will the hon. Gentleman give way?

[Stewart Hosie]

I will happily give way.

[Ian Murray]

Let us just dispel this constant nonsense from the Scottish National party. The hon. Gentleman’s own First Minister said, when she launched the Scottish business partnership at Tynecastle stadium in June, that the framework on which there was a vote on 13 January 2015 gave Governments enough flexibility to do as they wished. It was very similar to the fiscal framework or charter that he promoted back in November. He refuses to use such powers; he would rather demolish and demoralise Scottish public services.

[Stewart Hosie]

As the arguments are complicated, it is so much easier simply to quote in full from the 15 January issue of the new Labour leadership’s favourite newspaper, the Morning Star:

“Labour MP Diane Abbott accused her party’s leaders yesterday of doing working people a ‘great disservice’ by backing Tory plans for permanent austerity.”

The hon. Gentleman keeps getting it wrong.

The key thing is that Scotland’s budget has been cut and will continue to be cut by this Government, which makes the achievements of the Scottish Government all the more remarkable. That makes it all the more important not simply that we get any old fiscal agreement, but that we get it right. We must ensure that the Smith commission principle of “no detriment” is adhered to and that we do not embed unfairness in the system, so that we are not subject to possible additional cuts of about £350 million a year. We need to avoid that outcome so that we can continue to do good things and build on the progress we have seen in health spending, which is up to £12.3 billion this year and will be £13 billion next year, and in education.

Scotland Bill

Debate between Ian Murray and Stewart Hosie

Monday 29th June 2015 Commons Chamber

[Stewart Hosie]

I agree entirely. None of us should be encouraging tax avoidance or evasion—not least a Tory Government, which is why I am sure the Secretary of State will want to support the full devolution of tax on earned and unearned income. It is a jolly good idea.

However, whether the devolution of income tax is extended or not, issues of implementation must be fully resolved. I ask the Secretary of State to confirm that, as part of the fiscal framework discussions, the following issues are now being fully addressed: the timing of the implementation of the Smith provisions; the length of the transition period and how it relates to the transition period for the Scottish rate of income tax; how the costs of implementation will be met; whether there will be an agreement to revisit the memorandum of understanding between the Scottish Government and HMRC for the Scottish rate of income tax, to ensure that it remains fit for purpose; the enforcement and compliance regime under the Smith income tax proposals; how gift aid and pensions relief will be treated under Smith; how the block grant adjustment will work, although that is much broader than simply income tax; the forecasting of revenues, the interaction between the Office for Budget Responsibility and the Scottish Fiscal Commission and the detail of how we calculate the transfer of revenue; and the continued role of the National Audit Office in working in partnership with Audit Scotland.

The key issue is the forecasting that will drive the revenues that the Scottish Government will get and the block grant adjustment. There has to be a fair balance between the role and input of the OBR and the Scottish Fiscal Commission, particularly given that the OBR uses Treasury numbers to drive its calculations.

As I said at the outset, I am conscious of time; we have many groups of amendments to get through and others will want to speak. I hope that the Secretary of State can answer those important detailed questions on the proposed devolution. I commend amendment 54 to the Committee.

[Ian Murray (Edinburgh South) (Lab)]

I was not able to make it to the House earlier, Sir David; I would like to express my sympathies to everyone involved in the tragic events in Tunisia. Our thoughts are with the families all across the United Kingdom, but especially the people in Scotland who have been caught up.

I want to speak to new clause 32. Part 2 of the Bill devolves significant new powers to Scotland over income tax and other taxes, and it is a real opportunity to provide the powerhouse Parliament promised by the Smith agreement. Clauses 12, 13 and 14 make provision for transfer to the Scottish Parliament of the power to set rates and bands of income tax, including, as the hon. Member for Gainsborough (Sir Edward Leigh) was pushing for, the ability to set a zero rate. The full impact of that and other tax measures should not be downplayed.

