Scotland within the United Kingdom

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Monday 13th October 2014 Lords Chamber

[Lord Wallace of Tankerness]

I agree with my noble friend that a battle line approach will not be productive. I accept that the time is tight for the noble Lord, Lord Smith of Kelvin. I rather fear, however, that if we were to suggest any slippage the cries of betrayal would be even louder so I think it is important that we do stick to that. However, it is important too that people entering into these talks do so with a view to trying to achieve a lasting outcome. Simply to make a concession, for example, on monetary union, that was going to be made anyway in the context of independence, I do not consider a concession.

[Lord Kerr of Kinlochard (CB)]

I totally agree with the sentiment expressed by the noble Lord, Lord Steel of Aikwood, but I fear that the noble Lord, Lord Strathclyde, is more likely to be correct in his prediction of the outcome of the Smith commission. It would have been better—there is no point saying this—to have defined in advance what further devolution would make sense. Some of us in the House said that. I feel it was a great pity that in 2012 the Edinburgh agreement left only one question on the paper. My concern now is that the difficulties of reaching a consensus on this in the Smith commission will be greatly increased if extraneous issues are brought in. It was a great pity that the West Lothian question emerged at 7 am on the morning after the referendum. I thought that was a very great pity. I hope the noble and learned Lord will agree that in present political circumstances, whatever the mathematical logic of the West Lothian question, the correct answer is get over it.

[Lord Wallace of Tankerness]

My Lords, I do not think it was ever possible for three parties to come together in the heat of a referendum campaign and hammer out a single proposal. Many of our opponents would have loved us to have spent our time doing that rather than getting on with deploying the case for the United Kingdom. That is why we now have a Command Paper that sets out the proposals. I reassure the noble Lord, Lord Kerr, that while it is the case that the position on the West Lothian question is being looked at, it has been made clear by everyone that the extra powers for Scotland are not contingent or conditional on that. It is important to underline that.

Scotland Act 1998 (Modification of Schedule 5) Order 2013

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Wednesday 16th January 2013 Lords Chamber

[Lord Kerr of Kinlochard]

That is where I was going, although I would like to hear the Minister’s answer to my question on how one reads paragraphs 8 and 12 together.

[Lord Wallace of Tankerness]

I wonder whether it would be helpful to do so now, as it has been raised. The word “intelligibility” is used because Section 104(2) of the Political Parties, Elections and Referendums Act 2000, passed by this Parliament, states, in relation to a referendum question, that the Electoral Commission,

“shall consider the wording of the referendum question, and shall publish a statement of any views of the Commission as to the intelligibility of that question”.

That is why the word, “intelligibility” has been taken from the statute and put into the memorandum. As the noble Lord rightly points out, the Electoral Commission set out in its 2009 guidance and guidelines, which I quoted when moving the Motion, how it intends to go about determining intelligibility. I hope that that clarifies why the word was used. The other matters to which the noble Lord referred, such as ease of understanding, lack of ambiguity and avoiding misleading voters, are part of the criteria that the Electoral Commission has indicated that it applies when undertaking the word, “intelligibility” in statute.

[Lord Kerr of Kinlochard]

I am grateful to the Minister and in some way reassured. It seems to me that we need to keep a close eye on this issue. I strongly agree with the challenge raised by the noble Lord, Lord Sutherland, but I think in his normal, consensual, non-polemical way, the noble Lord, Lord Reid of Cardowan, got it absolutely right. There may be a fox around, but the Scots are not chickens. They are not stupid. If there is an attempt to rig the question, and the advice from the Electoral Commission, speaking to its remit as described by the Minister, is dodged or not responded to positively, it would be a considerable down side with the electorate in Scotland. The question of the question is very important, but let us not exaggerate it. If it is not a straight question the Scots are even more likely to give it a very straight answer.

Constitutional Settlement

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Thursday 11th October 2012 Lords Chamber

[Lord Wallace of Tankerness]

My noble friend and I are going to have to agree to disagree. I do not accept that that would be an automatic consequence. Before any change to the franchise for the House of Commons, or indeed for the Scottish Parliament or the Welsh Assembly, there would have to be full, proper debate and consideration, and it would require legislation in this Chamber. I do not think for one moment that my noble friend suggests that the House of Commons will suddenly roll over and vote for votes at 16. Apart from anything else, it will certainly not be at the hand of the Government, although they will have no opportunity to do so in the lifetime of this Parliament.

