Scotland Bill

Lord Browne of Ladyton Excerpts

Thursday 15th March 2012 Lords Chamber

[Baroness Liddell of Coatdyke]

The noble Lord, Lord Forsyth, has raised the issue of the legislative consent Motion and my noble friend Lord Foulkes has raised the issue of the timetable. We have also had within the process a consultation which concluded at the end of last week. At Second Reading we were told that one of the reasons for the truncated consultation process was to allow amendments to be brought forward at Report stage. However, there is a very short period of time between the Committee stage and the Report stage. I echo the points made by the noble Lord, Lord Forsyth, and my noble friend Lord Foulkes about this debate taking place on a Thursday and the final day of the Report stage taking place on the Wednesday before the Easter Recess

The whole process is in a muddle, and that is not the way to deal with a serious constitutional issue. I have the greatest respect for the noble and learned Lord, Lord Wallace of Tankerness, and I know that he would wish to be as straightforward with the House as he can be. I hope, too, that the Leader of the House, as the leader of the whole House, will not see this as some source of mischief but as an attempt to get to the bottom of what is happening.

[Lord Browne of Ladyton]

My Lords, it is with some reluctance that I rise to speak but I think that my contribution will substantially meet the criteria that the Leader of the House has laid down for this debate.

I addressed the House at some length on the first day in Committee setting out the reasons why I thought it was important that we should conclude our scrutiny of the Bill and present it back to the other place ready to become legislation. That was on 26 January and I do not intend to repeat all the points I made on that occasion. Those who are interested can read for themselves that 45 minute contribution in the Official Report. However, I do wish to make one or two important points.

First, I rebut the suggestion that we are meeting on this Thursday to discuss this part of the Bill at the request of this part of the Opposition. I cannot speak for all of the Opposition, of course, but I have been privy to many conversations, getting uncomfortably close to the usual channels in your Lordships’ House, and never at any time in these discussions did I ask, or was I party to a request from the Opposition, that we should meet on a Thursday.

Noble Lords ought to remind themselves of the somewhat chequered history of the management of the Committee stage in this House. It was the great plan that this day would be devoted to a debate about referendums. It was broadly agreed because the consultation would be over and it was expected that the Government would be able to come to the Dispatch Box and indicate what their response to the consultation would be. There was a degree of consensus that went beyond the Front Benches that it was appropriate to handle the matter in that fashion. However, as has consistently happened with the Committee days of the Bill, we have been subject to other items of business being imposed on them. We have just had the same thing today. In fact, we lost a whole Committee day for this Bill because it was seized from us for ping- pong on the Welfare Reform Bill. I was assured that that would take only a couple of hours—at the time I laughed uproariously at that idea—but it took all day and we lost a whole day in Committee.

There was an attempt, to which I was a party, by those who want to see this matter proceed appropriately to manage the business in such a way that we would conclude it within the appropriate time. However, there was no agreement that we would sit on Thursdays. A lot of what has happened has been imposed on me and other Members of the House by the circumstances of the business of the House. I understand that it has to be managed and I do not want to be part of that process, but any suggestion that the Opposition requested Thursdays is not correct to my knowledge.

[Lord Forsyth of Drumlean]

I apologise to the noble Lord if I implied that he was responsible for it. I was misinformed.

[Lord Browne of Ladyton]

I shall savour that apology. I am grateful to the noble Lord for his gracious apology. I shall bank it away because we may get to a point during the course of today when I will need it in order to bargain for others.

I am as interested as any Member of the House in where the discussions between the Government and the Scottish Government are in relation to the legislative consent Motion. However, I have been consistently of the opinion that the Scottish Parliament will pass a legislative consent Motion in relation to this Bill. I am also consistently of the view that we have promised the Scottish people that we will deliver the Bill in such a way that it can be enacted by a legislative consent Motion effectively and that we should keep our word to the Scottish people and to the Scottish political classes.

[The Advocate-General for Scotland (Lord Wallace of Tankerness)]

My Lords, picking up on the final point made by the noble Lord, Lord Browne, there was a commitment in the manifestos of all three parties—the Conservative Party, the Labour Party and the Liberal Democrats—at the last general election that we would seek to implement the Calman commission proposals, which this Bill substantially seeks to do.

On the issue of sitting days, I readily recognise the concerns. Indeed, I was told that the House would sit to debate the Scotland Bill on a Thursday and I have turned up today with my noble friend Lord Sassoon to respond to the amendments. The noble Lord, Lord Browne, indicated some of the issues that we have had to address. There was one day—Tuesday, 14 February—when, because of the time taken by the Welfare Reform Bill, we did not manage to debate anything. The decision was taken late in the day that it would not be proper to start our debates after 9.30 pm, and there was general agreement that that was the right decision. Our previous debate in Committee was on a Tuesday. Next week we will be in Committee on Wednesday.

On the point made by the noble Baroness, Lady Liddell, it was not on Second Reading but when we moved into Committee in January that the Government announced, as a result of representations they had received, quite properly, from my noble friend Lord Forsyth, that there would be a consultation. There were amendments on the Marshalled List to the effect that we would not deal with referendums until after the consultation period had closed. I indicated at the time that we would hope to deal with them in the week beginning 12 March, and today was originally identified as the date for doing so. However, as has been indicated, as we lost a day because of the ping-pong on the Welfare Reform Bill, we were not able to make as much progress on the last occasion as we had hoped. These debates will now take place next Wednesday, when there will be an opportunity to address the issues around referendums.