Lord Smith himself outlined that the measures proposed in the agreement would create one of the most powerful devolved Parliaments in the world. When taking taxation and spending clauses together, Scotland would be only slightly behind the Canadian provinces and Swiss cantons. Likewise, according to the OECD, in exercising power over setting both the rates and bases of income tax, Scotland would rank above sub-central legislatures in Sweden, Norway, Finland, the US and even Germany.

The economic evidence suggests that fiscal devolution can work. It is our responsibility, and that of the Scottish Government, to make sure that it does—that is the genesis of our new clause 32. However, these are hugely complicated processes; anyone who has tried to read the fiscal framework analysis in the Smith agreement will know that. I note that the Scottish National party and its new friend, the hon. Member for Gainsborough, have tabled new clauses that would seek to devolve income tax in its entirety.

I should say at the start that those are perfectly legitimate arguments that have been debated at great length at both the Calman and Smith commissions. Labour disagrees, because we believe fundamentally in the pooling and sharing of resources across the United Kingdom; that is not a criticism of the SNP position, but merely a disagreement on a fundamental broad principle. We have rightly and repeatedly criticised the Smith agreement and the Bill on a number of occasions, particularly on Second Reading and in last Monday’s debate, but I agree with the hon. Member for Dundee East (Stewart Hosie): in this instance at least, the Bill and the Smith agreement have got it right. That is probably why there are so few substantive amendments to the income tax clauses. The Chartered Institute of Taxation has echoed that by saying that the commission has made a

“pragmatic set of proposals which shows a lot of thought has been given to balancing the desire of Scots for greater tax powers against the practical obstacles to devolution”.

It is worth reflecting on the Scottish Parliament’s current position on income tax. Since 1999, Scotland has been able to vary the rate of income tax by 3p in the pound. Despite the current clamour for more powers, that power has never been used—incidentally, I believe that it has now lapsed, which shows the problems with the fiscal framework. Notwithstanding that, under the Scotland Act 2012, and as a result of the Calman commission, the Scottish Parliament has been afforded control over the first 10p of the basic rate of tax. Obviously, the Smith agreement and the Bill go much further.

The Scottish Parliament will have total control over income tax rates and thresholds and complete freedom over the levels at which those rates and thresholds are set. That is significant as the estimated devolved income tax liabilities on income tax in 2013-14 amounted to almost £11 billion. That is a considerable sum, the collection and deployment of which confers a substantial degree of responsibility on the Scottish Parliament. If they wish, the Scottish Government—of any colour—can increase or decrease that liability.

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[Ian Murray]

I am delighted by that intervention, because I was going to speak about that issue later. Given the time constraints, I will take that point out of my speech, because my hon. Friend has made it well. The Scottish Council for Voluntary Organisations has raised the relationship between income tax and gift aid. Although that matter is not mentioned in new clause 32, I hope that if there is a reporting mechanism, it will look not only at gift aid, but at pension relief. That is another matter that was not mentioned by the Smith agreement, but which has been raised by many of the organisations that have been in touch with us about the Bill. Gift aid is worth £1 billion a year to charities, so we must ensure that it is considered properly.

[Stewart Hosie]

The hon. Gentleman spoke about the principle of pooling and sharing, and I have heard that argument before. However, if it were a real principle, it would apply to the aggregates levy, landfill tax, air passenger duty and other small taxes that have been devolved. There is no principled reason why it is required to be applied to income tax. He rather gave the game away when he spoke about the ability to vary the rate by 3p either way, which was the original plan, and the ability to set the first 10p of income tax. Why does he think that so little is enough for a nation like Scotland? Why is he so afraid of giving our national Parliament all the powers it needs to tax income properly?

[Ian Murray]

What the hon. Gentleman is asking for is full fiscal autonomy. There are many amendments that will allow us to have a full debate about that later this evening, but I fundamentally disagree with that principle because the pooling and sharing of resources is important. The difference between income tax and the aggregates levy, landfill tax and all the other taxes he mentioned is that they are removable taxes, whereas income tax is not. We should be pooling and sharing resources, and we should therefore ensure that the significant sum of £11 billion is part of the overall matrix of the United Kingdom.