As I have indicated, the Government believe in the United Kingdom. We believe that the United Kingdom is greater than the sum of its parts, as was said by more than contributor to this debate. Our shared history during the past 300 years has been as a stable, successful, political, economic and cultural union. That has benefited our citizens, our economy and our place in the world. It is a unique constitutional achievement and one of the great success stories. It was striking that, in their contributions to the debate, my noble friend Lord Cormack and the noble Lord, Lord Judd, reflected on their own Scottish ancestry. The noble Lord, Lord Browne, indicated that, within his own family, the benefits of being part of a United Kingdom are manifest. Having looked up the origin in Scotland of the name Wallace, I found that it undoubtedly came from Shropshire or Wales in the 12th or 13th century, so it is clear that there has been movement of peoples in these islands for centuries. Geography is probably one thing that binds us more than anything else. Common sense says that we should not split up what has been successfully brought together.

Perhaps I may paraphrase the excellent case made for our United Kingdom in the report by my noble friend Lord Steel of Aikwood—the so-called Steel Commission report. That talked about nations which had been in conflict for hundreds of years, which were brought together and which together were able to exert a global influence. Our concepts of liberty, democracy and the rule of law, our philosophy and our ideas, have done much to shape the modern world.

Within our United Kingdom, Scots have made an important contribution—in science and engineering, medicine, administration, economics, finance and philosophy— and we have done so as an integral part of the United Kingdom’s success. In unity and co-operation with the other parts of the United Kingdom, Scotland has been able to punch above its weight as a small country and, in doing so, we have helped to build a United Kingdom which is more effective together than its combined resources would merit.

We benefit from being part of a strong United Kingdom and I believe that the United Kingdom benefits from having Scotland as a constituent member. Our experience together in the past 300 years has created a number of key British institutions which are part of a shared national identity: the BBC, the British Army, the Navy, the Royal Air Force, the Crown, the National Health Service and, indeed, this very Parliament. It is the strength of these institutions which will help influence people in Scotland when they cast their votes in the forthcoming referendum.

The Secretary of State for Scotland announced to the House of Commons on 20 June the work that the UK Government will do to highlight the benefits of the United Kingdom. I have detected—and it has been mentioned in some of our debates previously—an appetite for some objective and reliable information on the issues. It is right that the Government should provide facts ahead of the referendum and I welcome the fact that many other bodies now want to contribute objective information. That analysis can inform and support a debate on Scotland’s future within the United Kingdom.

Part of that future, and part of our immediate past, has been devolution. We have demonstrated a strong commitment to devolution, as it gives people choice and a real say over their own affairs. It is consistent with the decentralisation of power which is a core aim of this Government in line with our belief that there are benefits in making decisions at local level. We have an active devolution agenda. There is no status quo to defend because the devolution settlement, as the noble Lord, Lord McConnell of Glenscorrodale, pointed out, has continually evolved from day one. He will remember, when he and I were in government together in Scotland, the devolution of the railways under a Section 30 order and the fact that we were able then to take forward some important new railway building and construction in Scotland. That settlement continues to evolve.

Most recently, the Scotland Act 2012 was passed, representing the most significant development in devolution since 1998. Like the noble Lord, Lord Browne of Ladyton, and contrary to the view of the noble Lord, Lord Kerr of Kinlochard, I cannot accept that it is a ragbag of measures. First and foremost the measures that changed the devolution settlement in terms of powers were the product of a very detailed consideration by the Calman commission. The fact that it did not amount to a great number of powers is a testament to the settlement of the 1998 Act and the work that was done then. But it also included, very significantly, a substantial transfer of financial powers. That addressed a very important principle of the accountability of the Scottish Parliament, which hitherto has had total discretion on how it spends money but precious little responsibility or accountability in how it raises money.

[Lord Kerr of Kinlochard]

Churchill said of some pudding—I do not know what pudding it was—that “this pudding lacks a theme”. That was what was wrong with the Bill. Individually, there was a rationale for particular measures and many of them came out of Calman, I entirely understand that. But nowhere was there anything architectural or anything explaining the principles of the settlement with Scotland. That is what we still need and that is why I am very strongly in favour of the proposal of the noble Lord, Lord Maclennan.

