Scotland Bill

Lord Lyell Excerpts

Tuesday 6th September 2011 Lords Chamber

[Lord Sewel]

I think that it would depend on what the tax was. If it was a tax on left-handed people, I would happily vote against it. When it comes to taxation, nothing is ever simple—as the noble Lord, Lord Forsyth, knows. It is important to catch the right people and avoid creating the potential for someone finishing up being a territorial taxpayer in two jurisdictions. I am not quite sure that the Bill has that bit right. I remember long and interesting discussions on lorry drivers sleeping in their cabs at night north or south of Gretna and the great importance that that would have on whether they were a taxpayer. How anybody knew whether they were going to sleep north or south of Gretna, I never dared try to find out.

[Lord Lyell]

I have all that debate—it is in vol. 593 —here with me. After I have been able to speak in this debate—perhaps in the morning—the noble Lord might be able to read that in Hansard. However, he is absolutely right. I shall never forget all the efforts that he made—it is all here. Alas, I was before him getting vol. 593.

[Lord Sewel]

I thank the noble Lord very much for that intervention.

Perhaps I may focus on one last thing. The really big difference is now that Scottish public expenditure will be financed by a combination of tax raised in Scotland and grant given to Scotland by the United Kingdom Parliament. Everything about Scottish income tax is defined and specified in the Bill, but the Bill is silent on grant, and that is still going to be the largest source of income for the Scottish Parliament. I think that that is a lopsided arrangement that really is unsustainable. We have got to the stage now where the grant element ought to be defined in legislation as well as the tax element.

I have spoken much too long. I think that this is a good Bill. It builds on the original Bill without fundamentally disturbing it, and I welcome it wholeheartedly. However, I think that we are going to spend quite a bit of time in Committee.

--- Later in debate ---

[Lord Lyell]

My Lords, I start by thanking my noble and learned friend for his very clear exposition of this Bill at the outset. He and I, and maybe one or two others, are the only two who have attended virtually every second of this debate. Perhaps there is something in it, that the first Lord Lyell, my great-grandfather, was in fact the Member of Parliament for Orkney and Shetland for 15 years. So there is doubtless something in the breeding that makes hard men, and indeed my noble and learned friend might perhaps be one of those. I think he has done a super job, but he has not started yet: he has to wait until Committee stage comes, and then we shall have enormous fun.

I had a look at this Bill, and the first clause that crossed my mind, a clause which has been beautifully and eruditely covered in great detail by my noble friend Lord Shrewsbury, deals with airguns. I consulted the Tayside constabulary in Kirriemuir, and was told that in broad terms it was very pleased and quite happy with what was set out in the Bill. It seems that many of the airguns used in our neck of the woods are used legitimately in a very rural area. If indeed airguns are spreading and multiplying in urban areas in Scotland, no doubt my noble and learned friend will be able to take care of that, and we shall be able to make some arrangement.

I would turn fairly quickly towards the financial aspects of the Bill. I think that is is Clause 28 and further on. At the outset there have been notable contributions from the Liberal Democrat Benches. My noble friend Lord Forsyth was a marvellous opening bat, and we will come to him later. The Liberal Democrat Benches dealt very well and very effectively with a federal system. I think the noble Lord, Lord Steel, referred to what might be a federal tax system in the United Kingdom. I certainly call it a lopsided federal system. There might be a very good reason for this. It seems to me that what is set out in the tax-raising powers in the Bill, and indeed has been set out from the outset in all the aspects of devolution, in giving more powers to the Scottish Parliament. It is lopsided devolution, in that the tax measures that might be proposed for the Scottish Parliament will be in the nature of—if I take the Federal Republic of Germany—a state tax, whereas every other citizen of the United Kingdom, be they English, Welsh or from Northern Ireland, will be paying tax under a unitary system. Marvellous figures have been quoted: my noble friend Lord Caithness—was he Chancellor of the Duchy of Lancaster?—was a great financial expert in his previous expert incarnation, and he mentioned some percentages. The noble Baroness, Lady Liddell, will be able to explain the Australian system.

About 25 years ago I took a German course. It was very carefully explained to me that in Germany you pay tax to your Gemeinde, your local district. For every 100 euros of tax you pay, you know that 15 per cent—15 euros—are going to your Gemeinde. The 85 per cent is—or used to be—split, fifty-fifty, so that 42.5 per cent went to the federal government, 42.5 per cent went to your Land, your land government. That would be an exact replica of what we are discussing tonight, and what might come about in a federal system. It was another notable Member of your Lordships’ House from the Liberal Benches, a former member of the Institute of Chartered Accountants in England and Wales, the noble Lord, Lord Sharman, who said to me, “If you want to look at systems of federal taxation that might be relevant to the Scotland Bill and what we are discussing now, first of all look at Germany, then look at Switzerland”. I have been visiting Switzerland for 35 or 40 years, perhaps not entirely for purposes of tax, mainly for skiing. Indeed the noble Lord, Lord Forsyth, is a noted denizen of Lenzeheide, and he represented your Lordships at skiing, so he will have some idea of the breakdown of how you pay your federal tax, your local tax, and the other taxes. The main crux of the discussions we have had is on tax—we have looked at landfill tax and all the other taxes—but mainly it is income tax.