As I said at the start of my speech, I do not disagree with everything that the hon. Gentleman said, but we disagree on the fundamental principle of pooling and sharing. His speech was completely reasonable in terms of what he is seeking to achieve, but Labour Members simply disagree with the broad principle of not pooling and sharing. There is no right or wrong on these issues in terms of what should be devolved; the issue is whether one believes in these broad principles or not.

I find it difficult in these debates to have 56 SNP MPs braying at me from behind, when I am actually agreeing with them. I have no idea what they will be like when I disagree with them. I am paying a compliment to the hon. Member for Dundee East, which I do not do often, and he is still unhappy with my contribution. Never mind; given that they have signed most of our amendments to the welfare clauses, perhaps we will be much more collegiate tomorrow.

I was explaining new clause 32. The Scottish Affairs Committee report on the fundamental principles of the Smith agreement, which was published in March, said:

“The Smith Agreement represents the best of both worlds. It presents Scotland with much greater powers over taxation, meaning for the first time the majority of the money the Scottish Government spends will be paid for by its own taxation. This will make it more fiscally accountable to the people of Scotland for how it spends their taxes.”

I am confident that the income tax provisions in the Bill strike the right balance between reserved and devolved taxation, although I agree with the hon. Member for Gainsborough that some movement might be required in the future.

I believe that these clauses are in the spirit and the letter of the Smith agreement and the vow. The vow is quite concise on these issues. It says very little or nothing at all about taxation. One thing that it does say, which goes back to the pooling and sharing of resources, is that the Barnett formula should be maintained. The Bill and the Smith agreement are utterly in accord with that stand.

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[Ian Murray]

That is a rather strange intervention. If Members read new clause 1 and new clause 21, they will see very clearly that what we are asking for is an independent commission to analyse the consequences for Scotland of full fiscal autonomy. If the SNP is so confident about its figures, it should back that proposal and then we will have the transparency, impartiality and independence of those policies. If it is so confident that it was not fiddling the figures, it should help us to set up a Scottish office for budget responsibility and let that body analyse its figures. However, it is clear once again that, when we shine the light of scrutiny on SNP policies, its Members want to talk about the process but not look at the impartial and independent evidence before us. If they are so confident, they will back new clause 1 and new clause 21 and bring much needed transparency, credibility and accountability back to the Scottish Parliament’s finances.

[Stewart Hosie]

We have just listened to one of the worst speeches I have heard in 10 years. The Labour party now has one argument: we have gone from being too small, too poor and too stupid for independence to being too small, too poor and too stupid for any powers at all. The hon. Member for Edinburgh South (Ian Murray) spoke about something that was “credible”. Credible? The Scottish people decided what was credible at the election in May, and they did not say it was his party. He spoke about right-wing, Thatcherite Tories, but it sounds to me like the core vote of the only Labour MP left in Scotland.

New clause 33, which stands in my name and those of my hon. Friends, would require the Scottish and UK Governments to enter into an economic agreement setting out a plan for implementation of full fiscal autonomy for Scotland and establishing a framework within which the two Governments co-ordinate their economic and fiscal policies in the context of full fiscal autonomy for Scotland. The Scottish Parliament and Government would have competence for revenue raised in Scotland through taxation and borrowing and for determining levels of public expenditure in or as regards Scotland.

We see the framework including arrangements for facilitating fiscal co-ordination, overseeing economic co-operation, safeguarding fiscal sustainability, and setting out the joint responsibilities in certain areas. In the agreement, the two Governments must seek to ensure the maintenance of monetary stability throughout the UK and the single market of the UK and the EU. They must also ensure co-operation in the exercise of all the respective functions relating to the administration and collection of taxes and an equitable and transparent approach to the consequences, resources and rewards. The Scottish Parliament and Government would retain the benefits of increased tax revenues as a result of positive policy impacts and would have the powers they need to manage the consequences of full fiscal autonomy.