It is perfectly reasonable for my noble friend to ask where we have got to with the legislative consent Motion. A Motion was passed in the Scottish Parliament in March last year, which I suspect is the one that our honourable friend Mr Gauke was talking about. I have no doubt that the noble Lord, Lord Foulkes, voted for it, as he was still a Member of the Scottish Parliament at the time. It is also worth pointing out that on the final vote, Mr Alex Salmond voted for it, too, as did many people who are currently members of the Scottish Government. That legislative consent Motion stands until any subsequent Motion is tabled that updates it.

The Government intend to secure a legislative consent Motion from the Scottish Parliament in favour of the Bill—

--- Later in debate ---

[Lord Wallace of Tankerness]

I am not aware of any other degroupings.

[Lord Browne of Ladyton]

My Lords, I thank the noble Lord, Lord Forsyth, for his amendments and for opening this debate. I also thank him for the opportunity to make a speech that will, I hope, over the hours that we will spend on debating these and related issues, be considered to be multipurpose.

I had expected—and anticipated in preparing my speaking notes—the amendments of my noble friend Lord Foulkes to have been regrouped, for maybe the second time, with those of the noble Lord, Lord Forsyth. Therefore, I wrote a note to myself to apologise to both noble Lords for giving a generic response, rather than addressing all the subtleties of the individual effects of their amendments. I do so because this is, ultimately, an issue of principle. I do not devalue all the detailed points that underpin the argument that the noble Lord, Lord Forsyth, put forward about the interesting debates that we could have in Scotland on the referendum and the detail of these specific taxation powers. However, whether we have a referendum on them is an issue of principle, and there are principles that we ought to apply. I will deal with that. I am sure that we will then get to the detail through the revised groupings, or re-revised groupings, of amendments that I have in front of me. The noble Lord, Lord Forsyth, has indicated that the details are exercising him.

My second point is one that I have made before. I deeply regret that timetabling prevented the other place dealing with the detail of these very important issues. The last time that we convened this Committee, we had a very interesting debate on Clause 28— probably for the first time anywhere in the United Kingdom, unfortunately. It is a matter of deep regret that our elected representatives in this Parliament were denied the opportunity for debate by timetabling, thereby denying us a quarry of their position that we could mine to inform our debate. Therefore, when we draw on what we believe is the will of the Scottish people, as expressed by their elected representatives, we draw on information that unfortunately cannot be in the public domain, such as conversations and observations. Some of us have expertise that we have built up over time from watching what is happening in Scotland and knowing, from the conduct of politicians, what the people they represent are telling them. That is deeply unfortunate but it is where we are. There is a bigger issue at stake in the politics of Scotland, but I will come to that strongly later in the debate. We should keep our eye on the prize, which at this time is the union of the United Kingdom. There is a political imperative at the moment that should dominate everything that we do. I regret that we are sometimes forced into undermining that by the way in which this has been handled, which has been deeply inefficient.

I turn to the principle of referendum. I do not believe that there is any constitutional imperative to hold a referendum on the devolution of financial powers to Scotland, as provided for by Part 3 of the Bill, for the following reasons. First, the conclusion of the Select Committee on the Constitution in its 2010 report, Referendums in the United Kingdom, was:

“We do not believe that it is possible to provide a precise definition of what constitutes a ‘fundamental constitutional issue’”.

It is a fascinating publication for the reasons that I am about to explain to your Lordships’ House. The committee did not look specifically at the example of the devolution of financial powers, although it could have because it was in the air. Therefore, noble Lords are entitled to look beyond such a conclusion to test whether what has been described by government Ministers as the largest transfer of financial power from London since the creation of the United Kingdom would be a likely candidate for a referendum.

In looking beyond the committee’s conclusions, we should look at the evidence that was heard, which is deeply instructive. If noble Lords will excuse me, I will go into this in some detail because it is interesting. Before I rehearse some of the evidence, I am prepared to concede that people who listen to this debate may think, on the basis of the expert testimony to the committee, that there is a legitimate view that that evidence tends towards the view that the devolution of financial powers would commonly be considered a candidate for referendum, given that the definitions posited included the following. I will share a number of them with noble Lords.

In giving evidence, Professor Gallagher referred to,

“fundamental questions concerning sovereignty or a major constitutional settlement, especially if they concern steps that would be completely or virtually irreversible once enacted”.

The Institute of Welsh Affairs, in its evidence on page 126, referred to,

“truly major issues of democratic principle—change that alters fundamentally the nature of the state”.

Caroline Morris, who is an expert, gave two definitions:

“Topics ... which directly affect the constitutional make-up and powers of a state”,

and,

“changes to the sovereign powers of a state”.

My noble friend Lady Kennedy of the Shaws gave the following definition:

“Anything that changed the power balances within our democratic system ... anything that in any way redistributed power in a significant sense”.

Professor Bogdanor cited:

“Legislative proposals which provide for a radical alteration in the machinery by which the laws are made”.

