Scotland Bill

Mark Lazarowicz Excerpts

Thursday 27th January 2011 Commons Chamber

[Michael Moore]

First, I pay tribute to the right hon. Gentleman’s distinguished career of campaigning on these issues and to all the hard work and effort he has put into that over many years. The fundamentals of devolution since 1999 mean that the Scottish Parliament and then the Scottish Government are able to decide how to spend all the revenue that comes to them, whether it be directly through the grant or, to use a shorthand term, as a result of the Barnett consequentials. The hon. Gentleman is, of course, entitled to draw a distinction between how the money is spent south of the border and how it is spent north of the border. On occasions, the advantage might be the other way round, but I am afraid that that is the essence of devolution—it is for them to decide. The Bill enhances those principles rather than claws anything back.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The right hon. Gentleman is right that the essence of devolution means that the Scottish Government should not have their funding ring-fenced, as some have suggested it should be. However, the point raised by my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke) related to accountability. I do not think that he was suggesting that we should ring-fence the funding transferred to the Scottish Parliament. It is a question of how there can be accountability to the UK Parliament. Perhaps there could be some way of bringing to this Parliament the ability to question the way in which money is spent by the Scottish Parliament. Intergovernmental and inter-parliamentary co-operation should allow such questioning to be pursued and, although my right hon. Friend has been trying to do that, he has not always been successful in getting the Scottish Parliament to respond.

[Michael Moore]

I respect the hon. Gentleman’s interest in these matters and I commend the way he has followed devolution developments over the years. The primary responsibility for accountability is to the Scottish Parliament. Governments of different hues have gone before the committee system and made statements in the Scottish Parliament; there are 129 Members of the Scottish Parliament and that is their primary function. Ultimately, as in this House, all are accountable to the electorate. What we are trying to do with accountability in this Bill is enhance the financial powers so that parliamentarians in Scotland can be made accountable not just for the spending decisions, but for the tax-raising decisions that precede them.

Let me finish my point about the Barnett formula. We do not intend to alter it or review its arrangements at this time. Nothing in the Bill, however, prejudges future changes to the funding formula. Rather, the Bill’s effect will be to make the Scottish Parliament more reliant on its own revenues and less reliant on the block grant to fund public spending in Scotland.

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[Ann McKechin]

I am happy to provide my hon. Friend with that assurance. Unlike some other parties, we are already listening carefully to and speaking with people and bodies in Scotland, as we have done throughout this process, which has already lasted three years.

There has been much discussion, both in the Scotland Bill Committee in Holyrood and beyond, of the effect of the proposed devolution of the fiscal powers set out in the Bill to the Scottish Parliament. We urge the Secretary of State to set out and make transparent at the earliest opportunity the precise plans that the Government intend to introduce to ensure operational stability during the transition and the measures he intends to put in place to control the costs incurred during those changes. In particular, it is imperative that the Scotland Office, the Scottish Government and Her Majesty’s Revenue and Customs are in full and frank consultation and that operational systems are put in place to ensure that changes are fully effective so that Scottish taxpayers do not see public moneys wasted during a period of difficult financial constraint. What discussions has the Secretary of State held with HMRC and the Scottish Government on the initial planning required to implement those substantial changes, and will he undertake to report regularly to the House on progress during the preparation period leading up to the next general election?

We also seek clarity on the definition of “Scottish taxpayer”, which experts have already highlighted could lead to a series of what we suspect are unintended anomalies. According to the Institute of Chartered Accountants of Scotland, a worker who spends 101 days in Scotland, 99 days in England and 165 days working overseas, for example, will still be deemed to be a UK resident and a Scottish taxpayer, despite spending less than half the calendar year in Scotland. A person who lives in Scotland but works in England would derive all their income from their activities in England but still be classified as a Scottish taxpayer because that is where they end their day. As the Secretary of State and his No. 2, the Under-Secretary of State, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell), both represent border constituencies, that issue might be of direct relevance to their constituents. We understand that HMRC currently has no intention of introducing a concession to split the tax fiscal year to deal with the movement of workers across the border. None of those consequences seems particularly sensible, so we urge the Government to look carefully at the definition.

We are disappointed that the Government have not taken the opportunity to tackle the problems caused by the different approaches to the definition of “charitable purposes” and “charity” in the Charities and Trustee Investment (Scotland) Act 2005 and the Charities Act 2006, which applies to England and Wales. They have failed to use this opportunity to introduce measures to reduce the regulatory burdens on UK charities that operate in both Scotland and other parts of the UK —particularly in difficult times when charities are already affected by the spending review cuts and bearing the brunt of the economic downturn. The Bill is the ideal place to address the issue, and to quote the Secretary of State’s right hon. Friend the Prime Minister, “If not now, then when?”