I turn briefly to new clauses 1 and 21. New clause 1 would require that a Tory Secretary of State appoint a commission of between four and 11 members, none of whom can be a Member of Parliament, a Member of the Scottish Parliament or an employee thereof. It is backed by Labour and United Kingdom Independence party Members, so we have a Labour amendment backed by UKIP asking a Tory Secretary of State—

[Ian Murray]

rose—

[Stewart Hosie]

No, no, no.

The new clause asks for a Tory Secretary of State to appoint a commission of the great and the good from the House of Lords to determine Scotland’s future. What a lot of absolute rubbish!

[Ian Murray]

On that point, Madam Deputy Speaker. For the sake of clarity, the Committee will know that the procedure of this House is that any hon. Member can sign any amendment they so wish.

[Stewart Hosie]

So we have confirmation—Labour and UKIP hand in hand, empowering the Tories to run the rule over Scotland again.

As for new clause 21 on a Scottish OBR, we already have one—it is called the Scottish Fiscal Commission. The consultation on its expanded power closed on Friday. One would have thought that Scotland’s sole Labour MP might actually have known what was going on.

New clause 33 would have the Scottish and UK Governments enter into an economic agreement that set up a plan for the implementation of full fiscal autonomy and establish a framework within which the two Governments would co-ordinate their economic and fiscal policies in the context of full fiscal autonomy. That would mean the Scottish Parliament and the Scottish Government having competence for determining revenues raised in Scotland through taxation and borrowing, and for all of the spending, paying compensation to the UK for shared services. This is the right approach to take. I am just disappointed that we did not have proper time to debate it rather than being subject to the nonsensical rant and talking Scotland down by the so-called shadow Secretary of State. By taking responsibility for key areas of Scottish life, we can improve the Scottish Parliament’s ability to deliver real progress for the Scottish people. New clause 33 does that. It rejects the miserablist approach of the Labour party, and I commend it to the Committee.

Scotland Bill

Debate between Ian Murray and Stewart Hosie

Monday 15th June 2015 Commons Chamber

[Stewart Hosie]

I fear that my hon. Friend was intervening less on me than on Conservative Members, but he is absolutely right. There is no argument too odd for them to deploy.

On the opposition to full fiscal autonomy, basing an argument on one or two flawed analyses is using a snapshot in time in order to say no. It is less a case of analysing all the facts to come to a considered view, and more one of finding any reason to oppose for opposition’s sake.

[Ian Murray]

I have tremendous respect for the hon. Gentleman, but he is letting himself down by how he is conducting this debate. If he is saying that the Institute for Fiscal Studies is wrong, why has the same figure come out of the Scottish Government’s own accounts?

[Stewart Hosie]

The chief of the snapshot analyses I have just described is the one from the IFS that our opponents pray in aid. They claimed in April that Scotland would face a relative deficit of £7.6 billion, which may rise to £10 billion by 2019-20, and that in itself is enough for them to say no. I also like and respect the hon. Gentleman—I will not finish the rest of that sentence. I would tell him that his argument is fundamentally flawed. In essence, our opponents’ argument is that even if the IFS figures were true, UK Government economic policy has failed Scotland and we should therefore keep economic policy in the hands of a UK Government who have failed. That simply is not credible.

It is of course true that Scotland has a deficit, and so does the UK—borrowing £75 billion this year, almost four times what the Chancellor promised borrowing would be. The majority of advanced economies run deficits, particularly in difficult times. The UK deficit in 2013-14 was £98 billion. Over the five years to 2013-14, the cumulative deficit was £600 billion. The UK was in deficit for 43 of the past 50 years, and 28 of the 34 members of the OECD were in deficit in 2013. If the deficit alone was a reason for a country to surrender its financial independence, the UK economy would be run from Berlin.

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[Stewart Hosie]

That is absolutely right. Trend growth in the UK over decades has not been sufficient, and private sector investment and innovation have been lamentable. My hon. Friend is absolutely right that we need these powers for a reason.