Professor Saward referred to,

“significant, encompassing and lasting change in the formal and general rules and rights which locate political authority”.

Professor Graham Smith mentioned,

“anything that changes the dynamic and the relationship between the people and those who are elected”.

All these definitions, which are not mutually consistent, could support the argument of the noble Lord, Lord Forsyth. However, they must all be considered against the backdrop of historic precedent. As the Constitution Committee noted in its analysis, no definition of principle can be extracted from historic precedent.

[Lord Forsyth of Drumlean]

I agree that all those definitions could be advanced and are open to argument, but what about something that has been approved by referendum but which you propose to reverse?

[Lord Browne of Ladyton]

I am grateful to the noble Lord for his intervention. I think that the somewhat delayed intervention by the noble Earl, Lord Mar and Kellie, on the noble Lord’s speech—it occurred long after the noble Lord had stopped speaking, but it was in the nature of an intervention—answered that point, but I will come to that in a moment. I think that I can answer that question.

Although it could be said that matters of significant constitutional change ought to be put to a referendum, many are not. Indeed, there was never a referendum on the Human Rights Act 1998—some people may regret that—the Fixed-term Parliaments Act, the Constitutional Reform Act 2005 or, indeed, if I anticipate the outcome of the debate that is presently taking place, on the future of your Lordships’ House. The House of Lords Reform Bill does not anticipate a referendum on that matter in the next Parliament. Therefore, although there appear to be certain broad principles on which academics and others can give evidence, which indicate what is a good candidate for a referendum, ultimately it seems that it comes down to a political judgment. We appear consistently to have exercised this power on the basis of political judgment. It is for this reason that I do not think we can discuss the noble Lord’s amendments—I anticipate my noble friend’s amendments—in a vacuum from the political environment. We have to defer to the political circumstances that face us during our consideration of this Bill. That is what I invite noble Lords to do.

I suggest that to require a referendum on the devolution of financial powers before the commencement of Part 3 of this Bill would be irrelevant in the present political context. Indeed, I go further—I think it would be irresponsible for the reason that the single fundamental question being posed to the people of Scotland at this time concerns the issue of secession. An additional referendum in this context would only confuse such a debate and distract from the single important question at hand. I understand that the circumstances have changed but we are discussing this matter now and not when we had expected that we would when this Bill was conceived as it emerged out of the Calman commission.

It is important to note that with the exception—it is an impressive exception—of the noble Lord, Lord Forsyth, and his shaky alliance with my noble friend Lord Foulkes, there is no political movement at all for any such referendum. There is no clamour for such a referendum in Scotland. I know that the noble Lord, Lord Forsyth, will say that is because many people in Scotland do not understand the implications of this piece of legislation.

[Lord Forsyth of Drumlean]

I hope I may interrupt the noble Lord again. His speeches are always carefully crafted and well thought through and I am enjoying listening to him. However, when he says that there is no demand for such a referendum in Scotland—I absolutely agree with him that the key issue is whether or not we are going to break up the United Kingdom—I had the impression that the First Minister, the Scotsman, Scotland on Sunday and every newspaper in Scotland were all campaigning that people should have an opportunity to have a referendum on devo-max. To my mind what is in this Bill is devo-max. Indeed, my noble and learned friend the Minister says that in my mind in some ways it goes beyond that. However, there are within the Bill the powers to deliver devo-max. Therefore, when the noble Lord says there is no demand for this in Scotland, I think there is a demand for a referendum on extra powers which are already being delivered by this Parliament, and which people are completely unaware of.

[Lord Browne of Ladyton]

I hope the noble Lord will not be surprised to hear that I anticipated this very point about devo-max. I intend to cover it very specifically. However, I am driven in these arguments by the political imperative of concentrating most of my political firepower on the arguments for retaining the union of the United Kingdom. I have tested every contribution that I have made to this debate against whether or not it makes that retention more or less likely. I ask noble Lords to join me in concentrating their minds on that issue, to look at this matter in the context of the political circumstances that face us at the moment and to make priority choices. In other circumstances I might well have supported the amendment of the noble Lord, Lord Forsyth, but in these circumstances I do not. I am trying to lay out the arguments.

As I was saying, there is no political movement for such a referendum. There is remarkably complete coherence between the parties in Scotland on the view that there is no necessity to seek a further mandate from the electorate as regards a referendum on these powers. Further, as the Calman commission noted, and the noble Earl, Lord Mar and Kellie, has reminded the House, there is an argument contrary to the argument put forward by the noble Lord, Lord Forsyth, that such a mandate has already at least partially been granted by the 1997 referendum on Scottish devolution in which 63.5 per cent of the Scottish electorate agreed with the statement,

“I agree that a Scottish Parliament should have tax-varying powers”.

That was the question, not plus or minus 3p, or what the consequences would be if this power was or was not used—we know the history of that—but whether the Scottish electorate agreed with the statement,

“I agree that a Scottish Parliament should have tax-varying powers”.