[Lord Wallace of Tankerness]

My Lords, there is a theme. I hate the word “subsidiarity”, but the overall theme is about where decision-making can best be achieved and delivered consistent with good governance. I think the issues and headings that we identified in the Calman commission, which were taken forward in legislation, did subscribe to that theme. Also, as I have said, a very important theme was the accountability that came to the Scottish Parliament with the devolution of financial powers. It must now answer to the people of Scotland as to how it raises money and not solely as to how it spends money.

There is more than just what we have achieved in the Scotland Act 2012, which of course is still ongoing in terms of its delivery. We have established the McKay commission to explore how the House of Commons might deal with legislation that affects only part of the United Kingdom following the devolution of certain legislative powers to the Scottish Parliament, the Northern Ireland Assembly and the National Assembly for Wales. The Silk commission, set up in October last year to review the present financial and constitutional arrangements for Wales, is due to publish its first report on financial accountability within the next few weeks. These are significant processes, and we must allow them to reach fruition and not impede their development. They have a common aim, which is to deliver improvement in the lives of the people in Scotland, Wales and Northern Ireland. Each evolved in different historic ways, and we believe that recognising the different features and factors that make up the constituent parts of the United Kingdom has been an important part of the process.

My noble friend suggested that we should be looking at alternative constitutional settlements. The noble Lord, Lord Soley, suggested there should be a royal commission, while my noble friend Lord Maclennan said this is something that might go on for years and not something that was going to be done in just months. My noble friend—as he was, and still is personally—Lord McConnell talked about the Scottish Constitutional Convention, one of whose features was that it had a very clear end in sight. It is important that we remember that.

I was interested by the number of noble Lords, including the noble Lords, Lord Soley—whose article I have had the privilege to read—Lord Foulkes and, I think, Lord Judd, who mentioned federalism. I can assure the noble Lord, Lord Foulkes, that it remains the policy of the Liberal Democrats and I am sure that when he reads the report of the Campbell committee, which was set up by the Scottish Liberal Democrats, in the next weeks, he will be pleasantly reassured, not necessarily surprised, by what he reads in that.

Numerous ideas have been put forward by your Lordships in debate. My noble friend Lord Steel of Aikwood referred to the 1979 manifesto when he talked about the second Chamber having a role to play in the representation of the nations and regions of the United Kingdom. If I am not mistaken, I rather suspect that was in the evidence that he wrote for the Scottish Liberal Party to the Kilbrandon commission in about 1967. We can check back, but it has been a consistent theme for some time. Clearly there are issues there that merit further examination and discussion.

Scotland Bill

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Tuesday 24th April 2012 Lords Chamber

[Lord Kerr of Kinlochard]

My point was not about process—I do not want to get into questions of process—but the distinction is one without a difference. If Scotland had full independence on the prospectus in the Scottish Government’s consultation paper, it would still be using the United Kingdom currency. In my judgment, when the Scots applied for membership, the European Union would not insist that they adopt the euro forthwith, but it would probably ask for some sort of undefined commitment at a future date. Therefore, there would still be the problem of fiscal autonomy alongside continuing monetary integration. That problem would exist in a scenario of either devo-max or independence, so it needs to be addressed.

[Lord Wallace of Tankerness]

I do not dispute that. It needs to be addressed. It is one of the key issues that those who advocate ultimate fiscal autonomy or independence must address. I do not think that the noble Lord is suggesting that it would be suitable for inclusion in the Bill, but it is an important issue that has to be properly and fully addressed in the debate that we will undoubtedly have on the independence referendum.

Scotland Bill

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Wednesday 21st March 2012 Lords Chamber

[Lord Wallace of Tankerness]

This is where there is a misunderstanding. This is about making a shared tax base work in a way that is fair and revenue neutral to both jurisdictions. My noble friend Lord Caithness said that if the Scottish Parliament chose to change the allowances, it should bear the responsibility. The whole point of these proposals is that it cannot change the allowances. The personal allowance is determined by the United Kingdom Government. That is the nature of a shared tax base. The argument is that if that tax base is changed, there ought not to be detriment to the Scottish Parliament.