Notwithstanding what has been said, it is important to remember that Scotland is a prosperous economy. It is about far more than oil, although to listen to some of our political opponents, one would think that that was all the Scottish economy consisted of.

[Ian Murray]

Will the hon. Gentleman enlighten the Committee about what level of economic growth he thinks Scotland would require to balance the budget?

[Stewart Hosie]

We need to get trend growth up and we need to operate within a framework that will see the deficit begin to come down. I do not remember the previous Labour Opposition ever coming up with a cast-iron figure—2.75%, 3%, 3.25%, 4% or 5%—for trend growth. No one would be so silly as to put a figure on it, when it is dependent on so many external criteria.

Our political opponents dismiss the Scottish economy, saying that it is all about oil. They seem to forget that in two of the past four years our deficit was smaller than that of the UK. In the past 34 years, tax revenue per person has been higher than in the UK. Indeed, in the last full year, including our geographic share of the North sea, it was more than £10,000 per head compared with £9,700 in the UK. Even without North sea oil, output per head is almost identical to the UK. We remain the third most prosperous and productive of the 12 so-called regions of the UK, and, including a geographic share of oil and gas, our output per head is higher than the UK average, even today.

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[Ian Murray]

The hon. Gentleman is being incredibly generous with his time. Will he tell the Committee why, if full fiscal autonomy is so good for the Scottish budget, he will not support new clause 3, tabled by the hon. Member for Gainsborough (Sir Edward Leigh)?

[Stewart Hosie]

I want maximum power for Scotland. I want it as quickly as possible. I am not like the British Labour party, which keeps saying no and, in the absence of no, says delay with yet another commission. If the hon. Member for Gainsborough (Sir Edward Leigh) presses new clause 3 to a vote, we will support it. Here is the thing: I hope the hon. Member for Edinburgh South (Ian Murray), who is grinning like a Cheshire cat, will now get to his feet and tell us whether he intends to back the Government tonight in opposing powers for Scotland. The silence is deafening.

Let me continue with more of the arguments our opponents deploy against full fiscal autonomy. When they argue against more powers they say that they would require further cuts, but that argument is completely flawed. It would suggest that the Scottish Government are protected from Westminster cuts at present, which simply is not true. Cuts in the previous Parliament actually took place at a time of rising North sea revenues.

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[Ian Murray]

It seems to me that the SNP, in its fantastic victory, on which I have congratulated and complimented its Members on a number of occasions from this Dispatch Box, does not want any scrutiny at all. Just because the SNP has made a proposal for full fiscal autonomy does not mean that we should not scrutinise that proposal. In fact, if it was not for the hon. Member for Gainsborough (Sir Edward Leigh), we probably would not even be discussing full fiscal autonomy today. He forced the hand of the Scottish National party so that it brought forward its manifesto commitment, which it was rowing back on incredibly quickly.

[Stewart Hosie]

Will the hon. Gentleman give way?

[Ian Murray]

Let me make a little progress and then I will give way, as the hon. Gentleman was generous in giving way to me.

In the past couple of years it has become increasingly apparent that devolution is a matter not just for Scotland, Wales and Northern Ireland, but for England and the United Kingdom as a whole. The Labour movement has always been an engine of reform and the party of devolution. People want to see power devolved and exercised at local level, affording greater decision making and enhanced accountability.

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[Ian Murray]

I am not sure of the entire detail of the proposal that the hon. Gentleman refers to, but there is a general consensus across Scotland that the Scottish Parliament has been one of the most centralist Parliaments in the world by grappling power away from local government. What we are trying to do as part of this Bill, which I think is a major positive, and I hope the Government—

[Stewart Hosie]

Will the hon. Gentleman give way?

[Ian Murray]

Will the hon. Gentleman allow me to answer the previous intervention first? He is a seasoned professional in this Chamber, so he should allow me to get at least halfway through the response to his hon. Friend’s intervention.