In a recent report on a referendum on Scottish independence, the Select Committee on the Constitution agreed with the UK Government’s position—this comes to the point the noble Lord raised about devo-max—that whereas independence is a Scottish question, devolution-max is not solely a Scottish question and proposals for a significant change to the devolution settlement considered under this title must be addressed only once the issue of secession has been clearly and decisively addressed by a referendum of the Scottish people. Therefore, we need to deal with these things in series and we need to keep our eye on the ball as regards the issue which is foremost in Scottish and UK politics at the moment in terms of the constitution. It is within this public and political discourse that we need to consider the priority of a referendum on the devolution of financial powers. I argue that the conclusions of the Select Committee are of precise relevance to this question. A referendum on the devolution of financial powers as proposed by Calman, and elaborated in this Bill, would in my view be politically misguided and publicly rejected prior to a referendum on devolution.

These are powers which I have said repeatedly the Scottish people want. There is significant evidence of that. I regret that I am not able to refer noble Lords to detailed debates in the other place to advance that argument but I know from extensive consultation with Scottish parliamentarians and Scottish people that the Scottish people want these powers. Much more importantly, they want these powers now because they want them to address issues which are important to the Scottish people now and were made obvious as a priority to them by yet another performance of the Scottish economy that has reversed the previous trend of devolution over the past few years in that we are now behind the rest of the United Kingdom in unemployment and growth. For almost all the period of devolution in Scotland the opposite situation applied. It is only since the SNP has taken control of government in Scotland that we have got into a situation whereby we are falling behind the rest of the United Kingdom as regards unemployment and comparative growth of GDP. Therefore, these powers are needed now.

The future development of the devolution settlement, be that full fiscal autonomy or whatever—there are all sorts of titles—may well ultimately be a question for a referendum, but it is a question that needs to follow the broader one of Scotland’s future membership of the union. In my view it cannot coherently be proposed before that. Consequently, these Benches cannot support the noble Lord’s proposed amendment of the Bill. I apologise to my noble friend Lord Foulkes far more in advance than I would normally have to do as we will not support his call for a referendum, no matter what the motivation for it is, when we come to that part of our debate in Committee.

[Lord O'Neill of Clackmannan]

I should like to follow my noble friend and say that I do not support the amendment. I had the privilege of being a neighbour of the noble Lord, Lord Forsyth, for many years. I have seen him exercise political skill across a broad spectrum, but on many occasions not without a degree of cynicism. I have to say that his amendment today is just a cynical opportunity to attack the principle of taxation. The idea that referenda have anything of any substance to do with this is just a bit of a smokescreen. The fact of the matter is that a referendum agreed that a Scottish Parliament would have tax-raising powers. The powers have never been exercised. Do we therefore need a referendum to take away powers that we have never used? I do not think so. There is a case, which has been made quite well by the noble Lord, regarding the clumsiness of the manner in which this taxation will be imposed. Were it to be imposed in its present form, it would probably be grossly unfair to too many of the poorest people within Scotland. That is the issue.

Let us not bother about the referendum question. Let us just question whether or not taxation in the form that is being suggested is the most appropriate way of trying to develop a sense of fiscal responsibility in a Scottish Parliament—whether it is separate or devo- maxed, or even with its present fumbling, incompetent and profligate way of expenditure.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, we have had an interesting debate and I am grateful to everyone who has spoken. I seem to be somewhat isolated on this issue. I worry about the idea that the tax-raising powers in the Bill will increase the accountability of the Scottish Parliament. As I am sure my noble and learned friend will confirm, had those powers been in place and exercised since 1998 when the Scottish Parliament was established, the block grant which the Scottish Parliament had available to it would have been reduced by many billions. The exercise involves substituting a slice of the Barnett funding with funding that comes from the tax base. If public expenditure is growing faster than the tax base, the result is that far less revenue is available.

Tempted as I am to support the proposals because they would have had the effect of squeezing public expenditure in Scotland substantially and, I suggest, avoided considerable waste and the policies which have resisted reform of the public services, the notion that they would increase accountability needs to be looked at very carefully. It will squeeze the resources available to the Scottish Government over time and, in doing so, put pressure on them to use the tax powers, which by the nature of the gearing effect will result inevitably in Scotland becoming the highest taxed part of the United Kingdom. I venture to suggest that at that point, many people will say: “Why weren't we told this? Why didn't we know about it?”. If I am still around, I will take great pleasure in saying: “I suggested that there should be a referendum so that people had a chance to consider these arguments and know what they were being committed to”.

I entirely accept that the political classes and the political establishment have got together in the worthy cause of stopping the Scottish nationalists getting control of the Scottish Parliament and taking us towards independence, but I have my doubts about how it will increase accountability. I suggest that my noble and learned friend think about this again. If a referendum was held—I assume that those on both Front Benches are confident that the Scottish people would vote yes to these tax-raising powers, although I suspect that their opposition to the referendum may lie in their doubt that they would—there would be clear consent for the exercise of the powers.

The noble Lord, Lord Browne, and the noble Earl, Lord Mar and Kellie, suggested that a mandate was granted by the referendum on the original Scotland Bill. The noble Lord is quite right to say that the question was:

“I agree that the Scottish Parliament should have tax-varying powers”,

but those tax-varying powers were defined in the referendum campaign as being limited solely to 3p on the basic rate. This is far more than tax-varying powers. This is the introduction for the first time of a new Scottish rate of income tax. We are not talking about tax-varying powers here, we are talking about the ability to set a new rate of income tax that the Scottish Parliament chooses.

