Scotland Bill

Lord Cormack Excerpts

Tuesday 28th February 2012 Lords Chamber

[Lord Sassoon]

The answer is yes and yes to my noble friend. The introduction of new taxes is a constitutional change to the United Kingdom and a power which will be introduced. I will go through the steps one by one, because we have not debated them all fully so far this evening. One of the steps is for the order to be approved by both Houses of Parliament; the Government believe that to be appropriate. So that is a yes. There may be questions about whether orders can be amended and other questions, but emphatically it is our intention that the order to implement a new tax has to be approved in both Houses. That is clear. My noble friend may look surprised, but that is the case. I hope that that gives him significant comfort.

[Lord Cormack]

I am most grateful to my noble friend for giving way, but it would be invalid under the Parliament Act for this House to express a view and vote on taxes within the United Kingdom.

[Lord Sassoon]

My Lords, I am not a constitutional lawyer, but those who drafted the Bill, who are quite clear about the centrality of this to the new constitutional settlement embodied here, are clear that it is a proper power to be exercised in the way intended under the Bill.

If noble Lords will forgive me, I would like to go through all the steps. As I said, this is a construct with a number of elements to it and we should look at it in the round. It comes to the heart of the issue that was principally raised in detail by the noble Lord, Lord Sewel.

There is a technical issue relating to the noble Lord’s amendment which we should get out of the way: the amendment would also impact on the provisions which allow for devolution of taxes on disposals to landfill and on transfers of land. The effect would be to prevent the Scottish Government collecting and managing such taxes or entering into agency arrangements with others to collect and manage the taxes for them. This would be critical if the Scottish Government were to be able to exercise their new tax powers effectively. I park that on one side but it is not an unimportant question.

I now turn to the central question of the power to devolve new taxes. I shall go through this in a way that I hope will give noble Lords some assurances that sufficient and proportionate safeguards are in place to ensure that this power is exercised to the benefit of the UK as a whole. I should also like to explain its importance in raising the accountability of the Scottish Parliament. There are those who are clearly concerned that the power goes too far but there are others who believe that the power does not go far enough. In the middle, we have the noble Lord, Lord Browne of Ladyton, who wants more assurance on the criteria.

First, I come back to the central authority that would be needed for new devolved taxes to be added. They would need to be added by Order in Council, which would be subject to the type A procedure set out in Schedule 7 to the Scotland Act. It is clear that this requires that no recommendation can be made to Her Majesty in Council until a draft has been laid before, and approved by, both Houses of Parliament and by the Scottish Parliament. Therefore, there will be thorough scrutiny of any proposals under this power, including the opportunity for Members of this House to debate fully any such proposals.

What did not get so much attention in this debate were the criteria to be adopted when looking at any new tax. This was a point on which the noble Lord, Lord Browne, focused his remarks but other speakers seem not to have taken full account of these criteria. They are laid out clearly in the Command Paper that accompanies the Bill. I believe that they set a clear framework of guidelines as to how the Government will consider the impact of any new tax proposed by the Scottish Parliament and hence decide whether to devolve it. For the avoidance of doubt, perhaps I may read out the criteria. They will include the potential for the new tax to create or incentivise economic distortions and arbitrage within the UK; the potential that the new tax might create for tax avoidance across the UK; the impact of the proposed tax on compliance burdens across the UK; and the compatibility of the new tax with EU legislation and rules, such as those covering state aid, the single market and the Human Rights Act. Therefore, there will be a considerable screening process before the Government decide to propose any new devolved tax.

I stress that the foremost consideration here is the need to ensure that any proposed tax will not impose a disproportionately negative impact on UK macroeconomic policy or impede to any degree the single UK market. Taxes will be judged against their potential to create or incentivise economic distortions or to generate avoidance or an impact on compliance burdens across the UK. It is those criteria that will give the Scottish Parliament the flexibility to adopt the policies that it considers to be best for Scotland, while preventing adverse effects on the rest of the UK.