Let me conclude by reminding the House that the Bill is intended to preserve the political and economic union that has benefited both great countries over the past three centuries. The case for fiscal autonomy has disintegrated around the SNP, and its vision for Scotland is small, isolated and weak. Conversely, the Bill is designed to ensure that Scotland’s future in the United Kingdom is strong, enabling the Scottish Parliament to flourish further and to carry on improving the lives of people in Scotland.

[Mark Lazarowicz]

A large number of charities are headquartered in my constituency, and they regret the fact that the opportunity has not been taken to deal with this anomaly. Does my hon. Friend agree that, to allow the point to be dealt with, the Government could well consider tabling amendments in Committee? I myself am a director of a Scottish charity, but it is a local one that is unlikely to be affected by the provisions.

[Ann McKechin]

I am grateful to my hon. Friend. On that point, I agree that it would be helpful if the Government reconsidered their response to that recommendation by the Calman commission, because there is an additional burden on many very good charities that operate not only in Scotland but in other parts of the UK. They face two licensing processes and two sets of regulatory burdens, and, for a Government who always lecture people on reducing the regulatory burden, this is a good opportunity, working with the consensus among charities, to try to alleviate the amount of time they have to spend on paperwork and to increase the amount of time they have to spend on charitable purposes.

We will support the Bill’s Second Reading, not the Scottish National party’s amendment, if it is put to a vote. That does not mean we will not scrutinise the Bill carefully and closely, but, after almost three years of study and engagement with the Scottish public and with experts, and given the express will of the Holyrood Parliament, whose Committees are currently considering the matter in close detail, it is now important to get on with business and to put the Calman commission into legislation.

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[Iain Stewart]

My right hon. Friend makes a powerful point.

[Mark Lazarowicz]

Perhaps I should add that the Basque country and Catalonia have always had higher gross national product rates than the rest of Spain, so I do not think that the point made by the hon. Member for Dundee East (Stewart Hosie) has much weight.

[Iain Stewart]

I am grateful for that intervention. I think it is unhelpful to make an exact analogy with a particular model. Spain has a very curious multi-speed system of devolution between its different constituent parts.

I promised to discuss why I do not believe, certainly at this point, that fiscal autonomy is feasible or desirable for the Scottish Parliament. There are huge unknowns in the fiscal relationship between Scotland and England, for the simple reason that we have never assigned tax revenues or allocated public spending on a straight territorial basis—that just has not happened. As part of our research for the book, I spent many hours enjoying and analysing the various forecasts and documents that the Scottish National party had published over the years giving its view on what Scotland’s net contribution to or net borrowing from the United Kingdom had been.

Part of the SNP’s criticism was that the official Government figures, as published in the annual Government Expenditure and Revenue Scotland survey, were based on assumptions about what Scotland’s share of corporation tax or income tax should be. However, the SNP’s own figures are based on assumptions and projections. They disagree with the assumptions made, but they could not analyse particularly and exactly what the Scottish revenues were.

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[Iain Stewart]

I believe that it would be a difficulty, and I have seen no evidence from the Scottish National party that properly costs this or assesses what the split would be.

[Mark Lazarowicz]

Are not the economies of England, Scotland and the rest of the UK so closely integrated and dependent on each other that the consequences would not be the same as might be the case for, say, Germany and France? On the hon. Gentleman’s point about Standard Life, I am not normally someone who tries to air scare tactics about what might happen to the financial services sector under independence, but would there not be a danger that some companies, faced with the choices and difficulties that he has outlined, might choose to move their headquarters out of Scotland precisely because of the consequences of a differential in corporation tax rates?

[Iain Stewart]

That is exactly the point. The relationship between Scotland and England is so interwoven that to start to unpick it now would be hugely complicated and difficult. On the point about pensions, I have mentioned the potential difficulties under the current proposals that would need to be clarified. If there were full fiscal autonomy, those problems would be magnified many times over. People might have made national insurance contributions all through their lives. How would all that be untangled to sort out the different rights and contributions? The process would be enormously complicated. I am not saying that it would be impossible, but I do not believe that it is practical at this point in time. I hope that my right hon. Friends on the Front Bench will take up my point that we should move towards assigning revenues and spending on a straight territorial basis, so that in time we might be able to move to a system involving much greater devolution of fiscal power down to the Scottish Parliament.