My noble and learned friend talks about opinion polls and surveys. I venture to suggest that if you go out and say, “Do you think the Scottish Parliament should have more powers?”, that is a bit like saying, “Do you love your mother?”. Of course people are going to say yes, the Scottish Parliament should have more powers. If you ask them, “Do you think that Scotland should be able to be made the highest taxed part of the United Kingdom?”, I think they might have a different view. If you ask them, “Do you think that the Scottish Parliament should be able to take money out of your pay packet?”, you might get a different answer.

[Lord Browne of Ladyton]

It is an important part of the noble Lord’s argument that there is an inevitability of Scotland becoming the most heavily taxed part of the United Kingdom and that that will be done against the wishes of the Scottish people, who will never be consulted about it. We intend to have general elections in Scotland for the Scottish Parliament. This issue will come to the fore when we get to the next group of amendments, but the issue of the rate of tax will be decided in general elections by the Scottish people through manifestos put before them, just as it is for the rest of the United Kingdom.

[Lord Forsyth of Drumlean]

I venture to suggest that I cannot think of any way in which any politician of any party, with the setup as it is in respect of the taxation powers and the way that the block grant will be calculated—subject to later review, but even assuming that Barnett survives—and given the levels of public expenditure and the position we are in, would be able honestly to do other than to tell the voters that income tax will have to go up. The numbers simply do not add up.

Let us just take the promises being made by the First Minister. On the whole, if you promise people free health care, free prescriptions, free bus travel, free nursery care and free this, that and the other and you do not have the money to pay for it, whoever comes in will find it very difficult to reverse that. Those are all very expensive requirements. If a Chancellor of the Exchequer gives the First Minister in an election year a bisque so that he does not have to cut public expenditure to meet the budget deficit requirements and the cuts have to be made in the subsequent year, you are building up very substantial gaps. I said that the gap on the budget deficit was about £3 billion. A tax-varying power where one penny on income tax raises merely £400 million will not get you very far in that respect. It is a delusion. If anyone in this House believes that the power will be used to reduce taxation, I think they are misguided.

I entirely agree with the noble Lord that we must be careful to focus on the issue of independence. He is absolutely right about that. Where I believe that the Bill is playing into the hands of the nationalists is that they are saying: “Look, you cannot play golf with one club. You cannot run an economy simply by having limited tax-varying powers that relate to one part of the income tax yield. You need corporation tax powers so that you can get growth so that the yield goes up”. That argument has a certain degree of logic to it—if not, altogether, a degree of fantasy.

Some of us remember that the First Minister interrupted my noble friend Lord Lawson’s Budget, scandalised the House of Commons and was thrown out of the House. We are told now by the nats that that was done to protest about the poll tax. Of course, he interrupted to say, “That is an absolute outrage” when the Chancellor, my noble friend Lord Lawson, announced a reduction in corporation tax and income tax to the same rate of 25 per cent. So there is a fantasy here. We should be absolutely clear what we are doing here. We are committing Scotland to a position where it will have a higher rate of income tax. I am prepared to challenge anybody. Once these powers are in place and are being used—after 2015—I will be astonished if I am wrong about that, in the way that the noble Lord, Lord Robertson of Port Ellen, was wrong when he said that the Scotland Act would kill nationalism stone dead.

--- Later in debate ---

[Lord Browne of Ladyton]

It would be helpful if the noble Lord could clarify the following matter. If in any set of circumstances a serving member of the Armed Forces who is ordered to serve and live in Scotland is thereby made liable to a higher rate of income tax, will the service of which he is a member compensate him for that difference?

[Lord Lyell]

Before my noble friend replies on that point, perhaps I may say that I also had it in mind. Indeed, 18 miles from my home, and not far from the place of birth of my noble friend Lord Forsyth, is 45 Commando at Arbroath. I took the trouble to ring the electoral office in Angus. I was told that servicemen can vote in Westminster general elections—not Scottish elections—when they nominate their place of residence. Is my noble friend saying that the Government have consulted him, the Treasury and the Scottish Government and are laying down a new law whereby servicemen will be taxable even though they cannot vote in Scotland? Of course, the Scottish Government would like to get more tax from servicemen, even if the latter are not getting a vote there. Will my noble friend please check that?

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, this has been a very illuminating debate. I have to say to my noble friend that this principle is bonkers. It says that if a Government take people out of tax by raising the threshold because they think that will help with welfare policy and encourage people to go to work because of the effects of the why-work taper, they follow the example that was given by the noble Lord, Lord Kerr, or they cut the top rate of tax—would that they would in order to generate growth and get the economy moving again—Scotland gets a cheque and gets the benefit. So a Treasury Minister trying to find the money to raise thresholds does not just have to find the money to compensate for the loss of receipts but has to send a cheque to Scotland to compensate it. It makes “We’re all in this together” rather strange because we are not all in this together. There is a different rule.