One of the key questions—I hope the Secretary of State and those on the Treasury Bench look at some of these principles in the context of the Bill—is whether those principles go further towards double devolution. There is no point in sending powers from one Parliament to another. [Hon. Members: “Give way!”] Those powers also have to be spread across Scotland from Holyrood to local authorities. Without that process, hon. Members cannot take power closer to the people they seek to represent.

I will give way to the hon. Member for Dundee East (Stewart Hosie) and then to the hon. Member for North Ayrshire and Arran (Patricia Gibson). [Interruption.] The hon. Lady can blame her boss if she likes; he wants to come in first.

[Stewart Hosie]

The hon. Gentleman suggested about 10 minutes ago that the Scottish National party was not going to table an amendment to deliver full fiscal autonomy, and he suggested that it happened only because of the amendment tabled by the hon. Member for Gainsborough (Sir Edward Leigh). That is completely false. Amendment 89 is on the amendment paper to deliver full fiscal autonomy. Will the hon. Gentleman withdraw that daft allegation from the Labour Front Bench and, more importantly, confirm that Labour Members intend to go through the Lobby with members of the Tory Front-Bench team to stop power coming to Scotland?

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[Ian Murray]

The Bill before us will transfer nearly 50% of tax and 60% of spending to the Scottish Parliament. We promised to make it the most powerful devolved Parliament in the world, and that is a promise we will keep. As I have always said, we will ensure that the Bill is delivered in full, both in spirit and in substance. We will go further, as we will debate in Committee in due course.

Let me return to the £7.6 billion deficit—[Interruption.] I know that SNP Members do not like to talk about the £7.6 billion deficit, but it is important to get it on the record. It is unfortunate that they have consistently misquoted the figures from the Institute for Fiscal Studies, and indeed it has had to ask them to retract what they have said about its figures.

We have also heard no mention of the Office for Budget Responsibility’s oil report, which was published last week. It showed that the reliance on oil as an underpinning of the Scottish economy is no longer a viable projection. The collapse of revenues from oil will see the tax take from that source drop from £37 billion to just £2 billion over the 20-year period to 2040. That would be catastrophic for Scottish public finances. The question, then, is this: will SNP Members vote with the Tories to deliver what they want, as they have said they will do, or will they finally admit that their flagship policy of full fiscal autonomy is economically illiterate?

[Stewart Hosie]

rose—

[Ian Murray]

And there is no better time to go to the hon. Member for Dundee East.

[Stewart Hosie]

The hon. Gentleman is extremely generous. He mentioned the OBR. He will want to confirm, for the sake of completeness, that the OBR itself has said that the forecasts were very uncertain, even over the short term. It implies 8 billion barrels of oil extracted, rather than the normal industry 14 billion to 24 billion, and of course the figures it uses are contradicted by other expert groups that have higher prices and higher forecast extraction figures.

[Ian Murray]

Well, the hon. Gentleman is wasted in this House; he should be in the City, buying and selling futures in oil price shares. I think that is the best way for him to go. The three points that fall from the OBR report are the unpredictability of the oil price, the difficulty of extraction in the North sea and the fact that, whatever way we look at it, oil revenues will be declining sharply over the next 20-year period. It would appear that the hon. Gentleman—[Interruption.] I am happy to take other interventions, but it is quite clear that SNP Members cannot defend their policy for full fiscal autonomy. Indeed, they should listen to their hon. Friend, the hon. Member for East Lothian (George Kerevan), who said that it would be economic suicide. He is an experienced journalist and economist, so they would do well to listen to him.

In conclusion, we will push amendment 38 to the vote because we feel that the permanency of the Scottish Parliament should have the underpinning of the Scottish people by any means that would be appropriate, including a referendum. We will push to a vote new clause 2, which proposes a constitutional convention to resolve some of the larger issues on a constitutional settlement across the country. We will oppose full fiscal autonomy in all its forms, because it would be bad for the Scottish people, bad for the Scottish economy and bad for the future of Scotland.