[Lord Kerr of Kinlochard]

Let us look at this the other way around and think about the ease and the political acceptability in Scotland of making the case that if the Chancellor decides to put taxes up, not down, the Scots, in addition to paying the taxes, should send a cheque to London. It is the reverse of the case that the noble and learned Lord has just been discussing.

[Lord Wallace of Tankerness]

It is very unlikely to happen, but let us say that the personal allowance had gone down rather than up. It would have been a windfall to the Scottish Government. The argument therefore is that on a no-detriment principle, it should operate both ways. I shall come on to explain that.

I shall try to make this as simple as possible, but it is not readily simple. From April 2016, the income tax base in the United Kingdom will be shared between the United Kingdom and Scotland. With 10p from all rates in Scotland expected to yield between £4.3 billion and £5.6 billion over the OBR’s forecast period, the Scottish Government will receive around 3 per cent of UK income tax receipts. The Scottish Government will be responsible for setting their rate of income tax and the United Kingdom Government will be responsible for everything else, including, for example, personal allowances. In such a system, the UK Government must be accountable for decisions that they take on the structure of the tax. Conversely, the Scottish Government must be accountable for the decisions that they take in respect of the rate.

I shall give an example—the example seen in the letter from my noble friend Lord Sassoon, but seen the other way. Last year the United Kingdom Government decided to raise personal allowances from £6,475 to £7,475. This decision cost the United Kingdom Government approximately £3.5 billion across the United Kingdom. Since the proposal in the Bill is to devolve around 3 per cent of income tax, the cost to the UK Exchequer from raising personal allowances would reduce to 97 per cent per cent or around £3.4 billion. The remaining £100 million would fall on the Scottish budget. It would be a cost as a result of a decision for which the Scottish Government were not accountable.

If the Scottish Government had set a budget and a rate of tax and had planned their public expenditure on that basis, and then, some four or five months later, as the result of a decision for which they had no responsibility or accountability, they suddenly found that their budget was £100 million short, the no-detriment principle is intended to make up that difference because it is a decision for which the Scottish Parliament will not have had responsibility. That is why I believe that it is important for accountability, because not to do so means that suddenly a Scottish Government perhaps have to carry the can for particular expenditure to which they were committed but could not longer afford, not through any decision that they had made, but through a decision made by the United Kingdom. The obverse is true; for example, if the Scottish Government get a windfall because the tax base has changed, it is only right that that windfall is recovered by the United Kingdom Government.

Under the no-detriment principle, the UK Government would compensate the Scottish budget for any cost that led to a reduction in the tax, but at the end of the day the cost to the United Kingdom is exactly the same as it would be if this Bill were not implemented—that is, the £3.4 billion that it loses in revenue because of the increase in the personal allowance and the £100 million that it then gives to the Scottish Government.

[Lord Wallace of Tankerness]

My Lords, I cannot accept that last comment, but I can now see where my noble friend is coming from. I welcome anyone who wishes to express the case for going further. Of course, he is well aware that what has been presented to Parliament here is something that was worked on over a long period of time during which a consensus was achieved. There was never likely to be a consensus in favour of devolution of the whole tax base, as opposed to the tax rate.

My noble friend is basically saying that it should never be the case that a change in the tax base—for example, the increase in personal allowances—should benefit taxpayers in Scotland. He is saying that if the UK Government, who are still responsible for a substantial level of services in Scotland, take tax from the Scottish people, the Scottish people should never be allowed to take the kind of benefit that I believe they should—and I think that he once wrote a pamphlet on the benefit of raising the personal threshold—and the Scottish Parliament should raise its rate of tax to account for that. That is not accountability; that is a decision taken by the UK Government to bring benefits right throughout the United Kingdom.

It would seriously undermine the United Kingdom if Scottish taxpayers were not allowed to receive the benefit of a change to the UK tax base. It could mean that the tax change would reduce the amount of money available to the Scottish Government, so that budgetary considerations and calculations that had been put forward and might well have been voted through by Parliament would no longer be sustainable because of a decision taken by a body other than the Scottish Parliament. That is the essence of the no-detriment rule, and something that lies at the heart of the statement of funding policy.