It shows the paradox of this whole Scotland Bill. If anything, it almost makes me become a devo-max person. It almost makes me think that we should go for fiscal autonomy, because it is absolutely bonkers. It is saying that this is not about giving the Scottish Parliament tax-raising powers and accountability for what it does but about taking the block grant and pretending that it is a tax-raising power and, when the tax-raising power does not quite work because of changes in the tax system, topping it up. This is just about recreating the block grant, calling it a tax-raising power and dressing it up as accountability. That is what this principle means. I have studied this quite carefully, and I think that if this principle is to be applied, it is quite shocking that it is not in the Bill, because it is fundamental. It changes the whole architecture. Not many people follow this subject, but I do not believe that among them there is an understanding that changes in the position in England will be compensated for by expenditure north of the border, if, indeed, that is the position.

I would like to give an example from ancient times when I was in the Scottish Office. In England, water was privatised; in Scotland, it was not. The result was that there was no expenditure on water services because they were provided by private companies in England. The result was that the Barnett consequences did not come to Scotland. Under the ancien regime, we did not get an extra grant from the Treasury to compensate us for not doing what would have been the sensible thing, which was to privatise water services in Scotland. This is wholly new, although perhaps I am wrong.

[Lord Browne of Ladyton]

I enter this fantastic debate, as it develops, with some trepidation. It has perhaps been less illuminating than it could have been because, with respect to the noble Lord, people are using terms very carelessly. This is not a comparison between taxation in England and in Scotland; it is a comparison between decisions that are made for the UK and the consequences of this provision being devolved to Scotland.

I am not going to go any further because if I try to extemporise I am in danger of confusing this debate even more. It may be better if noble Lords wait to see whether the Government write to show how this will work, as they intend to. It is far from the case that those who understand how this works are surprised by this no-detriment policy. This no-detriment policy is actually at the heart of what we are doing because it is about accountability for an element of the tax-raising power, and that has to be sustained. Therefore, decisions made by the UK Government for all of the UK that undermine that accountability have to be compensated for in a balancing mechanism.

I go no further than that. I keep it very general. However, many of these examples that have been used to try to explain what is going on here are very far off the mark because they are comparing apples and pears. This is about what the UK Government do and the effect of that on the principle that we are trying to establish in this Bill.

--- Later in debate ---

[Lord Forsyth of Drumlean]

I am doing my best. I am very worried, because I am also tempted to divide the Committee, if only for the pleasure of seeing the noble Lord vote against his own amendment. He started off making the case for his amendment and then seemed to argue that it was not appropriate.

The noble Lord, Lord Browne, was right to warn us that the world has moved on and that referenda are dangerous in the context of taking our eye away from the main issue, which is independence. All this chat about devo-max and additional powers puts us exactly where the separatists want us to be. The last thing they want us to discuss is what the consequences of independence will be for Scotland. My party leader contributed to that by suggesting that we could look at that after the referendum. Others have said the same, and I am sure that the right focus is to do that.

However, the Bill has been caught out by the passage of events and it does not seem unreasonable for the considerable tax powers to be subject to a referendum. I was therefore attracted to the noble Lord’s amendment. However, I do not for the life of me understand his argument that that question, given its limited scope, gives permission to go down the road of fiscal autonomy. At the very least I would like the opportunity to see some numbers. The speech of the noble Lord, Lord Sewel, was right on the button. It went to the heart of the difficulties being created by people embracing concepts and policies without looking at the numbers, the arithmetic and the fiscal and financial consequences, which are subject to assumptions.

The other day, someone in my party—an accomplished policy wonk—was challenged with the notion that the Scotland Bill and the move towards taxation would inevitably result in discussion of the Barnett formula. He said: “Oh, there is no way that people will ever take that money away from Scotland. We are safe”. We must not make these assumptions. These are deep waters. I am not with the speech of the noble Lord, Lord Foulkes, in support of his amendment, but I think that the amendment is reasonably sensible. We should be guided very much by the pertinent point made by the midwife of this whole exercise, who must feel like someone whose child has turned into a delinquent adolescent. We have to find a way of gripping the issue. Whether it is a federal or some other solution I know not, but I am sure that we should not distract attention from the referendum on the future of the union.

[Lord Browne of Ladyton]

My Lords, almost everyone who is in the House now will recollect that when I last spoke at any length in Committee it was on the group led by Amendment 53. As I had expected that that group would be much bigger and would include my noble friend’s amendments, I told the Committee that it was my intention to address those in anticipation. I had intended to restrict my remarks to referring your Lordships and my noble friend, in particular, to the speech I made earlier, but he has drawn so much support for his greater agenda from one part of that speech that I think I should pause for a few moments and remind him of what I said and the context in which I said it. It will then be open to him, of course, to draw any conclusions he chooses. I feel like a government Minister at this point, repeating words.

I remember the shock when I said, in making a broader argument about the political circumstances that informed the decision that we needed to make on ordering our priorities in terms of a referendum—no doubt the Official Report will correct me if I am wrong —that, as the Calman commission noted, a mandate had at least partially been granted by the 1997 referendum on Scottish devolution. It was a partial mandate, in one part of a broader argument.

I have probably gone further in explanation and beyond my prepared script than any Minister has in this House today. Perhaps I was unwise to do that. However, my noble friend is well able to read the rest of the context of that shortened quotation. If that gives him the comfort that he seeks—should there be any future Labour Government within a timescale that would allow him to resurrect his ambition for full fiscal autonomy—then I would be surprised.

