Scotland Bill

Debate between Jim Sheridan and Stewart Hosie

Tuesday 21st June 2011 Commons Chamber

[Stewart Hosie]

As the Minister has pointed out, there is a large number of new clauses and amendments in this group. I intend to give them a decent airing, not least because I was chastised by the hon. Member for Glasgow North (Ann McKechin) in a recent newspaper article for speaking for barely 14 minutes in a previous debate. I would not want to disappoint her by not providing closely argued contributions on the new clauses and amendments tonight. It is also worth putting it on record that barely three hours for a Report stage is quite inadequate.

Our amendment 29 and new clause 9 deal with corporation tax, about which the Minister went on at some length. This is a tax levied on profits and the Scottish Government are seeking to devolve the competence to use it as key policy lever to promote economic activity in Scotland. It is important to focus not on the dry detail of the amendments, but on what we and any Scottish Government would do with the powers. We believe that corporation tax can be a key element in the country’s overall economic strategy and can promote economic growth and job creation by enhancing international competitiveness and encouraging innovation and investment.

We believe that the case for devolving corporation tax is clear. Over the past 30 years, Scotland’s economy has grown more slowly relative to both the UK and the average of small EU countries than it ought to have done. We believe that for Scotland to fulfil its economic potential, additional levers are required and corporation tax is, I believe, a key mechanism. It can be an important tool in helping to support increased business start-ups, increased business research and development and investment, and in encouraging more firms to locate their headquarters in Scotland—the very reasons, I suspect, why the UK Government announced a lower corporation tax rate and a strategy for reducing it further.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

Far be it for me to be a cynic, but could it be that both Governments—the UK and the Scottish Government—wish to reduce corporation tax to appease the big business people who make donations to their political parties?

[Stewart Hosie]

No. That would be extraordinarily cynical, and not something that even the hon. Gentleman in his daftest moments would actually believe to be true—[Interruption.] The hon. Member for Central Ayrshire (Mr Donohoe) says from a sedentary position that the hon. Gentleman does believe it. That worries me even more. I suspect that that kind of attitude from Labour sends a signal that Britain and Scotland are not open for business, which is a dreadful signal to send out.

We also believe that corporation tax can be used to support the development of new industries, which is vital. As it stands, the Bill contains no new effective levers for economic growth. The UK Government have made it clear that the Bill is primarily about improving financial accountability and political governance. There is no problem with either of those things, but we need economic development as well—and the tools to do the job. We are firmly of the view, as are the Scottish Government, that any transfer of powers to Scotland must include real economic levers to promote jobs and growth.

The argument from the UK Government that we cannot have corporation tax powers might appear rather contradictory. Clearly, there is increasing support for the principle of devolving the responsibility for corporation tax—not least to Northern Ireland, where it is currently under active review.

With those points in mind, I back the Scottish Government in seeking devolved competence for corporation tax to be used as a key policy lever to promote economic activity in Scotland. We are seeking the responsibility to vary both the corporation tax base and the tax rate, with the base defining the element that is subject or liable to be taxed—the bulk of profits, netting out allowances and so forth—and the tax rate being the amount of taxable profit required to be paid during each accounting period. At the moment, that is estimated to be about £2.8 billion for Scotland on 2008-09 figures— and for very good reason that excludes North sea corporation tax. It comes in at about 6.5% of the total tax revenue in Scotland. We believe that the full devolution of corporation tax with an appropriate reduction in the block grant, which covers the Azores issue, would provide the Scottish Government with a new lever to promote growth and jobs.

The position of the Scottish Parliament Scotland Bill Committee was established in a very clear conclusion:

“The Committee’s view is that if a scheme to vary corporation tax were to be available in some of the devolved countries of the UK as a tool of the UK Government’s regional economic policy, it should be available as an option for a Scottish Government to use also.”

That is incredibly important. Now that it is clear that such a tool is being considered for Northern Ireland in the UK Government’s consultation on “Rebalancing the Northern Ireland economy”, it follows that consideration must now be given to devolving corporation tax to Scotland.

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[Stewart Hosie]

I do not want a race to the bottom, but I do believe in tax competition. It is a pity that the hon. Gentleman and his new-found friends do not.

I must now move on from corporation tax to excise duty. Amendment 37 would ensure that provisions relating to alcohol excise came into force two months after the enactment of the Bill. New clause 19 would amend the Scotland Act 1998 so that alcohol duties became an exception to the general reservation in that regard.

All excise duties are currently levied by the UK Government. Alcohol duty is one of the most important excise duties levied in the UK. It is estimated to raise approximately £800 million a year in Scotland, less than 2% of the total tax yield in and on behalf of Scotland. In addition to raising revenues for the Exchequer, one of the key aims of the duty is to reduce excessive consumption of alcohol, which has been proved to lead to a variety of health and social problems. In the current devolution framework, the Scottish budget typically picks up the cost of addressing those problems through police, health and some social welfare costs expenditures. That is done entirely within the Scottish block. Devolving responsibility for excise duty to Scotland would help to ensure that the tax system for alcohol consumption was consistent with the alcohol policy of the Scottish Government and equipped to tackle one of the greatest health and social challenges facing Scotland.

[Jim Sheridan]

Will the hon. Gentleman give way on that point?

[Stewart Hosie]

Certainly.

[Jim Sheridan]

As chair of the all-party parliamentary Scotch whisky and spirits group, I can tell the hon. Gentleman that the Scottish whisky industry is deeply concerned about his proposals. What worries the industry are the administration costs. It would be necessary to designate the final destination of the product, and, even more worryingly, Members of Parliament would bear the additional burden of taking carry-outs from London to their constituencies in Glasgow.

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[Stewart Hosie]

There are always borders. The hon. Gentleman was presumably one of the 28 Lib Dems who backed us in 2009. I am pretty sure some of the Lib Dems in the Scottish Parliament now back minimum pricing. I ask for a wee bit of constituency in terms of the policy therefore, and given there are only five Lib Dem MSPs, it should not be too difficult to do a quick phone around.

I turn to the topic of capital borrowing and amendments 26 to 29. We all know that infrastructure investment is an essential contributor to productivity and economic growth. That is presumably why the Chancellor of the Exchequer made great play of spending £2 billion more on capital projects in the comprehensive spending review period than the previous Labour Administration had planned to spend. In the short term, such expenditure can boost economic growth, total output and employment. Over the long term, capital investment, both public and private, is a key driver of productivity, competitiveness and long-term economic growth.

Public sector investment that enhances a country’s physical, technological and digital infrastructure can increase the productive capacity of the economy and drive private sector growth and investment. Indeed, we know that direct capital investment would save or create twice as many jobs as the same amount of investment used for a VAT cut, such is the scale of the economic multipliers of direct capital investment.

[Jim Sheridan]

The hon. Gentleman is absolutely right that this does create jobs. Can he therefore justify his Government’s cancellation of the Glasgow airport rail link project?