Scotland Bill

Jacob Rees-Mogg Excerpts

Monday 15th June 2015 Commons Chamber

[Sir Edward Leigh]

The hon. Gentleman can vote for my new clause, if that is what he believes. That scenario is on offer tonight, and he can vote for it. As a No. 10 spokesman said helpfully over the weekend—it is not often that No. 10 spokesmen have supported my new clauses, but I am grateful to him—the new clause

“is the acid test for the SNP over whether they will back their own policy”.

A Labour party spokesman helpfully said over the weekend, “They can have full fiscal autonomy by 10 o’clock tonight if they want to vote for it.”

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Those of us who have a Eurosceptic point of view, as my hon. Friend does, have always been very cautious about fiscal autonomy without monetary autonomy. Would his amendment also enable the Scottish Parliament to have monetary autonomy?

[Sir Edward Leigh]

As my hon. Friend made that point last week, I was waiting for it. If he will be patient for a moment, I will finish a couple of sentences and come directly to him, because this is the kernel of the matter.

Under my proposals, the Barnett formula would be scrapped and an alternative formula based on need would be created. In the modern world—in modern finance—we create formulas based on need.

--- Later in debate ---

[Sir Edward Leigh]

Full fiscal autonomy results in full responsibility. That is what real Parliaments do.

Responsibility for bereavement allowance, bereavement payment, child benefit, guardian’s allowance, maternity allowance, statutory maternity pay, statutory sick pay and widowed parent’s allowance will all remain reserved and administered by the Department for Work and Pensions. Why? The Smith commission further proposes a complex system for sharing responsibility for income tax. Why? That is all affected by an oscillating block grant. As I have said, how can SNP Members promise lower taxes in an election or higher spending unless they are masters of their own fate?

What are the objections to full home rule? What are the real objections to full fiscal autonomy, apart from the fact that we appointed a Lord Smith—with lots of no doubt very worthy people—to produce a report, which has been overtaken by events? We are told that full fiscal autonomy will result in tax competition within the Union. What is wrong with that? That is what keeps the American states vibrant and competitive with one another and continually innovating. Do we not insist that our taxes in Britain compete with those of Europe? We are told that tax competition would create downward pressure on taxes. Well, I am sorry about that. Why should the Scottish Parliament not be able to lower or raise air passenger duty? It can do whatever it likes. I know it has had that power and it will be allowed it under Smith, but if that power is allowed, why not powers for other things?

On Second Reading, my hon. Friend the Member for North East Somerset said that a single currency requires fiscal and monetary union, with the implication that that is proved by the Greek experience. Surely he is not suggesting that the Scots are Greeks, or that the Scottish economy is as different from England’s as Germany’s is from Greece’s. No; Scotland can thrive with full fiscal autonomy because Scotland has the will and the skills to do so. It has universities, research, manufacturing, logistics, light manufacturing, oil and gas, food and drink and a flourishing creative sector. [Hon. Members: “Hooray!”] Vote for my new clause.

[Mr Rees-Mogg]

I agree with all the wonderful things my hon. Friend has been saying about Scotland, which are so clearly and self-evidently true. The point I was trying to make is that if a country has fiscal autonomy and issues debt in a currency other than its own, it may well get squeezed in the way seen not only in Greece, but in Italy and Spain, and in countries across Asia during the Asian financial crisis in the 1990s. For a country to have fiscal autonomy without its own currency is a recipe for economic failure. To go back historically, the same was true of the gold standard in the 1930s.

[Sir Edward Leigh]

That is a very fair point. I agree that that is a matter for debate. I have already made the point that Scotland’s situation is very different from that of Greece. I am actually suggesting that we remain a United Kingdom, with a sharing of the national debt. Nothing is more debilitating in this whole debate than saying, “That bit of the national debt is yours, or this bit is mine.” We are back to the same dreary arguments about who is responsible for spending and when. My hon. Friend makes a serious point. If we achieve full fiscal autonomy, which I believe is inevitable—whether it happens now or in five years time, it will happen—the Scottish Parliament and the Scottish Government will have to act responsibly and live within their means. I have confidence that they will do so.

--- Later in debate ---

[Stewart Hosie]

Yes, a future SNP Government would increase it, decrease it, keep it the same and use the amount raised in an intelligent way. I know the hon. Gentleman thinks he has asked a really clever question, but we have just had the 2015 election and I am not going to write the 2016 manifesto today.

To answer a little more clearly, we have argued for targeted reductions in corporation tax in order to promote investment in key industries. We have highlighted for many years the relatively low private sector research and development spend in Scotland. However, given that R and D tax credits can be claimed only by companies liable for corporation tax, in order to develop a comprehensive, joined-up approach to encourage more innovation, we need to move to full fiscal autonomy, including the devolution of corporation tax and all related allowances, in order to be able to use that lever.

[Mr Rees-Mogg]

The hon. Gentleman said that Government Members are not in favour of tax competition, but I am thoroughly in favour of tax competition. It would be an excellent idea for both Scotland and Northern Ireland to have control of their corporation tax, because I think they would suddenly discover the virtues of the Laffer curve and reduce taxes quite sharply.

[Stewart Hosie]

Our friends in the Labour party have criticised us for understanding the Laffer curve just a little too well.

We also want to see continued downward pressure on the cost of employing people. That is one of the reasons the SNP proposed in our manifesto to increase the employment allowance from £2,000 to £6,000 per business a year. We cannot do that at present, but we would be able to do so with the devolution of national insurance as part of a package delivering full fiscal autonomy.

--- Later in debate ---

[Stewart Hosie]

First things first: the central bank does not guarantee debt. It sets the base rate, but the gilts are issued by the UK Government. It would be UK debt, which is precisely why we need an agreed fiscal framework within which we operate. I would have thought that that is just common sense.

[Mr Rees-Mogg]

Will the hon. Gentleman give way?

[Stewart Hosie]

No. I have been very generous. I think I will stop being generous now.

In order to deliver full fiscal autonomy, amendment 89 would allow the Scottish Government to remove the reserved status of certain key areas, and allow that Government to have legislative competence over them. It would do so at an appropriate time, ensuring that the systems and the framework under which full fiscal autonomy would operate are fully in place.

We know we need full fiscal autonomy. We know how full fiscal autonomy will work. The Scottish people have voted for maximum powers, and we are here representing that view. Amendment 89 is the way forward to deliver the fairness, the justice and the economic levers that the Scottish Government need. I hope there will be huge support for it tonight. I commend the amendment to the Committee.