--- Later in debate ---

[Lord Sassoon]

My Lords, we need to make sure that UK expenditure, including Scottish expenditure, continues to be controlled in a way that imposes appropriate disciplines. The purpose of the Bill is of course to give the Scottish Government more responsibility for a proportion of their tax-raising powers, and that is linked to the expenditure. However, the expenditure having been agreed, it is appropriate that money from taxation should continue to flow as it does now into the Consolidated Fund, subject to the current regime under the Scotland Act 1998, which permits the Treasury, after consultation with Scottish Ministers, to designate receipts that go to the Consolidated Fund.

The devolved Administration in Scotland is currently required to surrender receipts from fines, forfeitures, fixed penalties, dividends on public dividend capital and most interest collected by Scottish Ministers. So there is currently a provision to recognise the flow of funds between Scotland and the UK Consolidated Fund. At the moment, the vast majority of the income in question is derived from fines and fixed penalties, which the Office for National Statistics defines as analogous to taxes. That arrangement is consistent with the Government’s view that taxes that are not devolved should be collected centrally and then redistributed across the UK. We continue to believe that, with the exception of what is explicitly devolved, the revenue should flow into the Consolidated Fund and that expenditure controls should otherwise continue to be exercised on the current basis.

There are much wider questions to be asked about end-year flexibility in individual departmental expenditure in the rest of the UK, and there is certainly a debate to be had—it is well outside the scope of the Bill—on the appropriateness for all government departments across the UK to carry forward expenditure from one year to another. The Treasury rules on this have changed over the years. I cannot remember in which year it was, but health expenditure got out of hand in the latter stages of the previous Government. I cannot remember if it was when the noble Lord, Lord Browne, was Chief Secretary. The noble Lord is indicating that it was, so he will know very well the difficulties of any regime under which expenditure is carried forward.

I do not want to be dismissive of my noble friend’s point, because there is a real issue here.

[Lord Browne of Ladyton]

For the purposes of clarity, my recollection is that the problem arose before I became Chief Secretary to the Treasury. However, it was brought under control when I was Chief Secretary.

[Lord Sassoon]

If my memory serves me, it was got under control by ending the system of end-year flexibility for departments to carry forward expenditure. There is an important debate to be had about this, but locking up funds in the Scottish Consolidated Fund, as a sort of back-door way of addressing the question of what should or should not be carried forward, which applies to the whole United Kingdom, is not the appropriate way to deal with this. However, I recognise that there is a broader issue here which the Treasury has wrestled with over a number of years.

--- Later in debate ---

[Lord Browne of Ladyton]

My Lords, I did not expect to be on my feet at 10 o’clock at night contributing to the debate on this amendment. The issue that has raised its head in our discussions in this Committee over the course of the day is the apparent failure to organise its affairs in a way that is at least predictable if nothing else. I will not report all the conversations that I have had because apparently it would be a breach of the protocol of the usual channels. I am not part of the usual channels, although I have been dragged into them repeatedly.

I have tried to get a predictable order into the way in which these matters are dealt with so that people could have that communicated to them. Over the course of the day—as, indeed, over the course of this Committee—I have had clear understandings that matters would be dealt with in a particular way only for them to be changed, sometimes within minutes, sometimes within hours. There was a flurry of activity just before 10 o’clock, which was far too little too late, in an endeavour to manage the timing of affairs in such a way that would be respectful not only to the contributions that needed to be made but to those who serve and support this House and your Lordships and that would allow them to make sense of the way in which this work is being done.

I have now given up, by and large, trying to reach any kind of agreement on how matters can be dealt with, and I am extremely disappointed that my best endeavours have not been able to introduce some sort of sense into the proceedings. It was my experience in another place that if there were agreements and people stuck to them, and they were communicated throughout the House, then, by and large, we could control the business. I am defeated by the way in which business is organised in this House. I have tried to achieve that repeatedly and it has been a great disappointment to me.

Turning quickly to the amendment because of the time—and, because of the rules of the House, I understand that this time of itself generates another momentum in this House that is unwelcome—I am grateful to my noble friend Lord Forsyth for his comments and for the amendment.

[Lord Forsyth of Drumlean]

It is in the name of your noble friend Lord Foulkes.

[Lord Browne of Ladyton]

I am sorry; it is. I have been here too long now; I am too tired and that is it. It is an indication of where we all are. It is probably why we should not debate matters as important as this after the hours we have been on our feet, deprived of food, in here.

In any event, my noble friend has done us a favour: he has exposed an issue that is of importance to the people of Scotland. With all due respect, it is important not because it is an issue of controversy—many issues of controversy are not important—but because it is important to the people of Scotland. It is important for this reason: good governance in our constitution depends on the impartiality of the Civil Service. Those who have had the privilege and experience of serving in the Executive know—we all know—that the Civil Service is there to serve the Government.