I am so pleased that the noble Lord, Lord Forsyth, is here. I am sorry that the noble and learned Lord, Lord Fraser, is not with us because the noble Lord, Lord Forsyth, and I are both Angus lads. I think that in the words of the Bill the closest connection he might have is with the lovely town of Arbroath. There is another Scot—also an Angus lad, from Arbroath—who 50 years ago put together a melody that is to be found in Rossini’s opera “William Tell”. It was originally called “William Wallace” but it was translated. The melody went via the Crimea to a pipe major in the Gordon Highlanders who prepared the wonderful melody that we marched to called “The Green Hills of Tyrol”. About 50 years ago, this marvellous denizen of Arbroath and Angus put the melody on a disc. It went platinum and trillions of copies were sold. He was called the “Scottish Soldier” and I look at many of his words as a Scottish taxpayer. In the words of Mr Andy Stewart, he wandered far away. Indeed, he did, and we have heard a great deal about that tonight from the noble Lord, Lord Watson of Invergowrie.

However, there is something that worries me very much, as it does several of the expert groups. I declare a tiny and humble interest as a member of the Institute of Chartered Accountants of Scotland. The institute briefed me in 1998 on aspects of who would pay the Scottish tax and who would be classified as a Scottish taxpayer. It seems that not much has changed since then. I purloined volume 593 of your Lordships’ Hansard report, which covers 6 October 1998. I made pretty well the same speech as I may be making in Committee about who would be a Scottish taxpayer. I received a wonderful, courteous briefing from the government spokesperson—the wonderful and very courteous noble Baroness, Lady Ramsay, who explained the matter quite vividly. If your Lordships glance at paragraph (4) at the top of page 24 of the Bill, they will find an exact description of what was in Section 75 of the 1998 Act concerning one’s residence in Scotland as being on a boat or vessel. Earlier, we heard a dissertation about houseboats, rafts and other things, but what the noble Baroness was pointing out then—I think that it is a major flaw in the Bill—was a ferry. I recall the late Lord Dunleath asking what would be the tax status of people from Northern Ireland arriving on a ferry at Stranraer or Cairnryan. Certainly I was given to understand that even if a UK taxpayer from Northern Ireland never set foot on Scottish soil, because that ferry was tied up on Scottish land he would be deemed to be, and would be classified as, a Scottish taxpayer. That was set out by the noble Baroness in a very erudite fashion at col. 296 of volume 593, but even with her great humility and wonderful courtesy I do not think that she was entirely convinced. Indeed, the late Lord Mackay of Ardbrecknish was in no way convinced. However, I hope that we can move on from that and that my noble and learned friend will be able to take care of it.

I think that it was the noble Lord, Lord Sewel, who during that debate referred to lorry drivers. He had been the Minister taking care of it. In 1998, I referred to a firm in my own neck of the woods in Kirriemuir which employed 360 lorry drivers, 27 of whom had residences in Scotland, Therefore, straight off they were Scottish taxpayers. When you start looking at midnight at where you are with new Sections 80D, 80E and 80F under Clause 30 relating to Scottish taxpayers, you become just as confused as you were in 1998. You have to start totting up how many days you spend in Scotland or elsewhere. We have not moved on from there. Could my noble and learned friend take this on board, so that we can come back to it at greater length in Committee? I worry about how many other non-Scots are going to be classified as Scottish taxpayers. I am delighted to hear—I think that I heard that it has been confirmed—that the decision as to who will be a Scottish taxpayer, let alone a rate payer, will be taken not by the Scottish Parliament, though that may cause consternation and anger, but by Parliament here.

The transport firm found that up to 70 out of their 360 employees would easily be deemed Scottish taxpayers. They have homes in England and all other aspects of their lives, including paying tax, are in England too. But if they are to be classified as Scottish taxpayers, the din down in the other place will be something like the zoo at feeding time. I do not think that even with a three-line Whip these tax measures will be pushed on to so-called Scottish taxpayers who do not live in and have nothing to do with Scotland, apart from the fact that for a certain hour at a certain time of the year they will be north of the border. I am grateful to my noble and learned friend for the details that he has provided, and I look forward with great relish to Committee, whenever it may come. I hope that it may be this year, not in 2012.