Scotland Bill

Sheila Gilmore Excerpts

Monday 14th March 2011 Commons Chamber

[Fiona O'Donnell]

I will withdraw my remark, then, and acknowledge the humility that we have now heard from the hon. Gentleman. Up until 20 February, however, we had seen none of the details of the SNP proposals. I have sometimes accused Conservative Members of shotgun legislation, and I have to level that accusation against him as well.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does my hon. Friend agree that one reason why we do not need to table copious amendments is that we took part in the deliberations of the Calman commission and in all the consultation related to it?

[Fiona O'Donnell]

I absolutely agree. The whole process has been about consultation, and at some point the SNP has to admit that perhaps the reason why it has been outside the process, and why it had to file a minority report, is that it is just plain wrong on this issue. I genuinely appeal to SNP Members to pause and consider whether Unionist parties would really advance legislation that would put Scotland and the Union at risk.

I am tempted to think that spring has come to the House, because what we have heard today is not the sound of chickens but the sound of constitutional cuckoos. That is what SNP Members are. They allow others to do the work and build the nest, then they come and try to throw our eggs out.

--- Later in debate ---

[Iain Stewart]

I support the clause, but I wish to raise a couple of specific examples just to test that the definition of a Scottish taxpayer as set out in the Bill is robust and covers all eventualities. I appreciate that the examples I am about to give are technical, and if the Minister is unable to give me a definitive response tonight, I hope he will be able to do so on Report.

My first example is based on the situation my father was in for a number of years. It relates to proposed new section 80E(3)(c) on the definition of Scottish residence, as opposed to residence of another part of the UK. My father’s home was, and is, in Hamilton, just outside Glasgow. By any reasonable test, that is his main residence: it has been the family home for generations; my mother lives there; and it is what my father would call home. However, for a number of years he worked for the Civil Aviation Authority and although he was mainly based at Prestwick, the nature of his job required him to spend a considerable amount of time at its headquarters in London. He rented a flat in central London, where he was registered on the electoral roll for council tax, for utility payments and for all the other aspects of living in a dwelling. For a number of tax years he spent a majority of nights in London, as opposed to spending them at the family home in Scotland. Therefore, if I have read proposed new section 80E(3)(c) correctly, he would not be deemed to be a Scottish taxpayer. I would be grateful if the Minister would confirm whether that is the case. If so, is this not an anomalous situation and will the Government re-examine what the definition of “a Scottish taxpayer” should be?

Secondly, I wish to discuss the “Caledonian sleeper” question, which relates to proposed new section 80F(1)(a) and the number of days spent in Scotland

“at the end of the day.”

I do not have a detailed knowledge of the railway timetable, but let us suppose that the sleeper train left Glasgow at 10.30 pm or 10.45 pm and so was clearly in Scotland at the end of the day. If it traversed the border before midnight and so was actually in England on the stroke of midnight, would that day be counted as Scottish or English for the purposes of this calculation? I hope hon. Members will forgive me for raising this very detailed point, which will affect only a small number of people, as it is the job of this Committee to tease out these practical matters. I do not expect the Minister to give me a definitive reply right now, but I would be grateful if he undertakes to examine the matter and give an answer at a later stage in our proceedings.

[Sheila Gilmore]

It is important that we move forward on these tax powers for the Scottish Parliament. The big difference between these proposals and the ones in the Scotland Act 1998 are that these apply to all the different rates of tax. The structure being used and the fact that there will be a corresponding reduction in the block grant will deliver to the Scottish Parliament a real ability to make decisions, be accountable and test how well these things work. We wanted that in Scotland and we need it, but that is not to say that the arrangements will not have any complications and that there is no need to be clear about the answers to some of these questions. Some could be covered by regulations that are to follow, but there is always an anxiety involved in depending too much on detailed regulations, as opposed to primary legislation.

I wish to discuss two particular areas, one of which is tax avoidance and the provisions that the Government suggest we put in place to deal with it. The last thing that we would want is for those who have the ability to arrange their tax affairs in different ways to be able to avoid paying this tax, as that would harm the Scottish economy and undermine the whole principle behind what we are trying to achieve. We need to know what provisions will be put in place to deal with tax avoidance in the future. My hon. Friend the Member for Glasgow North (Ann McKechin) mentioned the self-employed, and they are also important. It is easier for them to arrange their tax affairs in a beneficial way, whereas those of us on PAYE may not be able to do that. It is important for self-employed people to know exactly how this system will work for them, particularly if they generate earnings in different parts of the United Kingdom, as it is quite possible for such people to generate.