Of course, as the noble Lord, Lord Forsyth, identifies, on some occasions that leads to accusations of politicisation. That is inevitable and I can think of many such accusations during the time when we were last in government. They were always rebuffed and arguments were always made that the Civil Service was simply doing its job. However, there was always a sense that when these issues got to a certain pitch, the Civil Service itself ensured continued impartiality. The nature of the Civil Service’s relationship to the constitution requires, in a sense, that the service polices itself. A number of distinguished former civil servants, including former Cabinet Secretaries, are Members of your Lordships’ House. It is a great pity that none of them is here to contribute to this debate and to explain to those of us who have not been civil servants how these issues ought to be dealt with in the Civil Service codes; and whether the experience in Scotland, and the apparent failure of the Civil Service to be able to respond to these concerns in a way that reassures people that this impartiality is being protected, has been run properly or not.

[Lord Forsyth of Drumlean]

I agree with the noble Lord that it would have been marvellous to have contributions from the noble Lords, Lord Butler and Lord Armstrong, but I should think they are probably making their cocoa and going to bed. The reason that we are not able to devote attention to these things is because we seem to be engaged in this sort of endurance exercise. I must say that carrying out this business, at this time of night, in this way, is the most persuasive argument I have heard for devolution since we started discussing the Bill.

--- Later in debate ---

[Lord Forsyth of Drumlean]

My Lords, some months ago I tabled Amendment 74, which would provide for some kind of sanction should Ministers in the Scottish Parliament act in a manner that is ultra vires. I was concerned that, following the considerable election victory by Mr Alex Salmond, there seemed to be something in the rhetoric to suggest that, because he had won an election, he had a mandate to do what he liked in the context of, for example, holding a referendum; and that if a referendum on independence was not within the powers of the Scottish Parliament, he had a mandate from the Scottish people. As I have reported before in this House, I understand that it was suggested to my right honourable friend the Chancellor of the Exchequer that if a referendum was properly conducted and held under the legislative provisions of Westminster, the First Minister would boycott it and instruct his officials to do so accordingly.

This seemed to highlight the fact that checks and balances on the behaviour of Ministers and Members of the Scottish Parliament might be lacking. Certainly, I know that the former Prime Minister Mr Tony Blair got into trouble for comparing the Scottish Parliament to local government. However, as Shirley Porter discovered to her considerable discomfort in Westminster, very serious sanctions apply in local government if elected members operate beyond their powers. I have tabled this amendment to tease out whether Ministers think that some kind of sanction or control would be appropriate.

I am sure that that applies to civil servants who are accounting officers and can be held to account by the Public Accounts Committee. It could be said that this does not apply to Ministers of the Crown, but there are sanctions that can be applied to them. I think we have lost the noble Lord, Lord Sewel. I may be mistaken but I do not think that the original Scotland Act provides for any sanction. I would be most grateful if my noble and learned friend could point me in the direction of some sanction, if indeed there is one.

This measure is not a means of achieving political control: rather, it follows on from the debate that we have just had. It is meant to ensure that what have been long-standing and well regarded conventions are accepted and operated, and that there is a sanction if that is not the case. I beg to move.

[Lord Browne of Ladyton]

My Lords, initially I had no sympathy at all with this amendment. I think that is a consequence of political conditioning because I am old enough to be of that generation in politics for whom the imposition of surcharges has a certain resonance that makes one react against them. I do not intend to go into all the reasons for that but those who are old enough to remember surcharges, or the threat of surcharges in the politics of Scotland, particularly in local government at one stage, may well remember why that is the case.

Secondly, I instinctively believe that the combination of audit and a PAC according to the Westminster model of government is the appropriate way to deal with these issues. Interestingly, today the Public Accounts Committee, under the leadership of Margaret Hodge, appeared to challenge elements of parliamentary accountability and called for powers to be developed that reflected the changed way in which we deliver services. Margaret Hodge made a very interesting speech today about that issue, which arose out of the controversy associated with the evidence given by civil servants in HMRC about tax deals.

For those two reasons I was instinctively opposed to this amendment because I think we have a very valued and flexible constitution in this country that can adjust to circumstances. Indeed, I have faith that the Auditor-General in Scotland and Scotland’s own accounts committee should be able to handle these issues, and that the appropriate sanction will be available. The appropriate sanction is the exposure, principally to the electorate, of what those in charge of public spending do with that spending. That is the traditional method by which we redress these issues.

I am told by my noble and learned friend that there may be ways of imposing financial penalties on members of the Executive who behave in certain ways, but I do not know the detail of that and I do not wish to speculate on it at the Dispatch Box. I listened to the noble Lord argue for his amendment in a measured way, anticipating that we would probably be able to resolve the example he gave of an improper use of funding for a matter that was outwith the vires of the Scottish Government. It is almost certain that we will find a way of transferring the power—even if temporarily—to the Scottish Government to run the referendum. I would like them to do that more quickly than they plan to do, but I am happy to respect their electoral mandate to administer and run that referendum, provided it is run in an impartial and fair way. I do not think, therefore, that the concern that immediately generated the amendment is likely to persist.

To the extent that the noble Lord raises an issue that will continue beyond devolution in Scotland, this is a matter to which I would like to hear the Minister’s response. Whether I veer towards support for some form of statutory regulation of behaviour, with consequences in the longer term, will be a function not just of the reasonableness of the noble Lord’s argument for the amendment but the response that I hear from the noble and learned Lord.