I will read out the statement of funding policy, because the noble Lord, Lord Browne, might find that it echoes the passage from the Holtham commission that he read out. It says:

“Where decisions taken by any of the devolved administrations … have financial implications for departments or agencies of the United Kingdom Government or, alternatively, decisions of United Kingdom departments or agencies lead to additional costs for any of the devolved administrations … the body whose decision leads to the additional cost will meet that cost”.

That is where accountability properly lies.

This is not something new that has suddenly been dreamt up. There are probably people in the House who were involved at the beginning of devolution and this principle has been in the statement of funding policy since then. I believe that it is fair that Governments —be it a UK Government or a Scottish Government—should be accountable for the decisions that they make, but they should not be able to export some of the implications of their decisions on to another Government, who should not be held accountable for the decision of another Government.

[Lord Kerr of Kinlochard]

I understand the Minister’s logic, which seems to depend on the control total being the block grant. The block grant is what matters. All this stuff about tax is for perception and presentation at the edges. The block grant has to be maintained. Apparently the example in the Sassoon letter, which I have not seen, concerns a case where the Scottish economy would have benefited from the additional buoyancy and spending power of a reduction in the level of taxation paid by Scotland. However, because we are seeing everything through the prism that the block grant is the control, it needs to be maintained in Scotland, so the Scots need to be compensated for the additional buoyancy in the Scottish economy. That is quite difficult politically. The reverse case, which the Minister prefers not to talk about, is almost impossible to present politically in Scotland.

The trouble is that these tax revisions are neither fish nor fowl; they are only a good red herring. We are not addressing the real issue on taxation. I entirely agree with the noble Lord, Lord Browne of Ladyton, that accountability is accountability for spending and for raising the money which you spend. Until we get that and get away from having the block grant as the control, we will have a continuing unsatisfactory situation.

[Lord Wallace of Tankerness]

My Lords, I certainly agree with the final point that accountability is as much about what you raise as what you spend. The point at the heart of the statement on funding and the no-detriment principle is that one should not be accountable for consequences which you as a Government would have to see through but which are the result of a decision that you have not made. Having to say why a certain project does not take place—following not a decision that you have made but a decision made by another Government—is not accountability. That is what one is seeking to address, and it links in with what has been said about the Holtham principle. Again, there is an intention there that, if the Scottish Government’s tax proposals promote buoyancy in the Scottish economy, that should be to the benefit. Likewise, if they have tax proposals which have an opposite effect—they drive away enterprise and reduce revenues—there should be a negative consequence. A letter is not necessarily the best way to go through this issue but I am certainly open to ways in which we can go through it in more detail. This point links to the Holtham point made earlier by the noble Lord, Lord Browne.

The principal point is that this is not an issue of the Scottish Government getting two bites of the cake. It is to ensure that where a tax decision is made regarding the UK tax base by the UK Government, all taxpayers throughout the United Kingdom are treated in the same way as a result of that decision. It means, too, that if that decision has consequences—either inflating the money coming into the Scottish Government or reducing it—a rectifying amount is paid back or perhaps withheld from the block grant or, alternatively, is paid in addition. I regret that it is not the easiest thing to explain and there may be another way of discussing it other than across a Chamber. However, I emphasise that it is not a question of having your cake and eating it; ultimately, it is a question of ensuring accountability and making sure that the Scottish Government do not become accountable for a decision that is not their own. I cannot put it more simply than that. Although we may well return to this issue, on that basis I ask my noble friend to withdraw his amendment.

--- Later in debate ---

[Lord Wallace of Tankerness]

I do not think that that is the way to transfer backwards. That may be possible; I will have to check. It may be possible to go in the opposite direction. I am trying to think whether that has ever actually happened. When the Arts and Humanities Research Council was established, because it had not hitherto existed and because under the scheme of devolution it was a devolved as opposed to a reserved matter, an order had to be brought forward to establish that it would be a UK parliamentary responsibility. I am not sure that it was a Section 30 order. The noble Lord, Lord Sutherland, may have been involved at the time. I certainly was, because I took the order through the Scottish Parliament.