I also have concerns about the future interrelationship between the benefits system and the tax system. This is important because the way in which benefits are calculated for some people depends on their income after tax, which means that a variation in tax will affect benefits. The Government may be clear that systems will be in place to deal with that very quickly, but the last thing that people on benefits need is any uncertainty about their income. They need to know how any increases in their income, and therefore in their tax liability, or any decreases in their income will affect them, because at that level of income people suffer particularly badly when changes are made. If the Welfare Reform Bill proceeds in full, we will be moving towards a new benefits system at just about the same time as some of these new powers come into force, so it is important to get this right. I urge the Government to provide answers to these questions, if not now, in time for Report, so that we can be clear about how this interrelationship will work.

[Fiona Bruce]

May I begin by telling hon. Members how pleased I am that, after a thorough independent evaluation of the devolution settlement in Scotland, this Government have been quick to legislate on this issue, fulfilling a manifesto commitment of more than one party in this House? After more than a decade, the time is right to assess the implications and consequences of the devolution settlement.

I shall now speak generally in support of the provisions of clause 26. The Calman commission review predates the economic crisis, but the need to recover the UK’s economic strength makes this issue ever more important. It is clear that economic growth will be driven by enterprise in local communities. Creating a Scottish rate of income tax will give the Scottish Government more responsibility over not only how they spend revenue, but how they raise it. That is a crucial discipline, which we hope will increase the likelihood that fiscal decisions will reflect the needs and priorities of Scotland, the Scottish economy and, most importantly, the people of Scotland. This is an opportunity for genuine fiscal accountability.

The proposals outlined in the Bill are not entirely new, but they do mark the next stage of the devolution settlement for Scotland. The existing Scottish variable rate gives the Scottish Government the power to raise or reduce the basic level of income tax. As Donald Dewar, the original First Minister, said, the Scottish variable rate

“asks the Scottish Parliament to face real financial choices and makes it, in a sense, more directly accountable to the people it represents.”—[Official Report, 31 July 1997; Vol. 299, c. 465.]

However, as we have discussed tonight, the Scottish variable rate has previously been only somewhat theoretical, in that it has never been employed as a tool to influence the economic fortunes of Scotland. That raises the question of whether the new rate will be any different, but I believe that it will be. I believe that the Scottish Government can and will enjoy more financial responsibility through the radical proposals in the Bill. More importantly, the proposals have the propensity to have long-lasting positive effects in Scotland.

To understand that, we have only to ask ourselves how our constituents—no matter which part of the UK we represent—would respond if more funding were raised and distributed locally, rather than by central Government. If that were the case, I am sure that my constituents would take an even greater interest in what their money was spent on and would be able to assess more easily whether politicians were responding to local priorities. Although the provisions relating to Scotland are based at the national level, not the local one, the same phenomenon should apply. This move should strengthen democratic accountability and bolster political engagement in Scottish communities.

I am sure that I am not the only hon. Member recently to have received letters from constituents unhappy about the level of block grant funding given to the devolved nations and, in particular, concerned that there is a difference in funding for certain policy areas, such as university fees and prescription charges. What needs to be communicated more effectively is how the Scottish Government can prioritise their funding. In England, all funding is distributed by the UK Government but in Scotland, the UK Government pay for national—that is, UK-wide—public services, such as defence and industry, and the block grant funding is distributed by the Scottish Government and pays for devolved powers: education, various aspects of health policy and so on. As a result, although decisions on funding in England must involve national, regional and local priorities, the Scottish Government can spend their block grant funding on regional and local issues only.

The income tax provisions in the Bill will mean that the procedure of setting the Scottish Government’s budget is more responsive to the wishes of the Scottish electorate. That will increase the financial accountability of the Scottish Parliament and relieve the Scottish Government’s reliance on the block grant—a healthy development and one that many of my constituents will welcome.

[Sheila Gilmore]

Will the hon. Lady concede, nevertheless, that choices are made about how to spend that block grant and that if a Scottish Government make a choice about how to deal with university funding, they do so to the potential detriment of other funding? The decisions that have been taken in this place about tuition fees and the reduction of the teaching grant for universities have had a considerable impact on Scotland, so we are not somehow free from those decisions.

[Fiona Bruce]

The hon. Lady makes a valid point and that is why I prefaced my remarks with the phrase, “What needs to be communicated more effectively is how the Scottish Government can prioritise their funding.” By that, I meant that checks and balances are involved and that that needs to be communicated nationwide. A greater understanding of that needs to be gained.