The important point is that it changes the devolution settlement. It changes the boundaries between devolved and reserved powers. That is why it requires the consent of both Houses of Parliament and the Scottish Parliament before it proceeds to Her Majesty in Council.

I hope that I have shown that there is a distinction between that and a legislative consent Motion, which is by its nature a convention. On the basis of those explanations and the undertakings that I have given to try to identify ways in which we can discuss the matter in more detail—

[Lord Kerr of Kinlochard]

My Lords, the noble Lord, Lord Forsyth of Drumlean, raised one other question in his reading of the Statement. I am very grateful to the Minister for his Statement, and I feel much less pernickety about it than the Committee as a whole seems to do. It is a good thing that this agreement has been reached. A number of demands from the north have been dropped. A number of changes that the Government propose to make seem to me perfectly earnestful. The reason why it has been possible to negotiate this successfully is that everyone has decided that it is de minimis—it really does not change the price of fish. That is the trouble with the Bill: it does not attack the real issues.

The noble Lord, Lord Forsyth, referred to the sentence in the Statement in which we are told:

“The Government is open to considering what further powers might be devolved after a referendum on independence”.

The noble Lord asked how we should construe that sentence. Scots are good at punctuation. There is no punctuation in that sentence. That, I take it, means, “We are open to considering now, today”. It does not mean, “We are open to considering what further powers might be devolved, after a referendum”. The Minister had a good Scottish education, so I am convinced that I am reading this correctly. That seems to me to be a move from the porridge oats speech, where I think the punctuation included a comma. Am I right? Am I reading this correctly?

Secondly, what mode are we in? The porridge oats man is very muscular. He is very active.

“The Government is open to considering”,

suggests to me a rather passive role. The Government will sit there and if anyone turns up with an idea, they may look at it. Are we active or passive? I think that the porridge oats position, the punctuated position, is impossible—after there has been a referendum, then we will consider what more you might get. Scots have long memories. It will not work; that is an unsustainable position. Therefore, I am very glad to see no punctuation in that statement. Are we actively to define what further measure of devolution would be feasible, or are we to leave it to others to devise devo-maxes, devo- pluses and devo this, that and the other? I feel that there is a strong case in logic for being clear before an independence referendum about what would be on offer after it.

[Lord Wallace of Tankerness]

They may be very unfair on themselves but officials say, “Blame officials for poor punctuation”. I think I will reserve my position on that. I apologise for forgetting to pick up the point raised by my noble friend. As he and the noble Lord, Lord Kerr, correctly identify, the Statement says that the Government will consider further devolution after a referendum on independence. I believe that that is consistent with the position set out by the Prime Minister and with the evolution of devolution to date. It has involved a careful assessment of the evidence.

One could go back to the constitutional convention or the Calman commission. It has involved consideration of its implications across the United Kingdom—it is important to remember that any devolution has implications for other parts of our United Kingdom—and it has generally proceeded with cross-party agreement. Those are all essential ingredients, perhaps not of porridge oats but for moving forward. The Government are committed to continuing to consider amendments to the devolution settlement on that basis. My party and others are doing their own thinking on what that might be, but, as we have seen to date, any substantial progress has been made on the basis of cross-party agreement. That is important.

I make one further point for clarification. My noble friend the Duke of Montrose is right: the word “modify” means to decrease or extend the subject matter of Schedule 5, and I am advised that the order which I took through the Scottish Parliament with regard to the Arts and Humanities Research Council was indeed a Section 30 order that added something to Schedule 5.

Estates of Deceased Persons (Forfeiture Rule and Law of Succession) Bill

Debate between Lord Wallace of Tankerness and Lord Kerr of Kinlochard

Wednesday 15th June 2011 Lords Chamber

[Lord Kerr of Kinlochard]

I remind the Minister of the argument made by my noble friend Lord Pannick. If I introduced him to a lady and said that she was my wife because I married her, would I be required to say, “and because I have not married anybody else”?

[Lord Wallace of Tankerness]

No, my Lords, but one should consider the context. This new clause was proposed in its original form in the context of trying to lay to rest any contrary suggestion that there are other means—means which I do not think anyone in this debate has accepted; nevertheless, they are out there and are run as arguments—by which European Union law can be imported into the legal systems of the United Kingdom. That is why we use “only”.